-----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, FQfzzBJFCMf4EKDqvFmvGWwvH/emor0DYxshvGLP3TcwyA5RzQI6m87V+4ilJXgp 2Vs5hx5+UHiMve4SxU5RqA== 0000820027-06-000002.txt : 20060103 0000820027-06-000002.hdr.sgml : 20060102 20060103082515 ACCESSION NUMBER: 0000820027-06-000002 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20051031 FILED AS OF DATE: 20060103 DATE AS OF CHANGE: 20060103 EFFECTIVENESS DATE: 20060103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXP GLOBAL SERIES INC CENTRAL INDEX KEY: 0000842918 IRS NUMBER: 411850486 STATE OF INCORPORATION: MN FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-05696 FILM NUMBER: 06500119 BUSINESS ADDRESS: STREET 1: 50606 AXP FINANCIAL CENTER STREET 2: H27/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 BUSINESS PHONE: 6126712772 MAIL ADDRESS: STREET 1: 50606 AXP FINANCIAL CENTER STREET 2: H27/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 FORMER COMPANY: FORMER CONFORMED NAME: IDS GLOBAL SERIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: IDS GLOBAL BOND FUND INC DATE OF NAME CHANGE: 19901011 N-CSR 1 global-ncsr.txt AXP GLOBAL 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 811-5696 ------------ AXP GLOBAL SERIES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 50606 Ameriprise 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: 10/31 -------------- Date of reporting period: 10/31 -------------- ANNUAL REPORT [RIVERSOURCE(SM) INVESTMENTS LOGO] RIVERSOURCE(SM) EMERGING MARKETS FUND ANNUAL REPORT FOR THE PERIOD ENDED OCT. 31, 2005 > RIVERSOURCE EMERGING MARKETS FUND (FORMERLY AXP(R) THREADNEEDLE EMERGING MARKETS FUND) SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. TABLE OF CONTENTS Fund Snapshot 3 Performance Summary 4 Questions & Answers with Portfolio Management 5 The Fund's Long-term Performance 10 Investments in Securities 12 Financial Statements (Portfolio) 16 Notes to Financial Statements (Portfolio) 19 Report of Independent Registered Public Accounting Firm (Portfolio) 23 Financial Statements (Fund) 24 Notes to Financial Statements (Fund) 27 Report of Independent Registered Public Accounting Firm (Fund) 37 Federal Income Tax Information 38 Fund Expenses Example 39 Board Members and Officers 41 Approval of Investment Management Services Agreement 44 Proxy Voting 48 [DALBAR RATED FOR COMMUNICATION 2005 LOGO] American Express(R) Funds'* reports to shareholders have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. * As of Oct. 1, 2005, the RiverSource brand replaced "American Express" as the name of the American Express Funds. - -------------------------------------------------------------------------------- 2 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT FUND SNAPSHOT AT OCT. 31, 2005 PORTFOLIO MANAGERS
PORTFOLIO MANAGERS SINCE YEARS IN INDUSTRY Julian Thompson 1/00 13 Jules Mort 10/03 8
FUND OBJECTIVE For investors seeking long-term growth of capital Inception dates by class A: 11/13/96 B: 11/13/96 C: 6/26/00 I: 3/4/04 Y: 11/13/96 Ticker symbols by class A: IDEAX B: IEMBX C: -- I: -- Y: -- Total net assets $393.2 million Number of holdings 79
STYLE MATRIX
STYLE VALUE BLEND GROWTH SIZE LARGE / / /X/ / / MEDIUM / / / / / / SMALL / / / / / /
SHADING WITHIN THE STYLE MATRIX INDICATES AREAS IN WHICH THE FUND GENERALLY INVESTS. [CHART] COUNTRY COMPOSITION PERCENTAGE OF PORTFOLIO ASSETS South Korea 18.2% Brazil 14.5% South Africa 11.0% Mexico 10.0% Taiwan 8.8% Russia 7.0% China 5.0% India 4.3% Thailand 2.9% Hungary 2.8% Cash & Short-Term Securities 2.7% Israel 2.7% Hong Kong 2.1% Turkey 1.8% Czechoslovakia Federated Republic 1.7% Egypt 1.5% Argentina 1.0% Other* 2.0%
* Includes Finland, Indonesia, and Netherlands. TOP TEN HOLDINGS PERCENTAGE OF PORTFOLIO ASSETS Samsung Electronics (South Korea) 6.5% Petroleo Brasileiro ADR (Brazil) 3.9 Cia Vale do Rio Doce ADR (Brazil) 3.8 LUKOIL ADR (Russia) 3.6 Kookmin Bank (South Korea) 3.2 America Movil ADR Series L (Mexico) 2.9 Taiwan Semiconductor Mfg (Taiwan) 2.7 CNOOC (China) 2.2 Grupo Televisa ADR (Mexico) 1.9 ABSA Group (South Africa) 1.9
For further detail about these holdings, please refer to the section entitled "Investments in Securities." Investment products, including shares of mutual funds, involve investment risks including possible loss of principal and fluctuation in value. International investing involves increased risk and volatility, not typically associated with domestic investing, due to 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. The Fund primarily invests in large-capitalization companies but may invest a small portion in small- and mid-capitalization companies. 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. Fund holdings are subject to change. - -------------------------------------------------------------------------------- 3 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT PERFORMANCE SUMMARY [CHART] PERFORMANCE COMPARION FOR THE YEAR ENDED OCT. 31, 2005 RiverSource Emerging Markets Fund Class A (excluding sales charge) +31.83% Morgan Stanley Capital International(R) (MSCI) Emerging Markets Index (unmanaged) +34.34% Lipper Emerging Markets Funds Index +32.97%
(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 OR VISITING www.riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. AVERAGE ANNUAL TOTAL RETURNS
CLASS A CLASS B CLASS C CLASS I CLASS Y (11/13/96) (11/13/96) (6/26/00) (3/4/04) (11/13/96) AFTER AFTER (INCEPTION DATES) NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6) AT OCT. 31, 2005 1 year +31.83% +24.24% +30.59% +25.59% +30.54% +29.54% +32.32% +31.87% 3 years +27.83% +25.34% +26.79% +25.96% +26.82% +26.82% N/A +28.04% 5 years +11.68% +10.37% +10.82% +10.56% +10.85% +10.85% N/A +11.92% Since inception +6.25% +5.55% +5.42% +5.42% +6.33% +6.33% +16.40% +6.44% AT SEPT. 30, 2005 1 year +45.36% +37.00% +44.19% +39.19% +44.35% +43.35% +45.94% +45.64% 3 years +32.86% +30.27% +31.81% +31.04% +31.83% +31.83% N/A +33.18% 5 years +11.82% +10.51% +10.96% +10.69% +11.03% +11.03% N/A +12.07% Since inception +7.11% +6.40% +6.29% +6.29% +7.83% +7.83% +22.38% +7.32%
(1) EXCLUDING SALES CHARGE. (2) RETURNS AT PUBLIC OFFERING PRICE (POP) REFLECT A SALES CHARGE OF 5.75%. (3) RETURNS AT MAXIMUM CONTINGENT DEFERRED SALES CHARGE (CDSC). CDSC APPLIES AS FOLLOWS: FIRST YEAR 5%; SECOND AND THIRD YEAR 4%; FOURTH YEAR 3%; FIFTH YEAR 2%; SIXTH YEAR 1%; NO SALES CHARGE THEREAFTER. (4) 1% CDSC APPLIES TO REDEMPTIONS MADE WITHIN THE FIRST YEAR OF PURCHASE. (5) SALES CHARGE IS NOT APPLICABLE TO THESE SHARES. SHARES AVAILABLE TO ELIGIBLE INVESTORS ONLY, CURRENTLY LIMITED TO RIVERSOURCE PORTFOLIO BUILDER FUNDS, SIX AFFILIATED FUNDS-OF-FUNDS. (6) SALES CHARGE IS NOT APPLICABLE TO THESE SHARES. SHARES AVAILABLE TO INSTITUTIONAL INVESTORS ONLY. - -------------------------------------------------------------------------------- 4 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT BELOW, RIVERSOURCE EMERGING MARKETS FUND PORTFOLIO MANAGERS JULIAN THOMPSON AND JULES MORT OF THREADNEEDLE INTERNATIONAL LIMITED (THREADNEEEDLE) DISCUSS THE FUND'S RESULTS AND POSITIONING FOR THE 12 MONTHS ENDED OCT. 31, 2005. THREADNEEDLE, AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF AMERIPRISE FINANCIAL, INC., ACTS AS THE SUBADVISER TO THE FUND. Q: HOW DID RIVERSOURCE EMERGING MARKETS FUND PERFORM FOR THE FISCAL YEAR ENDED OCT. 31, 2005? A: The Fund returned 31.83% (Class A shares excluding sales charge) for the 12-month period. The Fund's benchmark, the Morgan Stanley Capital International (MSCI) Emerging Markets Index (MSCI Index), returned 34.34% over the same period. The Fund's peer group, the Lipper Emerging Markets Funds Index, returned 32.97% for the year. Q: WHAT FACTORS MOST SIGNIFICANTLY AFFECTED PERFORMANCE? Asset allocation was the main driver of performance. Latin America was up more than 61%, Europe, the Middle East and Africa (EMEA) rose more than 39% and Asia was up more than 23% 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 nearly 53% (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 approximately 76%. Outside of the Latin American region, we were very positive on Russia throughout the period, which rose nearly 39%. Although South Korea performed very well, up more than 46%, the Fund had a smaller position there than did the MSCI Index, and having a smaller exposure in 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 approximately 17%, 4% and 8% 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 nearly 54% and utilities up more than 37% over the 12-month period. We missed much of that run up. - -------------------------------------------------------------------------------- 5 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS - - THE RESULT OF FALLING INTEREST RATES IS INCREASED ACCESS TO CONSUMER CREDIT, WHICH LEADS US TO FOCUS ON CONSUMER-RELATED SECTORS. 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. 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. The whole sector has suffered from a deterioration in asset quality in unsecured lending. Taishin Financial Holdings and Chinatrust Financial Holding both suffered a sharp sell off. We have subsequently eliminated exposure to these holdings as we anticipate a protracted period of high provisioning expenses. Cathay Financial Holding, an insurance and banking business, also delivered undistinguished performance, although we continue to maintain a holding here as the insurance business is enjoying better business conditions. Check Point Software Technologies, 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 Check Point Software Technologies in the second half of the period. - -------------------------------------------------------------------------------- 6 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS 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 that 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 more 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, which led the stock to sell off to what we considered to be a very attractive level. It has subsequently recovered following the failure of its bid. In South Africa, we have become increasingly confident that the economic recovery underway is structural rather than cyclical. In other words, we have become more confident that interest rates are likely to stay low and that its currency is not vulnerable in the near term. This has given us confidence to invest more in the domestic economy in South Africa. Our largest holding in South Africa is ABSA Group, which 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 remains listed. - -------------------------------------------------------------------------------- 7 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS We took some profits in Latin America and reinvested them elsewhere. Even with this reduction, we remain overweight in Latin America relative to the MSCI Index. We believe Latin America should continue to benefit from falling interest rates in its two major markets, Mexico and Brazil. The result of falling interest rates is increased access to consumer credit, which leads us to focus on consumer-related sectors. Brazilian department store Lojas Renner was among the Fund's greatest contributors to performance late in the period. We reduced the Fund's position in Asia late in the reporting period. We have taken a more cautious stance in some countries and have turned our attention to others. For example, in Taiwan, the economic cycle is less advantageous and valuations less appealing than in Korea. For this reason, we have reduced our exposure to Taiwan, via the banking sector as discussed in the answer above. South Korea is showing signs of economic recovery in its domestic consumption sector. The Korean market is benefiting from cheap valuations and a lengthening of domestic investors' time horizons. Companies are starting to spend and consumers are also in recovery mode. For these reasons, we raised our exposure to the Korean financial sector and added to the banking sector via stocks such as Kookmin Bank, which is a key beneficiary of improving consumption. We have maintained a domestic focus in the Fund for much of the year. We have concentrated on those sectors, which benefit from rising consumer purchasing power, such as consumer staples and financials, which rose 39% and 35%, respectively. Q: WHAT IS THE FUND'S TACTICAL VIEW AND STRATEGY FOR THE MONTHS AHEAD? A: The Fund's strategy remains largely focused on 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. - -------------------------------------------------------------------------------- 8 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS The outlook for emerging markets remains strong. Although emerging markets tend to underperform during a U.S. 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 Brazil. 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 that demand. Stronger commodity prices and liquidity factors tend to be very beneficial. Our expectation is that emerging markets should continue to attract strong capital flows over the next few years. - -------------------------------------------------------------------------------- 9 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT THE FUND'S LONG-TERM PERFORMANCE The chart on the facing page illustrates the total value of an assumed $10,000 investment in RiverSource Emerging Markets Fund Class A shares (from 12/1/96 to 10/31/05)* as compared to the performance of two widely cited performance indices, the Morgan Stanley Capital International (MSCI) Emerging Markets Index and the Lipper Emerging Markets Funds Index. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5.75%, while such charges are not reflected in the performance of the indices. Returns for the Fund include the reinvestment of any distribution paid during each period. THE PERFORMANCE INFORMATION SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT A GUARANTEE OF FUTURE RESULTS. THE 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 OR VISITING www.riversource.com/funds. ALSO SEE "PAST PERFORMANCE" IN THE FUND'S CURRENT PROSPECTUS. * Fund data is from Nov. 13, 1996. MSCI Emerging Markets Index and Lipper peer group data is from Dec. 1, 1996. DISTRIBUTION SUMMARY THE TABLE BELOW DETAILS THE FUND'S INCOME AND CAPITAL GAIN DISTRIBUTIONS FOR THE FISCAL YEARS SHOWN. MORE INFORMATION ON THE OTHER CLASSES CAN BE FOUND IN THE FINANCIAL HIGHLIGHTS SECTION OF THIS REPORT'S NOTES TO FINANCIAL STATEMENTS.
CLASS A ------------------------------------------------ SHORT-TERM LONG-TERM FISCAL YEAR ENDED INCOME CAPITAL GAINS CAPITAL GAINS TOTAL Oct. 31, 2005 $0.03 $-- $-- $0.03 Oct. 31, 2004 0.06 -- -- 0.06 Oct. 31, 2003 -- -- -- -- Oct. 31, 2002 -- -- -- -- Oct. 31, 2001 -- -- -- --
- -------------------------------------------------------------------------------- 10 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT [CHART] VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE EMERGING MARKETS FUND
12/1/96 10/97 10/98 10/99 10/00 10/01 10/02 10/03 10/04 10/05 RIVERSOURCE EMERGING MARKETS FUND CLASS A (INCLUDES SALES CHARGE) $ 9,425 $10,070 $6,672 $9,687 $9,339 $7,165 $7,766 $10,601 $12,307 $16,224 MSCI(R) EMERGING MARKETS INDEX(1) $10,000 $ 9,001 $6,212 $8,984 $8,192 $6,270 $6,800 $10,114 $12,076 $16,223 LIPPER EMERGING MARKETS FUNDS INDEX(2) $10,000 $ 9,402 $6,283 $8,571 $8,204 $6,382 $6,837 $10,144 $12,333 $16,400
COMPARATIVE RESULTS RESULTS AT OCT. 31, 2005
SINCE 1 YEAR 3 YEARS 5 YEARS INCEPTION(3) RIVERSOURCE EMERGING MARKETS FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $12,424 $19,691 $16,378 $16,224 Average annual total return +24.24% +25.34% +10.37% +5.55% MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EMERGING MARKETS INDEX(1) Cumulative value of $10,000 $13,434 $23,857 $19,801 $16,223 Average annual total return +34.34% +33.62% +14.64% +5.58% LIPPER EMERGING MARKETS FUNDS INDEX(2) Cumulative value of $10,000 $13,297 $23,986 $19,991 $16,400 Average annual total return +32.97% +33.86% +14.86% +5.70%
RESULTS FOR OTHER SHARE CLASSES CAN BE FOUND ON PAGE 4. (1) 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. (2) The Lipper Emerging Markets Funds Index includes the 30 largest emerging markets funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. (3) Fund data is from Nov. 13, 1996. MSCI Emerging Markets Index and Lipper peer group data is from Dec. 1, 1996. - -------------------------------------------------------------------------------- 11 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT INVESTMENTS IN SECURITIES EMERGING MARKETS PORTFOLIO OCT. 31, 2005 (PERCENTAGES REPRESENT VALUE OF INVESTMENTS COMPARED TO NET ASSETS)
ISSUER SHARES VALUE(a) COMMON STOCKS (94.1%)(c) ARGENTINA (0.9%) REAL ESTATE IRSA Inversiones y Representaciones GDR 322,792(b) $ 3,734,703 - -------------------------------------------------------------------------------------------- BRAZIL (12.5%) COMMERCIAL BANKS (1.0%) UNIBANCO - Uniao de Bancos Brasileiros GDR 77,736 4,065,593 - -------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (0.3%) Banco Nossa Caixa 64,991(b) 1,076,545 - -------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (1.1%) Tele Norte Leste Participacoes ADR 252,296 4,465,639 - -------------------------------------------------------------------------------------------- METALS & MINING (3.7%) Cia Vale do Rio Doce ADR 397,209 14,657,012 - -------------------------------------------------------------------------------------------- OIL & GAS (4.0%) Petroleo Brasileiro ADR 266,137 15,268,280 - -------------------------------------------------------------------------------------------- REAL ESTATE (1.0%) Cyrela Brazil Realty 522,338 4,105,775 - -------------------------------------------------------------------------------------------- SPECIALTY RETAIL (1.4%) Lojas Renner 213,462(b) 5,687,770 - -------------------------------------------------------------------------------------------- CHINA (5.0%) INSURANCE (1.2%) China Life Insurance Cl H 6,295,000(b) 4,612,952 - -------------------------------------------------------------------------------------------- OIL & GAS (3.8%) CNOOC 13,338,000 8,770,041 PetroChina Cl H 7,962,000 6,106,102 ----------- Total 14,876,143 - -------------------------------------------------------------------------------------------- CZECHOSLOVAKIA FEDERATED REPUBLIC (1.7%) PHARMACEUTICALS Zentiva 147,755 6,537,182 - -------------------------------------------------------------------------------------------- EGYPT (1.4%) COMMERCIAL BANKS (0.5%) Commercial Intl Bank 207,475 $ 2,022,069 - -------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.9%) Orascom Telecom GDR 74,111(d) 3,635,145 - -------------------------------------------------------------------------------------------- FINLAND (0.6%) AUTO COMPONENTS Nokian Renkaat 161,550 2,517,487 - -------------------------------------------------------------------------------------------- HONG KONG (2.1%) MULTILINE RETAIL (0.8%) Lifestyle Intl Holdings 2,135,500 3,087,319 - -------------------------------------------------------------------------------------------- SPECIALTY RETAIL (1.3%) Esprit Holdings 551,500 3,907,133 Giordano Intl 2,304,000 1,326,014 ----------- Total 5,233,147 - -------------------------------------------------------------------------------------------- HUNGARY (2.8%) COMMERCIAL BANKS (1.6%) OTP Bank 176,392 6,379,272 - -------------------------------------------------------------------------------------------- OIL & GAS (1.2%) MOL Magyar Olaj-es Gazipari 50,953 4,724,651 - -------------------------------------------------------------------------------------------- INDIA (4.3%) COMMERCIAL BANKS (0.8%) State Bank of India GDR 69,412(d) 2,994,434 - -------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (0.4%) Grasim Inds GDR 70,391(d) 1,711,205 - -------------------------------------------------------------------------------------------- IT SERVICES (1.2%) Infosys Technologies 86,374 4,847,640 - -------------------------------------------------------------------------------------------- TOBACCO (1.1%) ITC 1,577,274 4,221,306 - -------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.8%) Bharti Tele-Ventures 442,651(b) 3,176,305 - --------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 12 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT
ISSUER SHARES VALUE(a) COMMON STOCKS (CONTINUED) INDONESIA (0.6%) MACHINERY United Tractors 5,991,135 $ 2,199,196 - -------------------------------------------------------------------------------------------- ISRAEL (2.7%) CHEMICALS (0.7%) Makhteshin-Agan Inds 492,804 2,826,158 - -------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (1.2%) Lipman Electronic Engineering 123,593(b) 2,746,236 Orbotech 78,690(b) 1,709,934 ----------- Total 4,456,170 - -------------------------------------------------------------------------------------------- PHARMACEUTICALS (0.8%) Teva Pharmaceutical Inds ADR 82,777 3,155,459 - -------------------------------------------------------------------------------------------- MEXICO (9.9%) BEVERAGES (1.2%) Grupo Modelo Series C 1,552,700 4,768,344 - -------------------------------------------------------------------------------------------- COMMERCIAL BANKS (0.7%) Grupo Financiero Banorte Cl O 333,856 2,847,600 - -------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (1.2%) CEMEX ADR 93,119 4,848,707 - -------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (1.2%) Wal-Mart de Mexico Series V 1,003,112 4,884,606 - -------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.7%) Urbi Desarrollos Urbanos 427,100(b) 2,733,377 - -------------------------------------------------------------------------------------------- MEDIA (1.9%) Grupo Televisa ADR 103,472 7,563,803 - -------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (3.0%) America Movil ADR Series L 427,567 11,223,634 - -------------------------------------------------------------------------------------------- NETHERLANDS (0.8%) BEVERAGES Efes Breweries Intl GDR 96,869(b),(d) 3,063,966 - -------------------------------------------------------------------------------------------- RUSSIA (6.5%) COMMERCIAL BANKS (0.1%) Sberbank 295 262,396 - -------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (0.8%) Pyaterochka Holding GDR 152,748(b),(d) 2,993,861 - -------------------------------------------------------------------------------------------- OIL & GAS (4.5%) LUKOIL ADR 254,834 $14,015,869 Novatek GDR 45,632(d) 1,025,807 Surgutneftegas ADR 54,256 2,550,032 ----------- Total 17,591,708 - -------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (1.1%) Mobile Telesystems ADR 120,676 4,463,805 - -------------------------------------------------------------------------------------------- SOUTH AFRICA (11.0%) COMMERCIAL BANKS (1.9%) ABSA Group 559,708 7,422,212 - -------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (1.1%) Massmart Holdings 544,943 4,211,442 - -------------------------------------------------------------------------------------------- METALS & MINING (4.7%) Anglo American 196,263 5,764,062 Gold Fields 473,877 6,321,928 Impala Platinum Holdings 59,331 6,501,118 ----------- Total 18,587,108 - -------------------------------------------------------------------------------------------- OIL & GAS (1.7%) Sasol 212,304 6,704,003 - -------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (1.6%) MTN Group 825,641 6,145,967 - -------------------------------------------------------------------------------------------- SOUTH KOREA (18.0%) AUTO COMPONENTS (0.7%) Hankook Tire 229,620 2,767,791 - -------------------------------------------------------------------------------------------- AUTOMOBILES (1.6%) Hyundai Motor 84,011 6,230,011 - -------------------------------------------------------------------------------------------- COMMERCIAL BANKS (4.7%) Kookmin Bank 215,460 12,299,686 Shinhan Financial Group 186,180 6,260,936 ----------- Total 18,560,622 - -------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.8%) Hyundai Development 89,270 3,275,333 - -------------------------------------------------------------------------------------------- ELECTRIC UTILITIES (0.7%) Korea Electric Power 88,590 2,897,158 - -------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (1.6%) Shinsegae 16,974 6,116,777 - --------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 13 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT
ISSUER SHARES VALUE(a) COMMON STOCKS (CONTINUED) SOUTH KOREA (CONT.) MACHINERY (0.8%) Samsung Heavy Inds 234,160 $ 3,004,892 - -------------------------------------------------------------------------------------------- OIL & GAS (0.7%) SK 54,000 2,781,422 - -------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (6.4%) Samsung Electronics 47,439 25,342,731 - -------------------------------------------------------------------------------------------- TAIWAN (8.7%) COMPUTERS & PERIPHERALS (2.7%) Acer 2,291,302 4,658,521 Asustek Computer 1,356,280 3,563,240 Quanta Computer 2,029,000 2,808,911 ------------ Total 11,030,672 - -------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (1.9%) AU Optronics ADR 166,181 2,118,808 Hon Hai Precision Industry 1,191,644 5,162,689 ------------ Total 7,281,497 - -------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (0.1%) Far Eastern Textile 354,280 207,065 - -------------------------------------------------------------------------------------------- INSURANCE (0.9%) Cathay Financial Holding 2,043,000 3,599,953 - -------------------------------------------------------------------------------------------- REAL ESTATE (0.5%) Hung Poo Real Estate Development 3,680,000 1,856,261 - -------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.6%) Taiwan Semiconductor Mfg 6,699,089 10,396,453 - -------------------------------------------------------------------------------------------- THAILAND (2.9%) COMMERCIAL BANKS (2.1%) Bangkok Bank 1,602,100 4,064,432 Kasikornbank 2,554,600 3,964,713 ------------ Total 8,029,145 - -------------------------------------------------------------------------------------------- OIL & GAS (0.8%) PTT 602,100 3,249,804 - -------------------------------------------------------------------------------------------- TURKEY (1.8%) COMMERCIAL BANKS (1.1%) Akbank 647,688 $ 4,063,857 - -------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.7%) Arcelik 473,805 2,838,908 - -------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $313,461,364) $370,121,448 - -------------------------------------------------------------------------------------------- PREFERRED STOCKS (2.5%)(C) BRAZIL (1.9%) Banco Bradesco 93,786 $ 4,827,159 Bradespar 104,600 2,740,652 ------------ Total 7,567,811 - -------------------------------------------------------------------------------------------- RUSSIA (0.6%) Transneft 1,337(b) 2,152,570 - -------------------------------------------------------------------------------------------- TOTAL PREFERRED STOCKS (Cost: $8,018,576) $ 9,720,381 - -------------------------------------------------------------------------------------------- AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) SHORT-TERM SECURITY (2.7%) COMMERCIAL PAPER Deutsche Bank 11-01-05 4.04% $10,600,000 $ 10,598,810 - -------------------------------------------------------------------------------------------- TOTAL SHORT-TERM SECURITY (Cost: $10,600,000) $ 10,598,810 - -------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $332,079,940)(e) $390,440,639 ============================================================================================
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 14 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT NOTES TO INVESTMENTS IN SECURITIES (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. (d) 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 Oct. 31, 2005, the value of these securities amounted to $15,424,418 or 3.9% of net assets. (e) At Oct. 31, 2005, the cost of securities for federal income tax purposes was $332,530,334 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $66,098,187 Unrealized depreciation (8,187,882) ------------------------------------------------------------------------- Net unrealized appreciation $57,910,305 -------------------------------------------------------------------------
THE GLOBAL INDUSTRY CLASSIFICATION STANDARD (GICS) WAS DEVELOPED BY AND IS THE EXCLUSIVE PROPERTY OF MORGAN STANLEY CAPITAL INTERNATIONAL INC. AND STANDARD & POOR'S, A DIVISION OF THE MCGRAW-HILL COMPANIES, INC. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/funds. - -------------------------------------------------------------------------------- 15 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES EMERGING MARKETS PORTFOLIO OCT. 31, 2005 ASSETS Investments in securities, at value (Note 1) (identified cost $332,079,940) $390,440,639 Foreign currency holdings (identified cost $596,648) (Note 1) 596,551 Dividends and accrued interest receivable 249,287 Receivable for investment securities sold 11,294,442 - ------------------------------------------------------------------------------------------------- Total assets 402,580,919 - ------------------------------------------------------------------------------------------------- LIABILITIES Disbursements in excess of cash on demand deposit 251,111 Payable for investment securities purchased 8,823,088 Unrealized depreciation on foreign currency contracts held, at value (Note 4) 4,441 Accrued investment management services fee 34,748 Other accrued expenses 90,662 - ------------------------------------------------------------------------------------------------- Total liabilities 9,204,050 - ------------------------------------------------------------------------------------------------- Net assets $393,376,869 =================================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT STATEMENT OF OPERATIONS EMERGING MARKETS PORTFOLIO YEAR ENDED OCT. 31, 2005 INVESTMENT INCOME Income: Dividends $ 9,382,189 Interest 254,221 Less foreign taxes withheld (1,035,508) - ------------------------------------------------------------------------------------------- Total income 8,600,902 - ------------------------------------------------------------------------------------------- Expenses (Note 2): Investment management services fee 3,801,760 Compensation of board members 10,376 Custodian fees 374,120 Audit fees 26,250 Other 29,253 - ------------------------------------------------------------------------------------------- Total expenses 4,241,759 Earnings credits on cash balances (Note 2) (2,460) - ------------------------------------------------------------------------------------------- Total net expenses 4,239,299 - ------------------------------------------------------------------------------------------- Investment income (loss) -- net 4,361,603 - ------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (Note 3) 74,811,876 Foreign currency transactions (945,936) - ------------------------------------------------------------------------------------------- Net realized gain (loss) on investments 73,865,940 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 21,807,865 - ------------------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 95,673,805 - ------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $100,035,408 ===========================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS EMERGING MARKETS PORTFOLIO
YEAR ENDED OCT. 31, 2005 2004 OPERATIONS Investment income (loss) -- net $ 4,361,603 $ 3,059,315 Net realized gain (loss) on investments 73,865,940 48,079,058 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 21,807,865 (9,980,094) - ------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 100,035,408 41,158,279 - ------------------------------------------------------------------------------------------------------- Proceeds from contributions 41,310,899 22,729,634 Fair value of withdrawals (44,269,538) (13,403,405) - ------------------------------------------------------------------------------------------------------- Net contributions (withdrawals) from partners (2,958,639) 9,326,229 - ------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 97,076,769 50,484,508 Net assets at beginning of year 296,300,100 245,815,592 - ------------------------------------------------------------------------------------------------------- Net assets at end of year $393,376,869 $296,300,100 =======================================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 18 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS EMERGING MARKETS PORTFOLIO 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Emerging Markets Portfolio (the Portfolio) is a series of World Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. The Portfolio invests primarily in equity securities of emerging markets companies. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. The Portfolio's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. Pursuant to procedures adopted by the Board of Trustees of the portfolios, Ameriprise Financial, Inc. (Ameriprise Financial) (formerly American Express Financial Corporation) utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with these procedures. If a development or event is so significant that there is a reasonably high degree of certainty that the effect of the development or event has actually caused the closing price to no longer reflect the actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the New York Stock Exchange. Significant events include material movements in the U.S. securities markets prior to the opening of foreign markets on the following trading day. FVP results in an estimated price that reasonably reflects the current market conditions in order to value the portfolio holdings such that shareholder transactions receive a fair net asset value. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. OPTION TRANSACTIONS To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio 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 Portfolio 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 Portfolio gives up the opportunity for profit if the - -------------------------------------------------------------------------------- 19 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT market price of the security increases. The risk in writing a put option is that the Portfolio 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 Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio 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 Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. FOREIGN CURRENCY TRANSLATIONS AND FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At Oct. 31, 2005, foreign currency holdings consisted of multiple denominations, primarily Taiwan dollars. The Portfolio 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 Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete its contract obligations. - -------------------------------------------------------------------------------- 20 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT GUARANTEES AND INDEMNIFICATIONS Under the Portfolio's organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Portfolio. In addition, certain of the Portfolio's contracts with its service providers contain general indemnification clauses. The Portfolio's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Portfolio cannot be determined and the Portfolio has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES For federal income tax purposes the Portfolio qualifies as a partnership and each investor in the Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore does not pay any income dividends or capital gain distributions. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. FEES AND EXPENSES The Trust, on behalf of the Portfolio, has an Investment Management Services Agreement with RiverSource Investments, LLC (the Investment Manager) to manage its portfolio. Prior to Oct. 1, 2005, investment management services were provided by Ameriprise Financial. Under this agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Portfolio's average daily net assets that declines from 1.10% to 1.00% annually as the Portfolio's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of RiverSource Emerging Markets Fund to the Lipper Emerging Markets Funds Index. In certain circumstances the Board may approve a change in the index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment decreased the fee by $251,371 for the year ended Oct. 31, 2005. Under the agreement, the Trust also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees, audit and certain legal fees, fidelity bond premiums, registration fees for units, office expenses, consultants' fees, compensation of trustees, corporate filing fees, expenses incurred in connection with lending securities of the Portfolio and any other expenses properly payable by the Trust or Portfolio and approved by the Board. Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the underlying Fund or other RiverSource funds. The Portfolio's liability for these amounts is adjusted for market value changes and remains in the Portfolio until distributed in accordance with the Plan. - -------------------------------------------------------------------------------- 21 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT The Investment Manager has a Subadvisory Agreement with Threadneedle International Limited, an indirect wholly-owned subsidiary of Ameriprise Financial, to subadvise the assets of the portfolio. During the year ended Oct. 31, 2005, the Portfolio's custodian fees were reduced by $2,460 as a result of earnings credits from overnight cash balances. The Portfolio also pays custodian fees to Ameriprise Trust Company (formerly American Express Trust Company), an affiliate of Ameriprise Financial. According to a Placement Agency Agreement, Ameriprise Financial Services, Inc. (formerly American Express Financial Advisors Inc.) acts as placement agent of the Trust's units. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $444,624,623 and $438,119,247, respectively, for the year ended Oct. 31, 2005. Realized gains and losses are determined on an identified cost basis. 4. FORWARD FOREIGN CURRENCY CONTRACTS At Oct. 31, 2005, the Portfolio has a forward foreign currency exchange contract that obligates it to deliver currency at a specified future date. The unrealized depreciation on this contract is included in the accompanying financial statements. See "Summary of significant accounting policies." The terms of the open contract are as follows:
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION - ------------------------------------------------------------------------------------------------ Nov. 3, 2005 799,422 166,000,000 $-- $4,441 U.S. Dollar Hungarian Forint - ------------------------------------------------------------------------------------------------
5. FINANCIAL HIGHLIGHTS The table below shows certain important financial information for evaluating the Portfolio's results.
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 RATIOS/SUPPLEMENTAL DATA Ratio of expenses to average daily net assets(a) 1.14% 1.14% 1.20% 1.23% 1.20% - ------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 1.18% 1.12% 1.20% .63% .79% - ------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 124% 128% 174% 226% 193% - ------------------------------------------------------------------------------------------------------------------------- Total return(b) 32.42% 17.03% 37.59% 9.39% (22.59%) - -------------------------------------------------------------------------------------------------------------------------
(a) Expense ratio is based on total expenses of the Portfolio before reduction of earnings credits on cash balances. The ratio does not include feeder fund expenses. (b) Total return is based on a calculated Portfolio net asset value and does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 22 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM THE BOARD OF TRUSTEES AND UNITHOLDERS WORLD TRUST We have audited the accompanying statement of assets and liabilities, including the schedule of investments in securities, of Emerging Markets Portfolio (a series of World Trust) as of October 31, 2005, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended October 31, 2005, and the financial highlights for each of the years in the five-year period ended October 31, 2005. These financial statements and the financial highlights are the responsibility of portfolio management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 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 Emerging Markets Portfolio as of October 31, 2005, and the results of its operations, changes in its net assets and the financial highlights for each of the periods stated in the first paragraph above, in conformity with U.S. generally accepted accounting principles. KPMG LLP Minneapolis, Minnesota December 20, 2005 - -------------------------------------------------------------------------------- 23 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES RIVERSOURCE EMERGING MARKETS FUND OCT. 31, 2005 ASSETS Investment in Portfolio (Note 1) $393,232,141 Capital shares receivable 215,547 - -------------------------------------------------------------------------------------------------------------- Total assets 393,447,688 - -------------------------------------------------------------------------------------------------------------- LIABILITIES Capital shares payable 17,087 Accrued distribution fee 12,130 Accrued service fee 20 Accrued transfer agency fee 6,849 Accrued administrative services fee 2,540 Other accrued expenses 255,502 - -------------------------------------------------------------------------------------------------------------- Total liabilities 294,128 - -------------------------------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $393,153,560 ============================================================================================================== REPRESENTED BY Capital stock -- $.01 par value (Note 1) $ 482,856 Additional paid-in capital 334,891,405 Undistributed net investment income 485,800 Accumulated net realized gain (loss) (Note 5) (1,024,120) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 58,317,619 - -------------------------------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $393,153,560 ============================================================================================================== Net assets applicable to outstanding shares: Class A $294,798,922 Class B $ 73,863,781 Class C $ 2,661,530 Class I $ 19,381,418 Class Y $ 2,447,909 Net asset value per share of outstanding capital stock: Class A shares 35,826,550 $ 8.23 Class B shares 9,501,233 $ 7.77 Class C shares 341,553 $ 7.79 Class I shares 2,322,319 $ 8.35 Class Y shares 293,926 $ 8.33 - --------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT STATEMENT OF OPERATIONS RIVERSOURCE EMERGING MARKETS FUND YEAR ENDED OCT. 31, 2005 INVESTMENT INCOME Income: Dividends $ 9,378,875 Interest 254,148 Less foreign taxes withheld (1,035,142) - ------------------------------------------------------------------------------------------------------- Total income 8,597,881 - ------------------------------------------------------------------------------------------------------- Expenses (Note 2): Expenses allocated from Portfolio 4,237,798 Distribution fee Class A 615,902 Class B 837,876 Class C 20,597 Transfer agency fee 764,930 Incremental transfer agency fee Class A 60,293 Class B 35,819 Class C 874 Service fee -- Class Y 18,301 Administrative services fees and expenses 351,359 Compensation of board members 10,251 Printing and postage 123,485 Registration fees 59,179 Audit fees 8,750 Other 11,685 - ------------------------------------------------------------------------------------------------------- Total expenses 7,157,099 Expenses waived/reimbursed by the Investment Manager and its affiliates (Note 2) (4,107) - ------------------------------------------------------------------------------------------------------- 7,152,992 Earnings credits on cash balances (Note 2) (10,213) - ------------------------------------------------------------------------------------------------------- Total net expenses 7,142,779 - ------------------------------------------------------------------------------------------------------- Investment income (loss)-- net 1,455,102 - ------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions 74,784,622 Foreign currency transactions (945,652) - ------------------------------------------------------------------------------------------------------- Net realized gain (loss) on investments 73,838,970 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 21,800,849 - ------------------------------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 95,639,819 - ------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $97,094,921 =======================================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 25 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS RIVERSOURCE EMERGING MARKETS FUND
YEAR ENDED OCT. 31, 2005 2004 OPERATIONS AND DISTRIBUTIONS Investment income (loss)-- net $ 1,455,102 $ 620,795 Net realized gain (loss) on investments 73,838,970 48,060,876 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 21,800,849 (9,976,656) - ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 97,094,921 38,705,015 - ----------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (923,069) (1,739,711) Class B -- (347,165) Class C (588) (2,977) Class I (128,053) -- Class Y (98,442) (233,251) - ----------------------------------------------------------------------------------------------------------------- Total distributions (1,150,152) (2,323,104) - ----------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 3) Proceeds from sales Class A shares (Note 2) 97,558,207 51,336,374 Class B shares 21,386,977 13,065,540 Class C shares 1,561,783 710,046 Class I shares 18,475,923 12,072,940 Class Y shares 3,414,988 3,109,037 Reinvestment of distributions at net asset value Class A shares 913,364 1,721,050 Class B shares -- 343,304 Class C shares 561 2,764 Class I shares 127,968 -- Class Y shares 98,442 233,251 Payments for redemptions Class A shares (56,764,158) (41,601,391) Class B shares (Note 2) (42,751,811) (21,634,907) Class C shares (Note 2) (601,925) (205,777) Class I shares (16,210,992) (2,074) Class Y shares (25,688,414) (5,555,746) - ----------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 1,520,913 13,594,411 - ----------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 97,465,682 49,976,322 Net assets at beginning of year 295,687,878 245,711,556 - ----------------------------------------------------------------------------------------------------------------- Net assets at end of year $393,153,560 $295,687,878 ================================================================================================================= Undistributed net investment income $ 485,800 $ 874,641 - -----------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 26 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS RIVERSOURCE EMERGING MARKETS FUND (FORMERLY AXP THREADNEEDLE EMERGING MARKETS FUND) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of AXP Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. AXP Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board. The Fund offers Class A, Class B, Class C and Class Y shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to CDSC. - - Class Y shares have no sales charge and are offered only to qualifying institutional investors. The Fund offers an additional class of shares, Class I, exclusively to certain institutional investors. Class I shares have no sales charge and are made available through a separate prospectus supplement provided to investors eligible to purchase the shares. At Oct. 31, 2005, Ameriprise Financial and the RiverSource Portfolio Builder Funds owned 100% of Class I shares, which represents 4.93% of the Fund's net assets. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee, transfer agency fees and service fee (class specific expenses) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. INVESTMENT IN EMERGING MARKETS PORTFOLIO The Fund invests all of its assets in Emerging Markets Portfolio (the Portfolio), a series of World Trust (the Trust), an open-end investment company that has the same objectives as the Fund. The Portfolio invests primarily in equity securities of emerging markets companies. The Fund records daily its share of the Portfolio's income, expenses and realized and unrealized gains and losses. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The Fund records its investment in the Portfolio at the value that is equal to the Fund's proportionate ownership interest in the Portfolio's net assets. The percentage of the Portfolio owned by the Fund at Oct. 31, 2005 was 99.96%. The Fund's Board approved the withdrawal of the Fund's assets from the Portfolio. As of Nov. 8, 2005, the Fund invests directly in and manages its own portfolio of securities rather than investing in the Portfolio. All securities held by the Portfolio 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 - -------------------------------------------------------------------------------- 27 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT 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 Trustees of the portfolios, Ameriprise Financial utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with these procedures. If a development or event is so significant that there is a reasonably high degree of certainty that the effect of the development or event has actually caused the closing price to no longer reflect the actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the New York Stock Exchange. Significant events include material movements in the U.S. securities markets prior to the opening of foreign markets on the following trading day. FVP results in an estimated price that reasonably reflects the current market conditions in order to value the portfolio holdings such that shareholder transactions receive a fair net asset value. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. 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. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with all sections of the Internal Revenue Code that apply to regulated investment companies and to distribute substantially all of its taxable income to the shareholders. No provision for income or excise taxes is thus required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes, and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. On the statement of assets and liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $693,791 and accumulated net realized loss has been decreased by $693,791. - -------------------------------------------------------------------------------- 28 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED OCT. 31, 2005 2004 - -------------------------------------------------------------------------------- CLASS A Distributions paid from: Ordinary income $923,069 $1,739,711 Long-term capital gain -- -- CLASS B Distributions paid from: Ordinary income -- 347,165 Long-term capital gain -- -- CLASS C Distributions paid from: Ordinary income 588 2,977 Long-term capital gain -- -- CLASS I* Distributions paid from: Ordinary income 128,053 -- Long-term capital gain -- -- CLASS Y Distributions paid from: Ordinary income 98,442 233,251 Long-term capital gain -- --
* Inception date is March 4, 2004. At Oct. 31, 2005, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ 810,704 Accumulated long-term gain (loss) $ (898,826) Unrealized appreciation (depreciation) $57,867,421
DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. 2. EXPENSES AND SALES CHARGES In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund has an agreement with Ameriprise Financial to provide administrative services. Under the current Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. Prior to Oct. 1, 2005, the fee percentage of the Fund's average daily net assets declined from 0.10% to 0.05% annually as the Fund's assets increased. A minor portion of additional administrative service expenses paid by the Fund are consultants' fees and fund office expenses. Under this agreement, the Fund also pays taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees and any other expenses properly payable by the Fund and approved by the Board. - -------------------------------------------------------------------------------- 29 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. The Investment Manager has a Subadvisory Agreement with Threadneedle International Limited, an indirect wholly-owned subsidiary of Ameriprise Financial, to subadvise the assets of the portfolio. Under a separate Transfer Agency Agreement, RiverSource Service Corporation (formerly American Express Client Service Corporation) (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual fee per shareholder account for this service as follows: - - Class A $19.50 - - Class B $20.50 - - Class C $20.00 - - Class Y $17.50 The incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. Class I pays a transfer agency fee at an annual rate per shareholder account of $1. This amount is included in the transfer agency fee on the statement of operations. Beginning May 20, 2005, the Transfer Agent implemented an annual closed account fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the statement of operations. The Fund has agreements with Ameriprise Financial Services, Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B and Class C shares. Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Sales charges received by the Distributor for distributing Fund shares were $730,166 for Class A, $68,163 for Class B and $661 for Class C for the year ended Oct. 31, 2005. For the year ended Oct. 31, 2005, the Investment Manager and its affiliates waived certain fund level fees and expenses amounting to $4,107, which had an insignificant impact on the expense ratios. Beginning Oct. 1, 2005, a new agreement to waive certain fees and expenses is effective until Oct. 31, 2006, such that net expenses, before giving effect to any performance incentive adjustment will not exceed 1.99% for Class A, 2.75% for Class B, 2.75% for Class C, 1.47% for Class I and 1.82% for Class Y of the Funds average daily net assets. - -------------------------------------------------------------------------------- 30 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT During the year ended Oct. 31, 2005, the Fund's transfer agency fees were reduced by $10,213 as a result of earnings credits from overnight cash balances. 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
YEAR ENDED OCT. 31, 2005 CLASS A CLASS B CLASS C CLASS I CLASS Y - ---------------------------------------------------------------------------------------------------------- Sold 12,930,006 3,046,847 222,252 2,524,461 464,075 Issued for reinvested distributions 132,757 -- 85 18,413 14,164 Redeemed (7,595,815) (5,861,794) (83,855) (2,219,970) (3,022,821) - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) 5,466,948 (2,814,947) 138,482 322,904 (2,544,582) - ---------------------------------------------------------------------------------------------------------- YEAR ENDED OCT. 31, 2004 CLASS A CLASS B CLASS C CLASS I* CLASS Y - ---------------------------------------------------------------------------------------------------------- Sold 8,624,819 2,280,081 122,428 1,999,746 521,530 Issued for reinvested distributions 308,432 64,531 518 -- 41,430 Redeemed (7,033,449) (3,919,054) (37,461) (331) (917,351) - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) 1,899,802 (1,574,442) 85,485 1,999,415 (354,391) - ----------------------------------------------------------------------------------------------------------
* Inception date is March 4, 2004. 4. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The agreement went into effect Sept. 20, 2005. The Fund must maintain asset coverage for borrowings of at least 300%. The agreement, which enables the Fund to participate with other RiverSource funds, permits borrowings up to $500 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to either the higher of the Federal Funds Effective Rate plus 0.40% or the JPMCB Prime Commercial Lending Rate. Borrowings are payable within 60 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.07% per annum. Prior to this agreement, the Fund had a revolving credit agreement that permitted borrowings up to $500 million with The Bank of New York. The Fund had no borrowings outstanding during the year ended Oct. 31, 2005. 5. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund had a capital loss carry-over of $898,826 at Oct. 31, 2005, that if not offset by capital gains will expire in 2009. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. - -------------------------------------------------------------------------------- 31 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT 6. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results. CLASS A
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $ 6.27 $ 5.46 $ 4.00 $3.69 $ 4.81 - --------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04 .03 .02 (.01) -- Net gains (losses) (both realized and unrealized) 1.95 .84 1.44 .32 (1.12) - --------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.99 .87 1.46 .31 (1.12) - --------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.03) (.06) -- -- -- - --------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 8.23 $ 6.27 $ 5.46 $4.00 $ 3.69 - --------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 295 $ 191 $ 155 $ 132 $ 143 - --------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(b) 1.79% 1.83% 2.02% 2.05% 2.02% - --------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .54% .41% .39% (.19%) (.02%) - --------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 124% 128% 174% 226% 193% - --------------------------------------------------------------------------------------------------------------------- Total return(c) 31.83% 16.09% 36.50% 8.40% (23.28%) - ---------------------------------------------------------------------------------------------------------------------
(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 a sales charge. - -------------------------------------------------------------------------------- 32 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT CLASS B
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $ 5.95 $ 5.19 $ 3.83 $3.56 $ 4.67 - --------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01) (.02) (.02) (.04) (.04) Net gains (losses) (both realized and unrealized) 1.83 .81 1.38 .31 (1.07) - --------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.82 .79 1.36 .27 (1.11) - --------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.03) -- -- -- - --------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 7.77 $ 5.95 $ 5.19 $3.83 $ 3.56 - --------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 74 $ 73 $ 72 $ 65 $ 73 - --------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(b) 2.55% 2.59% 2.80% 2.83% 2.79% - --------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets (.24%) (.32%) (.39%) (.95%) (.80%) - --------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 124% 128% 174% 226% 193% - --------------------------------------------------------------------------------------------------------------------- Total return(c) 30.59% 15.18% 35.51% 7.58% (23.77%) - ---------------------------------------------------------------------------------------------------------------------
(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 a sales charge. - -------------------------------------------------------------------------------- 33 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT CLASS C
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $ 5.97 $ 5.20 $ 3.84 $ 3.56 $ 4.68 - ------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) -- (.01) (.02) (.03) (.04) Net gains (losses) (both realized and unrealized) 1.82 .81 1.38 .31 (1.08) - ------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.82 .80 1.36 .28 (1.12) - ------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.03) -- -- -- - ------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 7.79 $ 5.97 $ 5.20 $ 3.84 $ 3.56 - ------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 3 $ 1 $ 1 $ 1 $ -- - ------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(b) 2.56% 2.60% 2.80% 2.85% 2.79% - ------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets (.19%) (.34%) (.41%) (1.13%) (.63%) - ------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 124% 128% 174% 226% 193% - ------------------------------------------------------------------------------------------------------------------------- Total return(c) 30.54% 15.37% 35.42% 7.87% (23.93%) - -------------------------------------------------------------------------------------------------------------------------
(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 a sales charge. - -------------------------------------------------------------------------------- 34 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT CLASS I
FISCAL PERIOD ENDED OCT. 31, 2005 2004(b) - ------------------------------------------------------------------------------------- PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $ 6.36 $ 6.54 - ------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .06 .01 Net gains (losses) (both realized and unrealized) 1.98 (.19) - -------------------------------------------------------------------------------------- Total from investment operations 2.04 (.18) - ------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) -- - ------------------------------------------------------------------------------------- Net asset value, end of period $ 8.35 $ 6.36 - ------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 19 $ 13 - ------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c) 1.30% 1.35%(d) - ------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .97% .79%(d) - ------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 124% 128% - ------------------------------------------------------------------------------------- Total return(e) 32.32% (2.75%)(f) - -------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date is March 4, 2004. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. (f) Not annualized. - -------------------------------------------------------------------------------- 35 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT CLASS Y
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $ 6.35 $ 5.52 $ 4.04 $3.72 $ 4.83 - --------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .05 .04 .03 -- .01 Net gains (losses) (both realized and unrealized) 1.97 .86 1.45 .32 (1.12) - --------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.02 .90 1.48 .32 (1.11) - --------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.07) -- -- -- - --------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 8.33 $ 6.35 $ 5.52 $4.04 $ 3.72 - --------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 2 $ 18 $ 18 $ -- $ -- - --------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(b) 1.59% 1.65% 1.87% 1.59% 1.84% - --------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .81% .61% .54% .19% .21% - --------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 124% 128% 174% 226% 193% - --------------------------------------------------------------------------------------------------------------------- Total return(c) 31.87% 16.50% 36.63% 8.60% (22.98%) - ---------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 36 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM THE BOARD AND SHAREHOLDERS AXP GLOBAL SERIES, INC. We have audited the accompanying statement of assets and liabilities of RiverSource Emerging Markets Fund (a series of AXP Global Series, Inc.) as of October 31, 2005, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended October 31, 2005, and the financial highlights for each of the years in the five-year period ended October 31, 2005. These financial statements and the financial highlights are the responsibility of fund management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 Emerging Markets Fund as of October 31, 2005, and the results of its operations, changes in its net assets and the financial highlights for each of the periods stated in the first paragraph above, in conformity with U.S. generally accepted accounting principles. KPMG LLP Minneapolis, Minnesota December 20, 2005 - -------------------------------------------------------------------------------- 37 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT FEDERAL INCOME TAX INFORMATION (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. RIVERSOURCE EMERGING MARKETS FUND FISCAL YEAR ENDED OCT. 31, 2005 CLASS A INCOME DISTRIBUTIONS -- TAXABLE AS DIVIDEND INCOME: Qualified Dividend Income for individuals 100% Dividends Received Deduction for corporations 0.00%
PAYABLE DATE PER SHARE Dec. 20, 2004 $0.02974
CLASS C INCOME DISTRIBUTIONS -- TAXABLE AS DIVIDEND INCOME: Qualified Dividend Income for individuals 100% Dividends Received Deduction for corporations 0.00%
PAYABLE DATE PER SHARE Dec. 20, 2004 $0.00269
CLASS I INCOME DISTRIBUTIONS -- TAXABLE AS DIVIDEND INCOME: Qualified Dividend Income for individuals 100% Dividends Received Deduction for corporations 0.00%
PAYABLE DATE PER SHARE Dec. 20, 2004 $0.05454
CLASS Y INCOME DISTRIBUTIONS -- TAXABLE AS DIVIDEND INCOME: Qualified Dividend Income for individuals 100% Dividends Received Deduction for corporations 0.00%
PAYABLE DATE PER SHARE Dec. 20, 2004 $0.03646
- -------------------------------------------------------------------------------- 38 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT FUND EXPENSES EXAMPLE (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Oct. 31, 2005. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 39 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT
BEGINNING ENDING EXPENSES ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE PAID DURING EXPENSE MAY 1, 2005 OCT. 31, 2005 THE PERIOD(a) RATIO Class A Actual(b) $1,000 $1,170.70 $ 9.96(c) 1.81% Hypothetical (5% return before expenses) $1,000 $1,016.17 $ 9.25(c) 1.81% Class B Actual(b) $1,000 $1,164.90 $14.10(c) 2.57% Hypothetical (5% return before expenses) $1,000 $1,012.37 $13.11(c) 2.57% Class C Actual(b) $1,000 $1,164.40 $14.15(c) 2.58% Hypothetical (5% return before expenses) $1,000 $1,012.27 $13.16(c) 2.58% Class I Actual(b) $1,000 $1,174.40 $ 7.22(c) 1.31% Hypothetical (5% return before expenses) $1,000 $1,018.70 $ 6.70(c) 1.31% Class Y Actual(b) $1,000 $1,171.60 $ 8.70(c) 1.58% Hypothetical (5% return before expenses) $1,000 $1,017.38 $ 8.08(c) 1.58%
(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 185/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended Oct. 31, 2005: +17.07% for Class A, +16.49% for Class B, +16.44% for Class C, +17.44% for Class I and +17.16% for Class Y. (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. The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Oct. 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 1.99% for Class A; 2.75% for Class B; 2.75% for Class C; 1.47% for Class I; and 1.82% for Class Y. 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 Oct. 31, 2005, the actual expenses paid would have been $9.85 for Class A, $13.99 for Class B, $14.04 for Class C, $7.11 for Class I and $8.59 for Class Y; the hypothetical expenses paid would have been $9.15 for Class A, $13.00 for Class B, $13.06 for Class C, $6.60 for Class I and $7.98 for Class Y. - -------------------------------------------------------------------------------- 40 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 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 5 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 may retire after her 75th birthday. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - -------------------------------------------------------------------------------------------------------------- Arne H. Carlson Board member Chair, Board Services 901 S. Marquette Ave. since 1999 Corporation (provides Minneapolis, MN 55402 administrative services Age 71 to boards); former Governor of Minnesota Philip J. Carroll, Jr.* Board member Retired Chairman and CEO, Scottish Power PLC, 901 S. Marquette Ave. since 2002 Fluor Corporation Vulcan Materials Company, Minneapolis, MN 55402 (engineering and Inc. (construction Age 67 construction) materials/chemicals) Patricia M. Flynn Board member Trustee Professor of 901 S. Marquette Ave. since 2004 Economics and Management, Minneapolis, MN 55402 Bentley College; former Age 54 Dean, McCallum Graduate School of Business, Bentley College Anne P. Jones Board member Attorney and Consultant 901 S. Marquette Ave. since 1985 Minneapolis, MN 55402 Age 70 Jeffrey Laikind Board member Former Managing Director, American Progressive 901 S. Marquette Ave. since 2005 Shikiar Asset Management Insurance Minneapolis, MN 55402 Age 70 Stephen R. Lewis, Jr. Board member President Emeritus and Valmont Industries, Inc. 901 S. Marquette Ave. since 2002 Professor of Economics, (manufactures irrigation Minneapolis, MN 55402 Carleton College systems) Age 65
* Phillip J. Carroll, Jr. retired as a member of the Board, effective Nov. 10, 2005. - -------------------------------------------------------------------------------- 41 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - -------------------------------------------------------------------------------------------------------------- Catherine James Paglia Board member Director, Enterprise Strategic Distribution, 901 S. Marquette Ave. since 2004 Asset Management, Inc. Inc. (transportation, Minneapolis, MN 55402 (private real estate and distribution and Age 53 asset management company) logistics consultants) Alan K. Simpson Board member Former three-term United 1201 Sunshine Ave. since 1997 States Senator for Cody, WY 82414 Wyoming Age 74 Alison Taunton-Rigby Board member Chief Executive Officer, Hybridon, Inc. 901 S. Marquette Ave. since 2002 RiboNovix, Inc. since (biotechnology); American Minneapolis, MN 55402 2003 (biotechnology); Healthways, Inc. (health Age 61 former President, management programs) Forester Biotech
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS**
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - -------------------------------------------------------------------------------------------------------------- William F. Truscott Board member President - U.S. Asset 53600 Ameriprise Financial Center since 2001, Management and Chief Minneapolis, MN 55474 Vice President Investment Officer, Age 45 since 2002 Ameriprise Financial, Inc. and President, Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC since 2005; Senior Vice President - Chief Investment Officer, Ameriprise Financial, Inc. and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001-2005; former Chief Investment Officer and Managing Director, Zurich Scudder Investments
** Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments. - -------------------------------------------------------------------------------- 42 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - -------------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer Vice President - 105 Ameriprise Financial Center since 2002 Investment Accounting, Minneapolis, MN 55474 Ameriprise Financial, Age 50 Inc., since 2002; Vice President - Finance, American Express Company, 2000-2002; Vice President - Corporate Controller, Ameriprise Financial, Inc., 1996-2000 Paula R. Meyer President Senior Vice President - 596 Ameriprise Financial Center since 2002 Mutual Funds, Ameriprise Minneapolis, MN 55474 Financial, Inc., since Age 51 2002 and Senior Vice 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 901 S. Marquette Ave. General Counsel, Services Corporation Minneapolis, MN 55402 and Secretary Age 67 since 1978 Beth E. Weimer Chief Compliance Vice President and Chief 172 Ameriprise Financial Center Officer since Compliance Officer, Minneapolis, MN 55474 2004 Ameriprise Financial, Age 52 Inc., since 2001 and Chief Compliance 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. - -------------------------------------------------------------------------------- 43 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT RiverSource Investments, LLC (RiverSource), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial, formerly American Express Financial Corporation), serves as the investment manager to the Fund. Under an investment management services agreement (the IMS Agreement), the investment manager provides investment advice and other services to the Fund. Throughout the year, the Fund's Board of Directors (the Board) and the Board's Investment Review and Contracts Committees monitor these services. Ameriprise Financial had served as investment manager to the Fund until Sept. 29, 2005. On that date, and pursuant to the consent of the Board, Ameriprise Financial transferred its rights, title, and interest and its burdens and obligations under the IMS Agreement to RiverSource, its wholly-owned subsidiary. Each year, the Board determines whether to continue the IMS Agreement by evaluating the quality and level of services received and the costs associated with those services. To assist the Board in making this determination, the investment manager prepares detailed reports for the Board and its Contracts Committee in March and April and provides data prepared by independent organizations. The Board gives considerable weight to the work, deliberations and conclusions of the Contracts and Investment Review Committees in determining whether to continue the IMS Agreement. BACKGROUND This past year, prior to the Board's annual review process, on Feb. 1, 2005, American Express Company, the former parent of Ameriprise Financial, announced its intention to pursue a spin-off of Ameriprise Financial by distributing shares of the common stock of Ameriprise Financial to shareholders of American Express Company. Following this announcement, the Board determined to proceed with its annual review process and, after thorough review of the reports and data provided, at a meeting held in person on April 14, 2005, the Board, including all of its independent members, determined that the quality and level of advisory services provided pursuant to the IMS Agreement were satisfactory and that fees were fair and reasonable. However, in light of the announced plans of the spin-off, the Board approved continuation of the IMS Agreement with Ameriprise Financial for only an interim period ending on the later of (i) the effective date of the spin-off; or (ii) the approval of a new IMS Agreement with Ameriprise Financial (or its subsidiary) by the shareholders of the Fund, but in no event for a period longer than one year. During the course of the six-month period following the April 2005 meeting, the Board evaluated whether to approve new investment management services agreements for each of the funds within the Ameriprise Financial fund complex (together, the Funds) with post-spin Ameriprise Financial (or RiverSource). Independent counsel, Schulte Roth & Zabel LLP (Schulte), assisted the Boards in fulfilling their statutory and other responsibilities associated with the spin-off and the resulting consideration of new contracts, including the new IMS Agreement. The Board and its committees were provided with a wealth of written and oral information in this regard. Furthermore, in connection with the Board's considerations as to whether post-spin Ameriprise Financial, as an entity independent from American Express Company, would be capable of continuing to provide a high quality of services to the Funds, - -------------------------------------------------------------------------------- 44 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT the Board's independent members retained their own financial adviser, Credit Suisse First Boston LLC (CSFB), to assist them in analyzing the capital adequacy of post-spin Ameriprise Financial. (The costs of independent counsel and CSFB and of additional meetings of the Boards were borne by Ameriprise Financial as part of the commitment of the American Express Company to ensure a complete and thorough review of the proposed spin-off and its effect on the services provided by Ameriprise Financial and its subsidiaries.) At a meeting of the Board held on Sept. 8, 2005, the Board, including all of its independent members, approved, and recommended that shareholders approve, a proposed new IMS Agreement with RiverSource (the New IMS Agreement). A meeting of the Fund's shareholders is expected to be held on Feb. 15, 2006 to consider approval of the New IMS Agreement. If approved, the New IMS Agreement would take effect shortly after the shareholder meeting. The following section, "Board Considerations Related to the New IMS Agreement," provides a detailed discussion of the Board's considerations and determinations respecting the New IMS Agreement. BOARD CONSIDERATIONS RELATED TO THE NEW IMS AGREEMENT In carrying out its legal responsibilities associated with the consideration of the New IMS Agreement, the Board evaluated the following factors: NATURE, EXTENT AND QUALITY OF SERVICES TO BE PROVIDED BY POST-SPIN AMERIPRISE FINANCIAL (AND ITS SUBSIDIARIES) The Board recognized that only a few months had passed since its April 2005 conclusion that the nature, extent and quality of services provided by Ameriprise Financial were satisfactory and consistent with those that would be expected for a fund family of the size of the Funds and its determination to renew the IMS Agreement for the interim period. However, the Board also recognized the need to supplement this assessment with an evaluation of whether the spin-off or other factors would result in changes to the advisory services being provided under the current IMS Agreement. The Board focused its evaluation on the following factors potentially impacting the nature, extent and quality of advisory services to be provided by Ameriprise Financial: (i) Ameriprise Financial's projected capital structure and capital adequacy as a stand-alone entity; (ii) its legal and regulatory risks; (iii) its ability to retain and attract personnel; and (iv) its ability to successfully re-brand its products and services. Based on extensive presentations and reports by Ameriprise Financial, CSFB and Schulte, the Board concluded that the proposed capital structure (which includes certain indemnification commitments made by American Express Company) should enable RiverSource to continue to provide a high quality and level of advisory services to the Fund. In making this determination, the Board took into account representations by management of Ameriprise Financial that projected capital levels would allow Ameriprise Financial and RiverSource to meet legal and compliance responsibilities, build their distribution network, pursue technological upgrades, make capital commitments necessary to retain and attract key personnel devoted to legal and compliance responsibilities, portfolio management and distribution, and pursue smaller asset management acquisitions to help grow the asset management business. The Board accorded significant weight to CSFB's confirmation as to the reasonableness of the proposed capital structure. The Board also considered the fact that there were no expected departures of key personnel involved in the portfolio management, operations and marketing of the Funds as a result of the announcement of the spin-off. - -------------------------------------------------------------------------------- 45 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT The Board concluded that, based on all of the materials and information provided, post-spin Ameriprise Financial (including RiverSource) would be in a position to continue to provide a high quality and level of advisory services to the Fund. INVESTMENT PERFORMANCE The Board next focused on investment performance. The Board reviewed reports documenting the Fund's performance over one-, three- and/or five-year periods, as well as the entire period during which its current portfolio manager has managed the Fund, and compared to relevant Lipper and market indices. The Board took into account its determination in April 2005 that investment performance met expectations. The Board also considered that it had been receiving monthly performance reports for the Fund and that there had been no significant deviations from April's overall performance data. COST OF SERVICES PROVIDED The Board evaluated comparative fees and the costs of services under the current IMS Agreement and the New IMS Agreement, including fees charged by Ameriprise Financial (including RiverSource and other subsidiaries) to institutional clients as well as those paid to subadvisers. The Board studied RiverSource's effort (i.e., its "pricing philosophy") to set substantially all Funds' total expense ratios at or below the median expense ratio of comparable mutual funds (as compiled by Lipper). The Board observed that the proposed advisory fee changes are designed to work in tandem with proposed changes to administrative services fees. It also noted that RiverSource has agreed to voluntarily impose expense caps or waivers to achieve this pricing objective whenever the expense ratio exceeded the median expense ratio by more than three basis points (unless the higher ratio was due to the impact of the performance fee adjustment or was due to the added costs associated with having subadvisers manage the Fund). The Board considered that advisory fees under the New IMS Agreement would stay the same. The Board also took into account the effect of the proposed performance incentive adjustment on the advisory fee. In this regard, the Board recalled its past determinations regarding the appropriateness of (i) the use of the relevant index for the performance comparison; (ii) the methodology for determining when the Board may change an index used to calculate the performance incentive adjustment; (iii) the periods used for averaging the Fund's assets and computing investment performance; and (iv) the length of the period over which performance is computed. Furthermore, the Board considered that there was limited opportunity for the Fund to achieve large-scale growth and thus provide RiverSource with potential economies of scale. The Board next considered the expected profitability to Ameriprise Financial and RiverSource derived from their relationship with the Fund, recalling the April 2005 determination that the profitability level was appropriate. The Board noted that projected profitability of Ameriprise Financial would allow it to operate effectively and, at the same time, reinvest in RiverSource and its other asset management businesses. The Board also considered that the proposed changes in advisory fees and the mergers of certain other Funds would result in revenue gains to Ameriprise Financial, but that these increases would not materially alter profit margins due to expected increases in costs associated with the spin-off, particularly re-branding and separation. CSFB also reported that Ameriprise Financial's projected level of return on equity was generally reasonable in light of the returns on equity of its industry competitors. In evaluating profitability, the Board also considered the benefits Ameriprise Financial obtains - -------------------------------------------------------------------------------- 46 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT through the use of commission dollars paid on portfolio transactions for the Fund and from other business relationships that result from managing the Fund. The Board also considered the fees charged by Ameriprise Financial (and its subsidiaries) to institutional clients as well as the fees paid to, and charged by, subadvisers, noting the differences in services provided in each case. In light of these considerations, the Board concluded that projected profitability levels were appropriate. ECONOMIES OF SCALE The Board also considered the "breakpoints" in fees that would be triggered as Fund net asset levels grew and the extent to which shareholders would benefit from such growth. The Board observed that the revised fee schedules under the proposed New IMS Agreement would continue to provide breakpoints similar to those in place pursuant to the current IMS Agreement. Accordingly, the Board concluded that the proposed New IMS Agreement provides adequate opportunity for shareholders to realize benefits as Fund assets grow. OTHER CONSIDERATIONS In addition, the Board accorded weight to the fact that, under the New IMS Agreement, RiverSource Investments is held to a higher standard of care than under the current IMS Agreement. The Board also noted Ameriprise Financial's commitment to a culture that adheres to ethical business practice, assigns accountability to senior management and seeks to identify conflicts and propose appropriate action to minimize the risks posed by the conflicts. Furthermore, the Board recognized that it was not limited to considering management's proposed New IMS Agreement. In this regard, the Board evaluated the circumstances under which it would consider the retention of an investment adviser different from RiverSource Investments. The Board concluded, based on its consultation with independent counsel, that pursuing the retention of a different adviser was not necessary, primarily because, in its best judgment, Ameriprise Financial continues to be basically the same organization (from a functional and managerial standpoint) as it was prior to the spin-off. The Board reasoned that shareholders purchased shares of the Fund with an expectation that the current investment advisory organization would be servicing the Fund. - -------------------------------------------------------------------------------- 47 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT PROXY VOTING The policy of the Board is to vote all proxies of the companies in which the Fund holds investments. The procedures are stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling (800) 862-7919; by looking at the website www.riversource.com/funds; 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 the Fund's administrator, Board Services Corporation, collect at (612) 330-9283; by looking at the website www.riversource.com/funds; or by searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- 48 -- RIVERSOURCE EMERGING MARKETS FUND -- 2005 ANNUAL REPORT [RIVERSOURCE(SM) INVESTMENTS LOGO] RIVERSOURCE INVESTMENTS 200 AMERIPRISE FINANCIAL CENTER MINNEAPOLIS, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. RiverSource Funds are managed by RiverSource Investments, LLC and distributed by Ameriprise Financial Services, Inc., Member NASD. Both companies are part of Ameriprise Financial, Inc. S-6354 P (12/05) ANNUAL REPORT [RIVERSOURCE(SM) INVESTMENTS LOGO] RIVERSOURCE(SM) GLOBAL BALANCED FUND ANNUAL REPORT FOR THE PERIOD ENDED OCT. 31, 2005 > RIVERSOURCE GLOBAL BALANCED FUND (FORMERLY AXP(R) THREADNEEDLE GLOBAL BALANCED FUND) SEEKS TO PROVIDE SHAREHOLDERS WITH A BALANCE OF GROWTH OF CAPITAL AND CURRENT INCOME. TABLE OF CONTENTS Fund Snapshot 3 Performance Summary 4 Questions & Answers with Portfolio Management 5 The Fund's Long-term Performance 12 Investments in Securities 14 Financial Statements 21 Notes to Financial Statements 24 Report of Independent Registered Public Accounting Firm 35 Federal Income Tax Information 36 Fund Expenses Example 37 Board Members and Officers 39 Approval of Investment Management Services Agreement 42 Proxy Voting 46 [DALBAR RATED FOR COMMUNICATION 2005 LOGO] American Express(R) Funds'* reports to shareholders have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. * As of Oct. 1, 2005, the RiverSource brand replaced "American Express" as the name of the American Express Funds. - -------------------------------------------------------------------------------- 2 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT FUND SNAPSHOT AT OCT. 31, 2005 PORTFOLIO MANAGERS EQUITY*
PORTFOLIO MANAGERS SINCE YEARS IN INDUSTRY Alex Lyle 10/03 25 Stephen Thornber 10/03 18
FIXED INCOME**
PORTFOLIO MANAGER SINCE YEARS IN INDUSTRY Nicholas Pifer, CFA 2/03 15
* This portion of the Fund is managed by a team led by Alex Lyle and Stephen Thornber in London. ** This portion of the Fund is managed by a team led by Nicholas Pifer in Minneapolis. FUND OBJECTIVE For investors seeking a balance of growth of capital and current income. Inception dates by class A: 11/13/96 B: 11/13/96 C: 6/26/00 Y: 11/13/96 Ticker symbols by class A: IDGAX B: IGBBX C: -- Y: AGBYX Total net assets $122.3 million Number of holdings 185
[CHART] STYLE MATRIX EQUITIES
STYLE SIZE VALUE BLEND GROWTH LARGE / / /X/ / / MEDIUM / / / / / / SMALL / / / / / /
SHADING WITHIN THE STYLE MATRIX INDICATES AREAS IN WHICH THE FUND GENERALLY INVESTS. [CHART] STYLE MATRIX (CONTINUED) BONDS
DURATION QUALITY SHORT INT. LONG HIGH / / / / /X/ MEDIUM / / / / /X/ LOW / / / / / /
SHADING WITHIN THE STYLE MATRIX INDICATES AREAS IN WHICH THE FUND GENERALLY INVESTS. TOP TEN HOLDINGS PERCENTAGE OF PORTFOLIO ASSETS Hellenic Republic (Greece) 2.75% 2006 2.0% Microsoft (United States) 1.4 Citigroup (United States) 1.4 Govt of Japan (Japan) 1.70% 2009 1.2 Oesterreichische Kontrollbank (Austria) 1.80% 2010 1.2 Roche Holding (Switzerland) 1.2 Johnson & Johnson (United States) 1.2 Govt of Canada (Canada) 4.25% 2008 1.2 Samsung Electronics (South Korea) 1.1 Mitsubishi UFJ Financial Group (Japan) 1.0
For further detail about these holdings, please refer to the section entitled "Investments in Securities." 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. Investment products, including shares of mutual funds, involve investment risks including possible loss of principal and fluctuation in value. International investing involves increased risk and volatility, not typically associated with domestic investing, due to 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. Fund holdings are subject to change. - -------------------------------------------------------------------------------- 3 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT PERFORMANCE SUMMARY [CHART] PERFORMANCE COMPARISON FOR THE YEAR ENDED OCT. 31, 2005
RiverSource Global Balanced Fund Class A (excluding sales charge) +13.82% Morgan Stanley Capital International (MSCI) All Country World Index (unmanaged) +14.87% Citigroup World Government Bond Index (unmanaged) -1.76% Lipper Global Flexible Funds Index +11.33%
(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 OR VISITING www.riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. AVERAGE ANNUAL TOTAL RETURNS
CLASS A CLASS B CLASS C CLASS Y (11/13/96) (11/13/96) (6/26/00) (11/13/96) (INCEPTION DATES) NAV(1) POP(2) NAV(1) AFTER CDSC(3) NAV(1) AFTER CDSC(4) NAV(5) AT OCT. 31, 2005 1 year +13.82% +7.28% +12.97% +7.97% +12.86% +11.86% +14.00% 3 years +14.09% +11.86% +13.21% +12.16% +13.21% +13.21% +14.33% 5 years +1.31% +0.11% +0.53% +0.17% +0.51% +0.51% +1.47% Since inception +4.80% +4.11% +4.00% +4.00% -0.61% -0.61% +5.00% AT SEPT. 30, 2005 1 year +19.95% +13.05% +19.18% +14.18% +19.06% +18.06% +20.34% 3 years +16.61% +14.33% +15.65% +14.65% +15.74% +15.74% +16.84% 5 years +1.25% +0.06% +0.48% +0.11% +0.46% +0.46% +1.42% Since inception +5.15% +4.45% +4.35% +4.35% -0.09% -0.09% +5.35%
(1) EXCLUDING SALES CHARGE. (2) RETURNS AT PUBLIC OFFERING PRICE (POP) REFLECT A SALES CHARGE OF 5.75%. (3) RETURNS AT MAXIMUM CONTINGENT DEFERRED SALES CHARGE (CDSC). CDSC APPLIES AS FOLLOWS: FIRST YEAR 5%; SECOND AND THIRD YEAR 4%; FOURTH YEAR 3%; FIFTH YEAR 2%; SIXTH YEAR 1%; NO SALES CHARGE THEREAFTER. (4) 1% CDSC APPLIES TO REDEMPTIONS MADE WITHIN THE FIRST YEAR OF PURCHASE. (5) SALES CHARGE IS NOT APPLICABLE TO THESE SHARES. SHARES AVAILABLE TO INSTITUTIONAL INVESTORS ONLY. - -------------------------------------------------------------------------------- 4 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT BELOW, RIVERSOURCE GLOBAL BALANCED FUND'S PORTFOLIO MANAGEMENT TEAM, ALEX LYLE AND STEPHEN THORNBER OF THREADNEEDLE INTERNATIONAL LIMITED (THREADNEEDLE), DISCUSS THE FUND'S POSITIONING AND RESULTS FOR FISCAL YEAR 2005. THREADNEEDLE, AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF AMERIPRISE FINANCIAL, INC., ACTS AS THE SUBADVISER TO THE FUND. ALEX LYLE MANAGES ASSET ALLOCATION. STEVE THORNBER MANAGES THE PORTION OF THE FUND ALLOCATED TO EQUITY SECURITIES. NICHOLAS PIFER OF RIVERSOURCE INVESTMENTS, LLC LEADS THE TEAM THAT MANAGES THE PORTION OF THE FUND ALLOCATED TO DEBT SECURITIES. SHAREHOLDERS WILL BE ASKED TO APPROVE A MERGER OF THE FUND INTO RIVERSOURCE BALANCED FUND AT A SHAREHOLDER MEETING ON FEB. 15, 2006. THIS APPROVAL IS NOT GUARANTEED. Q: HOW DID THE FUND PERFORM FOR THE FISCAL YEAR? A: RiverSource Global Balanced Fund's Class A shares gained 13.82% (excluding sales charge) for the 12 months ended October 31, 2005. This underperformed the all-equity MSCI All Country World Index, the Fund's benchmark index, which advanced 14.87% for the period. The Fund outperformed the Citigroup World Government Bond Index (Citigroup World Index), the Fund's benchmark index for the fixed income portion of the Fund, which fell 1.76% for the annual period. The Fund outperformed the Lipper Global Flexible Funds Index, representing the Fund's peer group, which rose 11.33%. Q: WHAT WAS THE ASSET ALLOCATION? A: At Oct. 31, 2005, the Fund was composed of 69.1% global equities, 29.9% global bonds and 1.0% cash. The equity allocation was split between U.S. stocks (41.1%) and foreign stocks (58.9%). Within the bond allocation, the largest position was foreign government obligations. Q: WHAT FACTORS MOST SIGNIFICANTLY AFFECTED EQUITY PERFORMANCE? A: Within the equity portion of the Fund, country allocation and stock selection proved most effective during the annual period. Sector allocation produced more mixed results. COUNTRY ALLOCATION The Fund's significant allocations to Japan, Asia and Latin America and its exposure to the U.S., which was less than the MSCI Index, had a positive effect on the Fund's relative results. Each of these international equity markets notably outperformed the U.S. equity market for the fiscal year. On an individual security basis, Asian property companies, such as Hong Kong's New World Development and South Korea's Hyundai Development, and Japanese financials, such as recently merged bank Mitsubishi UFJ Financial Group and insurance firm T&D Holdings, were among the strongest performers for the Fund during the annual period. - -------------------------------------------------------------------------------- 5 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS > THE FUND'S SIGNIFICANT ALLOCATIONS TO JAPAN, ASIA AND LATIN AMERICA AND ITS MODEST EXPOSURE TO THE U.S. HAD A POSITIVE EFFECT ON THE FUND'S RELATIVE RESULTS. -- STEPHEN THORNBER Within technology, the Fund's modest position in semiconductors and hardware and its emphasis on software proved beneficial to relative results, with the U.S.' Google and Adobe Systems among the winners in this sector. In health care, a focus on healthcare equipment and biotechnology firms over the large pharmaceuticals benefited the Fund over the annual period, as large pharmaceuticals as a group struggled with pricing concerns, patent challenges and lackluster growth prospects. Switzerland's Nobel Biocare Holding and the U.S.' Amgen and ViroPharma were among the outstanding performers within this sector. The one large pharmaceutical position the Fund did own, Switzerland's Roche Holding, was a strong performer as well. Within energy, we emphasized refiners and small exploration and production companies and focused less on the major oil companies, another strategy that worked well for the Fund during the fiscal year. Canada's EnCana and the U.S.' EOG Resources and Valero Energy performed particularly well. Of course, there were disappointments as well. Israeli Internet security firm Check Point Software Technologies, U.S. retailer Dillard's, and U.S. industrial firm Ingersoll-Rand each detracted from relative results, and we sold the Fund's positions in each of these stocks during the fiscal year. Fund performance was also hurt by its holdings in U.K. supermarket Tesco [CHART] COUNTRY COMPOSITION PERCENTAGE OF PORTFOLIO ASSETS AT OCT. 31, 2005 United States 34.7% Japan 13.9% Germany 7.4% United Kingdom 6.5% France 5.0% Greece 4.5% Italy 4.5% Switzerland 4.0% Canada 2.8% South Korea 2.7% Hong Kong 1.9% Netherlands 1.4% Austria 1.2% Cash & Short-Term Securities 1.0% Other* 8.5%
* Includes Australia, Belgium, Brazil, Czechoslovakia Federated Republic, Denmark, India, Ireland, Mexico, Norway, Peru, Poland, Russia, Singapore, South Africa, Spain, Supra-National, Sweden and Taiwan. - -------------------------------------------------------------------------------- 6 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS and U.S. specialty retailer Home Depot. However, we continued to hold these stocks, as we continue to believe these companies maintain leadership status within their industries. SECTOR POSITIONING From an equity sector perspective, the Fund benefited most from its significant exposure to energy. The Fund's below-MSCI Index allocations to the lagging consumer discretionary and industrials sectors also helped performance compared to the Index. A sizable position in materials helped the Fund, particularly during the first half of the fiscal year, though the benefit was moderated somewhat by our reduction of this allocation during the second half of the period. Detracting from the Fund's relative results was significant exposure to health care and technology, although, as indicated above, this was partially offset by effective stock selection within both of these sectors. The Fund's less-than-MSCI Index exposure to the strongly performing utilities sector hurt performance as well. Q: WHAT FACTORS MOST SIGNIFICANTLY AFFECTED FIXED-INCOME PERFORMANCE? A: Returns within the global fixed income markets were weak across the board during the fiscal year due primarily to the currency effect of a stronger U.S. dollar. On a trade-weighted basis, the U.S. dollar gained 4.6% for the 12 months ended Oct. 31, 2005. Remember, as the value of the U.S. dollar increases, the dollar value of foreign investments typically decreases and vice versa. Another factor that contributed to weak global bond markets were modest returns generated by the bonds themselves, as interest rates rose, particularly in the U.S. On a relative basis to the Citigroup World Index, the Fund benefited most from effective country allocation and currency positioning. Duration management and yield curve positioning helped as well. [CHART] ASSET ALLOCATION & SECTOR COMPOSITION PERCENTAGE OF PORTFOLIO ASSETS AT OCT. 31, 2005 STOCKS 69.1% Financials 18.1% Health Care 9.8% Information Technology 8.5% Consumer Discretionary 7.7% Energy 7.0% Consumer Staples 5.4% Industrials 4.1% Materials 3.8% Telecommunications Services 3.0% Utilities 1.7% BONDS 29.9% Foreign Government 25.1% U.S. Government Obligations & Agencies 4.8% CASH EQUIVALENTS 1.0% Short-Term Securities
- -------------------------------------------------------------------------------- 7 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS > AS FOR CURRENCY POSITIONING, WE INTEND TO MAINTAIN THE FUND'S MODEST POSITION IN THE U.S. DOLLAR AND TO SEEK TO MAKE TACTICAL ALLOCATION ADJUSTMENTS AS MARKET CONDITIONS WARRANT. -- NICHOLAS PIFER COUNTRY ALLOCATION 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 core European government bond market outperformed both the Japanese government bond market and U.S. Treasury market for the fiscal year in local currency terms. CURRENCY POSITIONING The Fund maintained its significant exposure to the euro and several other European currencies as well as to the "dollar bloc" currencies of Canada and Australia. The Fund gradually increased its exposure to the U.S. dollar from a modest to a more sizable position. The Fund maintained its modest exposure to the Japanese yen. For the annual period, the Fund's positioning in the "dollar bloc" currencies had a rather neutral effect, but relative positioning between the yen and euro helped. So, too, did the Fund's increased position in the U.S. dollar, as the U.S. dollar strengthened approximately 8.7% versus the euro, 11.9% versus the Japanese yen, 5.3% versus the British pound and 2.6% versus the Australian dollar. The major exception to this trend was the U.S. dollar's weakening 2.4% versus the Canadian dollar. DURATION MANAGEMENT We maintained the Fund's duration, a principal measure of interest rate risk, approximately half a year shorter than that of the Citigroup World Index throughout the annual period. This stance was based on our view that the U.S. economy, in particular, was growing at an above-trend pace and thus, that the Federal Reserve Board (the Fed) was likely to continue raising the targeted federal funds rate until it is back to more historically normal levels. Our view on U.S. monetary policy proved correct, with the Fed raising the targeted federal funds rate by 200 basis points (2%) during the period. Global bond yields generally declined over the first half of the fiscal year, and so our duration management detracted during this time. However, for the annual period overall, the Fund's short duration positioning helped relative results, adding significant - -------------------------------------------------------------------------------- 8 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS value in the last few months of the period as global bond yields finally moved up rather substantially. YIELD CURVE POSITIONING We maintained a yield curve flattening bias on the U.S. bond market and a neutral yield curve positioning bias in most other global bond markets through most of the fiscal year. Indeed, the U.S. Treasury yield curve flattened dramatically over the annual period, meaning short-term rates rose more than long-term rates. Q: WHAT CHANGES DID YOU MAKE TO THE FUND? A: Within the equity portion of the Fund, we decreased the Fund's exposure to Latin America. Following a period of outperformance from this region, we took profits in several holdings, believing that valuations had become less attractive. We probably made this move a bit early, as Latin American equities continued to perform well through the fiscal year. Nevertheless, we redeployed those assets primarily into Japan. Having begun to add to the Fund's Japanese allocation early in the fiscal year, the Fund participated fully when this strategy finally paid off during the last four months or so of the fiscal year. The Japanese equity market rallied in response to the nation's election result, as Prime Minister Koizumi is expected to push through several market-friendly reformist policies. Within equity sectors, we increased the Fund's positions in energy, shifting away from the major oil companies and toward the refiners and smaller exploration and production companies. We also increased the Fund's holdings in financials, especially in Japan, Asia, the U.K. and continental Europe, as valuations appeared attractive. We also added assets into Asian property stocks. We reduced the Fund's positions in technology and materials. Toward the end of the period, we sought to reduce the Fund's overall risk profile and lock in some gains, given the heightened concerns over global economic growth, rising interest rates and inflation pressures. For example, in October, we reduced the Fund's exposure to energy, while still maintaining a significant allocation. Investors had started to price in a slowdown in demand as a result of high prices. Indeed, demand figures were weaker during the month, even though this may have only been a result of an inability to access supplies due to Hurricanes Katrina and Rita-related interruptions. By virtue of equity appreciation, the Fund's exposure to large-cap stocks, i.e. those stocks that had already been in or that had moved into the Top 60 of the MSCI All Country World Index over the annual period, increased. For instance, Fund holdings in this Top 60 included Mitsubishi UFJ Financial Group, BNP Paribas and Google. - -------------------------------------------------------------------------------- 9 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS Within the fixed income portion of the Fund, as mentioned, we gradually increased exposure to the U.S. dollar. Also, given the recent run of strong performance by European government bonds, we took some profits there and gradually redeployed those assets into U.S. and Japanese government bonds, while still maintaining modest exposure to each of these markets. Finally, 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 maintained the Fund's duration shorter than that of the Citigroup World Index. Q: HOW DO YOU INTEND TO MANAGE THE FUND IN THE COMING MONTHS? A: Overall, we maintain a generally positive outlook for the financial markets. Global economic growth remains healthy, though not as robust as in 2004. We are particularly optimistic for ongoing growth in China and Japan, less so for Europe. We intend to keep the Fund's significant exposure to equities in the coming months. Equity valuations appear reasonably attractive, with narrow differentials between value stocks and growth stocks, both across the global markets and within many markets. While we do not believe this scenario will last long, it gives us the opportunity to compare various sectors and industries across global markets, seeking to identify the very best growth-oriented prospects wherever they may be. Given this view, we intend to maintain the Fund's significant equity exposure to Asia and Japan and its more moderate equity exposure to the U.S. and the U.K., although we believe we can continue to find attractive stocks in these markets on a select, opportunistic basis. We also intend to maintain the Fund's more modest exposure to Latin America for the near term, as we believe valuations in the region remain stretched. We continue to expect energy prices to remain strong as demand outstrips supply. We remain positive regarding the energy sector and will likely increase our position when the sector and oil prices stabilize. We also remain concerned about the consumer sectors, especially in the U.S., the U.K. and core Europe, given the potential impact of rising interest rates and inflation pressures on consumer spending, which, for some time now, has been the driver of economic growth in these regions. Within the fixed income portion of the Fund, we intend to lengthen the Fund's duration a bit over the near term given that yields have now risen to the point that we believe bonds are closer to fair value. Thus, we believe it would be prudent to take some profits, especially on the Fund's shorter-term positions. - -------------------------------------------------------------------------------- 10 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS At the same time, we think that yields will move still higher, with the Fed likely to continue raising the targeted federal funds rate into the early months of 2006. As for currency positioning, we intend to maintain the Fund's modest position in the U.S. dollar and to seek to make tactical allocation adjustments as market conditions warrant. For the time being, cyclical factors affecting the U.S. dollar, such as Fed tightening, appear to be winning the tug-of-war with ongoing structural problems, such as burgeoning current account and trade deficits. We may well re-evaluate this positioning once the Fed completes its tightening cycle, as the structural problems of the U.S. dollar may once again come to the fore. Another factor that may affect the relative strength or weakness of the U.S. dollar in the coming months is the actions of other central banks. Based on its recent comments, it currently appears that the European Central Bank may raise its interest rates in early 2006. This would be its first interest rate hike in more than two years. Also, with Japan's economy improving, the Bank of Japan may look to remove some of its monetary policy accommodation sooner than later. From a country perspective, we continue to favor European bonds. As always, we remain focused on careful security selection, as we continue to seek opportunities to capitalize on attractively valued bonds. - -------------------------------------------------------------------------------- 11 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT THE FUND'S LONG-TERM PERFORMANCE The chart on the facing page illustrates the total value of an assumed $10,000 investment in RiverSource Global Balanced Fund Class A shares (from 12/1/96 to 10/31/05)* as compared to the performance of three widely cited performance indices, the MSCI All Country World Index, the Citigroup World Government Bond Index and the Lipper Global Flexible Funds Index. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5.75%, while such charges are not reflected in the performance of the indices. Returns for the Fund include the reinvestment of any distribution paid during each period. THE PERFORMANCE INFORMATION SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT A GUARANTEE OF FUTURE RESULTS. THE 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 OR VISITING www.riversource.com/funds. ALSO SEE "PAST PERFORMANCE" IN THE FUND'S CURRENT PROSPECTUS. * Fund data is from Nov. 13, 1996. MSCI All Country World Index, Citigroup World Government Bond Index and Lipper peer group data is from Dec. 1, 1996. [CHART] VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE GLOBAL BALANCED FUND
12/1/96 10/97 10/98 10/99 10/00 10/01 10/02 10/03 10/04 10/05 RiverSource Global Balanced Fund Class A (includes sales charge) $ 9,425 $10,188 $11,310 $13,103 $13,446 $10,672 $ 9,660 $11,294 $12,606 $14,349 Morgan Stanley Capital International (MSCI) All Country World Index(1) $10,000 $11,018 $12,454 $15,694 $15,820 $11,841 $10,234 $12,818 $14,617 $16,790 Citigroup World Government Bond Index(2) $10,000 $10,128 $11,399 $11,119 $10,554 $11,492 $12,544 $14,335 $15,871 $15,592 Lipper Global Flexible Funds Index(3) $10,000 $11,100 $11,441 $13,557 $14,763 $12,758 $11,906 $14,369 $15,862 $17,659
- -------------------------------------------------------------------------------- 12 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT COMPARATIVE RESULTS RESULTS AT OCT. 31, 2005
SINCE 1 YEAR 3 YEARS 5 YEARS INCEPTION(4) RIVERSOURCE GLOBAL BALANCED FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $10,728 $13,997 $10,055 $14,349 Average annual total return +7.28% +11.86% +0.11% +4.11% MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) ALL COUNTRY WORLD INDEX(1) Cumulative value of $10,000 $11,487 $16,405 $10,615 $16,790 Average annual total return +14.87% +17.94% +1.20% +5.98% CITIGROUP WORLD GOVERNMENT BOND INDEX(2) Cumulative value of $10,000 $ 9,824 $12,430 $14,775 $15,592 Average annual total return -1.76% +7.52% +8.12% +5.11% LIPPER GLOBAL FLEXIBLE FUNDS INDEX(3) Cumulative value of $10,000 $11,133 $14,831 $11,963 $17,659 Average annual total return +11.33% +14.04% +3.65% +6.59%
RESULTS FOR OTHER SHARE CLASSES CAN BE FOUND ON PAGE 4. (1) The Morgan Stanley Capital International (MSCI) All Country World Index, an unmanaged index of equity securities, is designed to measure equity market performance in the global developed and emerging markets. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. (2) The Citigroup World Government Bond Index, an unmanaged market capitalization weighted benchmark, tracks the performance of the 17 government bond markets around the world. It is widely recognized by investors as a measurement index for portfolios of government bond securities. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. (3) The Lipper Global Flexible Funds Index includes the 10 largest global flexible (balanced) funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. (4) Fund data is from Nov. 13, 1996. MSCI All Country World Index, Citigroup World Government Bond Index and Lipper peer group data is from Dec. 1, 1996. DISTRIBUTION SUMMARY THE TABLE BELOW DETAILS THE FUND'S INCOME AND CAPITAL GAIN DISTRIBUTIONS FOR THE FISCAL YEARS SHOWN. MORE INFORMATION ON THE OTHER CLASSES CAN BE FOUND IN THE FINANCIAL HIGHLIGHTS SECTION OF THIS REPORT'S NOTES TO FINANCIAL STATEMENTS.
CLASS A --------------------------------------------- SHORT-TERM LONG-TERM FISCAL YEAR ENDED INCOME CAPITAL GAINS CAPITAL GAINS TOTAL Oct. 31, 2005 $0.16 $ -- $ -- $0.16 Oct. 31, 2004 0.03 -- -- 0.03 Oct. 31, 2003 0.04 -- -- 0.04 Oct. 31, 2002 0.02 -- -- 0.02 Oct. 31, 2001 0.03 0.22 0.29 0.54
- -------------------------------------------------------------------------------- 13 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT INVESTMENTS IN SECURITIES RIVERSOURCE GLOBAL BALANCED FUND OCT. 31, 2005 (PERCENTAGES REPRESENT VALUE OF INVESTMENTS COMPARED TO NET ASSETS)
ISSUER SHARES VALUE(a) COMMON STOCKS (66.9%)(c) BRAZIL (0.6%) METALS & MINING Cia Vale do Rio Doce ADR 20,816 $ 768,110 - ----------------------------------------------------------------------------------------------------- CANADA (1.3%) METALS & MINING (0.4%) Cameco 9,100 437,586 - ----------------------------------------------------------------------------------------------------- OIL & GAS (0.6%) EnCana 15,438 705,887 - ----------------------------------------------------------------------------------------------------- ROAD & RAIL (0.3%) Canadian Pacific Railway 10,100 415,203 - ----------------------------------------------------------------------------------------------------- CZECHOSLOVAKIA FEDERATED REPUBLIC (0.3%) PHARMACEUTICALS Zentiva GDR 6,965(b),(d) 308,371 - ----------------------------------------------------------------------------------------------------- DENMARK (--%) INSURANCE TrygVesta 988(b) 40,779 - ----------------------------------------------------------------------------------------------------- FRANCE (3.1%) AUTOMOBILES (0.3%) Renault 4,727 409,378 - ----------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (0.3%) BNP Paribas 5,377 407,812 - ----------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.4%) France Telecom 18,778 488,174 - ----------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.6%) Schneider Electric 8,215 675,098 - ----------------------------------------------------------------------------------------------------- IT SERVICES (0.5%) Atos Origin 8,353(b) 573,980 - ----------------------------------------------------------------------------------------------------- OIL & GAS (0.4%) Total 2,042 513,871 - ----------------------------------------------------------------------------------------------------- PHARMACEUTICALS (0.6%) Sanofi-Aventis 9,137 732,002 - ----------------------------------------------------------------------------------------------------- GERMANY (1.7%) ELECTRIC UTILITIES (0.6%) E.ON 7,921 $ 717,723 - ----------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (0.5%) Fresenius Medical Care 7,210 650,954 - ----------------------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (0.6%) Hypo Real Estate Holding 16,001 771,896 - ----------------------------------------------------------------------------------------------------- GREECE (0.4%) CONSTRUCTION MATERIALS TITAN Cement 16,000 547,080 - ----------------------------------------------------------------------------------------------------- HONG KONG (1.8%) MULTILINE RETAIL (0.3%) Lifestyle Intl Holdings 228,000 329,622 - ----------------------------------------------------------------------------------------------------- REAL ESTATE (0.7%) New World Development 503,600 623,296 Sun Hung Kai Properties 25,000 237,282 ---------- Total 860,578 - ----------------------------------------------------------------------------------------------------- SPECIALTY RETAIL (0.8%) Esprit Holdings 148,000 1,048,514 - ----------------------------------------------------------------------------------------------------- INDIA (0.7%) COMMERCIAL BANKS State Bank of India GDR 21,100(d) 910,254 - ----------------------------------------------------------------------------------------------------- IRELAND (0.4%) Commercial Banks Anglo Irish Bank 31,620 431,304 - ----------------------------------------------------------------------------------------------------- ITALY (0.3%) OIL & GAS Eni 15,940 426,668 - ----------------------------------------------------------------------------------------------------- JAPAN (11.2%) AUTOMOBILES (0.4%) Honda Motor 8,900 495,019 - -----------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 14 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT
ISSUER SHARES VALUE(a) COMMON STOCKS (CONTINUED) JAPAN (CONT.) CAPITAL MARKETS (1.1%) Matsui Securities 30,900 $ 343,368 Nomura Holdings 33,700 519,925 Tokai Tokyo Securities 130,000 510,147 ---------- Total 1,373,440 - ----------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (2.0%) Bank of Yokohama 85,000 692,128 Chiba Bank 51,000 454,004 Mitsubishi UFJ Financial Group 97 1,219,245 ---------- Total 2,365,377 - ----------------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.5%) Nishimatsu Construction 142,000 657,549 - ----------------------------------------------------------------------------------------------------- CONSUMER FINANCE (0.6%) Aiful 9,000 673,238 - ----------------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (0.6%) Hoya 21,200 742,581 - ----------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (1.8%) Daito Trust Construction 12,900 639,235 Daiwa House Industry 35,000 469,141 GOLDCREST 7,770 485,700 Sharp 39,000 535,569 ---------- Total 2,129,645 - ----------------------------------------------------------------------------------------------------- INSURANCE (1.0%) Nisshin Fire & Marine Insurance 56,000 252,295 T&D Holdings 15,550 977,933 ---------- Total 1,230,228 - ----------------------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (0.2%) eAccess 333 206,798 - ----------------------------------------------------------------------------------------------------- MACHINERY (1.2%) AMADA 93,000 710,551 Komatsu 60,000 799,550 ---------- Total 1,510,101 - ----------------------------------------------------------------------------------------------------- OFFICE ELECTRONICS (0.3%) Canon 6,200 328,189 - ----------------------------------------------------------------------------------------------------- OIL & GAS (0.4%) Nippon Oil 54,000 461,195 - ----------------------------------------------------------------------------------------------------- REAL ESTATE (0.6%) Mitsui Fudosan 47,000 769,462 - ----------------------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE (0.5%) Kamigumi 72,000 593,502 - ----------------------------------------------------------------------------------------------------- MEXICO (0.5%) WIRELESS TELECOMMUNICATION SERVICES America Movil ADR Series L 23,843 $ 625,879 - ----------------------------------------------------------------------------------------------------- NETHERLANDS (0.8%) FOOD PRODUCTS (0.4%) Royal Numico 12,439(b) 503,798 - ----------------------------------------------------------------------------------------------------- MEDIA (0.4%) VNU 15,836 503,926 - ----------------------------------------------------------------------------------------------------- NORWAY (0.2%) ENERGY EQUIPMENT & SERVICES TGS NOPEC Geophysical 5,500(b) 206,882 - ----------------------------------------------------------------------------------------------------- PERU (0.4%) METALS & MINING Compania de Minas Buenaventura ADR 18,344 472,725 - ----------------------------------------------------------------------------------------------------- RUSSIA (0.6%) WIRELESS TELECOMMUNICATION SERVICES Mobile Telesystems ADR 20,254 749,195 - ----------------------------------------------------------------------------------------------------- SINGAPORE (0.5%) REAL ESTATE City Developments 121,000 630,898 - ----------------------------------------------------------------------------------------------------- SOUTH AFRICA (0.3%) FOOD & STAPLES RETAILING Massmart Holdings 46,197 357,021 - ----------------------------------------------------------------------------------------------------- SOUTH KOREA (2.6%) CHEMICALS (0.3%) Hanwha Chemical 35,220 375,668 - ----------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (0.8%) Shinhan Financial Group 28,210 948,657 - ----------------------------------------------------------------------------------------------------- METALS & MINING (0.5%) POSCO 2,984 613,038 - ----------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.0%) Samsung Electronics 2,359 1,260,218 - ----------------------------------------------------------------------------------------------------- SPAIN (0.3%) IT SERVICES Indra Sistemas 20,562 421,292 - -----------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 15 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT
ISSUER SHARES VALUE(a) COMMON STOCKS (CONTINUED) SWEDEN (0.3%) COMMUNICATIONS EQUIPMENT Telefonaktiebolaget LM Ericsson Cl B 122,557 $ 401,679 - ----------------------------------------------------------------------------------------------------- SWITZERLAND (3.9%) BIOTECHNOLOGY (0.3%) Actelion 2,784(b) 313,144 - ----------------------------------------------------------------------------------------------------- CAPITAL MARKETS (0.8%) UBS 11,898 1,014,477 - ----------------------------------------------------------------------------------------------------- FOOD PRODUCTS (0.7%) Nestle 3,052 908,861 - ----------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.5%) Nobel Biocare Holding 2,554 588,858 - ----------------------------------------------------------------------------------------------------- PHARMACEUTICALS (1.6%) Novartis 8,622 463,780 Roche Holding 9,605 1,435,191 ---------- Total 1,898,971 - ----------------------------------------------------------------------------------------------------- TAIWAN (0.3%) SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Taiwan Semiconductor Mfg 259,253 402,340 - ----------------------------------------------------------------------------------------------------- UNITED KINGDOM (5.1%) CAPITAL MARKETS (0.5%) 3i Group 48,312 648,194 - ----------------------------------------------------------------------------------------------------- CHEMICALS (0.4%) BOC Group 23,244 458,219 - ----------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (0.5%) Standard Chartered Bank 31,473 660,914 - ----------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES (0.6%) British Energy Group 92,496(b) 727,350 - ----------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (0.5%) Tesco 107,556 572,695 - ----------------------------------------------------------------------------------------------------- FOOD PRODUCTS (0.8%) Cadbury Schweppes 84,467 832,336 - ----------------------------------------------------------------------------------------------------- MEDIA (0.2%) Reuters Group 47,715 303,256 - ----------------------------------------------------------------------------------------------------- METALS & MINING (0.8%) BHP Billiton 59,957 882,257 - ----------------------------------------------------------------------------------------------------- OIL & GAS (0.3%) BP 38,380 $ 425,144 - ----------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.5%) Vodafone Group 235,785 619,022 - ----------------------------------------------------------------------------------------------------- UNITED STATES (29.3%) BEVERAGES (0.8%) PepsiCo 17,362 1,025,747 - ----------------------------------------------------------------------------------------------------- BIOTECHNOLOGY (1.3%) Amgen 13,813(b) 1,046,473 ViroPharma 29,141(b) 558,342 ---------- Total 1,604,815 - ----------------------------------------------------------------------------------------------------- CAPITAL MARKETS (1.7%) Bear Stearns Companies 4,462 472,080 E*TRADE Financial 39,221(b) 727,549 Goldman Sachs Group 3,578 452,152 Lehman Brothers Holdings 3,951 472,815 ---------- Total 2,124,596 - ----------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (1.9%) Bank of America 25,904 1,133,042 US Bancorp 19,964 590,535 Wachovia 11,897 601,036 ---------- Total 2,324,613 - ----------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (0.3%) Cisco Systems 23,081(b) 402,764 - ----------------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (0.5%) Dell 17,691(b) 563,989 - ----------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (1.3%) Citigroup 35,586 1,629,127 - ----------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES (0.5%) Edison Intl 13,387 585,815 - ----------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (1.1%) CVS 21,133 515,857 Walgreen 17,053 774,717 ---------- Total 1,290,574 - ----------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (1.4%) St. Jude Medical 15,756(b) 757,391 Thermo Electron 20,072(b) 605,974 Zimmer Holdings 4,986(b) 317,957 ---------- Total 1,681,322 - -----------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 16 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT
ISSUER SHARES VALUE(a) COMMON STOCKS (CONTINUED) UNITED STATES (CONT.) HEALTH CARE PROVIDERS & SERVICES (1.4%) CIGNA 4,957 $ 574,368 Laboratory Corp of America Holdings 8,039(b) 387,882 WellPoint 9,510(b) 710,206 ----------- Total 1,672,456 - ----------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (0.5%) Carnival Unit 11,492 570,808 - ----------------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (0.5%) General Electric 19,500 661,245 - ----------------------------------------------------------------------------------------------------- INSURANCE (1.5%) American Intl Group 15,092 977,962 Genworth Financial Cl A 25,244 799,982 ----------- Total 1,777,944 - ----------------------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (0.9%) Google Cl A 2,836(b) 1,055,389 - ----------------------------------------------------------------------------------------------------- MEDIA (0.9%) Dex Media 28,932 780,296 Lamar Advertising Cl A 6,892(b) 307,521 ----------- Total 1,087,817 - ----------------------------------------------------------------------------------------------------- OIL & GAS (4.7%) Chevron 5,064 289,002 EOG Resources 12,303 833,897 Exxon Mobil 11,868 666,270 Forest Oil 16,562(b) 723,428 Kerr-McGee 7,205 612,713 Marathon Oil 6,500 391,040 Ultra Petroleum 18,244(b) 957,628 Valero Energy 10,651 1,120,912 ----------- Total 5,594,890 - ----------------------------------------------------------------------------------------------------- PHARMACEUTICALS (1.8%) Abbott Laboratories 13,875 597,319 Johnson & Johnson 23,003 1,440,448 Pfizer 9,141 198,725 ----------- Total 2,236,492 - ----------------------------------------------------------------------------------------------------- ROAD & RAIL (0.3%) Norfolk Southern 10,068 404,734 - ----------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.4%) Intel 21,299 500,527 - ----------------------------------------------------------------------------------------------------- SOFTWARE (2.7%) Adobe Systems 27,345 $ 881,876 Autodesk 15,067 679,974 Microsoft 67,023 1,722,491 ----------- Total 3,284,341 - ----------------------------------------------------------------------------------------------------- SPECIALTY RETAIL (1.3%) Home Depot 29,114 1,194,839 Staples 19,595 445,394 ----------- Total 1,640,233 - ----------------------------------------------------------------------------------------------------- TOBACCO (0.7%) Altria Group 11,993 900,075 - ----------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.9%) American Tower Cl A 48,154(b) 1,148,473 - ----------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $68,099,107) $81,802,868 - ----------------------------------------------------------------------------------------------------- PREFERRED STOCK & OTHER (0.6%)(c) GERMANY Porsche 941 $ 678,308 - ----------------------------------------------------------------------------------------------------- SINGAPORE City Development Warrants 12,600(b),(h) 46,871 - ----------------------------------------------------------------------------------------------------- TOTAL PREFERRED STOCK & OTHER (Cost: $452,886) $ 725,179 - ----------------------------------------------------------------------------------------------------- COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) BONDS (29.2%)(c) AUSTRALIA (0.5%) New South Wales Treasury (Australian Dollar) 03-01-08 8.00% 800,000 $ 629,605 - ----------------------------------------------------------------------------------------------------- AUSTRIA (1.2%) Oesterreichische Kontrollbank (Japanese Yen) 03-22-10 1.80 160,000,000 1,440,938 - -----------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 17 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT
COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) BONDS (CONTINUED) BELGIUM (0.6%) Govt of Belgium (European Monetary Unit) 12-24-12 8.00% 450,000 $ 703,184 - ----------------------------------------------------------------------------------------------------- CANADA (1.5%) Govt of Canada (Canadian Dollar) 09-01-08 4.25 1,600,000 1,374,699 Province of British Columbia (Canadian Dollar) 12-01-06 5.25 500,000 431,063 ---------- Total 1,805,762 - ----------------------------------------------------------------------------------------------------- DENMARK (0.2%) Realkredit Danmark (Danish Krone) 01-01-08 4.00 1,720,000 283,063 - ----------------------------------------------------------------------------------------------------- FRANCE (1.8%) French Treasury Note (European Monetary Unit) 07-12-08 3.00 300,000 361,569 Govt of France (European Monetary Unit) 04-25-13 4.00 500,000 629,579 10-25-14 4.00 930,000 1,169,978 ---------- Total 2,161,126 - ----------------------------------------------------------------------------------------------------- GERMANY (5.0%) Allgemeine Hypothekenbank Rheinboden (European Monetary Unit) 09-02-09 5.00 850,000(d) 1,084,440 Bundesrepublik Deutschland (European Monetary Unit) 01-05-06 6.00 700,000 844,136 07-04-08 4.75 725,000 913,463 07-04-09 4.50 85,000 107,579 07-04-10 5.25 850,000 1,118,869 06-20-16 6.00 434,598 640,043 07-04-27 6.50 400,000 675,393 Rheinische Hypothekenbank (European Monetary Unit) 09-24-08 4.25% 550,000 684,454 ---------- Total 6,068,377 - ----------------------------------------------------------------------------------------------------- GREECE (3.9%) Hellenic Republic (European Monetary Unit) 06-21-06 2.75 2,000,000 $2,401,389 04-18-08 3.50 100,000 121,874 04-20-09 3.50 800,000 976,030 05-20-13 4.60 400,000 517,174 10-22-22 5.90 500,000 749,373 ---------- Total 4,765,840 - ----------------------------------------------------------------------------------------------------- ITALY (4.0%) Buoni Poliennali Del Tesoro (European Monetary Unit) 11-01-09 4.25 400,000 503,041 08-01-11 5.25 200,000 265,963 08-01-13 4.25 600,000 762,450 08-01-14 4.25 720,000 914,031 08-01-15 3.75 400,000 487,082 02-01-20 4.50 350,000 451,960 11-01-29 5.25 600,000 855,616 08-01-34 5.00 500,000 698,426 ---------- Total 4,938,569 - ----------------------------------------------------------------------------------------------------- JAPAN (2.5%) Govt of Japan (Japanese Yen) 03-20-09 0.60 45,000,000 387,072 06-22-09 1.40 20,000,000 176,800 12-21-09 1.70 162,000,000 1,449,023 06-20-13 0.50 134,000,000 1,084,743 ---------- Total 3,097,638 - ----------------------------------------------------------------------------------------------------- NETHERLANDS (0.5%) Govt of Netherlands (European Monetary Unit) 07-15-12 5.00 500,000 664,201 - ----------------------------------------------------------------------------------------------------- NORWAY (0.3%) Govt of Norway (Norwegian Krone) 05-16-11 6.00% 2,100,000 360,961 - ----------------------------------------------------------------------------------------------------- POLAND (0.2%) Republic of Poland (Polish Zloty) 03-24-10 5.75 655,000 202,030 - -----------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 18 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT
COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) BONDS (CONTINUED) SPAIN (0.4%) Govt of Spain (European Monetary Unit) 07-30-09 5.15 350,000 $ 452,980 - ----------------------------------------------------------------------------------------------------- SUPRA-NATIONAL (0.4%) Intl Bank Reconstruction & Development (Japanese Yen) 02-18-08 2.00 55,000,000 493,044 - ----------------------------------------------------------------------------------------------------- SWEDEN (0.2%) Govt of Sweden (Swedish Krona) 03-15-11 5.25 2,000,000 279,315 - ----------------------------------------------------------------------------------------------------- UNITED KINGDOM (1.3%) Greater Beijing First Expressways Sr Nts 06-15-07 9.50 170,000(b),(e),(h) -- - ----------------------------------------------------------------------------------------------------- United Kingdom Treasury (British Pound) 07-12-11 9.00 410,000 895,020 09-27-13 8.00 340,000 747,799 ----------- Total 1,642,819 - ----------------------------------------------------------------------------------------------------- UNITED STATES (4.6%) ConocoPhillips 03-15-28 7.13% $ 200,000 209,872 Federal Natl Mtge Assn 07-15-08 3.88 700,000 686,074 05-15-10 4.13 415,000 403,718 U.S. Treasury 07-31-06 2.75 1,000,000 988,750 02-15-07 2.25 500,000 486,699 02-15-09 3.00 500,000 478,045 11-15-12 4.00 200,000 193,828 05-15-15 4.13 470,000 453,550 08-15-20 8.75 500,000 707,500 08-15-23 6.25 100,000 116,707 02-15-26 6.00 524,000 602,395 U.S. Treasury Inflation-Indexed Bond 01-15-15 1.63 370,224(g) 359,191 ----------- Total 5,686,329 - ----------------------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $34,924,562) $35,675,781 - ----------------------------------------------------------------------------------------------------- AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) SHORT-TERM SECURITY (1.0%) COMMERCIAL PAPER CRC Funding LLC 11-01-05 4.04% $1,200,000(f) $ 1,199,865 - ----------------------------------------------------------------------------------------------------- TOTAL SHORT-TERM SECURITY (Cost: $1,200,000) $ 1,199,865 - ----------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $104,676,555)(i) $119,403,693 =====================================================================================================
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 19 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT NOTES TO INVESTMENTS IN SECURITIES (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. 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. (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 Oct. 31, 2005, the value of these securities amounted to $2,303,065 or 1.9% of net assets. (e) Negligible market value. (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 Oct. 31, 2005, the value of these securities amounted to $1,199,865 or 1.0% of net assets. (g) 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. (h) 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 Oct. 31, 2005, is as follows:
ACQUISITION SECURITY DATE COST ---------------------------------------------------------------------------------- City Development Warrants 05-04-04 $ -- Greater Beijing First Expressways 9.50% Sr Nts 2007 06-12-97 thru 09-30-04 51,391
(i) At Oct. 31, 2005, the cost of securities for federal income tax purposes was $105,042,617 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $16,554,943 Unrealized depreciation (2,193,867) ----------------------------------------------------------------------------------- Net unrealized appreciation $14,361,076 -----------------------------------------------------------------------------------
THE GLOBAL INDUSTRY CLASSIFICATION STANDARD (GICS) WAS DEVELOPED BY AND IS THE EXCLUSIVE PROPERTY OF MORGAN STANLEY CAPITAL INTERNATIONAL INC. AND STANDARD & POOR'S, A DIVISION OF THE MCGRAW-HILL COMPANIES, INC. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/funds. - -------------------------------------------------------------------------------- 20 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES RIVERSOURCE GLOBAL BALANCED FUND OCT. 31, 2005 ASSETS Investments in securities, at value (Note 1) (identified cost $104,676,555) $119,403,693 Cash in bank on demand deposit 2,091,780 Foreign currency holdings (identified cost $608,494) (Note 1) 602,713 Capital shares receivable 66,848 Dividends and accrued interest receivable 531,953 Receivable for investment securities sold 781,605 - -------------------------------------------------------------------------------------------------------- Total assets 123,478,592 - -------------------------------------------------------------------------------------------------------- LIABILITIES Payable for investment securities purchased 1,031,709 Unrealized depreciation on foreign currency contracts held, at value (Note 5) 11,780 Accrued investment management services fee 7,892 Accrued distribution fee 3,495 Accrued service fee 244 Accrued transfer agency fee 2,302 Accrued administrative services fee 799 Other accrued expenses 73,897 - -------------------------------------------------------------------------------------------------------- Total liabilities 1,132,118 - -------------------------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $122,346,474 ======================================================================================================== REPRESENTED BY Capital stock -- $.01 par value (Note 1) $ 211,244 Additional paid-in capital 139,856,069 Undistributed net investment income 1,474,854 Accumulated net realized gain (loss) (Note 7) (33,904,556) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Note 5) 14,708,863 - -------------------------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $122,346,474 ======================================================================================================== Net assets applicable to outstanding shares: Class A $ 66,101,718 Class B $ 24,915,373 Class C $ 1,356,124 Class Y $ 29,973,259 Net asset value per share of outstanding capital stock: Class A shares 11,384,322 $ 5.81 Class B shares 4,366,600 $ 5.71 Class C shares 238,966 $ 5.67 Class Y shares 5,134,527 $ 5.84
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT STATEMENT OF OPERATIONS RIVERSOURCE GLOBAL BALANCED FUND YEAR ENDED OCT. 31, 2005 INVESTMENT INCOME Income: Dividends $ 1,477,346 Interest 1,321,001 Fee income from securities lending (Note 3) 3,158 Less foreign taxes withheld (116,364) - ------------------------------------------------------------------------------------------------- Total income 2,685,141 - ------------------------------------------------------------------------------------------------- Expenses (Note 2): Investment management services fee 991,484 Distribution fee Class A 157,634 Class B 298,401 Class C 12,559 Transfer agency fee 271,955 Incremental transfer agency fee Class A 14,258 Class B 11,275 Class C 395 Service fee -- Class Y 22,226 Administrative services fees and expenses 70,382 Compensation of board members 10,251 Custodian fees 55,650 Printing and postage 54,575 Registration fees 47,829 Audit fees 22,000 Other 7,362 - ------------------------------------------------------------------------------------------------- Total expenses 2,048,236 Earnings credits on cash balances (Note 2) (12,524) - ------------------------------------------------------------------------------------------------- Total net expenses 2,035,712 - ------------------------------------------------------------------------------------------------- Investment income (loss) -- net 649,429 - ------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (Note 3) 11,463,834 Foreign currency transactions 206,847 - ------------------------------------------------------------------------------------------------- Net realized gain (loss) on investments 11,670,681 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,789,225 - ------------------------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 13,459,906 - ------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $14,109,335 =================================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS RIVERSOURCE GLOBAL BALANCED FUND YEAR ENDED OCT. 31,
2005 2004 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 649,429 $ 579,391 Net realized gain (loss) on investments 11,670,681 5,362,031 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,789,225 4,301,031 - ------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 14,109,335 10,242,453 - ------------------------------------------------------------------------------------------------------ Distributions to shareholders from: Net Investment income Class A (1,724,303) (304,857) Class B (582,883) -- Class C (25,154) -- Class Y (593,206) (81,770) - ------------------------------------------------------------------------------------------------------ Total distributions (2,925,546) (386,627) - ------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales Class A shares (Note 2) 20,391,867 12,342,103 Class B shares 5,518,877 4,322,699 Class C shares 877,059 237,249 Class Y shares 16,574,779 8,838,422 Reinvestment of distributions at net asset value Class A shares 1,659,986 293,636 Class B shares 564,860 -- Class C shares 24,617 -- Class Y shares 593,163 81,761 Payments for redemptions Class A shares (18,894,367) (14,335,235) Class B shares (Note 2) (14,168,528) (10,299,121) Class C shares (Note 2) (444,824) (164,780) Class Y shares (1,579,209) (3,905,336) - ------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from capital share transactions 11,118,280 (2,588,602) - ------------------------------------------------------------------------------------------------------ Total increase (decrease) in net assets 22,302,069 7,267,224 Net assets at beginning of year 100,044,405 92,777,181 - ------------------------------------------------------------------------------------------------------ Net assets at end of year $122,346,474 $100,044,405 ====================================================================================================== Undistributed net investment income $ 1,474,854 $ 1,645,386 - ------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 23 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS RIVERSOURCE GLOBAL BALANCED FUND (FORMERLY AXP THREADNEEDLE GLOBAL BALANCED FUND) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of AXP Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified open-end management investment company. The Fund invests primarily in equity and debt securities of issuers throughout the world. AXP Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board. The Fund offers Class A, Class B, Class C and Class Y shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class Y shares have no sales charge and are offered only to qualifying institutional investors. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee, transfer agency fees and service fee (class specific expenses) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. 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, Inc. (Ameriprise Financial) (formerly American Express Financial Corporation) utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with these procedures. If a development or event is so significant that there is a reasonably high degree of certainty that the effect of the development or event has actually caused the closing price to no longer reflect the actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the New York Stock Exchange. Significant events include material movements in the U.S. securities markets prior to the opening of foreign markets on the following trading day. FVP results in an estimated price that reasonably reflects the current market conditions in order to value the portfolio holdings such - -------------------------------------------------------------------------------- 24 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT that shareholder transactions receive a fair net asset value. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. ILLIQUID SECURITIES At Oct. 31, 2005, investments in securities included issues that are illiquid which the Fund currently limits to 10% of net assets, at market value, at the time of purchase. The aggregate value of such securities at Oct. 31, 2005 was $46,871 representing 0.04% of net assets. These securities are valued at fair value according to methods selected in good faith by the Board. According to Board guidelines, certain unregistered securities are determined to be liquid and are not included within the 10% limitation specified above. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. OPTION TRANSACTIONS To produce incremental earnings, protect gains, and facilitate buying and selling of securities for investments, the Fund may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Fund also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. - -------------------------------------------------------------------------------- 25 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 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. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At Oct. 31, 2005, foreign currency holdings consisted of multiple denominations, primarily Canadian dollars and European monetary units. The Fund may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete its contract obligations. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The 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 shareholders. No provision for income or excise taxes is thus required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes, and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. On the statement of assets and liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been increased by $2,105,585 and accumulated net realized loss has been increased by $2,105,585. - -------------------------------------------------------------------------------- 26 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED OCT. 31, 2005 2004 - -------------------------------------------------------------------------------- CLASS A Distributions paid from: Ordinary income $1,724,303 $304,857 Long-term capital gain -- -- CLASS B Distributions paid from: Ordinary income 582,883 -- Long-term capital gain -- -- CLASS C Distributions paid from: Ordinary income 25,154 -- Long-term capital gain -- -- CLASS Y Distributions paid from: Ordinary income 593,206 81,770 Long-term capital gain -- --
At Oct. 31, 2005, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ 1,829,461 Accumulated long-term gain (loss) $(33,899,972) Unrealized appreciation (depreciation) $ 14,349,672
DIVIDENDS TO SHAREHOLDERS Dividends from net investment income, declared and paid each calendar quarter, when available, are reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the last income dividend of the calendar year. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. - -------------------------------------------------------------------------------- 27 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT 2. EXPENSES AND SALES CHARGES Under an Investment Management Services Agreement, RiverSource Investments, LLC (the Investment Manager) determines which securities will be purchased, held or sold. Prior to Oct. 1, 2005, investment management services were provided by Ameriprise Financial. The management fee is a percentage of the Fund's average daily net assets that declines from 0.79% to 0.665% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of the Fund to the Lipper Global Flexible Funds Index. In certain circumstances, the Board may approve a change in the index. The maximum adjustment is 0.08% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment increased the fee by $72,116 for the year ended Oct. 31, 2005. Under the current Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. Prior to Oct. 1, 2005, the fee percentage of the Fund's average daily net assets declined from 0.06% to 0.035% annually as the Fund's assets increased. A minor portion of additional administrative service expenses paid by the Fund are consultants' fees and fund office expenses. Under this agreement, the Fund also pays taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees and any other expenses properly payable by the Fund and approved by the Board. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. The Investment Manager has a Subadvisory Agreement with Threadneedle International Limited, an indirect wholly-owned subsidiary of Ameriprise Financial, to subadvise the assets of the Fund. Under a separate Transfer Agency Agreement, RiverSource Service Corporation (formerly American Express Client Service Corporation) (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual fee per shareholder account for this service as follows: - - Class A $19.50 - - Class B $20.50 - - Class C $20.00 - - Class Y $17.50 The incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. Beginning May 20, 2005, the Transfer Agent implemented an annual closed account fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the statement of operations. - -------------------------------------------------------------------------------- 28 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT The Fund has agreements with Ameriprise Financial Services, Inc. (formerly American Express Financial Advisors Inc.) (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B and Class C shares. Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Sales charges received by the Distributor for distributing Fund shares were $146,294 for Class A, $25,558 for Class B and $563 for Class C for the year ended Oct. 31, 2005. During the year ended Oct. 31, 2005, the Fund's custodian and transfer agency fees were reduced by $12,524 as a result of earnings credits from overnight cash balances. The Fund also pays custodian fees to Ameriprise Trust Company (formerly American Express Trust Company), an affiliate of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $87,611,644 and $79,163,249, respectively, for the year ended Oct. 31, 2005. Realized gains and losses are determined on an identified cost basis. Income from securities lending amounted to $3,158 for the year ended Oct. 31, 2005. The risks to the Fund of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
YEAR ENDED OCT. 31, 2005 CLASS A CLASS B CLASS C CLASS Y - --------------------------------------------------------------------------------------------------- Sold 3,625,731 1,007,324 161,736 2,936,414 Issued for reinvested distributions 298,858 104,281 4,563 105,851 Redeemed (3,359,404) (2,558,363) (80,993) (276,265) - --------------------------------------------------------------------------------------------------- Net increase (decrease) 565,185 (1,446,758) 85,306 2,766,000 - --------------------------------------------------------------------------------------------------- YEAR ENDED OCT. 31, 2004 CLASS A CLASS B CLASS C CLASS Y - --------------------------------------------------------------------------------------------------- Sold 2,472,726 879,364 48,206 1,747,550 Issued for reinvested distributions 58,294 -- -- 16,159 Redeemed (2,866,353) (2,107,582) (33,478) (772,959) - --------------------------------------------------------------------------------------------------- Net increase (decrease) (335,333) (1,228,218) 14,728 990,750 - ---------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 29 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT 5. FORWARD FOREIGN CURRENCY CONTRACTS At Oct. 31, 2005, the Fund has forward foreign currency exchange contracts that obligate it to deliver currencies at specified future dates. The unrealized appreciation and/or depreciation on these contracts is included in the accompanying financial statements. See "Summary of significant accounting policies." The terms of the open contracts are as follows:
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION - ---------------------------------------------------------------------------------------------- Nov. 1, 2005 242,230 319,776 $-- $ 3,134 U.S. Dollar Australian Dollar Nov. 1, 2005 127,330 104,790 -- 1,750 U.S. Dollar European Monetary Unit Nov. 3, 2005 13,600 24,056 -- 15 British Pound U.S. Dollar Nov. 3, 2005 34,000 28,779 -- 10 Canadian Dollar U.S. Dollar Nov. 21, 2005 835,000 997,090 -- 4,599 European Monetary Unit U.S. Dollar Nov. 22, 2005 1,275,000 1,077,951 -- 2,272 Canadian Dollar U.S. Dollar - ---------------------------------------------------------------------------------------------- Total $-- $11,780 - ----------------------------------------------------------------------------------------------
6. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The agreement went into effect Sept. 20, 2005. The Fund must maintain asset coverage for borrowings of at least 300%. The agreement, which enables the Fund to participate with other RiverSource funds, permits borrowings up to $500 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to either the higher of the Federal Funds Effective Rate plus 0.40% or the JPMCB Prime Commercial Lending Rate. Borrowings are payable within 60 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.07% per annum. Prior to this agreement, the Fund had a revolving credit agreement that permitted borrowings up to $500 million with The Bank of New York. The Fund had no borrowings outstanding during the year ended Oct. 31, 2005. 7. SUBSEQUENT EVENT Shareholders will be asked to approve a merger of RiverSource Global Balanced Fund into RiverSource Balanced Fund at a shareholder meeting on Feb. 15, 2006. This approval is not guaranteed. - -------------------------------------------------------------------------------- 30 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT 8. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund had a capital loss carry-over of $33,899,972 at Oct. 31, 2005, that if not offset by capital gains will expire as follows:
2009 2010 2011 $20,987,618 $10,684,989 $2,227,365
It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. 9. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results. CLASS A
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $ 5.25 $ 4.73 $ 4.08 $ 4.53 $ 6.27 - ----------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04 .04 .05 .07 .07 Net gains (losses) (both realized and unrealized) .68 .51 .64 (.50) (1.27) - ----------------------------------------------------------------------------------------------------------------------- Total from investment operations .72 .55 .69 (.43) (1.20) - ----------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.16) (.03) (.04) (.02) (.03) Distributions from realized gains -- -- -- -- (.51) - ----------------------------------------------------------------------------------------------------------------------- Total distributions (.16) (.03) (.04) (.02) (.54) - ----------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 5.81 $ 5.25 $ 4.73 $ 4.08 $ 4.53 - ----------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 66 $ 57 $ 53 $ 54 $ 80 - ----------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(b) 1.59% 1.49% 1.60% 1.48% 1.45% - ----------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .73% .83% 1.03% 1.38% 1.18% - ----------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 71% 74% 90% 99% 173% - ----------------------------------------------------------------------------------------------------------------------- Total return(c) 13.82% 11.62% 16.91% (9.48%) (20.63%) - -----------------------------------------------------------------------------------------------------------------------
(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 a sales charge. - -------------------------------------------------------------------------------- 31 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT CLASS B
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $ 5.15 $ 4.65 $ 4.01 $ 4.47 $ 6.21 - ----------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) -- .01 -- .04 .01 Net gains (losses) (both realized and unrealized) .66 .49 .64 (.49) (1.24) - ----------------------------------------------------------------------------------------------------------------------- Total from investment operations .66 .50 .64 (.45) (1.23) - ----------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.10) -- -- (.01) -- Distributions from realized gains -- -- -- -- (.51) - ----------------------------------------------------------------------------------------------------------------------- Total distributions (.10) -- -- (.01) (.51) - ----------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 5.71 $ 5.15 $ 4.65 $ 4.01 $ 4.47 - ----------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 25 $ 30 $ 33 $ 36 $ 53 - ----------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(b) 2.35% 2.25% 2.37% 2.25% 2.21% - ----------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .01% .08% .27% .61% .42% - ----------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 71% 74% 90% 99% 173% - ----------------------------------------------------------------------------------------------------------------------- Total return(c) 12.97% 10.75% 15.96% (10.19%) (21.21%) - -----------------------------------------------------------------------------------------------------------------------
(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 a sales charge. - -------------------------------------------------------------------------------- 32 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT CLASS C
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $ 5.13 $ 4.64 $ 3.99 $ 4.46 $ 6.21 - ----------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) -- .01 -- .03 .02 Net gains (losses) (both realized and unrealized) .65 .48 .65 (.49) (1.24) - ----------------------------------------------------------------------------------------------------------------------- Total from investment operations .65 .49 .65 (.46) (1.22) - ----------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.11) -- -- (.01) (.02) Distributions from realized gains -- -- -- -- (.51) - ----------------------------------------------------------------------------------------------------------------------- Total distributions (.11) -- -- (.01) (.53) - ----------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 5.67 $ 5.13 $ 4.64 $ 3.99 $ 4.46 - ----------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 1 $ 1 $ 1 $ 1 $ 1 - ----------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(b) 2.35% 2.24% 2.36% 2.24% 2.21% - ----------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets (.05%) .08% .26% .60% .41% - ----------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 71% 74% 90% 99% 173% - ----------------------------------------------------------------------------------------------------------------------- Total return(c) 12.86% 10.56% 16.29% (10.34%) (21.17%) - -----------------------------------------------------------------------------------------------------------------------
(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 a sales charge. - -------------------------------------------------------------------------------- 33 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT CLASS Y
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $ 5.28 $ 4.76 $ 4.10 $ 4.56 $ 6.30 - ----------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .05 .05 .07 .07 .08 Net gains (losses) (both realized and unrealized) .68 .51 .64 (.50) (1.28) - ----------------------------------------------------------------------------------------------------------------------- Total from investment operations .73 .56 .71 (.43) (1.20) - ----------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.17) (.04) (.05) (.03) (.03) Distributions from realized gains -- -- -- -- (.51) - ----------------------------------------------------------------------------------------------------------------------- Total distributions (.17) (.04) (.05) (.03) (.54) - ----------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 5.84 $ 5.28 $ 4.76 $ 4.10 $ 4.56 - ----------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 30 $ 13 $ 7 $ 4 $ 2 - ----------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(b) 1.42% 1.32% 1.43% 1.30% 1.31% - ----------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .84% 1.00% 1.21% 1.52% 1.35% - ----------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 71% 74% 90% 99% 173% - ----------------------------------------------------------------------------------------------------------------------- Total return(c) 14.00% 11.74% 17.32% (9.55%) (20.40%) - -----------------------------------------------------------------------------------------------------------------------
(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 a sales charge. - -------------------------------------------------------------------------------- 34 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM THE BOARD AND SHAREHOLDERS AXP GLOBAL SERIES, INC. We have audited the accompanying statement of assets and liabilities, including the schedule of investments in securities, of RiverSource Global Balanced Fund (a series of the AXP Global Series, Inc.) as of October 31, 2005, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended October 31, 2005, and the financial highlights for each of the years in the five-year period ended October 31, 2005. These financial statements and the financial highlights are the responsibility of fund management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 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 Global Balanced Fund as of October 31, 2005, and the results of its operations, changes in its net assets and the financial highlights for each of the periods stated in the first paragraph above, in conformity with U.S. generally accepted accounting principles. KPMG LLP Minneapolis, Minnesota December 20, 2005 - -------------------------------------------------------------------------------- 35 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT FEDERAL INCOME TAX INFORMATION (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. RIVERSOURCE GLOBAL BALANCED FUND FISCAL YEAR ENDED OCT. 31, 2005 CLASS A INCOME DISTRIBUTIONS -- TAXABLE AS DIVIDEND INCOME: Qualified Dividend Income for individuals 39.08% Dividends Received Deduction for corporations 15.46%
PAYABLE DATE PER SHARE Dec. 22, 2004 $0.09763 June 28, 2005 0.04724 Sept. 28, 2005 0.01205 TOTAL DISTRIBUTIONS $0.15692
CLASS B INCOME DISTRIBUTIONS -- TAXABLE AS DIVIDEND INCOME: Qualified Dividend Income for individuals 39.08% Dividends Received Deduction for corporations 15.46%
PAYABLE DATE PER SHARE Dec. 22, 2004 0.08773 June 28, 2005 0.01452 TOTAL DISTRIBUTIONS $0.10225
CLASS C INCOME DISTRIBUTIONS -- TAXABLE AS DIVIDEND INCOME: Qualified Dividend Income for individuals 39.08% Dividends Received Deduction for corporations 15.46%
PAYABLE DATE PER SHARE Dec. 22, 2004 $0.09146 June 28, 2005 0.02054 Sept. 28, 2005 0.00154 TOTAL DISTRIBUTIONS $0.11354
CLASS Y INCOME DISTRIBUTIONS-- TAXABLE AS DIVIDEND INCOME: Qualified Dividend Income for individuals 39.08% Dividends Received Deduction for corporations 15.46%
PAYABLE DATE PER SHARE Dec. 22, 2004 $0.10044 June 28, 2005 0.05467 Sept. 28, 2005 0.01471 TOTAL DISTRIBUTIONS $0.16982
- -------------------------------------------------------------------------------- 36 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT FUND EXPENSES EXAMPLE (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Oct. 31, 2005. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 37 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT
BEGINNING ENDING EXPENSES ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE PAID DURING EXPENSE MAY 1, 2005 OCT. 31, 2005 THE PERIOD(a) RATIO Class A Actual(b) $1,000 $1,071.40 $ 8.61(c) 1.64% Hypothetical (5% return before expenses) $1,000 $1,017.03 $ 8.38(c) 1.64% Class B Actual(b) $1,000 $1,066.10 $12.57(c) 2.40% Hypothetical (5% return before expenses) $1,000 $1,013.18 $12.24(c) 2.40% Class C Actual(b) $1,000 $1,064.10 $12.55(c) 2.40% Hypothetical (5% return before expenses) $1,000 $1,013.18 $12.24(c) 2.40% Class Y Actual(b) $1,000 $1,071.00 $ 7.61(c) 1.45% Hypothetical (5% return before expenses) $1,000 $1,017.99 $ 7.42(c) 1.45%
(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 185/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended Oct. 31, 2005: +7.14% for Class A, +6.61% for Class B, +6.41% for Class C and +7.10% for Class Y. (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 Oct. 31, 2005, the actual expenses paid would have been $8.71 for Class A, $12.67 for Class B, $12.66 for Class C and $7.72 for Class Y; the hypothetical expenses paid would have been $8.48 for Class A, $12.35 for Class B, $12.35 for Class C and $7.52 for Class Y. - -------------------------------------------------------------------------------- 38 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 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 5 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 may retire after her 75th birthday. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ----------------------------------------------------------------------------------------------------------------- Arne H. Carlson Board member since 1999 Chair, Board Services 901 S. Marquette Ave. Corporation (provides Minneapolis, MN 55402 administrative services Age 71 to boards); former Governor of Minnesota Philip J. Carroll, Jr.* Board member since 2002 Retired Chairman and Scottish Power PLC, 901 S. Marquette Ave. CEO, Fluor Corporation Vulcan Materials Minneapolis, MN 55402 (engineering and Company, Inc. Age 67 construction) (construction materials/chemicals) Patricia M. Flynn Board member since 2004 Trustee Professor of 901 S. Marquette Ave. Economics and Minneapolis, MN 55402 Management, Bentley Age 54 College; former Dean, McCallum Graduate School of Business, Bentley College Anne P. Jones Board member since 1985 Attorney and Consultant 901 S. Marquette Ave. Minneapolis, MN 55402 Age 70 Jeffrey Laikind Board member since 2005 Former Managing American Progressive 901 S. Marquette Ave. Director, Shikiar Asset Insurance Minneapolis, MN 55402 Management Age 70 Stephen R. Lewis, Jr. Board member since 2002 President Emeritus and Valmont Industries, Inc. 901 S. Marquette Ave. Professor of Economics, (manufactures irrigation Minneapolis, MN 55402 Carleton College systems) Age 65
* Phillip J. Carroll, Jr. retired as a member of the Board, effective Nov. 10, 2005. - -------------------------------------------------------------------------------- 39 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since 2004 Director, Enterprise Strategic Distribution, 901 S. Marquette Ave. Asset Management, Inc. Inc. (transportation, Minneapolis, MN 55402 (private real estate and distribution and Age 53 asset management logistics consultants) company) Alan K. Simpson Board member since 1997 Former three-term United 1201 Sunshine Ave. States Senator for Cody, WY 82414 Wyoming Age 74 Alison Taunton-Rigby Board member since 2002 Chief Executive Officer, Hybridon, Inc. 901 S. Marquette Ave. RiboNovix, Inc. since (biotechnology), Minneapolis, MN 55402 2003 (biotechnology); American Healthways, Inc. Age 61 former President, (health management Forester Biotech programs)
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS**
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President - U.S. Asset 53600 Ameriprise Financial Center 2001, Vice President Management and Chief Minneapolis, MN 55474 since 2002 Investment Officer, Age 45 Ameriprise Financial, Inc. and President, Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC since 2005; Senior Vice President - Chief Investment Officer, Ameriprise Financial, Inc. and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001-2005; former Chief Investment Officer and Managing Director, Zurich Scudder Investments
** Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments. - -------------------------------------------------------------------------------- 40 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------ Jeffrey P. Fox Treasurer since 2002 Vice President - 105 Ameriprise Financial Center Investment Minneapolis, MN 55474 Accounting, Age 50 Ameriprise Financial, Inc., since 2002; Vice President - Finance, American Express Company, 2000-2002; Vice President - Corporate Controller, Ameriprise Financial, Inc., 1996-2000 Paula R. Meyer President since 2002 Senior Vice 596 Ameriprise Financial Center President - Mutual Minneapolis, MN 55474 Funds, Ameriprise Age 51 Financial, Inc., since 2002 and Senior Vice 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, General President of Board 901 S. Marquette Ave. Counsel, and Secretary Services Corporation Minneapolis, MN 55402 since 1978 Age 67 Beth E. Weimer Chief Compliance Vice President and Chief 172 Ameriprise Financial Center Officer since 2004 Compliance Officer, Minneapolis, MN 55474 Ameriprise Financial, Age 52 Inc., since 2001 and Chief Compliance 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. - -------------------------------------------------------------------------------- 41 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT RiverSource Investments, LLC (RiverSource), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial, formerly American Express Financial Corporation), serves as the investment manager to the Fund. Under an investment management services agreement (the IMS Agreement), the investment manager provides investment advice and other services to the Fund. Throughout the year, the Fund's Board of Directors (the Board) and the Board's Investment Review and Contracts Committees monitor these services. Ameriprise Financial had served as investment manager to the Fund until Sept. 29, 2005. On that date, and pursuant to the consent of the Board, Ameriprise Financial transferred its rights, title, and interest and its burdens and obligations under the IMS Agreement to RiverSource, its wholly-owned subsidiary. Each year, the Board determines whether to continue the IMS Agreement by evaluating the quality and level of services received and the costs associated with those services. To assist the Board in making this determination, the investment manager prepares detailed reports for the Board and its Contracts Committee in March and April and provides data prepared by independent organizations. The Board gives considerable weight to the work, deliberations and conclusions of the Contracts and Investment Review Committees in determining whether to continue the IMS Agreement. BACKGROUND This past year, prior to the Board's annual review process, on Feb. 1, 2005, American Express Company, the former parent of Ameriprise Financial, announced its intention to pursue a spin-off of Ameriprise Financial by distributing shares of the common stock of Ameriprise Financial to shareholders of American Express Company. Following this announcement, the Board determined to proceed with its annual review process and, after thorough review of the reports and data provided, at a meeting held in person on April 14, 2005, the Board, including all of its independent members, determined that the quality and level of advisory services provided pursuant to the IMS Agreement were satisfactory and that fees were fair and reasonable. However, in light of the announced plans of the spin-off, the Board approved continuation of the IMS Agreement with Ameriprise Financial for only an interim period ending on the later of (i) the effective date of the spin-off; or (ii) the approval of a new IMS Agreement with Ameriprise Financial (or its subsidiary) by the shareholders of the Fund, but in no event for a period longer than one year. During the course of the six-month period following the April 2005 meeting, the Board evaluated whether to approve new investment management services agreements for each of the funds within the Ameriprise Financial fund complex (together, the Funds) with post-spin Ameriprise Financial (or RiverSource). Independent counsel, Schulte Roth & Zabel LLP (Schulte), assisted the Boards in fulfilling their statutory and other responsibilities associated with the spin-off and the resulting consideration of new contracts, including the new IMS Agreement. The Board and its committees were provided with a wealth of written and oral information in this regard. Furthermore, in connection with the Board's considerations as to whether post-spin Ameriprise Financial, as an entity independent from American Express Company, would be capable of continuing to provide a high quality of services to the Funds, - -------------------------------------------------------------------------------- 42 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT the Board's independent members retained their own financial adviser, Credit Suisse First Boston LLC (CSFB), to assist them in analyzing the capital adequacy of post-spin Ameriprise Financial. (The costs of independent counsel and CSFB and of additional meetings of the Boards were borne by Ameriprise Financial as part of the commitment of the American Express Company to ensure a complete and thorough review of the proposed spin-off and its effect on the services provided by Ameriprise Financial and its subsidiaries.) At a meeting of the Board held on Sept. 8, 2005, the Board, including all of its independent members, approved, and recommended that shareholders approve, a proposed new IMS Agreement with RiverSource (the New IMS Agreement). A meeting of the Fund's shareholders is expected to be held on Feb. 15, 2006 to consider approval of the New IMS Agreement. If approved, the New IMS Agreement would take effect shortly after the shareholder meeting. The following section, "Board Considerations Related to the New IMS Agreement," provides a detailed discussion of the Board's considerations and determinations respecting the New IMS Agreement. BOARD CONSIDERATIONS RELATED TO THE NEW IMS AGREEMENT In carrying out its legal responsibilities associated with the consideration of the New IMS Agreement, the Board evaluated the following factors: NATURE, EXTENT AND QUALITY OF SERVICES TO BE PROVIDED BY POST-SPIN AMERIPRISE FINANCIAL (AND ITS SUBSIDIARIES) The Board recognized that only a few months had passed since its April 2005 conclusion that the nature, extent and quality of services provided by Ameriprise Financial were satisfactory and consistent with those that would be expected for a fund family of the size of the Funds and its determination to renew the IMS Agreement for the interim period. However, the Board also recognized the need to supplement this assessment with an evaluation of whether the spin-off or other factors would result in changes to the advisory services being provided under the current IMS Agreement. The Board focused its evaluation on the following factors potentially impacting the nature, extent and quality of advisory services to be provided by Ameriprise Financial: (i) Ameriprise Financial's projected capital structure and capital adequacy as a stand-alone entity; (ii) its legal and regulatory risks; (iii) its ability to retain and attract personnel; and (iv) its ability to successfully re-brand its products and services. Based on extensive presentations and reports by Ameriprise Financial, CSFB and Schulte, the Board concluded that the proposed capital structure (which includes certain indemnification commitments made by American Express Company) should enable RiverSource to continue to provide a high quality and level of advisory services to the Fund. In making this determination, the Board took into account representations by management of Ameriprise Financial that projected capital levels would allow Ameriprise Financial and RiverSource to meet legal and compliance responsibilities, build their distribution network, pursue technological upgrades, make capital commitments necessary to retain and attract key personnel devoted to legal and compliance responsibilities, portfolio management and distribution, and pursue smaller asset management acquisitions to help grow the asset management business. The Board accorded significant weight to CSFB's confirmation as to the reasonableness of the proposed capital structure. The Board also considered the fact that there were no expected departures of key personnel involved in the portfolio management, operations and marketing of the Funds as a result of the announcement of the spin-off. - -------------------------------------------------------------------------------- 43 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT The Board concluded that, based on all of the materials and information provided, post-spin Ameriprise Financial (including RiverSource) would be in a position to continue to provide a high quality and level of advisory services to the Fund. INVESTMENT PERFORMANCE The Board next focused on investment performance. The Board reviewed reports documenting the Fund's performance over one-, three- and/or five-year periods, as well as the entire period during which its current portfolio manager has managed the Fund, and compared to relevant Lipper and market indices. The Board took into account its determination in April 2005 that investment performance met expectations. The Board also considered that it had been receiving monthly performance reports for the Fund and that there had been no significant deviations from April's overall performance data. COST OF SERVICES PROVIDED The Board evaluated comparative fees and the costs of services under the current IMS Agreement and the New IMS Agreement, including fees charged by Ameriprise Financial (including RiverSource and other subsidiaries) to institutional clients as well as those paid to subadvisers. The Board studied RiverSource's effort (i.e., its "pricing philosophy") to set substantially all Funds' total expense ratios at or below the median expense ratio of comparable mutual funds (as compiled by Lipper). The Board observed that the proposed advisory fee changes are designed to work in tandem with proposed changes to administrative services fees. It also noted that RiverSource has agreed to voluntarily impose expense caps or waivers to achieve this pricing objective whenever the expense ratio exceeded the median expense ratio by more than three basis points (unless the higher ratio was due to the impact of the performance fee adjustment or was due to the added costs associated with having subadvisers manage the Fund). The Board considered that advisory fees under the New IMS Agreement would stay the same. The Board also took into account the effect of the proposed performance incentive adjustment on the advisory fee. In this regard, the Board recalled its past determinations regarding the appropriateness of (i) the use of the relevant index for the performance comparison; (ii) the methodology for determining when the Board may change an index used to calculate the performance incentive adjustment; (iii) the periods used for averaging the Fund's assets and computing investment performance; and (iv) the length of the period over which performance is computed. Furthermore, the Board considered that there was limited opportunity for the Fund to achieve large-scale growth and thus provide RiverSource with potential economies of scale. The Board next considered the expected profitability to Ameriprise Financial and RiverSource derived from their relationship with the Fund, recalling the April 2005 determination that the profitability level was appropriate. The Board noted that projected profitability of Ameriprise Financial would allow it to operate effectively and, at the same time, reinvest in RiverSource and its other asset management businesses. The Board also considered that the proposed changes in advisory fees and the mergers of certain other Funds would result in revenue gains to Ameriprise Financial, but that these increases would not materially alter profit margins due to expected increases in costs associated with the spin-off, particularly re-branding and separation. CSFB also reported that Ameriprise Financial's projected level of return on equity was generally reasonable in light of the returns on equity of its industry competitors. In evaluating profitability, the Board also considered the benefits Ameriprise Financial obtains - -------------------------------------------------------------------------------- 44 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT through the use of commission dollars paid on portfolio transactions for the Fund and from other business relationships that result from managing the Fund. The Board also considered the fees charged by Ameriprise Financial (and its subsidiaries) to institutional clients as well as the fees paid to, and charged by, subadvisers, noting the differences in services provided in each case. In light of these considerations, the Board concluded that projected profitability levels were appropriate. ECONOMIES OF SCALE The Board also considered the "breakpoints" in fees that would be triggered as Fund net asset levels grew and the extent to which shareholders would benefit from such growth. The Board observed that the revised fee schedules under the proposed New IMS Agreement would continue to provide breakpoints similar to those in place pursuant to the current IMS Agreement. Accordingly, the Board concluded that the proposed New IMS Agreement provides adequate opportunity for shareholders to realize benefits as Fund assets grow. OTHER CONSIDERATIONS In addition, the Board accorded weight to the fact that, under the New IMS Agreement, RiverSource Investments is held to a higher standard of care than under the current IMS Agreement. The Board also noted Ameriprise Financial's commitment to a culture that adheres to ethical business practice, assigns accountability to senior management and seeks to identify conflicts and propose appropriate action to minimize the risks posed by the conflicts. Furthermore, the Board recognized that it was not limited to considering management's proposed New IMS Agreement. In this regard, the Board evaluated the circumstances under which it would consider the retention of an investment adviser different from RiverSource Investments. The Board concluded, based on its consultation with independent counsel, that pursuing the retention of a different adviser was not necessary, primarily because, in its best judgment, Ameriprise Financial continues to be basically the same organization (from a functional and managerial standpoint) as it was prior to the spin-off. The Board reasoned that shareholders purchased shares of the Fund with an expectation that the current investment advisory organization would be servicing the Fund. The Fund's Board has approved a merger of the Fund into RiverSource Balanced Fund. Completion of the merger is subject to final approval by shareholders of the Fund. Proxy materials regarding the merger will be distributed to shareholders in December 2005, and a meeting of shareholders to consider the merger will be scheduled for February 2006. - -------------------------------------------------------------------------------- 45 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT PROXY VOTING The policy of the Board is to vote all proxies of the companies in which the Fund holds investments. The procedures are stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling (800) 862-7919; by looking at the website www.riversource.com/funds; 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 the Fund's administrator, Board Services Corporation, collect at (612) 330-9283; by looking at the website www.riversource.com/funds; or by searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- 46 -- RIVERSOURCE GLOBAL BALANCED FUND -- 2005 ANNUAL REPORT [RIVERSOURCE(SM) INVESTMENTS LOGO] RIVERSOURCE INVESTMENTS 200 AMERIPRISE FINANCIAL CENTER MINNEAPOLIS, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. RiverSource Funds are managed by RiverSource Investments, LLC and distributed by Ameriprise Financial Services, Inc., Member NASD. Both companies are part of Ameriprise Financial, Inc. S-6352 N (12/05) ANNUAL REPORT [RIVERSOURCE(SM) INVESTMENTS LOGO] RIVERSOURCE(SM) GLOBAL BOND FUND ANNUAL REPORT FOR THE PERIOD ENDED OCT. 31, 2005 > RIVERSOURCE GLOBAL BOND FUND (FORMERLY AXP(R) GLOBAL BOND FUND) SEEKS TO PROVIDE SHAREHOLDERS WITH HIGH TOTAL RETURN THROUGH INCOME AND GROWTH OF CAPITAL. TABLE OF CONTENTS Fund Snapshot 3 Performance Summary 4 Questions & Answers with Portfolio Management 5 The Fund's Long-term Performance 10 Investments in Securities 12 Financial Statements (Portfolio) 22 Notes to Financial Statements (Portfolio) 25 Report of Independent Registered Public Accounting Firm (Portfolio) 31 Financial Statements (Fund) 32 Notes to Financial Statements (Fund) 35 Report of Independent Registered Public Accounting Firm (Fund) 45 Federal Income Tax Information 46 Fund Expenses Example 48 Board Members and Officers 50 Approval of Investment Management Services Agreement 53 Proxy Voting 57 [DALBAR RATED FOR COMMUNICATION 2005 LOGO] American Express(R) Funds'* reports to shareholders have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. * As of Oct. 1, 2005, the RiverSource brand replaced "American Express" as the name of the American Express Funds. - -------------------------------------------------------------------------------- 2 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT FUND SNAPSHOT AT OCT. 31, 2005 PORTFOLIO MANAGER
PORTFOLIO MANAGER SINCE YEARS IN INDUSTRY Nic Pifer, CFA* 5/00 15
* The Fund is managed by a team of portfolio managers led by Nic Pifer. FUND OBJECTIVE For investors seeking high total return through income and growth of capital. Inception dates by class A: 3/20/89 B: 3/20/95 C: 6/26/00 I: 3/4/04 Y: 3/20/95 Ticker symbols by class A: IGBFX B: IGLOX C: AGBCX I: AGBIX Y: -- Total net assets $556.8 million Number of holdings 252 Weighted average life* 6.3 years Effective duration** 4.6 years Weighted average bond rating*** AA+
* WEIGHTED AVERAGE LIFE measures a bond's maturity, which takes into consideration the possibility that the issuer may call the bond before its maturity date. ** EFFECTIVE DURATION measures the sensitivity of a security's price to parallel shifts in the yield curve (the graphical depiction of the levels of interest rates from two years out to 30 years). Positive duration means that as rates rise, the price decreases, and negative duration means that as rates rise, the price increases. *** WEIGHTED AVERAGE BOND RATING represents the average credit quality of the underlying bonds in the portfolio. [CHART] COUNTRY COMPOSITION PERCENTAGE OF PORTFOLIO ASSETS United States 35.2% Germany 10.9% Japan 8.6% France 6.5% Italy 5.0% United Kingdom 4.8% Spain 4.5% Greece 4.1% Netherlands 3.0% Canada 2.3% Finland 2.1% Belgium 1.9% Australia 1.8% Norway 1.2% Poland 1.2% New Zealand 1.1% Austria 1.0% Other* 4.8%
* Includes Brazil, Czechoslovakia Federated Republic, Denmark, Malaysia, Mexico, South Africa, South Korea, Super-National, Sweden and Cash & Short-Term Securities. CREDIT QUALITY SUMMARY PERCENTAGE OF BOND PORTFOLIO ASSETS AAA bonds 66.9% AA bonds 19.2 A bonds 9.4 BBB bonds 2.0 Non-investment grade bonds 2.5
Individual security ratings are based on information from Standard & Poor's Corp. and Moody's Investors Service. If a rating is unavailable, the rating is determined through an internal analysis, if appropriate. 1.2% of the portfolio rating above was determined through internal analysis. Investment products, including shares of mutual funds, involve investment risks including possible loss of principal and fluctuation in value. International investing involves increased risk and volatility, not typically associated with domestic investing, due to 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. There are risks associated with fixed income investments, including the impact of interest rates, credit, and inflation. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. Fund holdings are subject to change. - -------------------------------------------------------------------------------- 3 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT PERFORMANCE SUMMARY [CHART] PERFORMANCE COMPARISON FOR THE YEAR ENDED OCT. 31, 2005 RiverSource Global Bond Fund Class A (excluding sales charge) -1.18% Lehman Brothers Global Aggregate Index (unmanaged) -0.72% Lipper Global Income Funds Index +1.16%
(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 OR VISITING www.riversource.com/funds. The 4.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. AVERAGE ANNUAL TOTAL RETURNS
CLASS A CLASS B CLASS C CLASS I CLASS Y (3/20/89) (3/20/95) (6/26/00) (3/4/04) (3/20/95) AFTER AFTER (INCEPTION DATES) NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6) AT OCT. 31, 2005 1 year -1.18% -5.88% -1.98% -6.68% -1.83% -2.77% -0.56% -1.00% 3 years +7.40% +5.67% +6.56% +5.37% +6.58% +6.58% N/A +7.61% 5 years +7.84% +6.80% +6.99% +6.68% +7.01% +7.01% N/A +8.04% 10 years +5.23% +4.72% +4.42% +4.42% N/A N/A N/A +5.25% Since inception +7.54% +7.23% +5.25% +5.25% +6.04% +6.04% +3.26% +6.08% AT SEPT. 30, 2005 1 year +2.80% -2.09% +1.97% -2.92% +1.99% +1.02% +3.44% +2.98% 3 years +7.71% +5.98% +6.92% +5.74% +6.90% +6.90% N/A +7.98% 5 years +7.76% +6.72% +6.93% +6.63% +6.92% +6.92% N/A +7.96% 10 years +5.43% +4.92% +4.64% +4.64% N/A N/A N/A +5.45% Since inception +7.66% +7.34% +5.43% +5.43% +6.38% +6.38% +4.23% +6.25%
(1) EXCLUDING SALES CHARGE. (2) RETURNS AT PUBLIC OFFERING PRICE (POP) REFLECT A SALES CHARGE OF 4.75%. (3) RETURNS AT MAXIMUM CONTINGENT DEFERRED SALES CHARGE (CDSC). CDSC APPLIES AS FOLLOWS: FIRST YEAR 5%; SECOND AND THIRD YEAR 4%; FOURTH YEAR 3%; FIFTH YEAR 2%; SIXTH YEAR 1%; NO SALES CHARGE THEREAFTER. (4) 1% CDSC APPLIES TO REDEMPTIONS MADE WITHIN THE FIRST YEAR OF PURCHASE. (5) SALES CHARGE IS NOT APPLICABLE TO THESE SHARES. SHARES AVAILABLE TO ELIGIBLE INVESTORS ONLY, CURRENTLY LIMITED TO RIVERSOURCE PORTFOLIO BUILDER FUNDS, SIX AFFILIATED FUNDS-OF-FUNDS. (6) SALES CHARGE IS NOT APPLICABLE TO THESE SHARES. SHARES AVAILABLE TO INSTITUTIONAL INVESTORS ONLY. - -------------------------------------------------------------------------------- 4 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT Q: HOW DID RIVERSOURCE GLOBAL BOND FUND PERFORM FOR THE FISCAL YEAR? A: RiverSource Global Bond Fund's Class A shares declined -1.18% (excluding sales charge) for the 12 months ended Oct. 31, 2005. The Fund underperformed its benchmark, the Lehman Brothers Global Aggregate Index (Lehman Global Index), which fell -0.72%. The Fund also underperformed the Lipper Global Income Funds Index, representing the Fund's peer group, which increased 1.16% during the same period. Q: WHAT FACTORS MOST SIGNIFICANTLY AFFECTED PERFORMANCE? A: Returns across the board were weak during the fiscal year due primarily to the currency effect of a stronger U.S. dollar. On a trade-weighted basis, the U.S. dollar gained 4.6% for the 12 months ended Oct. 31, 2005. As the value of the U.S. dollar increases, the dollar value of foreign investments typically decreases and vice versa. Another factor that contributed to weak global bond markets were modest returns generated by the bonds themselves, as interest rates rose, particularly in the U.S. Relative to the Lehman Global Index, the Fund benefited most from effective country allocation and duration management. 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 core 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 government bonds in other European government bonds had a neutral effect SEC YIELDS At Sept. 30, 2005 by class A: 1.99% B: 1.30% C: 1.31% I: 2.58% Y: 2.27% At Oct. 31, 2005 by class A: 2.26% B: 1.60% C: 1.59% I: 2.66% Y: 2.54% The Securities and Exchange Commission (SEC) yield is calculated by dividing anticipated net investment income during a 31-day period by the public offering price (POP) per share on the last day of the period, and converting the results to yearly figures. See Average Annual Total Returns on page 4 for additional performance information. [CHART] STYLE MATRIX
DURATION SHORT INT. LONG QUALITY HIGH / / /X/ /X/ MEDIUM / / / / / / LOW / / / / / /
SHADING WITHIN THE STYLE MATRIX INDICATES AREAS IN WHICH THE FUND GENERALLY INVESTS. - -------------------------------------------------------------------------------- 5 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS > RELATIVE TO THE LEHMAN GLOBAL INDEX, THE FUND BENEFITED MOST FROM EFFECTIVE COUNTRY ALLOCATION AND DURATION MANAGEMENT. overall. The Fund's allocation to Poland's government bonds helped, as this market performed quite well during the 12 months. However, these gains were largely offset by the detracting effects of a modest exposure to the strongly performing U.K. government bond market and a more sizable position in Norway's weaker government bond market. We maintained the Fund's duration, a principal measure of interest rate risk, shorter than that of the Lehman Global Index throughout the annual period. This stance was based on our view that the U.S. economy, in particular, was growing at an above-trend pace and thus, that the Federal Reserve Board (the Fed) was likely to continue raising the targeted federal funds rate. The Fed did indeed raise the targeted federal funds rate by 200 basis points (2%) during the period. Global bond yields generally declined during the first half of the fiscal year, and so our duration management detracted during this time. However, overall, the Fund's short duration positioning helped results, adding significant value in the last few months of the period as global bond yields finally moved up rather substantially. The Fund's sector allocation and issue selection helped the Fund's results as well. While the Fund's exposure to agencies detracted, this was more than offset by its holdings in mortgage-backed securities and corporate bonds. Of course, the majority of the Fund's holdings remained in the government bond sector. The Fund maintained its significant exposure to the euro and several other European currencies as well as to the "dollar bloc" currencies of Canada, Australia and New Zealand during the annual period. The Fund also maintained its modest exposure to the U.S. dollar. - -------------------------------------------------------------------------------- 6 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS > WE INTEND TO LENGTHEN THE FUND'S DURATION A BIT DURING THE NEAR TERM GIVEN THAT YIELDS HAVE NOW RISEN TO THE POINT THAT WE BELIEVE BONDS ARE CLOSER TO FAIR VALUE. Positioning in the U.S. dollar and the euro detracted, as the U.S. dollar strengthened approximately 8.7% vs. the euro. Compared to other currencies, the U.S. dollar strengthened approximately 11.9% vs. the yen, 5.3% vs. the British pound, 2.6% vs. the Australian dollar, and 0.3% vs. the New Zealand dollar. The major exception to this trend was the U.S. dollar's weakening 2.4% vs. the Canadian dollar. The Fund underperformed its Lipper group due primarily to its greater currency exposure than many of its peers. The Fund does not hedge its foreign currency exposure while some of its peers do hedge foreign currency or have varying degrees of exposure to U.S. dollar-based assets. During a period such as this when the U.S. dollar strengthened vs. most major currencies, it is not surprising that the Fund's performance would lag. Remember, a strengthening dollar decreases the value of the Fund's foreign currency denominated securities when expressed in U.S. dollar terms. Q: WHAT CHANGES DID YOU MAKE TO THE FUND AND HOW IS IT CURRENTLY POSITIONED? A: We shortened the Fund's duration somewhat during the annual period, mostly in the U.S. portion of the portfolio. We moved the Fund's duration from slightly less than half a year shorter than that of the Lehman Global Index at the start of the fiscal year to about three-fourths of a year shorter than the Lehman Global Index by the end of October 2005. We maintained a yield curve flattening bias on the U.S. bond market and a neutral yield curve positioning bias in most other global bond markets through the first half of the fiscal year. Indeed, the U.S. Treasury yield curve flattened dramatically during these months, meaning short-term rates rose more than long-term rates. As the annual 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. - -------------------------------------------------------------------------------- 7 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS We made some adjustments in currency exposure and country allocation. We decreased further the Fund's already modest allocations to both the U.S. dollar and U.S. bonds. We, in turn, added to the Fund's already more sizable exposure to both the euro and core European bonds. Within sector weightings, we became increasingly conservative as the fiscal year progressed. We reduced the Fund's position in both investment grade and high-yield corporate bonds based on our valuation analysis and added to its allocation to AAA-rated commercial mortgage-backed securities (CMBS) and asset-backed securities. We view CMBS as high-quality substitutes for corporate bonds. Both CMBS and asset-backed securities, in our view, offer attractive yields as well as the kind of defensive characteristics we want in the current market environment. Q: HOW DO YOU INTEND TO MANAGE THE FUND IN THE COMING MONTHS? A: We intend to lengthen the Fund's duration a bit during the near term given that yields have now risen to the point that we believe bonds are closer to fair value. Thus, we believe it would be prudent to take some profits, especially on the Fund's shorter-term positions. At the same time, we think that yields will move still higher, with the Fed likely to continue raising the targeted federal funds rate into the early months of 2006. Within sectors, we intend to maintain modest positions in investment grade and high yield corporate bonds and U.S. mortgage-backed securities, given that we believe these sectors' valuations are not currently compelling. We intend to maintain a more sizable exposure to the more defensive AAA-rated CMBS and asset-backed securities for the near term. From a country perspective, we continue to favor European bonds. - -------------------------------------------------------------------------------- 8 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS As for currency positioning, we intend to maintain the Fund's modest position in the U.S. dollar and to seek to make tactical allocation adjustments as market conditions warrant. Cyclical factors affecting the U.S. dollar, such as the Fed tightening rates, appeared to have been winning the tug-of-war with ongoing structural problems, such as burgeoning current account and trade deficits, over the past fiscal year. However, we believe that once the Fed completes its tightening cycle in the foreseeable future, the structural problems of the U.S. dollar will once again come to the fore. Another factor that may affect the relative strength or weakness of the U.S. dollar in the coming months is the actions of other central banks. Based on its recent comments, it currently appears that the European Central Bank may raise its interest rates in early 2006. This would be its first interest rate hike in more than two years. Also, with Japan's economy improving, the Bank of Japan may look to remove some of its monetary policy accommodation sooner than later. 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. - -------------------------------------------------------------------------------- 9 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT THE FUND'S LONG-TERM PERFORMANCE The chart on the facing page illustrates the total value of an assumed $10,000 investment in RiverSource Global Bond Fund Class A shares (from 11/1/95 to 10/31/05) as compared to the performance of two widely cited performance indices, the Lehman Brothers Global Aggregate Index and the Lipper Global Income Funds Index. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 4.75%, while such charges are not reflected in the performance of the indices. Returns for the Fund include the reinvestment of any distribution paid during each period. THE PERFORMANCE INFORMATION SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT A GUARANTEE OF FUTURE RESULTS. THE 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 OR VISITING www.riversource.com/funds. ALSO SEE "PAST PERFORMANCE" IN THE FUND'S CURRENT PROSPECTUS. DISTRIBUTION SUMMARY THE TABLE BELOW DETAILS THE FUND'S INCOME AND CAPITAL GAIN DISTRIBUTIONS FOR THE FISCAL YEARS SHOWN. MORE INFORMATION ON THE OTHER CLASSES CAN BE FOUND IN THE FINANCIAL HIGHLIGHTS SECTION OF THIS REPORT'S NOTES TO FINANCIAL STATEMENTS.
CLASS A ------------------------------------------------ SHORT-TERM LONG-TERM FISCAL YEAR ENDED INCOME CAPITAL GAINS CAPITAL GAINS TOTAL Oct. 31, 2005 $0.36 $-- $-- $0.36 Oct. 31, 2004 0.24 -- -- 0.24 Oct. 31, 2003 0.21 -- -- 0.21 Oct. 31, 2002 0.17 -- -- 0.17 Oct. 31, 2001 0.15 -- -- 0.15
- -------------------------------------------------------------------------------- 10 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT [CHART] VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE GLOBAL BOND FUND
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 RiverSource Global Bond Fund Class A (includes sales charge) $ 9,525 $10,378 $10,888 $11,461 $11,421 $10,831 $12,004 $12,753 $14,443 $15,989 $15,800 Lehman Brothers Global Aggregate Index(1) $10,000 $10,677 $11,215 $12,591 $12,226 $11,879 $13,048 $14,103 $15,824 $17,356 $17,231 Lipper Global Income Funds Index(2) $10,000 $11,176 $11,793 $12,319 $12,241 $12,123 $13,347 $14,001 $15,850 $17,266 $17,466
COMPARATIVE RESULTS RESULTS AT OCT. 31, 2005
SINCE 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION(3) RIVERSOURCE GLOBAL BOND FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $ 9,412 $11,799 $13,895 $15,800 $31,897 Average annual total return -5.88% +5.67% +6.80% +4.72% +7.23% LEHMAN BROTHERS GLOBAL AGGREGATE INDEX(1) Cumulative value of $10,000 $ 9,928 $12,216 $14,504 $17,231 N/A Average annual total return -0.72% +6.90% +7.72% +5.59% N/A LIPPER GLOBAL INCOME FUNDS INDEX(2) Cumulative value of $10,000 $10,116 $12,475 $14,410 $17,466 $29,917 Average annual total return +1.16% +7.65% +7.58% +5.73% +6.83%
RESULTS FOR OTHER SHARE CLASSES CAN BE FOUND ON PAGE 4. (1) 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 reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. (2) 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. (3) Fund data is from March 20, 1989. Lehman Brothers Global Aggregate Index and Lipper peer group data is from April 1, 1989. The Fund began operating before the inception of the Lehman Brothers Global Aggregate Index. - -------------------------------------------------------------------------------- 11 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT INVESTMENTS IN SECURITIES WORLD INCOME PORTFOLIO OCT. 31, 2005 (PERCENTAGES REPRESENT VALUE OF INVESTMENTS COMPARED TO NET ASSETS)
COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) BONDS (97.4%)(c) AUSTRALIA (1.8%) Commonwealth Bank of Australia (European Monetary Unit) 11-12-09 3.38% 570,000 $ 693,079 New South Wales Treasury (Australian Dollar) 03-01-08 8.00 8,020,000 6,311,792 Telstra 04-01-12 6.38 500,000 530,007 Western Australian Treasury (Australian Dollar) 10-16-06 5.50 3,050,000 2,280,409 ----------- Total 9,815,287 - ------------------------------------------------------------------------------------ AUSTRIA (1.0%) Republic of Austria (European Monetary Unit) 01-15-10 5.50 4,340,000 5,723,470 - ------------------------------------------------------------------------------------ BELGIUM (1.9%) Kingdom of Belgium (European Monetary Unit) 03-28-10 3.00 8,690,000 10,446,712 - ------------------------------------------------------------------------------------ BRAZIL (0.2%) Federal Republic of Brazil 01-15-18 8.00 1,129,000 1,166,257 - ------------------------------------------------------------------------------------ CANADA (2.2%) Canada Housing Trust #1 (Canadian Dollar) 06-15-06 5.53 3,030,000 2,598,360 Canadian Pacific Railway (Canadian Dollar) 06-15-10 4.90 380,000(d) 329,709 Corus Entertainment Sr Sub Nts 03-01-12 8.75 40,000 42,700 Province of British Columbia (Canadian Dollar) 08-23-10 6.38 6,665,000 6,228,360 Province of Ontario (Canadian Dollar) 03-08-06 5.90% 3,300,000 $ 2,821,039 Sun Media 02-15-13 7.63 100,000 103,500 Utilicorp Canada Finance 06-15-11 7.75 140,000 143,150 Videotron Ltee 01-15-14 6.88 45,000 45,450 12-15-15 6.38 80,000(d) 79,000 ----------- Total 12,391,268 - ------------------------------------------------------------------------------------ CZECHOSLOVAKIA FEDERATED REPUBLIC (0.2%) Republic of Czechoslovakia (Czech Crown) 06-16-13 3.70 33,500,000 1,357,730 - ------------------------------------------------------------------------------------ DENMARK (0.7%) Realkredit Danmark (Danish Krone) 01-01-08 4.00 23,900,000 3,933,255 - ------------------------------------------------------------------------------------ FINLAND (2.1%) Republic of Finland (European Monetary Unit) 07-04-07 5.00 9,265,000 11,537,154 - ------------------------------------------------------------------------------------ FRANCE (6.4%) Dexia Municipal Agency (European Monetary Unit) 09-03-07 4.25 510,000 627,897 France Telecom 03-01-06 7.20 550,000 554,720 Govt of France (European Monetary Unit) 04-25-12 5.00 9,250,000 12,285,704 04-25-13 4.00 9,330,000 11,747,940 10-25-16 5.00 7,460,000 10,197,626 ----------- Total 35,413,887 - ------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 12 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT
COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) BONDS (CONTINUED) GERMANY (10.7%) Allgemeine Hypothekenbank Rheinboden (European Monetary Unit) 09-02-09 5.00% 2,030,000(d) $ 2,589,898 Bayerische Landesbank (Japanese Yen) Sr Nts 04-22-13 1.40 301,000,000 2,611,021 Bundesrepublik Deutschland (European Monetary Unit) 01-04-10 5.38 530,000 695,533 07-04-13 3.75 11,990,000 14,853,503 07-04-27 6.50 7,280,000 12,292,148 07-04-28 4.75 1,970,000 2,711,361 07-04-34 4.75 4,640,000 6,504,572 Bundesschatzanweisungen (European Monetary Unit) 12-16-05 2.75 7,105,000 8,520,179 DEPFA Deutsche Pfandbriefbank (European Monetary Unit) 01-15-10 5.50 2,200,000 2,897,378 Deutsche Bank (European Monetary Unit) 07-28-09 4.25 500,000 627,810 Landesbank Berlin Girozentrale (European Monetary Unit) 04-30-07 5.00 2,130,000 2,637,841 Rheinische Hypothekenbank (European Monetary Unit) 07-05-10 5.75 2,200,000 2,938,878 ----------- Total 59,880,122 - ------------------------------------------------------------------------------------ GREECE (4.0%) Hellenic Republic (European Monetary Unit) 06-21-06 2.75 7,600,000 9,125,281 04-19-07 4.65 5,875,000 7,242,003 10-22-22 5.90 4,090,000 6,129,873 ----------- Total 22,497,157 - ------------------------------------------------------------------------------------ ITALY (5.0%) Buoni Poliennali Del Tesoro (European Monetary Unit) 03-01-07 4.50 7,480,000 9,190,283 10-15-07 5.00 8,570,000 10,717,034 11-01-26 7.25 3,486,283 6,156,080 Telecom Italia Capital 10-01-15 5.25 1,645,000 1,583,544 ----------- Total 27,646,941 - ------------------------------------------------------------------------------------ JAPAN (8.5%) Development Bank of Japan (Japanese Yen) 06-20-12 1.40% 650,000,000 $ 5,675,196 Govt of Japan (Japanese Yen) 12-21-09 1.70 2,146,000,000 19,195,085 03-22-10 1.70 320,000,000 2,862,158 06-20-12 1.40 700,000,000 6,112,930 12-20-12 1.00 1,276,000,000 10,799,411 12-20-14 1.30 247,000,000 2,088,268 12-20-34 2.40 61,000,000 522,748 ----------- Total 47,255,796 - ------------------------------------------------------------------------------------ MALAYSIA (0.3%) Petronas Capital 05-22-12 7.00 1,500,000(d) 1,649,217 - ------------------------------------------------------------------------------------ MEXICO (0.4%) Govt of Mexico (Mexican Peso) 12-24-09 9.00 16,000,000 1,509,549 United Mexican States (Japanese Yen) 06-06-06 6.75 62,000,000 552,607 ----------- Total 2,062,156 - ------------------------------------------------------------------------------------ NETHERLANDS (3.0%) Bank Nederlandse Gemeenten (British Pound) Sr Unsecured 08-06-07 7.38 1,160,000 2,147,831 Govt of Netherlands (European Monetary Unit) 01-15-08 2.50 9,310,000 11,104,129 07-15-12 5.00 2,555,000 3,394,065 ----------- Total 16,646,025 - ------------------------------------------------------------------------------------ NEW ZEALAND (1.1%) Govt of New Zealand (New Zealand Dollar) 11-15-06 8.00 8,425,000 5,987,659 - ------------------------------------------------------------------------------------ NORWAY (1.1%) Govt of Norway (Norwegian Krone) 05-16-11 6.00 36,800,000 6,325,410 - ------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 13 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT
COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) BONDS (CONTINUED) POLAND (1.2%) Republic of Poland (Polish Zloty) 03-24-10 5.75% 21,190,000 $ 6,535,894 - -------------------------------------------------- ---------------------------------- SOUTH AFRICA (0.3%) Republic of South Africa (South African Rand) 08-31-10 13.00 10,357,500 1,857,046 - -------------------------------------------------- ---------------------------------- SOUTH KOREA (0.1%) Korea Development Bank (Japanese Yen) 06-25-08 0.98 70,000,000 604,327 - -------------------------------------------------- ---------------------------------- SPAIN (4.4%) Caja de Ahorros y Monte de Piedad de Madrid (European Monetary Unit) 03-25-11 3.50 2,800,000 3,411,876 Govt of Spain (European Monetary Unit) 07-30-09 5.15 11,670,000 15,103,636 07-30-10 3.25 4,940,000 5,995,180 ----------- Total 24,510,692 - -------------------------------------------------- ---------------------------------- SUPRA-NATIONAL (1.0%) European Investment Bank (British Pound) 12-07-11 5.50 2,910,000 5,402,467 - -------------------------------------------------- ---------------------------------- SWEDEN (0.5%) Govt of Sweden (Swedish Krona) 03-15-11 5.25 20,420,000 2,851,808 - -------------------------------------------------- ---------------------------------- UNITED KINGDOM (4.7%) BSKYB Finance UK 10-15-15 5.63 985,000(d) 969,954 BT Group 12-15-10 8.38 550,000 627,072 Greater Beijing First Expressways Sr Nts 06-15-07 9.50 8,750,000(b),(h),(j) -- HBOS Treasury Services (European Monetary Unit) 02-12-09 3.50 2,000,000 2,438,125 United Kingdom Treasury (British Pound) 03-07-12 5.00 6,495,000 11,919,677 09-07-14 5.00 5,505,000 10,209,998 ----------- Total 26,164,826 - ------------------------------------------------------------------------------------- UNITED STATES (34.5%) AAA Trust Series 2005-2 Cl A1 11-26-35 4.15% $ 2,606,182(d),(e) $ 2,605,985 Aesop Funding II LLC Series 2004-2A Cl A1 (FGIC) 04-20-08 2.76 500,000(d),(l) 487,369 Airgas 10-01-11 9.13 195,000 206,944 Allied Waste North America Series B 04-01-08 8.88 50,000 52,125 AmeriCredit Automobile Receivables Trust Series 2005-BM Cl A3 (MBIA) 02-06-10 4.05 2,000,000(l) 1,967,500 AmerisourceBergen 09-15-15 5.88 285,000(d) 274,313 ANR Pipeline 03-15-10 8.88 45,000 48,295 ARG Funding Series 2005-1A Cl A3 (MBIA) 04-20-11 4.29 1,250,000(d),(l) 1,215,333 ASIF Global Financing XIX Secured 01-17-13 4.90 790,000(d) 773,860 Banc of America Commercial Mtge Series 2005-1 Cl A4 11-10-42 5.03 750,000(f) 744,549 Banc of America Commercial Mtge Series 2005-4 Cl A5A 07-10-45 4.93 1,400,000(f) 1,367,296 Banc of America Large Loan Series 2005-BOCA Cl A2 12-15-16 4.14 1,950,000(d),(e),(f) 1,950,412 Bank of America-First Union NB Commercial Mtge Series 2001-3 Cl A1 04-11-37 4.89 739,901(f) 738,820 Bear Stearns Commercial Mtge Securities Series 2003-T10 Cl A1 03-13-40 4.00 605,502(f) 585,448 Bear Stearns Commercial Mtge Securities Series 2004-T16 Cl A3 02-13-46 4.03 600,000(f) 577,820 Bear Stearns Commercial Mtge Securities Series 2005-PWR8 Cl A1 06-11-41 4.21 1,533,243(f) 1,507,254 Bear Stearns Commercial Mtg Securities Series 2005-T20 Cl E 10-12-42 5.30 500,000(f) 487,031
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 14 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT
COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) BONDS (CONTINUED) UNITED STATES (CONT.) Caesars Entertainment Sr Nts 04-15-13 7.00% $ 575,000 $ 611,303 California State Teachers' Retirement System Trust Series 2002-C6 Cl A3 11-20-14 4.46 1,892,053(d(,(f) 1,855,492 Capital Auto Receivables Asset Trust Series 2004-1 09-15-10 2.84 700,000 676,986 Capital Auto Receivables Asset Trust Series 2005-1 Cl A4 07-15-09 4.05 1,450,000 1,427,569 Capital One Auto Finance Trust Series 2005-BSS Cl A3 11-15-09 4.08 1,000,000 983,910 Cardinal Health 06-15-15 4.00 1,450,000 1,283,185 Carmax Auto Owner Trust Series 2005-1 Cl A4 03-15-10 4.35 500,000 493,999 CDC Commercial Mtge Trust Series 2002-FX1 Cl A2 11-15-30 5.68 1,100,000(f) 1,126,327 Chesapeake Energy 01-15-15 7.75 115,000 121,900 Chesapeake Energy Sr Nts 06-15-14 7.50 30,000 31,800 Chesapeake Energy Sr Unsecured 08-15-17 6.50 175,000(d) 173,250 Citigroup (European Monetary Unit) Sr Nts 05-21-10 3.88 2,600,000 3,212,945 Citigroup Commercial Mtge Trust Series 2005-EMG Cl A1 09-20-51 4.15 2,274,089(d),(f) 2,230,723 Citigroup/Deutsche Bank Commercial Mtge Series 2005-CD1 Cl A4 09-15-20 5.22 1,000,000(f),(g) 1,000,234 CMS Energy Sr Nts 01-15-09 7.50 140,000 145,075 Colorado Interstate Gas Sr Nts 03-15-15 5.95 35,000(d),(g) 33,250 11-15-15 6.80 200,000(d),(g) 199,500 Comcast Cable Communications Holdings 03-15-13 8.38% $ 106,000 $ 122,102 Compass Minerals Group 08-15-11 10.00 100,000 107,750 Cott Beverages 12-15-11 8.00 200,000 204,500 Countrywide Alternative Loan Trust Series 2005-6CB Cl 1A1 04-25-35 7.50 1,321,053(f) 1,375,188 CS First Boston Mtge Securities Series 2002-CKS4 Cl A1 11-15-36 4.49 1,137,103(f) 1,115,973 CS First Boston Mtge Securities Series 2004-C1 Cl A2 01-15-37 3.52 250,000(f) 240,550 CS First Boston Mtge Securities Series 2005-C5 Cl A2 08-15-38 5.10 525,000(f),(g) 524,115 CS First Boston Mtge Securities Series 2005-C5 Cl A4 08-15-38 5.10 1,875,000(f),(g) 1,847,863 DaimlerChrysler NA Holding (European Monetary Unit) 01-16-07 5.63 670,000 829,609 Dex Media West LLC/Finance Sr Nts Series B 08-15-10 8.50 85,000 89,038 DR Horton Sr Nts 02-15-15 5.25 215,000 196,338 El Paso Natural Gas Sr Nts Series A 08-01-10 7.63 185,000 194,144 Encore Acquisition Sr Sub Nts 04-15-14 6.25 140,000 135,800 ERAC USA Finance 05-01-15 5.60 1,700,000(d) 1,673,662 Federal Home Loan Mtge Corp 07-12-10 4.13 6,816,000 6,626,318 Federal Home Loan Mtge Corp (European Monetary Unit) 02-15-07 4.63 3,730,000 4,584,152 Federal Home Loan Mtge Corp #A11799 08-01-33 6.50 261,557(f) 268,172 Federal Home Loan Mtge Corp #A15881 11-01-33 5.00 1,424,079(f) 1,375,818
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 15 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT
COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) BONDS (CONTINUED) UNITED STATES (CONT.) Federal Home Loan Mtge Corp #E91486 09-01-17 6.50% $ 427,096(f) $ 440,472 Federal Home Loan Mtge Corp #E99684 10-01-18 5.00 832,815(f) 822,445 Federal Home Loan Mtge Corp #G01535 04-01-33 6.00 2,046,345(f) 2,082,404 Federal Natl Mtge Assn #360800 01-01-09 5.74 1,178,712(f) 1,200,861 Federal Natl Mtge Assn #386599 11-01-10 4.47 361,768(f) 355,227 Federal Natl Mtge Assn #545874 08-01-32 6.50 342,536(f) 353,176 Federal Natl Mtge Assn #555316 02-01-13 4.87 1,326,079(f) 1,308,633 Federal Natl Mtge Assn #555734 07-01-23 5.00 1,135,543(f) 1,103,511 Federal Natl Mtge Assn #555740 08-01-18 4.50 1,849,435(f) 1,792,291 Federal Natl Mtge Assn #575487 04-01-17 6.50 1,002,094(f) 1,038,986 Federal Natl Mtge Assn #621581 12-01-31 6.50 377,220(f) 390,521 Federal Natl Mtge Assn #633966 03-01-17 6.00 272,318(f) 278,639 Federal Natl Mtge Assn #634749 03-01-17 5.50 1,032,211(f) 1,041,217 Federal Natl Mtge Assn #640996 05-01-32 7.50 623,535(f) 658,164 Federal Natl Mtge Assn #643381 06-01-17 6.00 650,742(f) 665,845 Federal Natl Mtge Assn #645053 05-01-32 7.00 1,309,306(f) 1,369,292 Federal Natl Mtge Assn #646147 06-01-32 7.00 536,969(f) 565,235 Federal Natl Mtge Assn #652284 08-01-32 6.50 571,137(f) 587,077 Federal Natl Mtge Assn #653145 07-01-17 6.00 376,070(f) 385,865 Federal Natl Mtge Assn #653730 09-01-32 6.50 351,693(f) 362,764 Federal Natl Mtge Assn #655589 08-01-32 6.50 2,027,010(f) 2,097,599 Federal Natl Mtge Assn #666424 08-01-32 6.50 366,489(f) 376,717 Federal Natl Mtge Assn #670461 11-01-32 7.50 609,218(f) 643,052 Federal Natl Mtge Assn #684595 03-01-33 6.00% $ 2,283,903(f) $2,305,689 Federal Natl Mtge Assn #688034 03-01-33 5.50 677,448(f) 670,617 Federal Natl Mtge Assn #688691 03-01-33 5.50 1,257,621(f) 1,242,673 Federal Natl Mtge Assn #703818 05-01-33 6.00 575,860(f) 582,257 Federal Natl Mtge Assn #711503 06-01-33 5.50 1,537,847(f) 1,525,498 Federal Natl Mtge Assn #735029 09-01-13 5.28 868,026(f) 876,588 Federal Natl Mtge Assn #741850 09-01-33 5.50 2,483,075(f) 2,453,561 Federal Natl Mtge Assn #753507 12-01-18 5.00 3,739,097(f) 3,693,391 Federal Natl Mtge Assn #755498 11-01-18 5.50 1,704,772(f) 1,718,457 Federal Natl Mtge Assn #756788 11-01-33 6.50 526,001(f) 541,277 GE Capital Commercial Mtge Series 2001-3 Cl A1 06-10-38 5.56 841,027(f) 850,803 GE Capital Commercial Mtge Series 2005-C3 Cl A1 07-10-45 4.59 1,073,255(f) 1,062,000 GE Capital Commercial Mtge Series 2005-C3 Cl A2 07-10-45 4.85 810,000(f) 802,567 General Electric Capital (European Monetary Unit) Sr Unsub 06-20-07 5.13 500,000 621,694 General Electric Capital (New Zealand Dollar) 02-04-10 6.63 3,530,000 2,436,234 General Electric Capital Assurance Series 2003-1 Cl A3 05-12-35 4.77 1,800,000(d),(f) 1,765,002 Genworth Financial (Japanese Yen) 06-20-11 1.60 130,000,000 1,112,771 Georgia Gulf Sr Nts 12-15-13 7.13 55,000 55,000 GMAC 09-15-11 6.88 65,000 63,025
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 16 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT
COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) BONDS (CONTINUED) UNITED STATES (CONT.) GMAC Commercial Mtge Securities Series 2004-C3 Cl A4 12-10-41 4.55% $1,050,000(f) $1,012,597 GMAC Commercial Mtge Securities Series 2005-C1 Cl A1 05-10-43 4.21 818,681(f) 803,628 Govt Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2002-80 Cl CI 01-20-32 0.00 1,544,508(f),(i) 155,094 Govt Natl Mtge Assn #604708 10-15-33 5.50 1,382,229(f) 1,381,088 Greenwich Capital Commercial Funding Series 2004-GG1 Cl A4 06-10-36 4.76 1,100,000(f) 1,082,160 Greenwich Capital Commercial Funding Series 2004-GG1 Cl A5 06-10-36 4.88 500,000(f) 493,828 Greenwich Capital Commercial Funding Series 2005-GG3 Cl A1 08-10-42 3.92 665,339(f) 653,749 Greenwich Capital Commercial Funding Series 2005-GG3 Cl A3 08-10-42 4.57 1,550,000(f) 1,500,694 Greenwich Capital Commercial Funding Series 2005-GG5 Cl A5 11-15-35 4.28 950,000(f),(g) 954,740 GS Mtge Securities II Series 2004-GG2 Cl A4 08-10-38 4.96 950,000(f) 940,086 GS Mtge Securities II Series 2005-GG4 Cl A1 07-10-39 4.37 1,326,240(f) 1,305,270 GS Mtge Securities II Series 2005-GG4 Cl A4A 07-10-39 4.75 1,600,000(f) 1,537,082 Gulfstream Natural Gas System LLC 11-01-15 5.56 155,000(d) 154,424 Harrah's Operating 06-01-15 5.63 770,000(d) 738,869 HCA Sr Nts 03-15-14 5.75 100,000 94,537 HCA Sr Unsecured 01-15-15 6.38 175,000 171,717 HSBC Bank USA Sub Nts 08-15-35 5.63% $2,750,000 $2,611,056 ING Security Life Institutional Funding 01-15-10 4.25 1,440,000(d) 1,396,997 Intl Paper (European Monetary Unit) 08-11-06 5.38 505,000 617,275 IPALCO Enterprises Secured 11-14-08 8.38 250,000 260,000 ITT 11-15-15 7.38 130,000 137,800 JPMorgan Chase & Co Sub Nts 10-01-15 5.15 1,780,000 1,734,247 JPMorgan Chase Commercial Mtge Securities Series 2002-CIB5 Cl A1 10-12-37 4.37 1,138,110(f) 1,117,063 JPMorgan Chase Commercial Mtge Securities Series 2003-LN1 Cl A1 10-15-37 4.13 450,683(f) 434,142 JPMorgan Chase Commercial Mtge Securities Series 2003-ML1A Cl A1 03-12-39 3.97 410,108(f) 395,891 JPMorgan Chase Commercial Mtge Securities Series 2004-CBX Cl A5 01-12-37 4.65 900,000(f) 871,589 Key Energy Services Series C 03-01-08 8.38 130,000 135,525 L-3 Communications 06-15-12 7.63 165,000 172,425 Lamar Media 01-01-13 7.25 50,000 51,875 LB-UBS Commercial Mtge Trust Series 2003-C8 Cl A3 11-15-27 4.83 1,000,000(f) 986,720 LB-UBS Commercial Mtge Trust Series 2004-C2 Cl A3 03-15-29 3.97 750,000(f) 705,495 LB-UBS Commercial Mtge Trust Series 2004-C4 Cl A3 06-15-29 4.99 700,000(e),(f) 701,016 LB-UBS Commercial Mtge Trust Series 2004-C6 Cl A2 08-15-29 4.19 1,100,000(f) 1,071,598
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 17 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT
COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) BONDS (CONTINUED) UNITED STATES (CONT.) LB-UBS Commercial Mtge Trust Series 2004-C6 Cl A4 08-15-29 4.58% $ 975,000(f) $ 948,804 LB-UBS Commercial Mtge Trust Series 2004-C7 Cl A2 10-15-29 3.99 1,000,000(f) 963,710 LB-UBS Commercial Mtge Trust Series 2004-C8 Cl A2 12-15-29 4.20 1,300,000(f) 1,263,535 LB-UBS Commercial Mtge Trust Series 2005-C3 Cl A1 07-15-30 4.39 855,575(f) 845,984 LB-UBS Commercial Mtge Trust Series 2005-C5 Cl A2 09-15-40 4.89 1,075,000(f) 1,066,733 Long Beach Auto Receivables Trust Series 2004-C Cl A3 (FSA) 09-15-09 3.40 750,000(l) 740,460 MacDermid 07-15-11 9.13 35,000 37,144 Merrill Lynch Mtge Trust Series 2005-MCP1 Cl A1 06-12-43 4.22 1,095,821(f) 1,077,793 MGM MIRAGE 10-01-09 6.00 45,000 44,100 MGM MIRAGE Sr Nts 02-27-14 5.88 50,000 47,000 MGM MIRAGE Sr Unsecured 07-15-15 6.63 200,000(d) 194,000 Mohegan Tribal Gaming Authority Sr Nts 02-15-13 6.13 45,000 43,538 Mohegan Tribal Gaming Authority Sr Sub Nts 04-01-12 8.00 75,000 78,094 Morgan Stanley Capital I Series 2004-HQ4 Cl A5 04-14-40 4.59 750,000(f) 728,820 Morgan Stanley Capital I Series 2005-IQ10 Cl A4A 09-15-42 5.23 1,075,000(f) 1,068,464 Morgan Stanley Group (European Monetary Unit) 03-16-06 5.25 2,125,000 2,571,730 Morgan Stanley, Dean Witter Capital I Series 2002-TOP7 Cl A2 01-15-39 5.98% $1,400,000(f) $1,456,417 Newfield Exploration Sr Sub Nts 08-15-12 8.38 340,000 363,800 Nextel Communications Sr Nts Series F 03-15-14 5.95 185,000 185,576 NorthWestern Energy Secured 11-01-14 5.88 15,000 14,862 Overseas Private Investment U.S. Govt Guaranty Series 1996A 09-15-08 6.99 2,500,000 2,587,700 Pacific Energy Partners LP/Finance Sr Nts 09-15-15 6.25 60,000(d) 59,250 Peabody Energy Series B 03-15-13 6.88 175,000 180,688 Plains Exploration & Production Sr Nts 06-15-14 7.13 60,000 62,250 Popular ABS Mtge Pass-Through Trust Series 2005-A Cl AF2 06-25-35 4.49 615,000 603,431 Potomac Edison 1st Mortgage 11-15-14 5.35 105,000 103,822 Pricoa Global Funding I 06-25-12 4.63 3,550,000(d) 3,434,487 Pride Intl Sr Nts 07-15-14 7.38 30,000 32,325 Prudential Commercial Mtge Trust Series 2003-PWR1 Cl A1 02-11-36 3.67 860,088(f) 823,802 Qwest 03-15-12 8.88 100,000 109,750 Qwest Sr Nts 06-15-15 7.63 145,000(d) 148,625 Residential Capital Sr Unsecured 06-30-10 6.38 2,275,000(d) 2,307,555
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 18 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT
COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) BONDS (CONTINUED) UNITED STATES (CONT.) Southern Star Central Secured 08-01-10 8.50% $ 70,000 $ 74,375 Sprint Capital 11-15-28 6.88 1,500,000 1,599,304 Station Casinos Sr Nts 04-01-12 6.00 100,000 98,250 Station Casinos Sr Sub Nts 03-01-16 6.88 355,000(d) 357,663 Susquehanna Media Sr Sub Nts 04-15-13 7.38 140,000 145,950 Toyota Motor Credit (Japanese Yen) Sr Unsub 06-09-08 0.75 297,000,000 2,565,688 Transcontinental Gas Pipe Line Series B 08-15-11 7.00 150,000 156,750 Triad Auto Receivables Owner Trust Series 2005-A Cl A3 (AMBAC) 03-12-10 4.05 1,700,000(l) 1,681,521 Triad Hospitals Sr Nts 05-15-12 7.00 140,000 142,100 U.S. Treasury 06-30-07 3.63 2,620,000 2,587,557 02-15-08 3.38 1,880,000 1,837,993 10-15-10 4.25 405,000 401,472 08-15-23 6.25 6,235,000(k) 7,276,681 02-15-26 6.00 6,665,000(k) 7,662,144 U.S. Treasury Inflation-Indexed Bond 01-15-15 1.63 5,882,448(m) 5,707,147 Verizon Pennsylvania Series A 11-15-11 5.65 7,750,000(k) 7,705,747 Wachovia Bank Commercial Mtge Trust Series 2003-C8 Cl A2 11-15-35 3.89 1,250,000(f) 1,209,953 Wachovia Bank Commercial Mtge Trust Series 2005-C16 Cl A3 10-15-41 4.62 1,250,000(f) 1,212,273 Wachovia Bank Commercial Mtge Trust Series 2005-C21 Cl A4 10-15-44 5.27% $ 1,625,000 $ 1,621,445 Wells Fargo Bank NA Sub Nts 02-01-11 6.45 1,030,000 1,095,669 ------------ Total 192,722,199 - ------------------------------------------------------------------------------------ TOTAL BONDS (Cost: $534,899,262) $542,384,762 - ------------------------------------------------------------------------------------ SHORT-TERM SECURITY (1.0%) AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) COMMERCIAL PAPER BNP Paribas Finance 11-01-05 4.03% $5,400,000 $ 5,399,396 - ------------------------------------------------------------------------------------ TOTAL SHORT-TERM SECURITY (Cost: $5,400,000) $ 5,399,396 - ------------------------------------------------------------------------------------ TOTAL INVESTMENTS IN SECURITIES (Cost: $540,299,262)(n) $547,784,158 ====================================================================================
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 19 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT NOTES TO INVESTMENTS IN SECURITIES (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. 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. (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 Oct. 31, 2005, the value of these securities amounted to $29,647,799 or 5.3% of net assets. (e) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Oct. 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) At Oct. 31, 2005, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $4,568,279. (h) Negligible market value. (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 Oct. 31, 2005. (j) 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 Oct. 31, 2005, is as follows:
ACQUISITION SECURITY DATES COST ------------------------------------------------------------------------------- Greater Beijing First Expressways 9.50% Sr Nts 2007 06-12-97 thru 09-16-98 $118,924
(k) Partially pledged as initial deposit on the following open interest rate futures contracts (see Note 5 to the financial statements):
TYPE OF SECURITY NOTIONAL AMOUNT ------------------------------------------------------------------------------- PURCHASE CONTRACTS Euro-Bund, Dec. 2005, 10-year $ 2,100,000 SALE CONTRACTS U.S. Treasury Note, Dec. 2005, 5-year 5,400,000 U.S. Treasury Note, Dec. 2005, 10-year 17,500,000
- -------------------------------------------------------------------------------- 20 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT NOTES TO INVESTMENTS IN SECURITIES (CONTINUED) (l) The following abbreviations may be 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) 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 Oct. 31, 2005, the cost of securities for federal income tax purposes was $540,613,239 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 19,575,610 Unrealized depreciation (12,404,691) ------------------------------------------------------------------------- Net unrealized appreciation $ 7,170,919 -------------------------------------------------------------------------
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/funds. - -------------------------------------------------------------------------------- 21 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES WORLD INCOME PORTFOLIO OCT. 31, 2005 ASSETS Investments in securities, at value (Note 1) (identified cost $540,299,262) $547,784,158 Foreign currency holdings (identified cost $6,454,200) (Note 1) 6,317,187 Dividends and accrued interest receivable 7,052,863 Receivable for investment securities sold 2,278,416 Unrealized appreciation on foreign currency contracts held, at value (Note 4) 5,179 - ----------------------------------------------------------------------------------------------- Total assets 563,437,803 - ----------------------------------------------------------------------------------------------- LIABILITIES Disbursements in excess of cash on demand deposit 386,129 Payable for investment securities purchased 5,681,097 Unrealized depreciation on foreign currency contracts held, at value (Note 4) 224,367 Unrealized depreciation on swap transactions, at value (Note 6) 40,363 Accrued investment management services fee 34,637 Other accrued expenses 70,525 - ----------------------------------------------------------------------------------------------- Total liabilities 6,437,118 - ----------------------------------------------------------------------------------------------- Net assets $557,000,685 ===============================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT STATEMENT OF OPERATIONS WORLD INCOME PORTFOLIO YEAR ENDED OCT. 31, 2005 INVESTMENT INCOME Income: Interest $ 21,867,643 Fee income from securities lending (Note 3) 14,624 Less foreign taxes withheld (30,299) - ----------------------------------------------------------------------------------------------- Total income 21,851,968 - ----------------------------------------------------------------------------------------------- Expenses (Note 2): Investment management services fee 4,359,713 Compensation of board members 21,278 Custodian fees 185,500 Audit fees 28,500 Other 16,130 - ----------------------------------------------------------------------------------------------- Total expenses 4,611,121 Earnings credits on cash balances (Note 2) (1,361) - ----------------------------------------------------------------------------------------------- Total net expenses 4,609,760 - ----------------------------------------------------------------------------------------------- Investment income (loss)-- net 17,242,208 - ----------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (Note 3) 15,714,975 Foreign currency transactions 1,898,783 Futures contracts 42,917 Swap transactions (55,771) - ----------------------------------------------------------------------------------------------- Net realized gain (loss) on investments 17,600,904 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (38,281,920) - ----------------------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (20,681,016) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (3,438,808) ===============================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 23 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS WORLD INCOME PORTFOLIO
YEAR ENDED OCT. 31, 2005 2004 OPERATIONS Investment income (loss) -- net $ 17,242,208 $ 17,621,605 Net realized gain (loss) on investments 17,600,904 16,438,227 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (38,281,920) 24,402,177 - ----------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (3,438,808) 58,462,009 - ----------------------------------------------------------------------------------------------------- Proceeds from contributions 43,317,978 20,341,237 Fair value of withdrawals (42,528,918) (62,192,959) - ----------------------------------------------------------------------------------------------------- Net contributions (withdrawals) from partners 789,060 (41,851,722) - ----------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (2,649,748) 16,610,287 Net assets at beginning of year 559,650,433 543,040,146 - ----------------------------------------------------------------------------------------------------- Net assets at end of year $557,000,685 $559,650,433 =====================================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS WORLD INCOME PORTFOLIO 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES World Income Portfolio (the Portfolio) is a series of World Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a non-diversified, open-end management investment company. The Portfolio invests primarily in debt obligations of U.S. and foreign issuers. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. The Portfolio's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. Pursuant to procedures adopted by the Board of Trustees of the portfolios, Ameriprise Financial, Inc. (Ameriprise Financial) (formerly American Express Financial Corporation) utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with these procedures. If a development or event is so significant that there is a reasonably high degree of certainty that the effect of the development or event has actually caused the closing price to no longer reflect the actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the New York Stock Exchange. Significant events include material movements in the U.S. securities markets prior to the opening of foreign markets on the following trading day. FVP results in an estimated price that reasonably reflects the current market conditions in order to value the portfolio holdings such that shareholder transactions receive a fair net asset value. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. - -------------------------------------------------------------------------------- 25 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT SECURITIES PURCHASED ON A FORWARD-COMMITMENT BASIS Delivery and payment for securities that have been purchased by the Portfolio on a forward-commitment basis, including when-issued securities and other forward-commitments, can take place one month or more after the transaction date. During this period, such securities are subject to market fluctuations, and they may affect the Portfolio's net assets the same as owned securities. The Portfolio designates cash or liquid securities at least equal to the amount of its forward-commitments. At Oct. 31, 2005, the Portfolio has entered into outstanding when-issued securities of $3,613,314 and other forward-commitments of $954,965. The Portfolio also enters into transactions to sell purchase commitments to third parties at current market values and concurrently acquires other purchase commitments for similar securities at later dates. As an inducement for the Portfolio to "roll over" its purchase commitments, the Portfolio receives 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 Portfolio 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 Portfolio 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 Portfolio gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Portfolio 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 Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio 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 Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. - -------------------------------------------------------------------------------- 26 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 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. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At Oct. 31, 2005, foreign currency holdings consisted of multiple denominations, primarily European monetary units. The Portfolio may enter into forward foreign currency exchange contracts to produce incremental earnings, for operational purposes, or to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete its contract obligations. TOTAL RETURN SWAP TRANSACTIONS The Portfolio 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 Portfolio either receives or pays the total return on a reference security or index applied to a notional principal amount. In return, the Portfolio agrees to pay or receive from the counterparty a floating rate, which is reset periodically based on short-term interest rates, applied to the same notional amount. The notional amounts of swap contracts are not recorded in the financial statements. Swaps are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time realized gain (loss) is recorded. Payments received or made are recorded as realized gains (losses). Total return swaps are subject to the risk that the counterparty will default on its obligation to pay net amounts due to the Portfolio. GUARANTEES AND INDEMNIFICATIONS Under the Portfolio's organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Portfolio. In addition, certain of the Portfolio's contracts with its service providers contain general indemnification clauses. The Portfolio's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Portfolio cannot be determined and the Portfolio has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES For federal income tax purposes the Portfolio qualifies as a partnership and each investor in the Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore does not pay any income dividends or capital gain distributions. - -------------------------------------------------------------------------------- 27 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. FEES AND EXPENSES The Trust, on behalf of the Portfolio, has an Investment Management Services Agreement with RiverSource Investments, LLC (the Investment Manager) to manage its portfolio. Prior to Oct. 1, 2005, investment management services were provided by Ameriprise Financial. Under this agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Portfolio's average daily net assets that declines from 0.77% to 0.67% annually as the Portfolio's assets increase. Under the agreement, the Trust also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees, audit and certain legal fees, fidelity bond premiums, registration fees for units, office expenses, consultants' fees, compensation of trustees, corporate filing fees, expenses incurred in connection with lending securities of the Portfolio and any other expenses properly payable by the Trust or Portfolio and approved by the Board. Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the underlying Fund or other RiverSource funds. The Portfolio's liability for these amounts is adjusted for market value changes and remains in the Portfolio until distributed in accordance with the Plan. During the year ended Oct. 31, 2005, the Portfolio's custodian fees were reduced by $1,361 as a result of earnings credits from overnight cash balances. The Portfolio also pays custodian fees to Ameriprise Trust Company (formerly American Express Trust Company), an affiliate of Ameriprise Financial. According to a Placement Agency Agreement, Ameriprise Financial Services, Inc. (formerly American Express Financial Advisors Inc.) acts as placement agent of the Trust's units. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $430,425,288 and $401,720,416, respectively, for the year ended Oct. 31, 2005. Realized gains and losses are determined on an identified cost basis. Income from securities lending amounted to $14,624 for the year ended Oct. 31, 2005. The risks to the Portfolio of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. - -------------------------------------------------------------------------------- 28 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT 4. FORWARD FOREIGN CURRENCY CONTRACTS At Oct. 31, 2005, the Portfolio has forward foreign currency exchange contracts that obligate it to deliver currencies at specified future dates. The unrealized appreciation and/or depreciation on these contracts is included in the accompanying financial statements. See "Summary of significant accounting policies." The terms of the open contracts are as follows:
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION - --------------------------------------------------------------------------------------------- Nov. 3, 2005 161,921 286,228 $ -- $ 356 British Pound U.S. Dollar Nov. 3, 2005 375,954 280,988 -- 113 Australian Dollar U.S. Dollar Nov. 18, 2005 8,938,596 1,019,000,000 -- 168,880 U.S. Dollar Japanese Yen Nov. 21, 2005 9,550,000 11,403,846 -- 52,601 European Monetary Unit U.S. Dollar Nov. 23, 2005 1,710,059 2,890,000 -- 2,417 U.S. Dollar Singapore Dollar Nov. 28, 2005 34,800,000 1,414,519 5,179 -- Czech Koruna U.S. Dollar - --------------------------------------------------------------------------------------------- Total $5,179 $224,367 - ---------------------------------------------------------------------------------------------
5. INTEREST RATE FUTURES CONTRACTS At Oct. 31, 2005, investments in securities included securities valued at $493,876 that were pledged as collateral to cover initial margin deposits on 21 open purchase contracts denominated in Euros and 229 open sale contracts. The notional market value of the open purchase contracts at Oct. 31, 2005 was $3,030,538 with a net unrealized loss of $71,709. The notional market value of the open sale contracts at Oct. 31, 2005 was $24,697,392 with a net unrealized gain of $589,258. See "Summary of significant accounting policies" and "Notes to investments in securities." 6. SWAP CONTRACTS At Oct. 31, 2005, the Portfolio had the following open total return swap contracts:
TERMINATION NOTIONAL UNREALIZED 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 0.30%. Counterparty: Citigroup 11/01/05 $2,400,000 $(40,363)
- -------------------------------------------------------------------------------- 29 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT 7. FINANCIAL HIGHLIGHTS The table below shows certain important financial information for evaluating the Portfolio's results. RATIOS/SUPPLEMENTAL DATA
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 Ratio of expenses to average daily net assets(a) .80% .79% .80% .79% .78% - --------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 2.98% 3.20% 3.29% 3.66% 5.27% - --------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 73% 92% 117% 51% 24% - --------------------------------------------------------------------------------------------------------------------------- Total return(b) (.67%) 11.21% 13.99% 6.89% 11.29% - ---------------------------------------------------------------------------------------------------------------------------
(a) Expense ratio is based on total expenses of the Portfolio before reduction of earnings credits on cash balances. The ratio does not include feeder fund expenses. (b) Total return is based on a calculated Portfolio net asset value and does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 30 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM THE BOARD OF TRUSTEES AND UNITHOLDERS WORLD TRUST We have audited the accompanying statement of assets and liabilities, including the schedule of investments in securities, of World Income Portfolio (a series of World Trust) as of October 31, 2005, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended October 31, 2005, and the financial highlights for each of the years in the five-year period ended October 31, 2005. These financial statements and the financial highlights are the responsibility of portfolio management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 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 World Income Portfolio as of October 31, 2005, and the results of its operations, changes in its net assets and the financial highlights for each of the periods stated in the first paragraph above, in conformity with U.S. generally accepted accounting principles. KPMG LLP Minneapolis, Minnesota December 20, 2005 - -------------------------------------------------------------------------------- 31 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES RIVERSOURCE GLOBAL BOND FUND OCT. 31, 2005 ASSETS Investment in Portfolio (Note 1) $556,854,713 Capital shares receivable 140,322 - ---------------------------------------------------------------------------------------------------------- Total assets 556,995,035 - ---------------------------------------------------------------------------------------------------------- LIABILITIES Capital shares payable 53,343 Accrued distribution fee 16,768 Accrued service fee 1 Accrued transfer agency fee 7,926 Accrued administrative services fee 3,650 Other accrued expenses 74,484 - ---------------------------------------------------------------------------------------------------------- Total liabilities 156,172 - ---------------------------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $556,838,863 ========================================================================================================== REPRESENTED BY Capital stock -- $.01 par value (Note 1) $ 844,495 Additional paid-in capital 543,118,322 Undistributed net investment income 11,782,029 Accumulated net realized gain (loss) (Note 5) (6,437,920) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 7,531,937 - ---------------------------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $556,838,863 ========================================================================================================== Net assets applicable to outstanding shares: Class A $353,306,100 Class B $110,636,065 Class C $ 4,262,484 Class I $ 88,550,052 Class Y $ 84,162 Net asset value per share of outstanding capital stock: Class A shares 53,604,049 $ 6.59 Class B shares 16,777,180 $ 6.59 Class C shares 649,122 $ 6.57 Class I shares 13,406,394 $ 6.61 Class Y shares 12,737 $ 6.61
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 32 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT STATEMENT OF OPERATIONS RIVERSOURCE GLOBAL BOND FUND YEAR ENDED OCT. 31, 2005 INVESTMENT INCOME Income: Interest $ 21,862,359 Fee income from securities lending 14,620 Less foreign taxes withheld (30,292) - --------------------------------------------------------------------------------------------------------------- Total income 21,846,687 - --------------------------------------------------------------------------------------------------------------- Expenses (Note 2): Expenses allocated from Portfolio 4,608,561 Distribution fee Class A 955,642 Class B 1,383,322 Class C 46,223 Transfer agency fee 1,054,247 Incremental transfer agency fee Class A 76,665 Class B 48,909 Class C 1,841 Service fee -- Class Y 74 Administrative services fees and expenses 342,324 Compensation of board members 10,251 Printing and postage 162,381 Registration fees 60,020 Audit fees 9,500 Other 16,473 - --------------------------------------------------------------------------------------------------------------- Total expenses 8,776,433 Expenses waived/reimbursed by the Investment Manager and its affiliates (Note 2) (84,459) - --------------------------------------------------------------------------------------------------------------- 8,691,974 Earnings credits on cash balances (Note 2) (16,080) - --------------------------------------------------------------------------------------------------------------- Total net expenses 8,675,894 - --------------------------------------------------------------------------------------------------------------- Investment income (loss)-- net 13,170,793 - --------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions 15,713,733 Foreign currency transactions 1,895,566 Futures contracts 42,902 Swap transactions (55,756) - --------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on investments 17,596,445 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (38,272,090) - --------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (20,675,645) - --------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (7,504,852) ===============================================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 33 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS RIVERSOURCE GLOBAL BOND FUND
YEAR ENDED OCT. 31, 2005 2004 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 13,170,793 $ 13,433,467 Net realized gain (loss) on investments 17,596,445 16,434,312 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (38,272,090) 24,395,700 - -------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (7,504,852) 54,263,479 - -------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (19,756,566) (13,588,587) Class B (6,142,688) (4,397,000) Class C (200,996) (141,492) Class I (2,313,524) (208,980) Class Y (3,814) (2,872) - -------------------------------------------------------------------------------------------------------------- Total distributions (28,417,588) (18,338,931) - -------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 3) Proceeds from sales Class A shares (Note 2) 88,281,344 90,482,357 Class B shares 31,813,617 34,513,320 Class C shares 1,377,503 1,609,678 Class I shares 68,619,250 22,849,823 Class Y shares 62,732 13,380 Reinvestment of distributions at net asset value Class A shares 18,374,858 12,568,801 Class B shares 5,728,791 4,090,856 Class C shares 176,818 124,689 Class I shares 2,312,955 208,773 Class Y shares 3,814 2,872 Payments for redemptions Class A shares (118,593,333) (119,978,418) Class B shares (Note 2) (60,508,139) (63,787,048) Class C shares (Note 2) (1,728,928) (2,223,406) Class I shares (2,478,963) (97,951) Class Y shares (56,092) (7,940) - -------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 33,386,227 (19,630,214) - -------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (2,536,213) 16,294,334 Net assets at beginning of year 559,375,076 543,080,742 - -------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 556,838,863 $ 559,375,076 ============================================================================================================== Undistributed net investment income $ 11,782,029 $ 14,144,995 - --------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 34 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS RIVERSOURCE GLOBAL BOND FUND (FORMERLY AXP GLOBAL BOND FUND) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of AXP Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a non-diversified open-end management investment company. AXP Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board. The Fund offers Class A, Class B, Class C and Class Y shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class Y shares have no sales charge and are offered only to qualifying institutional investors. The Fund offers an additional class of shares, Class I, exclusively to certain institutional investors. Class I shares have no sales charges and are made available through a separate prospectus supplement provided to investors eligible to purchase the shares. At Oct. 31, 2005, Ameriprise Financial and the RiverSource Portfolio Builder Funds owned 100% of Class I shares, which represents 15.90% of the Fund's net assets. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee, transfer agency fees and service fee (class specific expenses) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. INVESTMENT IN WORLD INCOME PORTFOLIO The Fund invests all of its assets in the World Income Portfolio (the Portfolio), a series of World Trust, an open-end investment company that has the same objectives as the Fund. The Portfolio invests primarily in debt obligations of U.S. and foreign issuers. The Fund records daily its share of the Portfolio's income, expenses and realized and unrealized gains and losses. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The Fund records its investment in the Portfolio at the value that is equal to the Fund's proportionate ownership interest in the Portfolio's net assets. The percentage of the Portfolio owned by the Fund at Oct. 31, 2005 was 99.97%. The Fund's Board approved the withdrawal of the Fund's assets from the Portfolio. As of Nov. 8, 2005, the Fund invests directly in and manages its own portfolio of securities rather than investing in the Portfolio. - -------------------------------------------------------------------------------- 35 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT All securities held by the Portfolio 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 Trustees of the portfolios, Ameriprise Financial utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with these procedures. If a development or event is so significant that there is a reasonably high degree of certainty that the effect of the development or event has actually caused the closing price to no longer reflect the actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the New York Stock Exchange. Significant events include material movements in the U.S. securities markets prior to the opening of foreign markets on the following trading day. FVP results in an estimated price that reasonably reflects the current market conditions in order to value the portfolio holdings such that shareholder transactions receive a fair net asset value. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. 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. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with all sections of the Internal Revenue Code that apply to regulated investment companies and to distribute substantially all of its taxable income to the shareholders. No provision for income or excise taxes is thus required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes, and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. - -------------------------------------------------------------------------------- 36 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT On the statement of assets and liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been increased by $12,883,829 and accumulated net realized gain has been decreased by $12,883,829. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED OCT. 31, 2005 2004 - ------------------------------------------------------------------------------------------ CLASS A Distributions paid from: Ordinary income $19,756,566 $13,588,587 Long-term capital gain -- -- CLASS B Distributions paid from: Ordinary income 6,142,688 4,397,000 Long-term capital gain -- -- CLASS C Distributions paid from: Ordinary income 200,996 141,492 Long-term capital gain -- -- CLASS I* Ordinary income 2,313,524 208,980 Long-term capital gain -- -- CLASS Y Distributions paid from: Ordinary income 3,814 2,872 Long-term capital gain -- --
* Inception date is March 4, 2004. At Oct. 31, 2005, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $12,660,256 Accumulated long-term gain (loss) $(6,100,374) Unrealized appreciation (depreciation) $ 6,316,164
DIVIDENDS TO SHAREHOLDERS Dividends from net investment income, declared and paid each calendar quarter, when available, are reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the last income dividend of the calendar year. - -------------------------------------------------------------------------------- 37 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT 2. EXPENSES AND SALES CHARGES In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund has an agreement with Ameriprise Financial to provide administrative services. Under the current Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. Prior to Oct. 1, 2005, the fee percentage of the Fund's average daily net assets declined from 0.06% to 0.04% annually as the Fund's assets increased. A minor portion of additional administrative service expenses paid by the Fund are consultants' fees and fund office expenses. Under this agreement, the Fund also pays taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees and any other expenses properly payable by the Fund and approved by the Board. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. Under a separate Transfer Agency Agreement, RiverSource Service Corporation (formerly American Express Client Service Corporation) (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual fee per shareholder account for this service as follows: - - Class A $20.50 - - Class B $21.50 - - Class C $21.00 - - Class Y $18.50 The incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. Class I pays a transfer agency fee at an annual rate per shareholder account of $1. This amount is included in the transfer agency fee on the statement of operations. Beginning May 20, 2005, the Transfer Agent implemented an annual closed account fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the statement of operations. The Fund has agreements with Ameriprise Financial Services, Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B and Class C shares. Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. - -------------------------------------------------------------------------------- 38 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT Sales charges received by the Distributor for distributing Fund shares were $619,773 for Class A, $144,502 for Class B and $1,163 for Class C for the year ended Oct. 31, 2005. Beginning Oct. 1, 2005, a new agreement to waive certain fees and expenses is effective until Oct. 31, 2006, such that net expenses will not exceed 1.25% for Class A, 2.02% for Class B, 2.02% for Class C, 0.95% for Class I and 1.08% for Class Y. For the year ended Oct. 31, 2005, the Investment Manager and its affiliates waived certain fees and expenses to 1.35% for Class A, 2.12% for Class B, 2.12% for Class C, 0.91% for Class I and 1.18% for Class Y. Of these waived fees and expenses, the transfer agency fees waived for Class A, Class B, Class C and Class Y were $58,077, $17,961, $700 and $13, respectively, and the management fees waived at the Fund level were $7,708. During the year ended Oct. 31, 2005, the Fund's transfer agency fees were reduced by $16,080 as a result of earnings credits from overnight cash balances. 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
YEAR ENDED OCT. 31, 2005 CLASS A CLASS B CLASS C CLASS I CLASS Y - ------------------------------------------------------------------------------------------------------- Sold 12,792,108 4,572,740 200,644 10,013,472 9,106 Issued for reinvested distributions 2,648,124 822,515 25,507 336,240 549 Redeemed (17,214,211) (8,827,651) (251,580) (357,832) (8,067) - ------------------------------------------------------------------------------------------------------- Net increase (decrease) (1,773,979) (3,432,396) (25,429) 9,991,880 1,588 - ------------------------------------------------------------------------------------------------------- YEAR ENDED OCT. 31, 2004 CLASS A CLASS B CLASS C CLASS I* CLASS Y - ------------------------------------------------------------------------------------------------------- Sold 13,443,824 5,113,276 239,474 3,398,078 2,007 Issued for reinvested distributions 1,868,388 607,744 18,597 31,012 426 Redeemed (17,795,771) (9,514,367) (331,347) (14,576) (1,156) - ------------------------------------------------------------------------------------------------------- Net increase (decrease) (2,483,559) (3,793,347) (73,276) 3,414,514 1,277 - -------------------------------------------------------------------------------------------------------
* Inception date is March 4, 2004. 4. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The agreement went into effect Sept. 20, 2005. The Fund must maintain asset coverage for borrowings of at least 300%. The agreement, which enables the Fund to participate with other RiverSource funds, permits borrowings up to $500 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to either the higher of the Federal Funds Effective Rate plus 0.40% or the JPMCB Prime Commercial Lending Rate. Borrowings are payable within 60 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.07% per annum. Prior to this agreement, the Fund had a revolving credit agreement that permitted borrowings up to $500 million with The Bank of New York. The Fund had no borrowings outstanding during the year ended Oct. 31, 2005. - -------------------------------------------------------------------------------- 39 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT 5. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund had a capital loss carry-over of $6,100,374 at Oct. 31, 2005, that if not offset by capital gains will expire in 2010. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. 6. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results. CLASS A
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $ 7.02 $ 6.57 $ 6.00 $5.81 $ 5.39 - ----------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .16 .17 .18 .19 .27 Net gains (losses) (both realized and unrealized) (.23) .52 .60 .17 .30 - ----------------------------------------------------------------------------------------------------------------------- Total from investment operations (.07) .69 .78 .36 .57 - ----------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.36) (.24) (.21) (.17) (.15) - ----------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 6.59 $ 7.02 $ 6.57 $6.00 $ 5.81 - ----------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 353 $ 389 $ 380 $ 348 $ 355 - ----------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(b) 1.35%(c) 1.34% 1.36% 1.34% 1.32% - ----------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 2.42% 2.66% 2.73% 3.12% 4.75% - ----------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 73% 92% 117% 51% 24% - ----------------------------------------------------------------------------------------------------------------------- Total return(d) (1.18%) 10.70% 13.25% 6.24% 10.83% - -----------------------------------------------------------------------------------------------------------------------
(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) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses for Class A would have been 1.37% for the year ended Oct. 31, 2005. (d) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 40 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT CLASS B
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $ 7.02 $6.57 $5.99 $5.79 $5.38 - ----------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .10 .14 .12 .13 .21 Net gains (losses) (both realized and unrealized) (.23) .50 .62 .19 .31 - ----------------------------------------------------------------------------------------------------------------------- Total from investment operations (.13) .64 .74 .32 .52 - ----------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.30) (.19) (.16) (.12) (.11) - ----------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 6.59 $7.02 $6.57 $5.99 $5.79 - ----------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 111 $ 142 $ 158 $ 152 $ 145 - ----------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(b) 2.12%(c) 2.10% 2.12% 2.10% 2.09% - ----------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 1.65% 1.90% 1.97% 2.36% 3.99% - ----------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 73% 92% 117% 51% 24% - ----------------------------------------------------------------------------------------------------------------------- Total return(d) (1.98%) 9.83% 12.39% 5.59% 9.73% - -----------------------------------------------------------------------------------------------------------------------
(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) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses for Class B would have been 2.13% for the year ended Oct. 31, 2005. (d) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 41 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT CLASS C
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $ 6.99 $6.55 $ 5.98 $5.79 $5.38 - ----------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .11 .14 .13 .14 .21 Net gains (losses) (both realized and unrealized) (.22) .49 .60 .18 .31 - ----------------------------------------------------------------------------------------------------------------------- Total from investment operations (.11) .63 .73 .32 .52 - ----------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.31) (.19) (.16) (.13) (.11) - ----------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 6.57 $6.99 $ 6.55 $5.98 $5.79 - ----------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 4 $ 5 $ 5 $ 3 $ 1 - ----------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(b) 2.12%(c) 2.09% 2.14% 2.10% 2.09% - ----------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 1.65% 1.91% 1.89% 2.29% 3.84% - ----------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 73% 92% 117% 51% 24% - ----------------------------------------------------------------------------------------------------------------------- Total return(d) (1.83%) 9.72% 12.41% 5.51% 9.84% - -----------------------------------------------------------------------------------------------------------------------
(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) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses for Class C would have been 2.14% for the year ended Oct. 31, 2005. (d) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 42 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT CLASS I
FISCAL PERIOD ENDED OCT. 31, 2005 2004(b) PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $7.03 $6.77 - ----------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .19 .16 Net gains (losses) (both realized and unrealized) (.22) .24 - ----------------------------------------------------------------------------------------------------------------------- Total from investment operations (.03) .40 - ----------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.39) (.14) - ----------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.61 $7.03 - ----------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 89 $ 24 - ----------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c) .91% .89%(d) - ----------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 2.87% 3.07%(d) - ----------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 73% 92% - ----------------------------------------------------------------------------------------------------------------------- Total return(e) (.56%) 6.06%(f) - -----------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date is March 4, 2004. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. (f) Not annualized. - -------------------------------------------------------------------------------- 43 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT CLASS Y
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $ 7.04 $ 6.59 $ 6.01 $5.80 $ 5.40 - ------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .16 .18 .19 .20 .29 Net gains (losses) (both realized and unrealized) (.22) .52 .61 .19 .27 - ------------------------------------------------------------------------------------------------------------------------ Total from investment operations (.06) .70 .80 .39 .56 - ------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.37) (.25) (.22) (.18) (.16) - ------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 6.61 $ 7.04 $ 6.59 $6.01 $ 5.80 - ------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ -- $ -- $ -- $ -- $ -- - ------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(b) 1.18%(c) 1.17% 1.18% 1.17% 1.16% - ------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets 2.60% 2.83% 2.69% 3.29% 4.90% - ------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 73% 92% 117% 51% 24% - ------------------------------------------------------------------------------------------------------------------------ Total return(d) (1.00%) 10.86% 13.54% 6.72% 10.71% - ------------------------------------------------------------------------------------------------------------------------
(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) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses for Class Y would have been 1.20% for the year ended Oct. 31, 2005. (d) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 44 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM THE BOARD AND SHAREHOLDERS AXP GLOBAL SERIES, INC. We have audited the accompanying statement of assets and liabilities of RiverSource Global Bond Fund (a series of AXP Global Series, Inc.) as of October 31, 2005, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended October 31, 2005, and the financial highlights for each of the years in the five-year period ended October 31, 2005. These financial statements and the financial highlights are the responsibility of fund management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 Global Bond Fund as of October 31, 2005, and the results of its operations, changes in its net assets and the financial highlights for each of the periods stated in the first paragraph above, in conformity with U.S. generally accepted accounting principles. KPMG LLP Minneapolis, Minnesota December 20, 2005 - -------------------------------------------------------------------------------- 45 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT FEDERAL INCOME TAX INFORMATION (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. RIVERSOURCE GLOBAL BOND FUND FISCAL YEAR ENDED OCT. 31, 2005 CLASS A INCOME DISTRIBUTIONS -- TAXABLE AS DIVIDEND INCOME: Qualified Dividend Income for individuals 0.00% Dividends Received Deduction for corporations 0.00%
PAYABLE DATE PER SHARE Dec. 22, 2004 $0.23249 March 28, 2005 0.04306 June 28, 2005 0.05252 Sept. 28, 2005 0.03204 TOTAL DISTRIBUTIONS $0.36011
CLASS B INCOME DISTRIBUTIONS -- TAXABLE AS DIVIDEND INCOME: Qualified Dividend Income for individuals 0.00% Dividends Received Deduction for corporations 0.00%
PAYABLE DATE PER SHARE Dec. 22, 2004 $0.21941 March 28, 2005 0.02901 June 28, 2005 0.03903 Sept. 28, 2005 0.01659 TOTAL DISTRIBUTIONS $0.30404
- -------------------------------------------------------------------------------- 46 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT CLASS C INCOME DISTRIBUTIONS -- TAXABLE AS DIVIDEND INCOME: Qualified Dividend Income for individuals 0.00% Dividends Received Deduction for corporations 0.00%
PAYABLE DATE PER SHARE Dec. 22, 2004 $0.21871 March 28, 2005 0.02859 June 28, 2005 0.03913 Sept. 28, 2005 0.01881 TOTAL DISTRIBUTIONS $0.30524
CLASS I INCOME DISTRIBUTIONS -- TAXABLE AS DIVIDEND INCOME: Qualified Dividend Income for individuals 0.00% Dividends Received Deduction for corporations 0.00%
PAYABLE DATE PER SHARE Dec. 22, 2004 $0.24058 March 28, 2005 0.05160 June 28, 2005 0.06083 Sept. 28, 2005 0.04024 TOTAL DISTRIBUTIONS $0.39325
CLASS Y INCOME DISTRIBUTIONS -- TAXABLE AS DIVIDEND INCOME: Qualified Dividend Income for individuals 0.00% Dividends Received Deduction for corporations 0.00%
PAYABLE DATE PER SHARE Dec. 22, 2004 $0.23547 March 28, 2005 0.04605 June 28, 2005 0.05582 Sept. 28, 2005 0.03493 TOTAL DISTRIBUTIONS $0.37227
- -------------------------------------------------------------------------------- 47 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT FUND EXPENSES EXAMPLE (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Oct. 31, 2005. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 48 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED MAY 1, 2005 OCT. 31, 2005 THE PERIOD(a) EXPENSE RATIO Class A Actual(b) $1,000 $ 960.20 $ 6.71(c) 1.35% Hypothetical (5% return before expenses) $1,000 $1,018.50 $ 6.91(c) 1.35% Class B Actual(b) $1,000 $ 956.00 $10.46(c) 2.11% Hypothetical (5% return before expenses) $1,000 $1,014.65 $10.77(c) 2.11% Class C Actual(b) $1,000 $ 956.30 $10.51(c) 2.12% Hypothetical (5% return before expenses) $1,000 $1,014.60 $10.82(c) 2.12% Class I Actual(b) $1,000 $ 962.60 $ 4.48(c) .90% Hypothetical (5% return before expenses) $1,000 $1,020.78 $ 4.61(c) .90% Class Y Actual(b) $1,000 $ 961.20 $ 5.82(c) 1.17% Hypothetical (5% return before expenses) $1,000 $1,019.41 $ 5.99(c) 1.17%
(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 185/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended Oct. 31, 2005: -3.98% for Class A, -4.40% for Class B, -4.37% for Class C, -3.74% for Class I and -3.88% for Class Y. (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. The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Oct. 31, 2006, unless sooner terminated at the discretion of the Board. Under this expense cap/fee waiver agreement, net expenses will not exceed 1.25% for Class A; 2.02% for Class B; 2.02% for Class C; 0.95% for Class I; and 1.08% for Class Y. 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 Oct. 31, 2005, the actual expenses paid would have been $6.21 for Class A, $10.01 for Class B, $10.01 for Class C, $4.58 for Class I and $5.37 for Class Y; the hypothetical expenses paid would have been $6.40 for Class A, $10.32 for Class B, $10.32 for Class C, $4.71 for Class I and $5.53 for Class Y. - -------------------------------------------------------------------------------- 49 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 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 5 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 may retire after her 75th birthday. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - -------------------------------------------------------------------------------------------------------------------------------- Arne H. Carlson Board member since 1999 Chair, Board Services 901 S. Marquette Ave. Corporation (provides Minneapolis, MN 55402 administrative services Age 71 to boards); former Governor of Minnesota Philip J. Carroll, Jr.* Board member since 2002 Retired Chairman and Scottish Power PLC, 901 S. Marquette Ave. CEO, Fluor Corporation Vulcan Materials Minneapolis, MN 55402 (engineering and Company, Inc. (construction Age 67 construction) materials/chemicals) Patricia M. Flynn Board member since 2004 Trustee Professor of 901 S. Marquette Ave. Economics and Minneapolis, MN 55402 Management, Bentley Age 54 College; former Dean, McCallum Graduate School of Business, Bentley College Anne P. Jones Board member since 1985 Attorney and Consultant 901 S. Marquette Ave. Minneapolis, MN 55402 Age 70 Jeffrey Laikind Board member since 2005 Former Managing American Progressive 901 S. Marquette Ave. Director, Shikiar Asset Insurance Minneapolis, MN 55402 Management Age 70 Stephen R. Lewis, Jr. Board member since 2002 President Emeritus and Valmont Industries, Inc. 901 S. Marquette Ave. Professor of Economics, (manufactures irrigation Minneapolis, MN 55402 Carleton College systems) Age 65
* Phillip J. Carroll, Jr. retired as a member of the Board, effective Nov. 10, 2005. - -------------------------------------------------------------------------------- 50 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - -------------------------------------------------------------------------------------------------------------------------------- Catherine James Paglia Board member since 2004 Director, Enterprise Strategic Distribution, Inc. 901 S. Marquette Ave. Asset Management, Inc. (transportation, Minneapolis, MN 55402 (private real estate and distribution and Age 53 asset management company) logistics consultants) Alan K. Simpson Board member since 1997 Former three-term United 1201 Sunshine Ave. States Senator for Cody, WY 82414 Wyoming Age 74 Alison Taunton-Rigby Board member since 2002 Chief Executive Officer, Hybridon, Inc. 901 S. Marquette Ave. RiboNovix, Inc. since (biotechnology); American Minneapolis, MN 55402 2003 (biotechnology); Healthways, Inc. (health Age 61 former President, management programs) Forester Biotech
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS**
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - -------------------------------------------------------------------------------------------------------------------------------- William F. Truscott Board member since 2001, President - U.S. Asset 53600 Ameriprise Financial Center Vice President Management and Chief Minneapolis, MN 55474 since 2002 Investment Officer, Age 45 Ameriprise Financial, Inc. and President, Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC since 2005; Senior Vice President - Chief Investment Officer, Ameriprise Financial, Inc. and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001-2005; former Chief Investment Officer and Managing Director, Zurich Scudder Investments
** Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments. - -------------------------------------------------------------------------------- 51 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - -------------------------------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President - 105 Ameriprise Financial Center Investment Accounting, Minneapolis, MN 55474 Ameriprise Financial, Age 50 Inc., since 2002; Vice President - Finance, American Express Company, 2000-2002; Vice President - Corporate Controller, Ameriprise Financial, Inc., 1996-2000 Paula R. Meyer President since 2002 Senior Vice President - 596 Ameriprise Financial Center Mutual Funds, Ameriprise Minneapolis, MN 55474 Financial, Inc., since Age 51 2002 and Senior Vice 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, General President of Board 901 S. Marquette Ave. Counsel, and Secretary Services Corporation Minneapolis, MN 55402 since 1978 Age 67 Beth E. Weimer Chief Compliance Officer Vice President and Chief 172 Ameriprise Financial Center since 2004 Compliance Officer, Minneapolis, MN 55474 Ameriprise Financial, Age 52 Inc., since 2001 and Chief Compliance 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. - -------------------------------------------------------------------------------- 52 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT RiverSource Investments, LLC (RiverSource), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial, formerly American Express Financial Corporation), serves as the investment manager to the Fund. Under an investment management services agreement (the IMS Agreement), the investment manager provides investment advice and other services to the Fund. Throughout the year, the Fund's Board of Directors (the Board) and the Board's Investment Review and Contracts Committees monitor these services. Ameriprise Financial had served as investment manager to the Fund until Sept. 29, 2005. On that date, and pursuant to the consent of the Board, Ameriprise Financial transferred its rights, title, and interest and its burdens and obligations under the IMS Agreement to RiverSource, its wholly-owned subsidiary. Each year, the Board determines whether to continue the IMS Agreement by evaluating the quality and level of services received and the costs associated with those services. To assist the Board in making this determination, the investment manager prepares detailed reports for the Board and its Contracts Committee in March and April and provides data prepared by independent organizations. The Board gives considerable weight to the work, deliberations and conclusions of the Contracts and Investment Review Committees in determining whether to continue the IMS Agreement. BACKGROUND This past year, prior to the Board's annual review process, on Feb. 1, 2005, American Express Company, the former parent of Ameriprise Financial, announced its intention to pursue a spin-off of Ameriprise Financial by distributing shares of the common stock of Ameriprise Financial to shareholders of American Express Company. Following this announcement, the Board determined to proceed with its annual review process and, after thorough review of the reports and data provided, at a meeting held in person on April 14, 2005, the Board, including all of its independent members, determined that the quality and level of advisory services provided pursuant to the IMS Agreement were satisfactory and that fees were fair and reasonable. However, in light of the announced plans of the spin-off, the Board approved continuation of the IMS Agreement with Ameriprise Financial for only an interim period ending on the later of (i) the effective date of the spin-off; or (ii) the approval of a new IMS Agreement with Ameriprise Financial (or its subsidiary) by the shareholders of the Fund, but in no event for a period longer than one year. During the course of the six-month period following the April 2005 meeting, the Board evaluated whether to approve new investment management services agreements for each of the funds within the Ameriprise Financial fund complex (together, the Funds) with post-spin Ameriprise Financial (or RiverSource). Independent counsel, Schulte Roth & Zabel LLP (Schulte), assisted the Boards in fulfilling their statutory and other responsibilities associated with the spin-off and the resulting consideration of new contracts, including the new IMS Agreement. The Board and its committees were provided with a wealth of written and oral information in this regard. Furthermore, in connection with the Board's considerations as to whether post-spin Ameriprise Financial, as an entity independent from American Express Company, would be capable of continuing to provide a high quality of services to the Funds, - -------------------------------------------------------------------------------- 53 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT the Board's independent members retained their own financial adviser, Credit Suisse First Boston LLC (CSFB), to assist them in analyzing the capital adequacy of post-spin Ameriprise Financial. (The costs of independent counsel and CSFB and of additional meetings of the Boards were borne by Ameriprise Financial as part of the commitment of the American Express Company to ensure a complete and thorough review of the proposed spin-off and its effect on the services provided by Ameriprise Financial and its subsidiaries.) At a meeting of the Board held on Sept. 8, 2005, the Board, including all of its independent members, approved, and recommended that shareholders approve, a proposed new IMS Agreement with RiverSource (the New IMS Agreement). A meeting of the Fund's shareholders is expected to be held on Feb. 15, 2006 to consider approval of the New IMS Agreement. If approved, the New IMS Agreement would take effect shortly after the shareholder meeting. The following section, "Board Considerations Related to the New IMS Agreement," provides a detailed discussion of the Board's considerations and determinations respecting the New IMS Agreement. BOARD CONSIDERATIONS RELATED TO THE NEW IMS AGREEMENT In carrying out its legal responsibilities associated with the consideration of the New IMS Agreement, the Board evaluated the following factors: NATURE, EXTENT AND QUALITY OF SERVICES TO BE PROVIDED BY POST-SPIN AMERIPRISE FINANCIAL (AND ITS SUBSIDIARIES) The Board recognized that only a few months had passed since its April 2005 conclusion that the nature, extent and quality of services provided by Ameriprise Financial were satisfactory and consistent with those that would be expected for a fund family of the size of the Funds and its determination to renew the IMS Agreement for the interim period. However, the Board also recognized the need to supplement this assessment with an evaluation of whether the spin-off or other factors would result in changes to the advisory services being provided under the current IMS Agreement. The Board focused its evaluation on the following factors potentially impacting the nature, extent and quality of advisory services to be provided by Ameriprise Financial: (i) Ameriprise Financial's projected capital structure and capital adequacy as a stand-alone entity; (ii) its legal and regulatory risks; (iii) its ability to retain and attract personnel; and (iv) its ability to successfully re-brand its products and services. Based on extensive presentations and reports by Ameriprise Financial, CSFB and Schulte, the Board concluded that the proposed capital structure (which includes certain indemnification commitments made by American Express Company) should enable RiverSource to continue to provide a high quality and level of advisory services to the Fund. In making this determination, the Board took into account representations by management of Ameriprise Financial that projected capital levels would allow Ameriprise Financial and RiverSource to meet legal and compliance responsibilities, build their distribution network, pursue technological upgrades, make capital commitments necessary to retain and attract key personnel devoted to legal and compliance responsibilities, portfolio management and distribution, and pursue smaller asset management acquisitions to help grow the asset management business. The Board accorded significant weight to CSFB's confirmation as to the reasonableness of the proposed capital structure. The Board also - -------------------------------------------------------------------------------- 54 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT considered the fact that there were no expected departures of key personnel involved in the portfolio management, operations and marketing of the Funds as a result of the announcement of the spin-off. The Board concluded that, based on all of the materials and information provided, post-spin Ameriprise Financial (including RiverSource) would be in a position to continue to provide a high quality and level of advisory services to the Fund. INVESTMENT PERFORMANCE The Board next focused on investment performance. The Board reviewed reports documenting the Fund's performance over one-, three- and/or five-year periods, as well as the entire period during which its current portfolio manager has managed the Fund, and compared to relevant Lipper and market indices. The Board took into account its determination in April 2005 that investment performance met expectations. The Board also considered that it had been receiving monthly performance reports for the Fund and that there had been no significant deviations from April's overall performance data. COST OF SERVICES PROVIDED The Board evaluated comparative fees and the costs of services under the current IMS Agreement and the New IMS Agreement, including fees charged by Ameriprise Financial (including RiverSource and other subsidiaries) to institutional clients. The Board studied RiverSource's effort (i.e., its "pricing philosophy") to set substantially all Funds' total expense ratios at or below the median expense ratio of comparable mutual funds (as compiled by Lipper). The Board observed that the proposed advisory fee changes are designed to work in tandem with proposed changes to administrative services fees. It also noted that RiverSource has agreed to voluntarily impose expense caps or waivers to achieve this pricing objective whenever the expense ratio exceeded the median expense ratio by more than three basis points. The Board considered that advisory fees under the New IMS Agreement would decrease. The Board next considered the expected profitability to Ameriprise Financial and RiverSource derived from their relationship with the Fund, recalling the April 2005 determination that the profitability level was appropriate. The Board noted that projected profitability of Ameriprise Financial would allow it to operate effectively and, at the same time, reinvest in RiverSource and its other asset management businesses. The Board also considered that the proposed changes in advisory fees and the mergers of certain other Funds would result in revenue gains to Ameriprise Financial, but that these increases would not materially alter profit margins due to expected increases in costs associated with the spin-off, particularly re-branding and separation. CSFB also reported that Ameriprise Financial's projected level of return on equity was generally reasonable in light of the returns on equity of its industry competitors. In evaluating profitability, the Board also considered the benefits Ameriprise Financial obtains through the use of commission dollars paid on portfolio transactions for the Fund and from other business relationships that result from managing the Fund. The Board also considered the fees charged by Ameriprise Financial (and its subsidiaries) to institutional clients as well as the fees paid to, and charged by, subadvisers, noting the differences in services provided in each case. In light of these considerations, the Board concluded that projected profitability levels were appropriate. - -------------------------------------------------------------------------------- 55 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT ECONOMIES OF SCALE The Board also considered the "breakpoints" in fees that would be triggered as Fund net asset levels grew and the extent to which shareholders would benefit from such growth. The Board observed that the revised fee schedules under the proposed New IMS Agreement would continue to provide breakpoints similar to those in place pursuant to the current IMS Agreement. Accordingly, the Board concluded that the proposed New IMS Agreement provides adequate opportunity for shareholders to realize benefits as Fund assets grow. OTHER CONSIDERATIONS In addition, the Board accorded weight to the fact that, under the New IMS Agreement, RiverSource Investments is held to a higher standard of care than under the current IMS Agreement. The Board also noted Ameriprise Financial's commitment to a culture that adheres to ethical business practice, assigns accountability to senior management and seeks to identify conflicts and propose appropriate action to minimize the risks posed by the conflicts. Furthermore, the Board recognized that it was not limited to considering management's proposed New IMS Agreement. In this regard, the Board evaluated the circumstances under which it would consider the retention of an investment adviser different from RiverSource Investments. The Board concluded, based on its consultation with independent counsel, that pursuing the retention of a different adviser was not necessary, primarily because, in its best judgment, Ameriprise Financial continues to be basically the same organization (from a functional and managerial standpoint) as it was prior to the spin-off. The Board reasoned that shareholders purchased shares of the Fund with an expectation that the current investment advisory organization would be servicing the Fund. - -------------------------------------------------------------------------------- 56 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT PROXY VOTING The policy of the Board is to vote all proxies of the companies in which the Fund holds investments. The procedures are stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling (800) 862-7919; by looking at the website www.riversource.com/funds; 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 the Fund's administrator, Board Services Corporation, collect at (612) 330-9283; by looking at the website www.riversource.com/funds; or by searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- 57 -- RIVERSOURCE GLOBAL BOND FUND -- 2005 ANNUAL REPORT [RIVERSOURCE INVESTMENTS(SM) LOGO] RIVERSOURCE INVESTMENTS 200 AMERIPRISE FINANCIAL CENTER MINNEAPOLIS, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. RiverSource Funds are managed by RiverSource Investments, LLC and distributed by Ameriprise Financial Services, Inc., Member NASD. Both companies are part of Ameriprise Financial, Inc. S-6309 AA (12/05) ANNUAL REPORT [RIVERSOURCE(SM) INVESTMENTS LOGO] RIVERSOURCE(SM) GLOBAL EQUITY FUND ANNUAL REPORT FOR THE PERIOD ENDED OCT. 31, 2005 > RIVERSOURCE GLOBAL EQUITY FUND (FORMERLY AXP(R) THREADNEEDLE GLOBAL EQUITY FUND) SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. TABLE OF CONTENTS Fund Snapshot 3 Performance Summary 4 Questions & Answers with Portfolio Management 5 The Fund's Long-term Performance 10 Investments in Securities 12 Financial Statements (Portfolio) 17 Notes to Financial Statements (Portfolio) 20 Report of Independent Registered Public Accounting Firm (Portfolio) 24 Financial Statements (Fund) 25 Notes to Financial Statements (Fund) 28 Report of Independent Registered Public Accounting Firm (Fund) 37 Federal Income Tax Information 38 Fund Expenses Example 39 Board Members and Officers 41 Approval of Investment Management Services Agreement 44 Proxy Voting 49 [DALBAR RATED FOR COMMUNICATION 2005 LOGO] American Express(R) Funds'* reports to shareholders have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. * As of Oct. 1, 2005, the RiverSource brand replaced "American Express" as the name of the American Express Funds. - -------------------------------------------------------------------------------- 2 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT FUND SNAPSHOT AT OCT. 31, 2005 PORTFOLIO MANAGERS
PORTFOLIO MANAGERS SINCE YEARS IN INDUSTRY Dominic Rossi 10/03 19 Steve Thornber 10/03 18
FUND OBJECTIVE For investors seeking long-term capital growth. Inception dates by class A: 5/29/90 B: 3/20/95 C: 6/26/00 Y: 3/20/95 Ticker symbols by class A: IGLGX B: IDGBX C: -- Y: IDGYX Total net assets $556.7 million Number of holdings 120
[CHART] STYLE MATRIX
STYLE VALUE BLEND GROWTH SIZE LARGE / / /X/ / / MEDIUM / / / / / / SMALL / / / / / /
SHADING WITHIN THE STYLE MATRIX INDICATES AREAS IN WHICH THE FUND GENERALLY INVESTS. COUNTRY COMPOSITION PERCENTAGE OF PORTFOLIO ASSETS [CHART] United States 37.4% Japan 20.0% United Kingdom 6.4% Switzerland 5.4% France 5.2% South Korea 4.8% Cash & Short-Term Securities* 4.5% Germany 3.1% Hong Kong 3.1% Canada 2.8% Sweden 1.0% Other** 6.3%
* Of the 4.5%, 1.3% is due to security lending activity and 3.2% is the Fund's cash equivalent position. ** Includes Brazil, Czechoslovakia Federated Republic, Denmark, Greece, India, Italy, Netherlands, Norway, Peru, Russia, South Africa and Taiwan. TOP TEN HOLDINGS PERCENTAGE OF PORTFOLIO ASSETS Microsoft (United States) 2.3% Home Depot (United States) 2.2 Mitsubishi UFJ Financial Group (Japan) 2.1 Citigroup (United States) 2.0 Roche Holding (Switzerland) 2.0 UBS (Switzerland) 1.9 Johnson & Johnson (United States) 1.8 Samsung Electronics (South Korea) 1.8 Altria Group (United States) 1.5 Shinhan Financial Group (South Korea) 1.4
For further detail about these holdings, please refer to the section entitled "Investments in Securities." Investment products, including shares of mutual funds, involve investment risks including possible loss of principal and fluctuation in value. International investing involves increased risk and volatility, not typically associated with domestic investing, due to 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. This Fund primarily invests in large-capitalization companies but may invest a small portion in small- and mid-capitalization companies. 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. Fund holdings are subject to change. - -------------------------------------------------------------------------------- 3 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT PERFORMANCE SUMMARY [CHART] PERFORMANCE COMPARISON FOR THE YEAR ENDED OCT. 31, 2005 RiverSource Global Equity Fund Class A (excluding sales charge) +21.48% Morgan Stanley Capital International (MSCI) All Country World Index (unmanaged) +14.87% Lipper Global Funds Index +15.12%
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 OR VISITING www.riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. AVERAGE ANNUAL TOTAL RETURNS
CLASS A CLASS B CLASS C CLASS Y (5/29/90) (3/20/95) (6/26/00) (3/20/95) (INCEPTION DATES) NAV(1) POP(2) NAV(1) AFTER CDSC(3) NAV(1) AFTER CDSC(4) NAV(5) AT OCT. 31, 2005 1 year +21.48% +14.49% +20.74% +15.74% +20.89% +19.89% +21.90% 3 years +16.95% +14.66% +16.07% +15.07% +16.06% +16.06% +17.19% 5 years -2.72% -3.87% -3.45% -3.77% -3.47% -3.47% -2.53% 10 years +4.84% +4.22% +4.05% +4.05% N/A N/A +5.02% Since inception +5.23% +4.82% +4.66% +4.66% -5.28% -5.28% +5.64% AT SEPT. 30, 2005 1 year +28.62% +21.22% +27.52% +22.52% +27.50% +26.50% +28.74% 3 years +20.37% +18.03% +19.47% +18.52% +19.40% +19.40% +20.71% 5 years -3.15% -4.28% -3.90% -4.21% -3.94% -3.94% -2.95% 10 years +4.77% +4.15% +3.97% +3.97% N/A N/A +4.95% Since inception +5.47% +5.07% +5.01% +5.01% -4.82% -4.82% +6.00%
(1) EXCLUDING SALES CHARGE. (2) RETURNS AT PUBLIC OFFERING PRICE (POP) REFLECT A SALES CHARGE OF 5.75%. (3) RETURNS AT MAXIMUM CONTINGENT DEFERRED SALES CHARGE (CDSC). CDSC APPLIES AS FOLLOWS: FIRST YEAR 5%; SECOND AND THIRD YEAR 4%; FOURTH YEAR 3%; FIFTH YEAR 2%; SIXTH YEAR 1%; NO SALES CHARGE THEREAFTER. (4) 1% CDSC APPLIES TO REDEMPTIONS MADE WITHIN THE FIRST YEAR OF PURCHASE. (5) SALES CHARGE IS NOT APPLICABLE TO THESE SHARES. SHARES AVAILABLE TO INSTITUTIONAL INVESTORS ONLY. - -------------------------------------------------------------------------------- 4 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT BELOW, RIVERSOURCE GLOBAL EQUITY FUND PORTFOLIO MANAGERS DOMINIC ROSSI AND STEPHEN THORNBER OF THREADNEEDLE INTERNATIONAL LIMITED (THREADNEEDLE) DISCUSS THE FUND'S RESULTS AND POSITIONING FOR THE 12 MONTHS ENDED OCT. 31, 2005. THREADNEEDLE, AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF AMERIPRISE FINANCIAL, INC. ACTS AS THE SUBADVISER TO THE FUND. Q: HOW DID RIVERSOURCE GLOBAL EQUITY FUND PERFORM FOR THE FISCAL YEAR ENDED OCT. 31, 2005? A: The Fund gained 21.48% (Class A shares excluding sales charge) for the 12-month period ended Oct. 31, 2005. The Fund significantly outperformed its benchmark, the Morgan Stanley Capital International (MSCI) All Country World Index (MSCI Index), which advanced 14.87% for the period. The Lipper Global Funds Index, representing the Fund's peer group, rose 15.12% over the same time frame. Q: WHAT FACTORS MOST SIGNIFICANTLY AFFECTED PERFORMANCE? A: The Fund had an outstanding year. While sector and asset allocation (i.e., geographic) strategies added value over the course of the year, it was stock selection that added significant value and drove the Fund's consistent outperformance. Energy was a strong theme that we followed throughout the period. We kept our allocation to the energy sector greater than the MSCI Index throughout the year. Some noteworthy energy stocks in the Fund included U.S. oil and gas companies Valero Energy and EOG (Enron Oil and Gas) Resources. Both companies delivered very strong performance throughout the period. Another notable -- and somewhat different type of oil stock -- is Canadian oil sands stock EnCana, another strong energy performer. Currently, oil sands account for about one-third of Canada's total oil production. Oil sands are composed of sand, bitumen (a thick form of crude oil), clay and water. After processing, it is sent by pipeline and used by conventional oil refineries. Generally, the Fund's positions in energy are geared toward refining, marketing and exploration companies at the expense of the larger integrated oil companies. This strategy has worked well for the Fund. The majority of the Fund's oil and gas holdings are located in North America. Our energy holdings with resources in the path of Hurricane Katrina escaped significant damage. Some notable stocks that helped boost the Fund's performance include U.S. companies AmeriTrade and Google Cl A. AmeriTrade, the online brokerage company, had some takeover activity that helped the share price. Google Cl A, the technology company best known for its internet search engine, did extremely well and more than doubled its share price. - -------------------------------------------------------------------------------- 5 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS > GENERALLY, THE FUND'S POSITIONS IN ENERGY ARE GEARED TOWARD REFINING, MARKETING AND EXPLORATION COMPANIES AT THE EXPENSE OF THE LARGER INTEGRATED OIL COMPANIES. THIS STRATEGY HAS WORKED WELL FOR THE FUND. Another noteworthy stock is Hyundai Development, a property developer in South Korea. It rose more than 100% over the course of the year. Although we had reported that stock selection was strong throughout the year, the strongest period of outperformance was May through July, or the Fund's "third quarter." The list of stock winners in this timeframe was extensive, including Canadian oil sand company, EnCana (discussed above), up more than 60%; Brazilian iron ore producer Cia Vale do Rio Doce ADR (CVRD), up 50% against a backdrop of rising commodity prices; and U.S. biochemical company Myogen rose no less than 230%. Myogen researches, develops and markets small molecule therapeutics for treating cardiovascular diseases. It is a long-term holding that had disappointed for months on end. However, its extraordinary performance over this timeframe validated our on-going confidence in the company and our patience, which is a necessary virtue when investing, but is especially needed in biopharmaceutical company investments -- where success is based on innovative research and development, lengthy clinical trials and needs in the marketplace. During that same three-month timeframe, our strategy in Japan came into its own. In retrospect, we focused on Japan too early in the fiscal year. We have maintained a larger-than-MSCI Index position since early in the year and added to our Japanese positions in early spring. Our position in Japan did not start to benefit the Fund until the second half of the fiscal year. Then the allocation and sector strategies, as well as stock selection came together. Some stocks that contributed significantly to performance were: Mitsubishi UFJ Financial Group (MUFG), which is one of the world's largest banks; GOLDCREST, a condominium developer; Komatsu, an earth moving equipment company that posted very strong profits on the back of burgeoning Chinese demand; and Nisshin Steel, a leader for both quality and volume of production in the specialty steel industry. - -------------------------------------------------------------------------------- 6 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS > OUR POSITION IN JAPAN DID NOT START TO BENEFIT THE FUND UNTIL THE SECOND HALF OF THE FISCAL YEAR. THEN THE ALLOCATION AND SECTOR STRATEGIES, AS WELL AS STOCK SELECTION CAME TOGETHER. Not every strategy or stock played to our favor. The Fund had several detractors from performance during the period. One such detractor was our underweight position (relative to the MSCI Index) in the industrials sector. Industrials did well throughout the year, and we did not fully capture the performance in that sector. Another detractor was our too-early entry to the Japanese market, as discussed above. Although this asset allocation decision later benefited the Fund, we waited nearly six months for the strategy to show success. Although we noted that stock selection was beneficial to performance throughout the year, not every stock over the annual period was a winner. For example, over a three-month period, U.S. orthopaedic mattress company Temper-Pedic's stock dropped by 50%. We weathered its first large drop because we still held out hope of recovery. However when Temper-Pedic's stock fell again, we sold our position. Other disappointing stocks included U.S. companies Harley Davidson, the motorcycle manufacturer and Rockwell Automation, manufacturer of computer equipment for use in factory automation applications. Q: WHAT CHANGES DID YOU MAKE TO THE FUND? A: Energy was a key contributor to the Fund's performance through much of the year, and there was considerable activity in the sector. Spring was an especially volatile season for oil stocks. In March, we reduced our positions in oil companies. Shortly after, in April, prices on those stocks dropped. In May, we re-established our position in oil stocks. So, taking profits from holdings, exercising watchful patience and then buying on market lows has been a successful strategy that helped boost performance. In early October -- late in the fiscal year -- we again reduced our oil stocks. In the financials sector, we increased our exposure around the world over the course of the year. We noted previously that we added MUFG in Japan, but also added banks, insurance companies and - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT -- 7 QUESTIONS & ANSWERS brokerage service companies in the U.K. and U.S. bank stocks in the U.S. have been inexpensive for some time. We believe this will change, so we established positions in several large U.S. banks while their valuations remained low. We added Bank of America, Wells Fargo & Co., Wachovia and US Bancorp to the Fund. Another sector-related change was to increase the Fund's health care exposure. Companies such as Nobel Biocare Holding, a Swiss company that produces innovative orthodontics; St. Jude Medical, a U.S. medical equipment and supply company; and German health care services provider Fresenius Medical Care have all contributed to performance this year. In the biopharmaceutical area, we have had considerable success with U.S. companies Myogen (discussed above), Amgen, a developer and producer of innovative human therapeutics, and recently added ViroPharma, a company developing proprietary antiviral pharmaceuticals for treating viral diseases, such as colds and influenza. Also, in this period, we have entered a new area of focus in the U.S., home building-related companies. One such company that we added to the Fund is Home Depot, a specialty retailer for the building trade and home improvement do-it-yourself consumers. Many companies related to home construction and remodeling in the United States have had a recent setback. We, however, take their setback as an encouraging investment opportunity. On the asset allocation front, as discussed, we increased our position in Japan at certain points throughout the period. Also, in Asia, we reduced our position in Hong Kong and later added to our South Korean holdings. Early in the period, for example, Hong Kong and South Korea were approximately 6% and 2% of the Fund. Late in the period, those percentages were reversed with South Korea at nearly 4.8%. At the end of the reporting period, the countries with the three greatest percentages of the portfolio's assets were the U.S. at 37.4%, Japan at 20.0% and the U.K. at 6.4%. Q: HOW IS THE FUND CURRENTLY POSITIONED, AND HOW DO YOU INTEND TO MANAGE THE FUND IN THE COMING MONTHS? A: We believe that our big themes this year -- oil and Japan -- have exhausted themselves in the short term. This is not to say that we will desert them, but we have cut back on our positions somewhat; here is why: - Oil has had a long, successful run, although fraught with volatility. We believe this sector will continue to benefit investors over the long term, - -------------------------------------------------------------------------------- 8 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS but in the short term, oil stocks have slowed. We have reduced the Fund's position in oil, but still remain overweight in the energy sector relative to the MSCI Index. - Japan has been a key focus over the course of the year, and started to pay off in the second half. Even though we have reduced our allocation to Japan, we remain heavily invested there. At the end of the period, Japan was the Fund's second largest country position. Political and economic news late in the year add credence to our optimistic view of Japan. In September 2005, Prime Minister Koizumi's decisive victory in Japan's general election spurred the Japanese market to new four-year highs, fuelled by foreign buying. The election result has enhanced the prospects for further reforms in Japan. The brighter economic outlook and increasing corporate profitability there have also continued to drive the market higher. Also, there has been a notable fall in unemployment and an improvement in consumer spending; both bode well for the recovering economy. We are bullish on Japan and will likely remain so, but we felt a reduction in exposure was necessary at this time. Always mindful that markets are volatile, we strive to limit risk, so we have reduced our exposure to oil and Japan, although our positions still remain above those of the MSCI Index. In the near term, we will likely not change the overall structure of the Fund much more. Our asset allocation, with its heavy focus on the U.S., is poised for results. We have built up our exposure to South Korea, which at the end of the fiscal year was at 4.8%. We see promise here and will continue to look for opportunities going forward. On the sector side, we have increased our positions in the financials sector, to bring it to be the largest sector in the Fund. We anticipate that the addition of several U.S., U.K and Japanese banks, brokerage companies and insurance companies will benefit the Fund's on-going performance. We watch for, as always, sectors with improving returns on capital, some growth, and areas that are uncorrelated with other sectors or regions. So, by adding new ideas to the Fund, we build in some additional diversification and increase the likelihood that the Fund will benefit from these new ideas over both the short- and long-term. - -------------------------------------------------------------------------------- 9 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT THE FUND'S LONG-TERM PERFORMANCE The chart on the facing page illustrates the total value of an assumed $10,000 investment in RiverSource Global Equity Fund Class A shares (from 11/1/95 to 10/31/05) as compared to the performance of two widely cited performance indices, the Morgan Stanley Capital International (MSCI) All Country World Index and the Lipper Global Funds Index. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5.75%, while such charges are not reflected in the performance of the indices. Returns for the Fund include the reinvestment of any distribution paid during each period. THE PERFORMANCE INFORMATION SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT A GUARANTEE OF FUTURE RESULTS. THE 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 OR VISITING www.riversource.com/funds. ALSO SEE "PAST PERFORMANCE" IN THE FUND'S CURRENT PROSPECTUS. DISTRIBUTION SUMMARY THE TABLE BELOW DETAILS THE FUND'S INCOME AND CAPITAL GAIN DISTRIBUTIONS FOR THE FISCAL YEARS SHOWN. MORE INFORMATION ON THE OTHER CLASSES CAN BE FOUND IN THE FINANCIAL HIGHLIGHTS SECTION OF THIS REPORT'S NOTES TO FINANCIAL STATEMENTS.
CLASS A -------------------------------------------------- SHORT-TERM LONG-TERM FISCAL YEAR ENDED INCOME CAPITAL GAINS CAPITAL GAINS TOTAL Oct. 31, 2005 $0.03 $ -- $ -- $0.03 Oct. 31, 2004 -- -- -- -- Oct. 31, 2003 -- -- -- -- Oct. 31, 2002 -- -- -- -- Oct. 31, 2001 0.02 0.08 1.26 1.36
- -------------------------------------------------------------------------------- 10 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT [CHART] VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE GLOBAL EQUITY FUND
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 RIVERSOURCE GLOBAL EQUITY FUND CLASS A (INCLUDING SALES CHARGE) $ 9,425 $10,793 $11,464 $13,413 $16,577 $17,363 $11,315 $ 9,457 $11,146 $12,453 $15,127 MSCI ALL COUNTRY WORLD INDEX(1) $10,000 $11,585 $13,447 $15,199 $19,154 $19,307 $14,451 $12,490 $15,644 $17,839 $20,491 LIPPER GLOBAL FUNDS INDEX(2) $10,000 $11,485 $13,544 $14,324 $17,748 $19,863 $15,160 $13,151 $16,130 $18,204 $20,957
COMPARATIVE RESULTS RESULTS AT OCT. 31, 2005
SINCE 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION(3) RIVERSOURCE GLOBAL EQUITY FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $11,449 $15,074 $ 8,209 $15,127 $20,670 Average annual total return +14.49% +14.66% -3.87% +4.22% +4.82% MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) ALL COUNTRY WORLD INDEX(1) Cumulative value of $10,000 $11,487 $16,405 $10,615 $20,491 $30,984 Average annual total return +14.87% +17.94% +1.20% +7.44% +7.61% LIPPER GLOBAL FUNDS INDEX(2) Cumulative value of $10,000 $11,512 $15,926 $10,547 $20,957 $32,297 Average annual total return +15.12% +16.78% +1.07% +7.67% +7.90%
RESULTS FOR OTHER SHARE CLASSES CAN BE FOUND ON PAGE 4. (1) The Morgan Stanley Capital International (MSCI) All Country World Index, an unmanaged index of equity securities, is designed to measure equity market performance in the global developed and emerging markets. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. (2) The Lipper Global Funds Index includes the 30 largest global funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. (3) Fund data is from May 29, 1990. MSCI All Country World Index and Lipper peer group data is from June 1, 1990. - -------------------------------------------------------------------------------- 11 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT INVESTMENTS IN SECURITIES WORLD GROWTH PORTFOLIO OCT. 31, 2005 (PERCENTAGES REPRESENT VALUE OF INVESTMENTS COMPARED TO NET ASSETS)
ISSUER SHARES VALUE(a) COMMON STOCKS (96.2%)(c) BRAZIL (0.6%) METALS & MINING Cia Vale do Rio Doce ADR 90,427 $3,336,756 - ------------------------------------------------------------------------------------------------------- CANADA (2.8%) AIRLINES (0.5%) ACE Aviation Holdings Cl A 114,100(b) 2,995,004 - ------------------------------------------------------------------------------------------------------- METALS & MINING (0.5%) Cameco 60,800 2,923,651 - ------------------------------------------------------------------------------------------------------- OIL & GAS (1.8%) EnCana 78,040 3,568,298 Suncor Energy 114,374 6,133,878 ------------- Total 9,702,176 - ------------------------------------------------------------------------------------------------------- CZECHOSLOVAKIA FEDERATED REPUBLIC (0.4%) PHARMACEUTICALS Zentiva GDR 44,801(b),(d) 1,983,533 - ------------------------------------------------------------------------------------------------------- DENMARK (--%) INSURANCE TrygVesta 6,459(b) 266,592 - ------------------------------------------------------------------------------------------------------- FRANCE (5.3%) AUTOMOBILES (0.5%) Renault 31,821 2,755,832 - ------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (0.5%) BNP Paribas 35,490 2,691,698 - ------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.6%) France Telecom 130,000 3,379,630 - ------------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.8%) Schneider Electric 56,311 4,627,564 - ------------------------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (0.1%) Gaz de France 9,968 306,406 - ------------------------------------------------------------------------------------------------------- IT SERVICES (1.0%) Atos Origin 80,174(b) 5,509,198 - ------------------------------------------------------------------------------------------------------- OIL & GAS (0.5%) Total 10,773 $2,711,033 - ------------------------------------------------------------------------------------------------------- PHARMACEUTICALS (1.3%) Sanofi-Aventis 92,529 7,412,870 - ------------------------------------------------------------------------------------------------------- GERMANY (2.3%) ELECTRIC UTILITIES (0.7%) E.ON 41,070 3,721,357 - ------------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (0.7%) Fresenius Medical Care 40,736 3,677,847 - ------------------------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (0.9%) Hypo Real Estate Holding 110,000 5,306,452 - ------------------------------------------------------------------------------------------------------- GREECE (0.9%) CONSTRUCTION MATERIALS TITAN Cement 153,130 5,235,897 - ------------------------------------------------------------------------------------------------------- HONG KONG (3.2%) MULTILINE RETAIL (0.9%) Lifestyle Intl Holdings 3,275,000 4,734,709 - ------------------------------------------------------------------------------------------------------- REAL ESTATE (1.1%) New World Development 3,106,600 3,844,980 Sun Hung Kai Properties 263,000 2,496,207 ------------- Total 6,341,187 - ------------------------------------------------------------------------------------------------------- SPECIALTY RETAIL (1.2%) Esprit Holdings 929,500 6,585,095 - ------------------------------------------------------------------------------------------------------- INDIA (0.7%) COMMERCIAL BANKS State Bank of India GDR 87,394(d) 3,770,177 - ------------------------------------------------------------------------------------------------------- ITALY (0.9%) OIL & GAS Eni 193,225(e) 5,172,083 - -------------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 12 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT
ISSUER SHARES VALUE(a) COMMON STOCKS (CONTINUED) JAPAN (20.3%) AUTOMOBILES (0.7%) Honda Motor 70,700 $ 3,932,338 - ------------------------------------------------------------------------------------------------------- CAPITAL MARKETS (2.2%) Matsui Securities 229,800(e) 2,553,594 Nomura Holdings 408,000 6,294,630 Tokai Tokyo Securities 844,000 3,312,034 ------------- Total 12,160,258 - ------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (4.1%) Bank of Yokohama 610,000 4,967,031 Chiba Bank 618,000 5,501,462 Mitsubishi UFJ Financial Group 953 11,978,762 ------------- Total 22,447,255 - ------------------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.8%) Nishimatsu Construction 690,000 3,195,131 Okumura 209,000 1,308,097 ------------- Total 4,503,228 - ------------------------------------------------------------------------------------------------------- CONSUMER FINANCE (1.0%) Aiful 74,050 5,539,251 - ------------------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (1.0%) Hoya 153,600 5,380,209 - ------------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (3.2%) Daito Trust Construction 137,300 6,803,644 Daiwa House Industry 218,000 2,922,079 GOLDCREST 66,230 4,140,011 Sharp 293,000 4,023,637 ------------- Total 17,889,371 - ------------------------------------------------------------------------------------------------------- INSURANCE (1.5%) Nisshin Fire & Marine Insurance 363,000 1,635,411 T&D Holdings 106,950 6,726,040 ------------- Total 8,361,451 - ------------------------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (0.5%) eAccess 4,857 3,016,276 - ------------------------------------------------------------------------------------------------------- MACHINERY (2.0%) AMADA 713,000 5,447,555 Komatsu 438,000 5,836,719 ------------- Total 11,284,274 - ------------------------------------------------------------------------------------------------------- METALS & MINING (0.8%) Nisshin Steel 1,488,000 4,723,968 - ------------------------------------------------------------------------------------------------------- OIL & GAS (1.0%) Nippon Oil 651,000 $ 5,559,960 - ------------------------------------------------------------------------------------------------------- REAL ESTATE (1.0%) Mitsui Fudosan 328,000 5,369,861 - ------------------------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE (0.5%) Kamigumi 362,000 2,983,996 - ------------------------------------------------------------------------------------------------------- NETHERLANDS (0.7%) FOOD PRODUCTS Royal Numico 100,070(b) 4,052,981 - ------------------------------------------------------------------------------------------------------- NORWAY (0.2%) ENERGY EQUIPMENT & SERVICES TGS NOPEC Geophysical 35,000(b) 1,316,522 - ------------------------------------------------------------------------------------------------------- PERU (0.4%) METALS & MINING Compania de Minas Buenaventura ADR 86,661 2,233,254 - ------------------------------------------------------------------------------------------------------- RUSSIA (0.5%) WIRELESS TELECOMMUNICATION SERVICES Mobile Telesystems ADR 72,758 2,691,318 - ------------------------------------------------------------------------------------------------------- SOUTH AFRICA (0.7%) FOOD & STAPLES RETAILING Massmart Holdings 485,061 3,748,660 - ------------------------------------------------------------------------------------------------------- SOUTH KOREA (4.9%) CHEMICALS (0.4%) Hanwha Chemical 200,000 2,133,263 - ------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (1.4%) Shinhan Financial Group 237,150 7,974,976 - ------------------------------------------------------------------------------------------------------- MACHINERY (0.2%) Hyundai Heavy Inds 18,040 1,186,646 - ------------------------------------------------------------------------------------------------------- METALS & MINING (1.1%) POSCO 28,616 5,878,921 - ------------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.8%) Samsung Electronics 18,695 9,987,191
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 13 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT
ISSUER SHARES VALUE(a) COMMON STOCKS (CONTINUED) SWEDEN (1.0%) COMMUNICATIONS EQUIPMENT Telefonaktiebolaget LM Ericsson Cl B 1,650,539 $ 5,409,623 - ------------------------------------------------------------------------------------------------------- SWITZERLAND (5.5%) CAPITAL MARKETS (1.9%) UBS 125,105(b) 10,667,013 - ------------------------------------------------------------------------------------------------------- FOOD PRODUCTS (0.7%) Nestle 13,970 4,160,155 - ------------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.9%) Nobel Biocare Holding 21,063 4,856,349 - ------------------------------------------------------------------------------------------------------- PHARMACEUTICALS (2.0%) Roche Holding 74,712 11,163,559 - ------------------------------------------------------------------------------------------------------- TAIWAN (0.3%) REAL ESTATE Hung Poo Real Estate Development 3,778,000 1,905,694 - ------------------------------------------------------------------------------------------------------- UNITED KINGDOM (6.5%) CAPITAL MARKETS (0.4%) 3i Group 180,271 2,418,664 - ------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (0.8%) Standard Chartered Bank 205,546 4,316,341 - ------------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES (0.6%) British Energy Group 422,869(b) 3,325,266 - ------------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (0.9%) Tesco 914,739 4,870,641 - ------------------------------------------------------------------------------------------------------- FOOD PRODUCTS (1.0%) Cadbury Schweppes 584,861 5,763,206 - ------------------------------------------------------------------------------------------------------- METALS & MINING (1.2%) BHP Billiton 441,866 6,501,982 - ------------------------------------------------------------------------------------------------------- OIL & GAS (0.9%) BP 464,057 5,140,466 - ------------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.7%) Vodafone Group 1,545,044 4,056,308 - ------------------------------------------------------------------------------------------------------- UNITED STATES (38.1%) BEVERAGES (0.8%) PepsiCo 72,699 $ 4,295,057 - ------------------------------------------------------------------------------------------------------- BIOTECHNOLOGY (1.8%) Amgen 67,935(b) 5,146,755 Myogen 161,959(b) 3,247,278 ViroPharma 93,168(b) 1,785,099 ------------- Total 10,179,132 - ------------------------------------------------------------------------------------------------------- CAPITAL MARKETS (2.7%) Bear Stearns Companies 37,617 3,979,879 E*TRADE Financial 190,939(b) 3,541,918 Goldman Sachs Group 23,250 2,938,103 Lehman Brothers Holdings 36,837 4,408,283 ------------- Total 14,868,183 - ------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (3.2%) Bank of America 165,988 7,260,314 US Bancorp 150,881 4,463,060 Wachovia 59,946 3,028,472 Wells Fargo & Co 48,197 2,901,459 ------------- Total 17,653,305 - ------------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (0.5%) Cisco Systems 159,609(b) 2,785,177 - ------------------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (0.3%) Dell 55,342(b) 1,764,303 - ------------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (2.0%) Citigroup 246,327 11,276,850 - ------------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (1.2%) CVS 99,385 2,425,988 Walgreen 87,962 3,996,114 ------------- Total 6,422,102 - ------------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (2.1%) St. Jude Medical 115,059(b) 5,530,886 Thermo Electron 116,225(b) 3,508,833 Zimmer Holdings 44,678(b) 2,849,116 ------------- Total 11,888,835 - ------------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (2.3%) DaVita 40,683(b) 2,000,790 Laboratory Corp of America Holdings 64,205(b) 3,097,891 WellPoint 104,108(b) 7,774,786 ------------- Total 12,873,467 - -------------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 14 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT
ISSUER SHARES VALUE(a) COMMON STOCKS (CONTINUED) UNITED STATES (CONT.) INSURANCE (1.9%) American Intl Group 97,213 $ 6,299,403 Genworth Financial Cl A 130,693 4,141,661 ------------- Total 10,441,064 - ------------------------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (1.2%) Google Cl A 17,857(b) 6,645,304 - ------------------------------------------------------------------------------------------------------- MEDIA (0.9%) Dex Media 187,328 5,052,236 - ------------------------------------------------------------------------------------------------------- OIL & GAS (4.8%) EOG Resources 60,389 4,093,166 Forest Oil 105,453(b) 4,606,187 Kerr-McGee 42,867 3,645,410 Marathon Oil 51,181 3,079,049 Ultra Petroleum 75,888(b) 3,983,361 Valero Energy 62,402 6,567,186 ------------- Total 25,974,359 - ------------------------------------------------------------------------------------------------------- PHARMACEUTICALS (2.7%) Abbott Laboratories 113,775 4,898,014 Johnson & Johnson 165,163 10,342,507 ------------- Total 15,240,521 - ------------------------------------------------------------------------------------------------------- SOFTWARE (4.2%) Adobe Systems 207,100 6,678,975 Autodesk 93,844 4,235,180 Microsoft 495,744 12,740,621 ------------- Total 23,654,776 - ------------------------------------------------------------------------------------------------------- SPECIALTY RETAIL (3.0%) Home Depot 302,863 12,429,498 Staples 185,069 4,206,607 ------------- Total 16,636,105 - ------------------------------------------------------------------------------------------------------- TOBACCO (1.5%) Altria Group 112,843 8,468,867 - ------------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (1.0%) American Tower Cl A 223,308(b) 5,325,896 - ------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $463,620,644) $535,502,981 - ------------------------------------------------------------------------------------------------------- PREFERRED STOCK (0.8%)(c) GERMANY Porsche 6,537 $ 4,712,115 - ------------------------------------------------------------------------------------------------------- TOTAL PREFERRED STOCK (Cost: $3,369,108) $ 4,712,115 - ------------------------------------------------------------------------------------------------------- AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) SHORT-TERM SECURITIES (4.6%)(f) COMMERCIAL PAPER Alpine Securitization 11-30-05 4.02% $ 5,000,000(g) $ 4,983,292 Bryant Park Funding 11-21-05 4.01 5,000,000(g) 4,988,333 Deutsche Bank 11-01-05 4.04 10,600,000 10,598,810 Park Granada LLC 11-07-05 3.87 5,000,000(g) 4,996,238 - ------------------------------------------------------------------------------------------------------- TOTAL SHORT-TERM SECURITIES (Cost: $25,569,513) $25,566,673 - ------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $492,559,265)(h) $565,781,769 =======================================================================================================
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 15 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT NOTES TO INVESTMENTS IN SECURITIES (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. (d) 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 Oct. 31, 2005, the value of these securities amounted to $5,753,710 or 1.0% of net assets. (e) At Oct. 31, 2005, security was partially or fully on loan. See Note 4 to the financial statements. (f) Cash collateral received from security lending activity is invested in short-term securities and represents 1.3% of net assets. See Note 4 to the financial statements. 3.3% 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 Oct. 31, 2005, the value of these securities amounted to $14,967,863 or 2.7% of net assets. (h) At Oct. 31, 2005, the cost of securities for federal income tax purposes was $495,298,524 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 80,607,994 Unrealized depreciation (10,124,749) ---------------------------------------------------------------------------- Net unrealized appreciation $ 70,483,245 ----------------------------------------------------------------------------
THE GLOBAL INDUSTRY CLASSIFICATION STANDARD (GICS) WAS DEVELOPED BY AND IS THE EXCLUSIVE PROPERTY OF MORGAN STANLEY CAPITAL INTERNATIONAL INC. AND STANDARD & POOR'S, A DIVISION OF THE MCGRAW-HILL COMPANIES, INC. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/funds. - -------------------------------------------------------------------------------- 16 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES WORLD GROWTH PORTFOLIO OCT. 31, 2005 ASSETS Investments in securities, at value (Note 1)* (identified cost $492,559,265) $565,781,769 Foreign currency holdings (identified cost $277,188) (Note 1) 269,354 Dividends and accrued interest receivable 546,756 Reclaims receivable 399,283 - -------------------------------------------------------------------------------- Total assets 566,997,162 - -------------------------------------------------------------------------------- LIABILITIES Disbursements in excess of cash on demand deposit 566,820 Payable for investment securities purchased 2,582,557 Payable upon return of securities loaned (Note 4) 7,082,800 Accrued investment management services fee 35,537 Other accrued expenses 86,852 - -------------------------------------------------------------------------------- Total liabilities 10,354,566 - -------------------------------------------------------------------------------- Net assets $556,642,596 ================================================================================ * Including securities on loan, at value (Note 4) $ 6,438,448 - --------------------------------------------------------------------------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT STATEMENT OF OPERATIONS WORLD GROWTH PORTFOLIO YEAR ENDED OCT. 31, 2005 INVESTMENT INCOME Income: Dividends $ 9,813,718 Interest 203,069 Fee income from securities lending (Note 4) 185,022 Less foreign taxes withheld (419,426) - ----------------------------------------------------------------------------------------- Total income 9,782,383 - ----------------------------------------------------------------------------------------- Expenses (Note 2): Investment management services fee 4,471,632 Compensation of board members 11,035 Custodian fees 176,418 Audit fees 30,000 Other 17,901 - ----------------------------------------------------------------------------------------- Total expenses 4,706,986 Earnings credits on cash balances (Note 2) (3,574) - ----------------------------------------------------------------------------------------- Total net expenses 4,703,412 - ----------------------------------------------------------------------------------------- Investment income (loss) -- net 5,078,971 - ----------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (Note 3) 66,629,594 Foreign currency transactions 72,400 - ----------------------------------------------------------------------------------------- Net realized gain (loss) on investments 66,701,994 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 30,984,448 - ----------------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 97,686,442 - ----------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $102,765,413 =========================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 18 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS WORLD GROWTH PORTFOLIO
YEAR ENDED OCT. 31, 2005 2004 OPERATIONS Investment income (loss) -- net $ 5,078,971 $ 3,837,875 Net realized gain (loss) on investments 66,701,994 42,451,978 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 30,984,448 11,388,618 - ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 102,765,413 57,678,471 - ----------------------------------------------------------------------------------------------------------------- Proceeds from contributions 16,120,671 954,259 Fair value of withdrawals (36,146,462) (98,738,060) - ----------------------------------------------------------------------------------------------------------------- Net contributions (withdrawals) from partners (20,025,791) (97,783,801) - ----------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 82,739,622 (40,105,330) Net assets at beginning of year 473,902,974 514,008,304 - ----------------------------------------------------------------------------------------------------------------- Net assets at end of year $556,642,596 $473,902,974 =================================================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 19 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS WORLD GROWTH PORTFOLIO 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES World Growth Portfolio (the Portfolio) is a series of World Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. The Portfolio invests primarily in equity securities of companies around the world, including companies located in developed and emerging countries. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. The Portfolio's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. Pursuant to procedures adopted by the Board of Trustees of the portfolios, Ameriprise Financial, Inc. (Ameriprise Financial) (formerly American Express Financial Corporation) utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with these procedures. If a development or event is so significant that there is a reasonably high degree of certainty that the effect of the development or event has actually caused the closing price to no longer reflect the actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the New York Stock Exchange. Significant events include material movements in the U.S. securities markets prior to the opening of foreign markets on the following trading day. FVP results in an estimated price that reasonably reflects the current market conditions in order to value the portfolio holdings such that shareholder transactions receive a fair net asset value. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. - -------------------------------------------------------------------------------- 20 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT OPTION TRANSACTIONS To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio 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 Portfolio 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 Portfolio gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Portfolio 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 Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio 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 Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. FOREIGN CURRENCY TRANSLATIONS AND FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At Oct. 31, 2005, foreign currency holdings consisted of multiple denominations, primarily Taiwan dollars. - -------------------------------------------------------------------------------- 21 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT The Portfolio 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 Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete its contract obligations. GUARANTEES AND INDEMNIFICATIONS Under the Portfolio's organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Portfolio. In addition, certain of the Portfolio's contracts with its service providers contain general indemnification clauses. The Portfolio's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Portfolio cannot be determined and the Portfolio has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES For federal income tax purposes the Portfolio qualifies as a partnership and each investor in the Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore does not pay any income dividends or capital gain distributions. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. FEES AND EXPENSES The Trust, on behalf of the Portfolio, has an Investment Management Services Agreement with RiverSource Investments, LLC (the Investment Manager) to manage its portfolio. Prior to Oct. 1, 2005, investment management services were provided by Ameriprise Financial. Under this agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Portfolio's average daily net assets that declines from 0.8% to 0.675% annually as the Portfolio's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of RiverSource Global Equity Fund to the Lipper Global Funds Index. In certain circumstances, the Board may approve a change in the index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment increased the fee by $417,773 for the year ended Oct. 31, 2005. Under the agreement, the Trust also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees, audit and certain legal fees, fidelity bond premiums, registration fees for units, office expenses, consultants' fees, compensation of trustees, corporate filing fees, expenses incurred in connection with lending securities of the Portfolio and any other expenses properly payable by the Trust or Portfolio and approved by the Board. - -------------------------------------------------------------------------------- 22 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the underlying Fund or other RiverSource funds. The Portfolio's liability for these amounts is adjusted for market value changes and remains in the Portfolio until distributed in accordance with the Plan. The Investment Manager has a Subadvisory Agreement with Threadneedle International Limited, an indirect wholly-owned subsidiary of Ameriprise Financial, to subadvise the assets of the portfolio. During the year ended Oct. 31, 2005, the Portfolio's custodian fees were reduced by $3,574 as a result of earnings credits from overnight cash balances. The Portfolio also pays custodian fees to Ameriprise Trust Company (formerly American Express Trust Company), an affiliate of Ameriprise Financial. According to a Placement Agency Agreement, Ameriprise Financial Services, Inc. (formerly American Express Financial Advisors Inc.) acts as placement agent of the Trust's units. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $468,876,014 and $490,183,946, respectively, for the year ended Oct. 31, 2005. Realized gains and losses are determined on an identified cost basis. 4. LENDING OF PORTFOLIO SECURITIES At Oct. 31, 2005, securities valued at $6,438,448 were on loan to brokers. For collateral, the Portfolio received $7,082,800 in cash. Cash collateral received is invested in short-term securities, which are included in the short-term section of the "Investments in securities." Income from securities lending amounted to $185,022 for the year ended Oct. 31, 2005. The risks to the Portfolio of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. 5. FINANCIAL HIGHLIGHTS The table below shows certain important financial information for evaluating the Portfolio's results.
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 RATIOS/SUPPLEMENTAL DATA Ratio of expenses to average daily net assets(a) .91% .71% .74% .72% .62% - -------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .99% .78% 1.01% .67% .95% - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 93% 104% 132% 123% 218% - -------------------------------------------------------------------------------------------------------------------------------- Total return(b) 22.53% 12.26% 18.91% (15.58%) (34.42%) - --------------------------------------------------------------------------------------------------------------------------------
(a) Expense ratio is based on total expenses of the Portfolio before reduction of earnings credits on cash balances. The ratio does not include feeder fund expenses. (b) Total return is based on a calculated Portfolio net asset value and does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 23 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM THE BOARD OF TRUSTEES AND UNITHOLDERS WORLD TRUST We have audited the accompanying statement of assets and liabilities, including the schedule of investments in securities, of World Growth Portfolio (a series of World Trust) as of October 31, 2005, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended October 31, 2005, and the financial highlights for each of the years in the five-year period ended October 31, 2005. These financial statements and the financial highlights are the responsibility of portfolio management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 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 World Growth Portfolio as of October 31, 2005, and the results of its operations, changes in its net assets and the financial highlights for each of the periods stated in the first paragraph above, in conformity with U.S. generally accepted accounting principles. KPMG LLP Minneapolis, Minnesota December 20, 2005 - -------------------------------------------------------------------------------- 24 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES RIVERSOURCE GLOBAL EQUITY FUND OCT. 31, 2005 ASSETS Investment in Portfolio (Note 1) $ 556,563,613 Capital shares receivable 326,004 - ----------------------------------------------------------------------------------------------------------- Total assets 556,889,617 - ----------------------------------------------------------------------------------------------------------- LIABILITIES Capital shares payable 30,101 Accrued distribution fee 17,546 Accrued service fee 52 Accrued transfer agency fee 10,754 Accrued administrative services fee 3,603 Other accrued expenses 96,898 - ----------------------------------------------------------------------------------------------------------- Total liabilities 158,954 - ----------------------------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 556,730,663 =========================================================================================================== REPRESENTED BY Capital stock -- $.01 par value (Note 1) $ 903,058 Additional paid-in capital 1,049,508,642 Excess of distributions over net investment income (1,367,979) Accumulated net realized gain (loss) (Note 5) (565,543,381) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 73,230,323 - ----------------------------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 556,730,663 =========================================================================================================== Net assets applicable to outstanding shares: Class A $ 446,193,352 Class B $ 101,828,582 Class C $ 2,334,217 Class Y $ 6,374,512 Net asset value per share of outstanding capital stock: Class A shares 71,576,192 $ 6.23 Class B shares 17,316,751 $ 5.88 Class C shares 399,315 $ 5.85 Class Y shares 1,013,563 $ 6.29
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 25 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT STATEMENT OF OPERATIONS RIVERSOURCE GLOBAL EQUITY FUND YEAR ENDED OCT. 31, 2005 INVESTMENT INCOME Income: Dividends $ 9,812,334 Interest 203,037 Fee income from securities lending 184,996 Less foreign taxes withheld (419,367) - -------------------------------------------------------------------------------------------- Total income 9,781,000 - -------------------------------------------------------------------------------------------- Expenses (Note 2): Expenses allocated from Portfolio 4,702,746 Distribution fee Class A 998,361 Class B 1,085,962 Class C 16,253 Transfer agency fee 1,359,024 Incremental transfer agency fee Class A 110,026 Class B 57,027 Class C 728 Service fee -- Class Y 5,695 Administrative services fees and expenses 305,907 Compensation of board members 10,251 Printing and postage 188,250 Registration fees 54,130 Audit fees 10,000 Other 12,554 - -------------------------------------------------------------------------------------------- Total expenses 8,916,914 Earnings credits on cash balances (Note 2) (21,787) - -------------------------------------------------------------------------------------------- Total net expenses 8,895,127 - -------------------------------------------------------------------------------------------- Investment income (loss) -- net 885,873 - -------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions 66,620,647 Foreign currency transactions 72,407 - -------------------------------------------------------------------------------------------- Net realized gain (loss) on investments 66,693,054 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 30,979,613 - -------------------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 97,672,667 - -------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $98,558,540 ============================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 26 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS RIVERSOURCE GLOBAL EQUITY FUND
YEAR ENDED OCT. 31, 2005 2004 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 885,873 $ (598,332) Net realized gain (loss) on investments 66,693,054 42,447,414 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 30,979,613 11,386,564 - ------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 98,558,540 53,235,646 - ------------------------------------------------------------------------------------------------------------------ Distributions to shareholders from: Net investment income Class A (2,338,575) (95,223) Class C (2,880) -- Class Y (38,052) (2,413) - ------------------------------------------------------------------------------------------------------------------ Total distributions (2,379,507) (97,636) - ------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS (NOTE 3) Proceeds from sales Class A shares (Note 2) 104,040,955 46,610,187 Class B shares 24,780,371 7,409,628 Class C shares 1,498,251 260,184 Class Y shares 1,968,825 1,305,145 Reinvestment of distributions at net asset value Class A shares 2,297,175 93,330 Class C shares 2,823 -- Class Y shares 38,052 2,413 Payments for redemptions Class A shares (99,120,333) (88,638,536) Class B shares (Note 2) (47,049,861) (57,159,405) Class C shares (Note 2) (408,707) (378,214) Class Y shares (1,162,458) (2,804,270) - ------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from capital share transactions (13,114,907) (93,299,538) - ------------------------------------------------------------------------------------------------------------------ Total increase (decrease) in net assets 83,064,126 (40,161,528) Net assets at beginning of year 473,666,537 513,828,065 - ------------------------------------------------------------------------------------------------------------------ Net assets at end of year $556,730,663 $473,666,537 ==================================================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 27 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS RIVERSOURCE GLOBAL EQUITY FUND (FORMERLY AXP THREADNEEDLE GLOBAL EQUITY FUND) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of AXP Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. AXP Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board. The Fund offers Class A, Class B, Class C and Class Y shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class Y shares have no sales charge and are offered only to qualifying institutional investors. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee, transfer agency fees and service fee (class specific expenses) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. INVESTMENT IN WORLD GROWTH PORTFOLIO The Fund invests all of its assets in World Growth Portfolio (the Portfolio), a series of World Trust (the Trust), an open-end investment company that has the same objectives as the Fund. The Portfolio invests primarily in equity securities of companies around the world that are positioned to meet market needs in a changing world economy. The Fund records daily its share of the Portfolio's income, expenses and realized and unrealized gains and losses. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The Fund records its investment in the Portfolio at the value that is equal to the Fund's proportionate ownership interest in the Portfolio's net assets. The percentage of the Portfolio owned by the Fund at Oct. 31, 2005 was 99.99%. The Fund's Board approved the withdrawal of the Fund's assets from the Portfolio. As of Nov. 8, 2005, the Fund invests directly in and manages its own portfolio of securities rather than investing in the Portfolio. - -------------------------------------------------------------------------------- 28 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT All securities held by the Portfolio 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 Trustees of the portfolios, Ameriprise Financial utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with these procedures. If a development or event is so significant that there is a reasonably high degree of certainty that the effect of the development or event has actually caused the closing price to no longer reflect the actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the New York Stock Exchange. Significant events include material movements in the U.S. securities markets prior to the opening of foreign markets on the following trading day. FVP results in an estimated price that reasonably reflects the current market conditions in order to value the portfolio holdings such that shareholder transactions receive a fair net asset value. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. 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. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with all sections of the Internal Revenue Code that apply to regulated investment companies and to distribute substantially all of its taxable income to the shareholders. No provision for income or excise taxes is thus required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes, and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. - -------------------------------------------------------------------------------- 29 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT On the statement of assets and liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been increased by $239,162 and accumulated net realized loss has been increased by $239,162. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED OCT. 31, 2005 2004 - ----------------------------------------------------------------------------------------- CLASS A Distributions paid from: Ordinary income $2,338,575 $95,223 Long-term capital gain -- -- CLASS B Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- CLASS C Distributions paid from: Ordinary income 2,880 -- Long-term capital gain -- -- CLASS Y Distributions paid from: Ordinary income 38,052 2.413 Long-term capital gain -- --
At Oct. 31, 2005, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ 1,276,992 Accumulated long-term gain (loss) $(565,449,466) Unrealized appreciation (depreciation) $ 70,491,437
DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. 2. EXPENSES AND SALES CHARGES In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund has an agreement with Ameriprise Financial to provide administrative services. Under the current Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. Prior to Oct. 1, 2005, the fee percentage of the Fund's average daily net assets declined from 0.06% to 0.035% annually as the Fund's assets increased. A minor portion of additional administrative service expenses paid by the Fund are consultants' fees and fund office expenses. Under this agreement, the Fund also pays taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees and any other expenses properly payable by the Fund and approved by the Board. - -------------------------------------------------------------------------------- 30 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. Under a separate Transfer Agency Agreement, RiverSource Service Corporation (formerly American Express Client Service Corporation) (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual fee per shareholder account for this service as follows: - - Class A $19.50 - - Class B $20.50 - - Class C $20.00 - - Class Y $17.50 The incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. Beginning May 20, 2005, the Transfer Agent implemented an annual closed account fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the statement of operations. The Fund has agreements with Ameriprise Financial Services, Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B and Class C shares. Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Sales charges received by the Distributor for distributing Fund shares were $689,672 for Class A, $87,985 for Class B and $405 for Class C for the year ended Oct. 31, 2005. During the year ended Oct. 31, 2005, the Fund's transfer agency fees were reduced by $21,787 as a result of earnings credits from overnight cash balances. - -------------------------------------------------------------------------------- 31 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
YEAR ENDED OCT. 31, 2005 CLASS A CLASS B CLASS C CLASS Y - ------------------------------------------------------------------------------------------- Sold 17,716,088 4,520,559 276,626 343,576 Issued for reinvested distributions 417,668 -- 544 6,869 Redeemed (17,262,949) (8,504,166) (75,366) (199,031) - ------------------------------------------------------------------------------------------- Net increase (decrease) 870,807 (3,983,607) 201,804 151,414 - ------------------------------------------------------------------------------------------- YEAR ENDED OCT. 31, 2004 CLASS A CLASS B CLASS C CLASS Y - ------------------------------------------------------------------------------------------- Sold 9,625,192 1,590,230 55,798 264,315 Issued for reinvested distributions 19,608 -- -- 504 Redeemed (18,107,612) (12,478,367) (81,146) (572,441) - ------------------------------------------------------------------------------------------- Net increase (decrease) (8,462,812) (10,888,137) (25,348) (307,622) - -------------------------------------------------------------------------------------------
4. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The agreement went into effect Sept. 20, 2005. The Fund must maintain asset coverage for borrowings of at least 300%. The agreement, which enables the Fund to participate with other RiverSource funds, permits borrowings up to $500 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to either the higher of the Federal Funds Effective Rate plus 0.40% or the JPMCB Prime Commercial Lending Rate. Borrowings are payable within 60 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.07% per annum. Prior to this agreement, the Fund had a revolving credit agreement that permitted borrowings up to $500 million with The Bank of New York. The Fund had no borrowings outstanding during the year ended Oct. 31, 2005. 5. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund had a capital loss carry-over of $565,449,466 at Oct. 31, 2005, that if not offset by capital gains will expire as follows:
2009 2010 2011 $391,304,630 $143,634,885 $30,509,951
It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. - -------------------------------------------------------------------------------- 32 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT 6. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results. CLASS A
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $ 5.16 $ 4.62 $ 3.92 $ 4.69 $ 8.74 - -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02 -- .01 -- .02 Net gains (losses) (both realized and unrealized) 1.08 .54 .69 (.77) (2.71) - -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.10 .54 .70 (.77) (2.69) - -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from and in excess of net investment income (.03) -- -- -- (.02) Distributions from realized gains -- -- -- -- (1.34) - -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.03) -- -- -- (1.36) - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 6.23 $ 5.16 $ 4.62 $ 3.92 $ 4.69 - -------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 446 $ 364 $ 366 $ 406 $ 714 - -------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(b) 1.57% 1.41% 1.50% 1.39% 1.18% - -------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .33% .07% .26% .01% .39% - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 93% 104% 132% 123% 218% - -------------------------------------------------------------------------------------------------------------------------------- Total return(c) 21.48% 11.72% 17.86% (16.42%) (34.83%) - --------------------------------------------------------------------------------------------------------------------------------
(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 a sales charge. - -------------------------------------------------------------------------------- 33 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT CLASS B
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $ 4.87 $ 4.40 $ 3.76 $ 4.53 $ 8.53 - ---------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.02) (.03) (.03) (.04) (.02) Net gains (losses) (both realized and unrealized) 1.03 .50 .67 (.73) (2.64) - ---------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.01 .47 .64 (.77) (2.66) - ---------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from realized gains -- -- -- -- (1.34) - ---------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 5.88 $ 4.87 $ 4.40 $ 3.76 $ 4.53 - ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 102 $ 104 $ 142 $ 173 $ 309 - ---------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(b) 2.34% 2.18% 2.27% 2.16% 1.95% - ---------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets (.41%) (.66%) (.52%) (.77%) (.38%) - ---------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 93% 104% 132% 123% 218% - ---------------------------------------------------------------------------------------------------------------------------------- Total return(c) 20.74% 10.68% 17.02% (17.00%) (35.38%) - ----------------------------------------------------------------------------------------------------------------------------------
(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 a sales charge. - -------------------------------------------------------------------------------- 34 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT CLASS C
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $ 4.85 $ 4.38 $ 3.75 $ 4.52 $ 8.54 - -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.02) (.02) (.03) (.04) (.02) Net gains (losses) (both realized and unrealized) 1.03 .49 .66 (.73) (2.64) - -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.01 .47 .63 (.77) (2.66) - -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from and in excess of net investment income (.01) -- -- -- (.02) Distributions from realized gains -- -- -- -- (1.34) - -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.01) -- -- -- (1.36) - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 5.85 $ 4.85 $ 4.38 $ 3.75 $ 4.52 - -------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 2 $ 1 $ 1 $ 1 $ 1 - -------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(b) 2.33% 2.19% 2.29% 2.19% 1.95% - -------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets (.53%) (.69%) (.52%) (.78%) (.42%) - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 93% 104% 132% 123% 218% - -------------------------------------------------------------------------------------------------------------------------------- Total return(c) 20.89% 10.73% 16.80% (17.04%) (35.37%) - --------------------------------------------------------------------------------------------------------------------------------
(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 a sales charge. - -------------------------------------------------------------------------------- 35 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT CLASS Y
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $ 5.20 $ 4.65 $ 3.94 $ 4.70 $ 8.76 - -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04 .01 .02 .01 .04 Net gains (losses) (both realized and unrealized) 1.09 .54 .69 (.77) (2.73) - -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.13 .55 .71 (.76) (2.69) - -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from and in excess of net investment income (.04) -- -- -- (.03) Distributions from realized gains -- -- -- -- (1.34) - -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.04) -- -- -- (1.37) - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 6.29 $ 5.20 $ 4.65 $ 3.94 $ 4.70 - -------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 6 $ 4 $ 5 $ 8 $ 12 - -------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(b) 1.38% 1.23% 1.30% 1.21% 1.01% - -------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .49% .25% .43% .18% .55% - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 93% 104% 132% 123% 218% - -------------------------------------------------------------------------------------------------------------------------------- Total return(c) 21.90% 11.88% 18.02% (16.17%) (34.78%) - --------------------------------------------------------------------------------------------------------------------------------
(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 a sales charge. - -------------------------------------------------------------------------------- 36 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM THE BOARD AND SHAREHOLDERS AXP GLOBAL SERIES, INC. We have audited the accompanying statement of assets and liabilities of RiverSource Global Equity Fund (a series of AXP Global Series, Inc.) as of October 31, 2005, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended October 31, 2005, and the financial highlights for each of the years in the five-year period ended October 31, 2005. These financial statements and the financial highlights are the responsibility of fund management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 Global Equity Fund as of October 31, 2005, and the results of its operations, changes in its net assets and the financial highlights for each of the periods stated in the first paragraph above, in conformity with U.S. generally accepted accounting principles. KPMG LLP Minneapolis, Minnesota December 20, 2005 - -------------------------------------------------------------------------------- 37 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT FEDERAL INCOME TAX INFORMATION (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. RIVERSOURCE GLOBAL EQUITY FUND FISCAL YEAR ENDED OCT. 31, 2005 CLASS A INCOME DISTRIBUTIONS -- TAXABLE AS DIVIDEND INCOME: Qualified Dividend Income for individuals 100% Dividends Received Deduction for corporations 100%
PAYABLE DATE PER SHARE Dec. 20, 2004 $0.03371
CLASS C INCOME DISTRIBUTIONS -- TAXABLE AS DIVIDEND INCOME: Qualified Dividend Income for individuals 100% Dividends Received Deduction for corporations 100%
PAYABLE DATE PER SHARE Dec. 20, 2004 $0.01158
CLASS Y INCOME DISTRIBUTIONS -- TAXABLE AS DIVIDEND INCOME: Qualified Dividend Income for individuals 100% Dividends Received Deduction for corporations 100%
PAYABLE DATE PER SHARE Dec. 20, 2004 $0.04276
- -------------------------------------------------------------------------------- 38 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT FUND EXPENSES EXAMPLE (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Oct. 31, 2005. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 39 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED MAY 1, 2005 OCT. 31, 2005 THE PERIOD(a) EXPENSE RATIO Class A Actual(b) $1,000 $1,134.80 $ 8.60(c) 1.59% Hypothetical (5% return before expenses) $1,000 $1,017.28 $ 8.13(c) 1.59% Class B Actual(b) $1,000 $1,130.80 $12.74(c) 2.36% Hypothetical (5% return before expenses) $1,000 $1,013.38 $12.04(c) 2.36% Class C Actual(b) $1,000 $1,131.50 $12.69(c) 2.35% Hypothetical (5% return before expenses) $1,000 $1,013.43 $11.99(c) 2.35% Class Y Actual(b) $1,000 $1,135.40 $ 7.58(c) 1.40% Hypothetical (5% return before expenses) $1,000 $1,018.25 $ 7.16(c) 1.40%
(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 185/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended Oct. 31, 2005: +13.48% for Class A, +13.08% for Class B, +13.15% for Class C and +13.54% for Class Y. (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 Oct. 31, 2005, the actual expenses paid would have been $8.71 for Class A, $12.85 for Class B, $12.80 for Class C and $7.68 for Class Y; the hypothetical expenses paid would have been $8.23 for Class A, $12.14 for Class B, $12.09 for Class C and $7.26 for Class Y. - -------------------------------------------------------------------------------- 40 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 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 5 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 may retire after her 75th birthday. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since 1999 Chair, Board Services 901 S. Marquette Ave. Corporation (provides Minneapolis, MN 55402 administrative services Age 71 to boards); former Governor of Minnesota Philip J. Carroll, Jr.* Board member since 2002 Retired Chairman and Scottish Power PLC, 901 S. Marquette Ave. CEO, Fluor Corporation Vulcan Materials Minneapolis, MN 55402 (engineering and Company, Inc. Age 67 construction) (construction materials/chemicals) Patricia M. Flynn Board member since 2004 Trustee Professor of 901 S. Marquette Ave. Economics and Minneapolis, MN 55402 Management, Bentley Age 54 College; former Dean, McCallum Graduate School of Business, Bentley College Anne P. Jones Board member since 1985 Attorney and Consultant 901 S. Marquette Ave. Minneapolis, MN 55402 Age 70 Jeffrey Laikind Board member since 2005 Former Managing American Progressive 901 S. Marquette Ave. Director, Shikiar Asset Insurance Minneapolis, MN 55402 Management Age 70 Stephen R. Lewis, Jr. Board member since 2002 President Emeritus and Valmont Industries, Inc. 901 S. Marquette Ave. Professor of Economics, (manufactures irrigation Minneapolis, MN 55402 Carleton College systems) Age 65
* Phillip J. Carroll, Jr. retired as a member of the Board, effective Nov. 10, 2005. - -------------------------------------------------------------------------------- 41 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since 2004 Director, Enterprise Strategic Distribution, 901 S. Marquette Ave. Asset Management, Inc. Inc. (transportation, Minneapolis, MN 55402 (private real estate and distribution and Age 53 asset management company) logistics consultants) Alan K. Simpson Board member since 1997 Former three-term United 1201 Sunshine Ave. States Senator for Cody, WY 82414 Wyoming Age 74 Alison Taunton-Rigby Board member since 2002 Chief Executive Officer, Hybridon, Inc. 901 S. Marquette Ave. RiboNovix, Inc. since (biotechnology); American Minneapolis, MN 55402 2003 (biotechnology); Healthways, Inc. (health Age 61 former President, management programs) Forester Biotech
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS**
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President - U.S. Asset 53600 Ameriprise Financial Center 2001, Vice President Management and Chief Minneapolis, MN 55474 since 2002 Investment Officer, Age 45 Ameriprise Financial, Inc. and President, Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC since 2005; Senior Vice President - Chief Investment Officer, Ameriprise Financial, Inc. and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001-2005; former Chief Investment Officer and Managing Director, Zurich Scudder Investments
** Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments. - -------------------------------------------------------------------------------- 42 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ Jeffrey P. Fox Treasurer since 2002 Vice President - 105 Ameriprise Financial Center Investment Accounting, Minneapolis, MN 55474 Ameriprise Financial, Age 50 Inc., since 2002; Vice President - Finance, American Express Company, 2000-2002; Vice President - Corporate Controller, Ameriprise Financial, Inc., 1996-2000 Paula R. Meyer President since 2002 Senior Vice President - 596 Ameriprise Financial Center Mutual Funds, Ameriprise Minneapolis, MN 55474 Financial, Inc., since Age 51 2002 and Senior Vice 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, General President of Board 901 S. Marquette Ave. Counsel, and Secretary Services Corporation Minneapolis, MN 55402 since 1978 Age 67 Beth E. Weimer Chief Compliance Officer Vice President and Chief 172 Ameriprise Financial Center since 2004 Compliance Officer, Minneapolis, MN 55474 Ameriprise Financial, Age 52 Inc., since 2001 and Chief Compliance 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. - -------------------------------------------------------------------------------- 43 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT RiverSource Investments, LLC (RiverSource), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial, formerly American Express Financial Corporation), serves as the investment manager to the Fund. Under an investment management services agreement (the IMS Agreement), the investment manager provides investment advice and other services to the Fund. Throughout the year, the Fund's Board of Directors (the Board) and the Board's Investment Review and Contracts Committees monitor these services. Ameriprise Financial had served as investment manager to the Fund until Sept. 29, 2005. On that date, and pursuant to the consent of the Board, Ameriprise Financial transferred its rights, title, and interest and its burdens and obligations under the IMS Agreement to RiverSource, its wholly-owned subsidiary. Each year, the Board determines whether to continue the IMS Agreement by evaluating the quality and level of services received and the costs associated with those services. To assist the Board in making this determination, the investment manager prepares detailed reports for the Board and its Contracts Committee in March and April and provides data prepared by independent organizations. The Board gives considerable weight to the work, deliberations and conclusions of the Contracts and Investment Review Committees in determining whether to continue the IMS Agreement. BACKGROUND This past year, prior to the Board's annual review process, on Feb. 1, 2005, American Express Company, the former parent of Ameriprise Financial, announced its intention to pursue a spin-off of Ameriprise Financial by distributing shares of the common stock of Ameriprise Financial to shareholders of American Express Company. Following this announcement, the Board determined to proceed with its annual review process and, after thorough review of the reports and data provided, at a meeting held in person on April 14, 2005, the Board, including all of its independent members, determined that the quality and level of advisory services provided pursuant to the IMS Agreement were satisfactory and that fees were fair and reasonable. However, in light of the announced plans of the spin-off, the Board approved continuation of the IMS Agreement with Ameriprise Financial for only an interim period ending on the later of (i) the effective date of the spin-off; or (ii) the approval of a new IMS Agreement with Ameriprise Financial (or its subsidiary) by the shareholders of the Fund, but in no event for a period longer than one year. - -------------------------------------------------------------------------------- 44 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT During the course of the six-month period following the April 2005 meeting, the Board evaluated whether to approve new investment management services agreements for each of the funds within the Ameriprise Financial fund complex (together, the Funds) with post-spin Ameriprise Financial (or RiverSource). Independent counsel, Schulte Roth & Zabel LLP (Schulte), assisted the Boards in fulfilling their statutory and other responsibilities associated with the spin-off and the resulting consideration of new contracts, including the new IMS Agreement. The Board and its committees were provided with a wealth of written and oral information in this regard. Furthermore, in connection with the Board's considerations as to whether post-spin Ameriprise Financial, as an entity independent from American Express Company, would be capable of continuing to provide a high quality of services to the Funds, the Board's independent members retained their own financial adviser, Credit Suisse First Boston LLC (CSFB), to assist them in analyzing the capital adequacy of post-spin Ameriprise Financial. (The costs of independent counsel and CSFB and of additional meetings of the Boards were borne by Ameriprise Financial as part of the commitment of the American Express Company to ensure a complete and thorough review of the proposed spin-off and its effect on the services provided by Ameriprise Financial and its subsidiaries.) At a meeting of the Board held on Sept. 8, 2005, the Board, including all of its independent members, approved, and recommended that shareholders approve, a proposed new IMS Agreement with RiverSource (the New IMS Agreement). A meeting of the Fund's shareholders is expected to be held on Feb. 15, 2006 to consider approval of the New IMS Agreement. If approved, the New IMS Agreement would take effect shortly after the shareholder meeting. The following section, "Board Considerations Related to the New IMS Agreement," provides a detailed discussion of the Board's considerations and determinations respecting the New IMS Agreement. BOARD CONSIDERATIONS RELATED TO THE NEW IMS AGREEMENT In carrying out its legal responsibilities associated with the consideration of the New IMS Agreement, the Board evaluated the following factors: NATURE, EXTENT AND QUALITY OF SERVICES TO BE PROVIDED BY POST-SPIN AMERIPRISE FINANCIAL (AND ITS SUBSIDIARIES) The Board recognized that only a few months had passed since its April 2005 conclusion that the nature, extent and quality of services provided by Ameriprise Financial were satisfactory and consistent with those that would be expected for a fund family of the size of the Funds and its determination to renew the IMS Agreement for the interim period. However, the Board also recognized the need to supplement this assessment with an evaluation of whether the spin-off or other factors would result in changes to the advisory services being provided under the current IMS Agreement. - -------------------------------------------------------------------------------- 45 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT The Board focused its evaluation on the following factors potentially impacting the nature, extent and quality of advisory services to be provided by Ameriprise Financial: (i) Ameriprise Financial's projected capital structure and capital adequacy as a stand-alone entity; (ii) its legal and regulatory risks; (iii) its ability to retain and attract personnel; and (iv) its ability to successfully re-brand its products and services. Based on extensive presentations and reports by Ameriprise Financial, CSFB and Schulte, the Board concluded that the proposed capital structure (which includes certain indemnification commitments made by American Express Company) should enable RiverSource to continue to provide a high quality and level of advisory services to the Fund. In making this determination, the Board took into account representations by management of Ameriprise Financial that projected capital levels would allow Ameriprise Financial and RiverSource to meet legal and compliance responsibilities, build their distribution network, pursue technological upgrades, make capital commitments necessary to retain and attract key personnel devoted to legal and compliance responsibilities, portfolio management and distribution, and pursue smaller asset management acquisitions to help grow the asset management business. The Board accorded significant weight to CSFB's confirmation as to the reasonableness of the proposed capital structure. The Board also considered the fact that there were no expected departures of key personnel involved in the portfolio management, operations and marketing of the Funds as a result of the announcement of the spin-off. The Board concluded that, based on all of the materials and information provided, post-spin Ameriprise Financial (including RiverSource) would be in a position to continue to provide a high quality and level of advisory services to the Fund. INVESTMENT PERFORMANCE The Board next focused on investment performance. The Board reviewed reports documenting the Fund's performance over one-, three- and/or five-year periods, as well as the entire period during which its current portfolio manager has managed the Fund, and compared to relevant Lipper and market indices. The Board took into account its determination in April 2005 that investment performance met expectations. The Board also considered that it had been receiving monthly performance reports for the Fund and that there had been no significant deviations from April's overall performance data. - -------------------------------------------------------------------------------- 46 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT COST OF SERVICES PROVIDED The Board evaluated comparative fees and the costs of services under the current IMS Agreement and the New IMS Agreement, including fees charged by Ameriprise Financial (including RiverSource and other subsidiaries) to institutional clients as well as those paid to subadvisers. The Board studied RiverSource's effort (i.e., its "pricing philosophy") to set substantially all Funds' total expense ratios at or below the median expense ratio of comparable mutual funds (as compiled by Lipper). The Board observed that the proposed advisory fee changes are designed to work in tandem with proposed changes to administrative services fees. It also noted that RiverSource has agreed to voluntarily impose expense caps or waivers to achieve this pricing objective whenever the expense ratio exceeded the median expense ratio by more than three basis points (unless the higher ratio was due to the impact of the performance fee adjustment or was due to the added costs associated with having subadvisers manage the Fund). The Board considered that advisory fees under the New IMS Agreement would stay the same. The Board also took into account the effect of the proposed performance incentive adjustment on the advisory fee. In this regard, the Board recalled its past determinations regarding the appropriateness of (i) the use of the relevant index for the performance comparison; (ii) the methodology for determining when the Board may change an index used to calculate the performance incentive adjustment; (iii) the periods used for averaging the Fund's assets and computing investment performance; and (iv) the length of the period over which performance is computed. Furthermore, the Board considered that there was limited opportunity for the Fund to achieve large-scale growth and thus provide RiverSource with potential economies of scale. The Board next considered the expected profitability to Ameriprise Financial and RiverSource derived from their relationship with the Fund, recalling the April 2005 determination that the profitability level was appropriate. The Board noted that projected profitability of Ameriprise Financial would allow it to operate effectively and, at the same time, reinvest in RiverSource and its other asset management businesses. The Board also considered that the proposed changes in advisory fees and the mergers of certain other Funds would result in revenue gains to Ameriprise Financial, but that these increases would not materially alter profit margins due to expected increases in costs associated with the spin-off, particularly re-branding and separation. CSFB also reported that Ameriprise Financial's projected level of return on equity was generally reasonable in light of the returns on equity of its industry competitors. In evaluating profitability, the Board also considered the benefits Ameriprise Financial obtains through the use of commission dollars paid on portfolio transactions for the Fund and from other business relationships that result from managing the Fund. The Board also considered the fees charged by Ameriprise Financial (and its subsidiaries) to institutional clients as well as the fees paid to, and charged by, subadvisers, noting the differences in services provided in each case. In light of these considerations, the Board concluded that projected profitability levels were appropriate. - -------------------------------------------------------------------------------- 47 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT ECONOMIES OF SCALE The Board also considered the "breakpoints" in fees that would be triggered as Fund net asset levels grew and the extent to which shareholders would benefit from such growth. The Board observed that the revised fee schedules under the proposed New IMS Agreement would continue to provide breakpoints similar to those in place pursuant to the current IMS Agreement. Accordingly, the Board concluded that the proposed New IMS Agreement provides adequate opportunity for shareholders to realize benefits as Fund assets grow. OTHER CONSIDERATIONS In addition, the Board accorded weight to the fact that, under the New IMS Agreement, RiverSource Investments is held to a higher standard of care than under the current IMS Agreement. The Board also noted Ameriprise Financial's commitment to a culture that adheres to ethical business practice, assigns accountability to senior management and seeks to identify conflicts and propose appropriate action to minimize the risks posed by the conflicts. Furthermore, the Board recognized that it was not limited to considering management's proposed New IMS Agreement. In this regard, the Board evaluated the circumstances under which it would consider the retention of an investment adviser different from RiverSource Investments. The Board concluded, based on its consultation with independent counsel, that pursuing the retention of a different adviser was not necessary, primarily because, in its best judgment, Ameriprise Financial continues to be basically the same organization (from a functional and managerial standpoint) as it was prior to the spin-off. The Board reasoned that shareholders purchased shares of the Fund with an expectation that the current investment advisory organization would be servicing the Fund. - -------------------------------------------------------------------------------- 48 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT PROXY VOTING The policy of the Board is to vote all proxies of the companies in which the Fund holds investments. The procedures are stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling (800) 862-7919; by looking at the website www.riversource.com/funds; 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 the Fund's administrator, Board Services Corporation, collect at (612) 330-9283; by looking at the website www.riversource.com/funds; or by searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- 49 -- RIVERSOURCE GLOBAL EQUITY FUND -- 2005 ANNUAL REPORT [RIVERSOURCE(SM) INVESTMENTS LOGO] RIVERSOURCE INVESTMENTS 200 AMERIPRISE FINANCIAL CENTER MINNEAPOLIS, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. RiverSource Funds are managed by RiverSource Investments, LLC and distributed by Ameriprise Financial Services, Inc., Member NASD. Both companies are part of Ameriprise Financial, Inc. S-6334 Z (12/05) ANNUAL REPORT [RIVERSOURCE(SM) INVESTMENTS LOGO] RIVERSOURCE(SM) GLOBAL TECHNOLOGY FUND ANNUAL REPORT FOR THE PERIOD ENDED OCT. 31, 2005 > RIVERSOURCE GLOBAL TECHNOLOGY FUND (FORMERLY AXP(R) GLOBAL TECHNOLOGY FUND) SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. TABLE OF CONTENTS Fund Snapshot 3 Performance Summary 4 Questions & Answers with Portfolio Management 5 The Fund's Long-term Performance 10 Investments in Securities 12 Financial Statements (Portfolio) 15 Notes to Financial Statements (Portfolio) 18 Report of Independent Registered Public Accounting Firm (Portfolio) 23 Financial Statements (Fund) 24 Notes to Financial Statements (Fund) 27 Report of Independent Registered Public Accounting Firm (Fund) 35 Fund Expenses Example 36 Board Members and Officers 38 Approval of Investment Management Services Agreement 41 Proxy Voting 45 [DALBAR RATED FOR COMMUNICATION 2005 LOGO] American Express(R) Funds'* reports to shareholders have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. * As of Oct. 1, 2005, the RiverSource brand replaced "American Express" as the name of the American Express Funds. - -------------------------------------------------------------------------------- 2 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT FUND SNAPSHOT AT OCT. 31, 2005 PORTFOLIO MANAGER
PORTFOLIO MANAGER SINCE YEARS IN INDUSTRY Nina Hughes 6/02 7
FUND OBJECTIVE For investors seeking long-term capital growth. Inception dates by class A: 11/13/96 B: 11/13/96 C: 6/26/00 I: 7/15/04 Y: 11/13/96 Ticker symbols by class A: AXIAX B: INVBX C: AXICX I: -- Y: -- Total net assets $169.6 million Number of holdings 68
[CHART] STYLE MATRIX
STYLE VALUE BLEND GROWTH SIZE LARGE / / / / /X/ MEDIUM / / / / /X/ SMALL / / / / /X/
SHADING WITHIN THE STYLE MATRIX INDICATES AREAS IN WHICH THE FUND GENERALLY INVESTS. [CHART] SECTOR COMPOSITION PERCENTAGE OF PORTFOLIO ASSETS Information Technology 85.2% Telecommunication Services 8.7% Consumer Discretionary 3.8% Short-Term Securities* 2.3%
* Of the 2.3%,0.8% is due to security lending activity and 1.5% is the Portfolio's cash equivalent position. TOP TEN HOLDINGS PERCENTAGE OF PORTFOLIO ASSETS EMC (Computers & Peripherals) 4.5% Nokia ADR (Communications Equipment) 4.4 Google Cl A (Internet Software & Services) 4.0 Sprint Nextel (Diversified Telecommunication Services) 3.9 Oracle (Software) 3.5 Samsung Electronics (Semiconductors & Semiconductor Equipment) 3.4 Yahoo! (Internet Software & Services) 3.3 Intel (Semiconductors & Semiconductor Equipment) 3.2 Broadcom Cl A (Semiconductors & Semiconductor Equipment) 3.2 Microsoft (Software) 2.8
For further detail about these holdings, please refer to the section entitled "Investments in Securities." 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. Investment products, including shares of mutual funds, involve investment risks including possible loss of principal and fluctuation in value. The RiverSource Global Technology Fund is a narrowly-focused sector fund and it may exhibit higher volatility than funds with broader investment objectives. 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. 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. Fund holdings are subject to change. - -------------------------------------------------------------------------------- 3 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT PERFORMANCE SUMMARY [CHART] PERFORMANCE COMPARISON FOR THE YEAR ENDED OCT. 31, 2005 RiverSource Global Technology Fund Class A (excluding sales charge) +8.74% Goldman Sachs Technology Index(R) (GSTI(R)) Composite Index (unmanaged) +6.20% Lipper Science and Technology Funds Index +9.10%
(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 OR VISITING www.riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. AVERAGE ANNUAL TOTAL RETURNS
CLASS A CLASS B CLASS C CLASS I CLASS Y (11/13/96) (11/13/96) (6/26/00) (7/15/04) (11/13/96) AFTER AFTER (INCEPTION DATES) NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6) AT OCT. 31, 2005 1 year +8.74% +2.47% +8.75% +3.75% +8.07% +7.07% +9.84% +9.29% 3 years +24.55% +22.11% +23.67% +22.79% +23.67% +23.67% N/A +24.76% 5 years -17.67% -18.64% -18.27% -18.59% -18.27% -18.27% N/A -17.55% Since inception +3.99% +3.31% +3.22% +3.22% -18.06% -18.06% +13.80% +4.05% AT SEPT. 30, 2005 1 year +20.83% +13.92% +19.59% +14.59% +19.59% +18.59% +21.30% +20.71% 3 years +34.73% +32.08% +33.74% +32.99% +33.74% +33.74% N/A +34.95% 5 years -19.02% -19.98% -19.67% -19.99% -19.63% -19.63% N/A -18.89% Since inception +4.27% +3.57% +3.45% +3.45% -18.06% -18.06% +16.72% +4.32%
(1) EXCLUDING SALES CHARGE. (2) RETURNS AT PUBLIC OFFERING PRICE (POP) REFLECT A SALES CHARGE OF 5.75%. (3) RETURNS AT MAXIMUM CONTINGENT DEFERRED SALES CHARGE (CDSC). CDSC APPLIES AS FOLLOWS: FIRST YEAR 5%; SECOND AND THIRD YEAR 4%; FOURTH YEAR 3%; FIFTH YEAR 2%; SIXTH YEAR 1%; NO SALES CHARGE THEREAFTER. (4) 1% CDSC APPLIES TO REDEMPTIONS MADE WITHIN THE FIRST YEAR OF PURCHASE. (5) SALES CHARGE IS NOT APPLICABLE TO THESE SHARES. SHARES AVAILABLE TO ELIGIBLE INVESTORS ONLY, CURRENTLY LIMITED TO RIVERSOURCE PORTFOLIO BUILDER FUNDS, SIX AFFILIATED FUNDS-OF-FUNDS. (6) SALES CHARGE IS NOT APPLICABLE TO THESE SHARES. SHARES AVAILABLE TO INSTITUTIONAL INVESTORS ONLY. - -------------------------------------------------------------------------------- 4 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT BELOW, PORTFOLIO MANAGER NINA HUGHES DISCUSSES THE FUND'S RESULTS AND POSITIONING FOR THE FISCAL YEAR ENDED OCT. 31, 2005. Q: HOW DID RIVERSOURCE GLOBAL TECHNOLOGY FUND PERFORM FOR THE 12 MONTHS ENDED OCT. 31, 2005? A: RiverSource Global Technology Fund's Class A shares advanced 8.74% (excluding sales charge) for the 12 months ended Oct. 31, 2005. This outpaced the Fund's benchmark, the unmanaged Goldman Sachs Technology Index(R) Composite Index (GSTI(R) Composite Index), which rose 6.20%. The Fund underperformed its peer group, represented by the Lipper Science and Technology Funds Index, which rose 9.10% over the same period. Q: WHAT FACTORS MOST SIGNIFICANTLY AFFECTED PERFORMANCE DURING THE FISCAL YEAR? A: Global equity markets delivered strong returns over the course of the past year, although technology, in general, was not one of the best performing sectors. The Fund successfully navigated this market environment. Effective positioning in the semiconductor industry was largely responsible for the Fund's outperformance of its benchmark. At the start of the fiscal period, there was widespread skepticism about the outlook for semiconductors, particularly due to high inventory levels in late 2004. We believed the negative sentiment was excessive and that inventory issues would be resolved. In addition, we thought semiconductor companies could benefit from steady economic growth and from expansion opportunities in areas such as high definition TVs, multi-media and wireless components. We established significant positions in semiconductor companies where we thought the balance of reward and risk was very compelling. In our view, any good news for the economy or the industry was likely to make this positioning particularly effective and, in fact, a larger-than-benchmark allocation to semiconductors was the largest contributor to the Fund's relative performance. The Fund's positioning in the internet software and services group was less effective. We had de-emphasized service stocks, which performed very well during the period. Although we were not betting against the services group, we thought there were other technology areas that held more promise for the Fund. Stock selection in the computers and peripherals group also detracted from relative performance primarily due to a significant holding in Lexmark International, a printing and paper company that failed to execute its business model in this period. - -------------------------------------------------------------------------------- 5 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS > EFFECTIVE POSITIONING IN THE SEMICONDUCTOR INDUSTRY WAS LARGELY RESPONSIBLE FOR THE FUND'S OUTPERFORMANCE OF ITS BENCHMARK. In terms of individual holdings, Macromedia, a software firm that provides multi-media for the internet, was the largest positive contributor on an absolute and relative basis. Other investors were avoiding this stock because they feared that a near-term product line transition would negatively impact earnings. However, we had done a great deal of research on this company and were aware that Macromedia was expanding into cell phones in Asia. We believed this foreign exposure would offset any transition-related weakness in the company's domestic earnings. As a result, we built a sizeable position at an attractive valuation. In April 2005, Adobe announced its intent to acquire Macromedia and thus we benefited from our positioning even sooner than anticipated. Broadcom, a semiconductor stock, also had a positive impact on absolute performance. This company develops semiconductor chips for many of the growth drivers in the technology sector. They produce chips used for Voice over Internet Protocols, broadband, Bluetooth technology and cell phones. The company has broad product space, but the stock was at an attractive price level following a reduction in management's earnings guidance. We established a meaningful position because we did not think the company was in a weak position, but rather that expectations just had to be reset. During the period, the Fund benefited from this decision. A third major contributor to absolute return was internet search engine Google. When Google initially went public last year, there was some - -------------------------------------------------------------------------------- 6 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS - - WE BELIEVE THERE ARE STILL SOME GREAT GROWTH DRIVERS IN THE TECHNOLOGY INDUSTRY. IN PARTICULAR, WE THINK CONSUMERS WILL ULTIMATELY BE A MAJOR DRIVER OF GROWTH. skepticism as to whether the company and management team could function successfully as a public company. However, they have been proving themselves and are incorporating other growth drivers into their business model. The company delivered both top line and bottom line growth and, as a result, the stock has performed extremely well. Conversely, network provider Cisco Systems was one of the most significant individual detractors for the period. We took a position in the stock, believing that for a large cap company with a great management team, it was at an attractive valuation. The company subsequently reduced its earnings guidance. Although Cisco's top line growth appears to be fairly steady, we haven't seen any growth coming back to the networking industry, so we reduced the portfolio's position. We have already mentioned Lexmark International, a provider of printing products and supplies for laser jets and other types of printers, which was another key detractor. The stock of this company traded at an attractive valuation and we anticipated that earnings would be stable, but not accelerate. However, Lexmark's earnings are highly dependent on top line growth and when that growth fell just a little bit short, the company was forced to sharply cut its earnings estimate. We chose to eliminate the stock because there has been some deceleration in the printing industry as people shift from printing photos at home to sending them out. We don't see evidence that Lexmark is adapting its business model to the changing environment, so we foresee no growth potential and, therefore, think the Fund can benefit more from other growth opportunities. - -------------------------------------------------------------------------------- 7 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS Internet auction company eBay was another detractor. We like eBay's story, we consider their business model dynamic and are impressed with eBay's expansion beyond person to person trading into other areas such as selling cars. However, eBay missed its earnings estimate in the middle of the year and the stock was hit hard. We trimmed the portfolio's position at that time and in retrospect, that was an inopportune time to sell. The stock has since advanced as eBay has continued to execute effectively and its business model remains intact. Q: WHAT CHANGES DID YOU MAKE TO THE FUND AND HOW IS IT CURRENTLY POSITIONED? A: We have reduced the portfolio's semiconductor position, moving from a larger-than-benchmark allocation to a more neutral weighting. Instead we have placed more emphasis on software and internet stocks, while remaining underweight in service-related stocks. Semiconductors advanced sharply this past year and valuations are no longer as attractive to us. For the industry to repeat its recent strong performance, we believe consumers would need to spend significantly in the upcoming months and we are somewhat concerned that spending might be more restrained, given high oil prices and a softening housing market. We aren't negative on semiconductors, but we don't want to be over-allocated to this group. Regarding the portfolio's increased software emphasis, we found software valuations very attractive following the industry's traditional summer weakness. In addition, we wanted to be positioned to benefit from increasing merger and acquisition activity in the software arena. During the period, we began building a position in telecommunications company Sprint Nextel because we believe synergies related to Sprint's merger with Nextel haven't been fully realized yet. In general, we see opportunities in telecommunications services and we consider Sprint Nextel one of the better companies within that group. We sold a substantial portion of our holdings of Dell, which had been one of the largest positions in the Fund. We had continued to see evidence that Dell was not executing as well as it had in the past and was facing greater competition from IBM and Hewlett-Packard. - -------------------------------------------------------------------------------- 8 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT QUESTIONS & ANSWERS Q: HOW DO YOU INTEND TO MANAGE THE FUND IN THE COMING MONTHS? A: We believe there are still some great growth drivers in the technology industry. In particular, we think consumers will ultimately be a major driver of growth. Cell phones are using more technology and offer more multi-media capabilities. In addition, other consumer devices such as the iPod and digital TVs have more semi-conductor content in them. Sales of digital TVs have been accelerating and with the cost of LCD monitors decreasing we are beginning to see increased volume of units being sold. These are excellent drivers for technology. However, we are watching these areas closely because, as we mentioned above, we are somewhat wary of consumer spending patterns. Although we have not seen any evidence that consumer spending is declining, external pressures such as high oil prices and weaker housing prices indicate that we should be careful. Consequently, we have pared back consumer-focused positions. Within the semi-conductor group, we have begun shifting to less expensive semiconductor stocks, but we continue to see growth longer term because semiconductor use is so widespread in diverse products such as cars and cell phones. The U.S. economy seems to be on track for further improvement, although the improvement may be slow. We think corporate enterprise spending remains pretty stable. Such spending is usually quite strong in the fourth quarter and we see no evidence this won't be the case in the final quarter of 2005. - -------------------------------------------------------------------------------- 9 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT THE FUND'S LONG-TERM PERFORMANCE The chart on the facing page illustrates the total value of an assumed $10,000 investment in RiverSource Global Technology Fund Class A shares (from 12/1/96 to 10/31/05)* as compared to the performance of two widely cited performance indices, the Goldman Sachs Technology Index(R) (GSTI(R)) Composite Index and the Lipper Science and Technology Funds Index. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5.75%, while such charges are not reflected in the performance of the indices. Returns for the Fund include the reinvestment of any distribution paid during each period. THE PERFORMANCE INFORMATION SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT A GUARANTEE OF FUTURE RESULTS. THE 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 OR VISITING www.riversource.com/funds. ALSO SEE "PAST PERFORMANCE" IN THE FUND'S CURRENT PROSPECTUS. * Fund data is from Nov. 13, 1996. GSTI Composite Index and Lipper peer group data is from Dec. 1, 1996. DISTRIBUTION SUMMARY THE TABLE BELOW DETAILS THE FUND'S INCOME AND CAPITAL GAIN DISTRIBUTIONS FOR THE FISCAL YEARS SHOWN. MORE INFORMATION ON THE OTHER CLASSES CAN BE FOUND IN THE FINANCIAL HIGHLIGHTS SECTION OF THIS REPORT'S NOTES TO FINANCIAL STATEMENTS.
CLASS A -------------------------------------------------- SHORT-TERM LONG-TERM FISCAL YEAR ENDED INCOME CAPITAL GAINS CAPITAL GAINS TOTAL Oct. 31, 2005 $-- $-- $-- $-- Oct. 31, 2004 -- -- -- -- Oct. 31, 2003 -- -- -- -- Oct. 31, 2002 -- -- -- -- Oct. 31, 2001 -- -- -- --
- -------------------------------------------------------------------------------- 10 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT [CHART] VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE GLOBAL TECHNOLOGY FUND
12/1/96 10/97 10/98 10/99 10/00 10/01 10/02 10/03 10/04 10/05 RIVERSOURCE GLOBAL TECHNOLOGY FUND CLASS A (INCLUDES SALES CHARGE) $ 9,425 $ 9,932 $10,198 $21,245 $35,390 $10,766 $ 6,931 $11,574 $12,315 $13,391 GOLDMAN SACHS TECHNOLOGY INDEX(R) (GSTI(R)) COMPOSITE INDEX(1) $10,000 $12,358 $15,565 $27,861 $33,687 $14,752 $10,092 $15,091 $14,747 $15,661 LIPPER SCIENCE AND TECHNOLOGY FUNDS INDEX(2) $10,000 $1,1218 $12,057 $23,440 $31,637 $13,177 $ 8,829 $13,191 $12,784 $13,948
COMPARATIVE RESULTS RESULTS AT OCT. 31, 2005
SINCE 1 YEAR 3 YEARS 5 YEARS INCEPTION(3) RIVERSOURCE GLOBAL TECHNOLOGY FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $10,247 $18,208 $ 3,565 $13,391 Average annual total return +2.47% +22.11% -18.64% +3.31% GOLDMAN SACHS TECHNOLOGY INDEX(R) (GSTI(R)) COMPOSITE INDEX(1) Cumulative value of $10,000 $10,620 $15,512 $ 4,647 $15,661 Average annual total return +6.20% +15.76% -14.21% +5.15% LIPPER SCIENCE AND TECHNOLOGY FUNDS INDEX(2) Cumulative value of $10,000 $10,910 $15,799 $ 4,408 $13,948 Average annual total return +9.10% +16.47% -15.11% +3.80%
RESULTS FOR OTHER SHARE CLASSES CAN BE FOUND ON PAGE 4. (1) The Goldman Sachs Technology Index(R) (GSTI(R)) Composite Index (GSTI Composite Index), an unmanaged index published by Goldman Sachs, is a market capitalization-weighted index of over 200 stocks designed to measure the performance of companies in the technology sector. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. (2) The Lipper Science and Technology Funds Index includes the 30 largest science and technology funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. (3) Fund data is from Nov. 13, 1996. GSTI Composite Index and Lipper peer group data is from Dec. 1, 1996. - -------------------------------------------------------------------------------- 11 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT INVESTMENTS IN SECURITIES WORLD TECHNOLOGIES PORTFOLIO OCT. 31, 2005 (PERCENTAGES REPRESENT VALUE OF INVESTMENTS COMPARED TO NET ASSETS)
ISSUER SHARES VALUE(a) COMMON STOCKS (98.9%) COMMUNICATIONS EQUIPMENT (8.5%) Alcatel ADR 140,175(b),(c) $ 1,645,655 Cisco Systems 150,268(b) 2,622,177 Corning 133,005(b) 2,672,070 Nokia ADR 445,478(c) 7,492,940 ------------- Total 14,432,842 - ------------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (10.3%) Dell 88,500(b) 2,821,380 EMC 558,991(b) 7,803,514 Hewlett-Packard 112,714 3,160,501 Intl Business Machines 44,518 3,645,134 ------------- Total 17,430,529 - ------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (7.8%) ALLTEL 20,126 1,244,994 Cogent Communications Group 203,500(b),(d) 1,068,375 SBC Communications 136,430 3,253,856 Sprint Nextel 286,490 6,679,034 Telewest Global 40,540(b),(c) 924,717 ------------- Total 13,170,976 - ------------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (3.7%) Celestica 108,086(b),(c) 1,033,302 Flextronics Intl 172,670(b),(c) 1,604,104 Hon Hai Precision Industry 393,000(c) 1,702,637 Spatialight 170,900(b),(d) 758,796 Vishay Intertechnology 109,450(b) 1,241,163 ------------- Total 6,340,002 - ------------------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (1.2%) eBay 49,500(b) 1,960,200 - ------------------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (12.4%) CNET Networks 129,771(b) 1,763,588 Google Cl A 18,437(b) 6,861,145 Interwoven 50,737(b) 476,928 Loudeye 2,368,485(b) 1,728,994 MatrixOne 198,108(b) 998,464 VeriSign 146,666(b) 3,465,718 Yahoo! 153,625(b) 5,679,516 ------------- Total 20,974,353 - ------------------------------------------------------------------------------------------------- IT SERVICES (6.1%) Affiliated Computer Services Cl A 23,647(b) $ 1,279,539 Cognizant Technology Solutions Cl A 51,670(b) 2,272,447 Ness Technologies 278,810(b),(c) 2,534,383 Paychex 45,965 1,781,603 Satyam Computer Services ADR 56,481(c) 1,930,521 Telvent GIT 60,000(b),(c) 609,000 ------------- Total 10,407,493 - ------------------------------------------------------------------------------------------------- MEDIA (1.7%) Comcast Cl A 41,900(b) 1,166,077 NTL 28,565(b) 1,751,606 ------------- Total 2,917,683 - ------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (26.2%) Analog Devices 52,420 1,823,168 ATI Technologies 182,164(b),(c) 2,632,270 Atmel 609,681(b) 1,499,815 Broadcom Cl A 130,045(b) 5,521,710 Credence Systems 196,219(b) 1,510,886 Fairchild Semiconductor Intl 83,117(b) 1,280,002 Freescale Semiconductor Cl A 112,935(b) 2,675,430 Integrated Device Technology 84,135(b) 831,254 Intel 235,450 5,533,074 Maxim Integrated Products 91,200 3,162,816 MEMC Electronic Materials 123,654(b) 2,218,353 Micron Technology 165,294(b) 2,147,169 Samsung Electronics 10,860(c) 5,801,599 Taiwan Semiconductor Mfg ADR 225,539(c) 1,822,355 Texas Instruments 168,405 4,807,963 Xilinx 52,450 1,256,178 ------------- Total 44,524,042 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 12 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT
ISSUER SHARES VALUE(a) COMMON STOCKS (CONTINUED) SOFTWARE (19.0%) Compuware 221,514(b) $ 1,792,048 Electronic Arts 22,033(b) 1,253,237 i2 Technologies 43,785(b),(d) 535,053 Macromedia 59,200(b) 2,600,064 Mercury Interactive 94,896(b) 3,301,432 Microsoft 187,416 4,816,591 Open Solutions 64,100(b) 1,372,381 OPNET Technologies 100,000(b) 833,000 Oracle 472,880(b) 5,996,118 SAP ADR 28,970(c) 1,243,972 Symantec 153,350(b) 3,657,398 Taleo Cl A 61,650(b) 712,058 TIBCO Software 359,541(b) 2,728,916 Wind River Systems 103,763(b) 1,359,295 ------------ Total 32,201,563 - ------------------------------------------------------------------------------------------------------ SPECIALTY RETAIL (1.0%) Circuit City Stores 93,704 1,666,994 - ------------------------------------------------------------------------------------------------------ WIRELESS TELECOMMUNICATION SERVICES (1.0%) O2 481,189(c) 1,752,777 - ------------------------------------------------------------------------------------------------------ TOTAL COMMON STOCKS (Cost: $158,184,260) $167,779,454 - ------------------------------------------------------------------------------------------------------ OTHER (--%) UBI Soft Entertainment Warrants 5,712(b),(c),(g) $ 68,110 - ------------------------------------------------------------------------------------------------------ TOTAL OTHER (Cost: $19,674) $ 68,110 - ------------------------------------------------------------------------------------------------------ AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) SHORT-TERM SECURITY (2.3%)(e) COMMERCIAL PAPER CRC Funding LLC 11-01-05 4.04% $3,900,000(f) $ 3,899,562 - ------------------------------------------------------------------------------------------------------ TOTAL SHORT-TERM SECURITY (Cost: $3,900,000) $ 3,899,562 - ------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS IN SECURITIES (Cost: $162,103,934)(h) $171,747,126 ======================================================================================================
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 13 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT NOTES TO INVESTMENTS IN SECURITIES (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Oct. 31, 2005, the value of foreign securities represented 19.3% of net assets. (d) At Oct. 31, 2005, security was partially or fully on loan. See Note 4 to the financial statements. (e) Cash collateral received from security lending activity is invested in short-term securities and represents 0.8% of net assets. See Note 4 to the financial statements. 1.5% of net assets is the Portfolio'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 Oct. 31, 2005, the value of these securities amounted to $3,899,562 or 2.3% of net assets. (g) 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 Oct. 31, 2005, is as follows:
ACQUISITION SECURITY DATE COST ---------------------------------------------------------------------------------------- UBI Soft Entertainment Warrants 12-02-03 $19,674
(h) At Oct. 31, 2005, the cost of securities for federal income tax purposes was $165,032,999 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $13,793,587 Unrealized depreciation (7,079,460) ---------------------------------------------------------------------------------------- Net unrealized appreciation $ 6,714,127 ----------------------------------------------------------------------------------------
THE GLOBAL INDUSTRY CLASSIFICATION STANDARD (GICS) WAS DEVELOPED BY AND IS THE EXCLUSIVE PROPERTY OF MORGAN STANLEY CAPITAL INTERNATIONAL INC. AND STANDARD & POOR'S, A DIVISION OF THE MCGRAW-HILL COMPANIES, INC. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/funds. - -------------------------------------------------------------------------------- 14 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES WORLD TECHNOLOGIES PORTFOLIO OCT. 31, 2005 ASSETS Investments in securities, at value (Note 1)* (identified cost $162,103,934) $171,747,126 Foreign currency holdings (identified cost $2,579) (Note 1) 2,588 Dividends and accrued interest receivable 56,405 Receivable for investment securities sold 3,083,682 - ------------------------------------------------------------------------------------------ Total assets 174,889,801 - ------------------------------------------------------------------------------------------ LIABILITIES Disbursements in excess of cash on demand deposit 134,855 Payable for investment securities purchased 3,605,027 Payable upon return of securities loaned (Note 4) 1,426,000 Accrued investment management services fee 9,874 Other accrued expenses 32,765 - ------------------------------------------------------------------------------------------ Total liabilities 5,208,521 - ------------------------------------------------------------------------------------------ Net assets $169,681,280 ========================================================================================== * Including securities on loan, at value (Note 4) $ 1,304,724 - ------------------------------------------------------------------------------------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT STATEMENT OF OPERATIONS WORLD TECHNOLOGIES PORTFOLIO YEAR ENDED OCT. 31, 2005 INVESTMENT INCOME Income: Dividends $ 1,379,608 Interest 139,266 Fee income from securities lending (Note 4) 97,842 Less foreign taxes withheld (53,351) - ------------------------------------------------------------------------------------------ Total income 1,563,365 - ------------------------------------------------------------------------------------------ Expenses (Note 2): Investment management services fee 1,574,791 Compensation of board members 10,251 Custodian fees 36,035 Audit fees 25,500 Other 9,546 - ------------------------------------------------------------------------------------------ Total expenses 1,656,123 Earnings credits on cash balances (Note 2) (3,218) - ------------------------------------------------------------------------------------------ Total net expenses 1,652,905 - ------------------------------------------------------------------------------------------ Investment income (loss) -- net (89,540) - ------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (Note 3) 22,841,219 Foreign currency transactions 8,654 - ------------------------------------------------------------------------------------------ Net realized gain (loss) on investments 22,849,873 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (4,849,352) - ------------------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 18,000,521 - ------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $17,910,981 ==========================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS WORLD TECHNOLOGIES PORTFOLIO
YEAR ENDED OCT. 31, 2005 2004 OPERATIONS Investment income (loss) -- net $ (89,540) $ (1,343,295) Net realized gain (loss) on investments 22,849,873 14,444,467 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (4,849,352) 53,902 - ------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 17,910,981 13,155,074 - ------------------------------------------------------------------------------------------------------------ Proceeds from contributions 440,388 8,830,768 Fair value of withdrawals (58,572,339) (26,055,794) - ------------------------------------------------------------------------------------------------------------ Net contributions (withdrawals) from partners (58,131,951) (17,225,026) - ------------------------------------------------------------------------------------------------------------ Total increase (decrease) in net assets (40,220,970) (4,069,952) Net assets at beginning of year 209,902,250 213,972,202 - ------------------------------------------------------------------------------------------------------------ Net assets at end of year $169,681,280 $209,902,250 ============================================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS WORLD TECHNOLOGIES PORTFOLIO 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES World Technologies Portfolio (the Portfolio) is a series of World Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a non-diversified, open-end management investment company. The Portfolio invests in equity securities of companies in the information technology industry throughout the world. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. The Portfolio's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which securities are normally traded. Pursuant to procedures adopted by the Board of Trustees of the portfolios, Ameriprise Financial, Inc. (Ameriprise Financial) (formerly American Express Financial Corporation) utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with these procedures. If a development or event is so significant that there is a reasonably high degree of certainty that the effect of the development or event has actually caused the closing price to no longer reflect the actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the New York Stock Exchange. Significant events include material movements in the U.S. securities markets prior to the opening of foreign markets on the following trading day. FVP results in an estimated price that reasonably reflects the current market conditions in order to value the portfolio holdings such that shareholder transactions receive a fair net asset value. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. - -------------------------------------------------------------------------------- 18 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT ILLIQUID SECURITIES At Oct. 31, 2005, investments in securities included issues that are illiquid which the Fund currently limit to 10% of net assets, at market value, at the time of purchase. The aggregate value of such securities at Oct. 31, 2005 was $68,110 representing 0.04% of net assets. These securities are valued at fair value according to methods selected in good faith by the Board. According to board guidelines, certain unregistered securities are determined to be liquid and are not included within the 10% limitation specified above. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. OPTION TRANSACTIONS To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio 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 Portfolio 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 Portfolio gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Portfolio 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 Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio 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 Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. - -------------------------------------------------------------------------------- 19 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 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. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At Oct. 31, 2005, foreign currency holdings were entirely comprised of Taiwan dollars. The Portfolio 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 Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete its contract obligations. GUARANTEES AND INDEMNIFICATIONS Under the Portfolio's organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Portfolio. In addition, certain of the Portfolio's contracts with its service providers contain general indemnification clauses. The Portfolio's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Portfolio cannot be determined and the Portfolio has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES For federal income tax purposes the Portfolio qualifies as a partnership and each investor in the Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore does not pay any income dividends or capital gain distributions. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. - -------------------------------------------------------------------------------- 20 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT 2. FEES AND EXPENSES The Trust, on behalf of the Portfolio, has an Investment Management Services Agreement with RiverSource Investments, LLC (the Investment Manager) to manage its portfolio. Prior to Oct. 1, 2005, investment management services were provided by Ameriprise Financial. Under this agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Portfolio's average daily net assets that declines from 0.72% to 0.595% annually as the Portfolio's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of the RiverSource Global Technology Fund to the Lipper Science and Technology Funds Index. In certain circumstances, the Board may approve a change in the index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment increased the fee by $197,924 for the year ended Oct. 31, 2005. Under the agreement, the Trust also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees, audit and certain legal fees, fidelity bond premiums, registration fees for units, office expenses, consultants' fees, compensation of trustees, corporate filing fees, expenses incurred in connection with lending securities of the Portfolio and any other expenses properly payable by the Trust or Portfolio and approved by the Board. Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer receipt of their annual compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the underlying Fund or other RiverSource funds. The Portfolio's liability for these amounts is adjusted for market value changes and remains in the Portfolio until distributed in accordance with the Plan. During the year ended Oct. 31, 2005, the Portfolio's custodian fees were reduced by $3,218 as a result of earnings credits from overnight cash balances. The Portfolio also pays custodian fees to Ameriprise Trust Company (formerly American Express Trust Company), an affiliate of Ameriprise Financial. According to a Placement Agency Agreement, Ameriprise Financial Services, Inc. (formerly American Express Financial Advisors Inc.) acts as placement agent of the Trust's units. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $212,701,258 and $265,752,024, respectively, for the year ended Oct. 31, 2005. Realized gains and losses are determined on an identified cost basis. - -------------------------------------------------------------------------------- 21 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT 4. LENDING OF PORTFOLIO SECURITIES At Oct. 31, 2005, securities valued at $1,304,724 were on loan to brokers. For collateral, the Portfolio received $1,426,000 in cash. Cash collateral received is invested in short-term securities, which are included in the short-term section of the "Investments in securities." Income from securities lending amounted to $97,842 for the year ended Oct. 31, 2005. The risks to the Portfolio of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. 5. FINANCIAL HIGHLIGHTS The table below shows certain important financial information for evaluating the Portfolio's results.
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 RATIOS/SUPPLEMENTAL DATA Ratio of expenses to average daily net assets(a) .87% .87% .84% .77% .75% - ----------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets (.05%) (.61%) (.37%) (.51%) (.11%) - ----------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 115% 349% 546% 391% 233% - ----------------------------------------------------------------------------------------------------------------- Total return(b) 9.99% 6.91% 68.97% (34.78%) (69.21%) - -----------------------------------------------------------------------------------------------------------------
(a) Expense ratio is based on total expenses of the Portfolio before reduction of earnings credits on cash balances. The ratio does not include feeder fund expenses. (b) Total return is based on a calculated Portfolio net asset value and does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 22 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM THE BOARD OF TRUSTEES AND UNITHOLDERS WORLD TRUST We have audited the accompanying statement of assets and liabilities, including the schedule of investments in securities, of World Technologies Portfolio (a series of World Trust) as of October 31, 2005, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended October 31, 2005 and the financial highlights for each of the years in the five-year period ended October 31, 2005. These financial statements and the financial highlights are the responsibility of portfolio management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 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 World Technologies Portfolio as of October 31, 2005, and the results of its operations, changes in its net assets and the financial highlights for each of the periods stated in the first paragraph above, in conformity with U.S. generally accepted accounting principles. KPMG LLP Minneapolis, Minnesota December 20, 2005 - -------------------------------------------------------------------------------- 23 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES RIVERSOURCE GLOBAL TECHNOLOGY FUND OCT. 31, 2005 ASSETS Investment in Portfolio (Note 1) $ 169,647,259 Capital shares receivable 4,337 - ----------------------------------------------------------------------------------------------------------------- Total assets 169,651,596 - ----------------------------------------------------------------------------------------------------------------- LIABILITIES Accrued distribution fee 6,418 Accrued service fee 3 Accrued transfer agency fee 6,046 Accrued administrative services fee 821 Other accrued expenses 61,815 - ----------------------------------------------------------------------------------------------------------------- Total liabilities 75,103 - ----------------------------------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 169,576,493 ================================================================================================================= REPRESENTED BY Capital stock -- $.01 par value (Note 1) $ 887,682 Additional paid-in capital 548,045,202 Accumulated net realized gain (loss) (Note 5) (388,997,886) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 9,641,495 - ----------------------------------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 169,576,493 ================================================================================================================= Net assets applicable to outstanding shares: Class A $ 119,620,235 Class B $ 46,433,081 Class C $ 3,185,209 Class I $ 11,844 Class Y $ 326,124 Net asset value per share of outstanding capital stock: Class A shares 60,027,181 $ 1.99 Class B shares 26,742,918 $ 1.74 Class C shares 1,829,272 $ 1.74 Class I shares 5,882 $ 2.01 Class Y shares 162,930 $ 2.00
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT STATEMENT OF OPERATIONS RIVERSOURCE GLOBAL TECHNOLOGY FUND YEAR ENDED OCT. 31, 2005 INVESTMENT INCOME Income: Dividends $ 1,379,370 Interest 139,245 Fee income from securities lending 97,822 Less foreign taxes withheld (53,342) - ------------------------------------------------------------------------------------------ Total income 1,563,095 - ------------------------------------------------------------------------------------------ Expenses (Note 2): Expenses allocated from Portfolio 1,652,626 Distribution fee Class A 332,148 Class B 541,521 Class C 36,342 Transfer agency fee 801,039 Incremental transfer agency fee Class A 58,206 Class B 41,984 Class C 2,189 Service fee -- Class Y 353 Administrative services fees and expenses 112,326 Compensation of board members 9,468 Printing and postage 137,155 Registration fees 49,203 Audit fees 8,500 Other 8,783 - ------------------------------------------------------------------------------------------ Total expenses 3,791,843 Earnings credits on cash balances (Note 2) (8,334) - ------------------------------------------------------------------------------------------ Total net expenses 3,783,509 - ------------------------------------------------------------------------------------------ Investment income (loss) -- net (2,220,414) - ------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions 22,837,736 Foreign currency transactions 8,654 - ------------------------------------------------------------------------------------------ Net realized gain (loss) on investments 22,846,390 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (4,848,983) - ------------------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 17,997,407 - ------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $15,776,993 ==========================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 25 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS RIVERSOURCE GLOBAL TECHNOLOGY FUND
YEAR ENDED OCT. 31, 2005 2004 OPERATIONS Investment income (loss) -- net $ (2,220,414) $ (3,788,715) Net realized gain (loss) on investments 22,846,390 14,442,457 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (4,848,983) 53,737 - ------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 15,776,993 10,707,479 - ------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 3) Proceeds from sales Class A shares (Note 2) 14,032,284 32,538,914 Class B shares 4,198,752 8,831,756 Class C shares 365,934 1,113,196 Class I shares -- 10,000 Class Y shares 144,798 361,012 Payments for redemptions Class A shares (51,747,616) (39,802,082) Class B shares (Note 2) (21,314,709) (16,473,859) Class C shares (Note 2) (1,409,826) (1,305,583) Class Y shares (256,391) (191,700) - ------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (55,986,774) (14,918,346) - ------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (40,209,781) (4,210,867) Net assets at beginning of year 209,786,274 213,997,141 - ------------------------------------------------------------------------------------------------------------- Net assets at end of year $169,576,493 $209,786,274 =============================================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 26 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS RIVERSOURCE GLOBAL TECHNOLOGY FUND (FORMERLY AXP GLOBAL TECHNOLOGY FUND) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RiverSource Global Technology Fund (a series of AXP Global Series, Inc.) is registered under the Investment Company Act of 1940 (as amended) as a non-diversified, open-end management investment company. AXP Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board. The Fund offers Class A, Class B, Class C and Class Y shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class Y shares have no sales charge and are offered only to qualifying institutional investors. The Fund offers an additional class of shares, Class I, exclusively to certain institutional investors. Class I shares have no sales charge and are made available through a separate prospectus supplement provided to investors eligible to purchase the shares. At Oct. 31, 2005, Ameriprise Financial owned 100% of Class I shares, which represents 0.01% of the Fund's net assets. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee, transfer agency fees and service fee (class specific expenses) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. INVESTMENT IN WORLD TECHNOLOGIES PORTFOLIO The Fund invests all of its assets in World Technologies Portfolio (the Portfolio), a series of World Trust (the Trust), an open-end investment company that has the same objectives as the Portfolio. The Portfolio invests in equity securities of companies in the information technology industry throughout the world. The Fund records daily its share of the Portfolio's income, expenses and realized and unrealized gains and losses. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The Fund records its investment in the Portfolio at the value that is equal to the Fund's proportionate ownership interest in the Portfolio's net assets. The percentage of the Portfolio owned by the Fund at Oct. 31, 2005 was 99.98%. The Fund's Board approved the withdrawal of the Fund's assets from the Portfolio. As of Dec. 6, 2005, the Fund invests directly in and manages its own portfolio of securities rather than investing in the Portfolio. - -------------------------------------------------------------------------------- 27 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT All securities held by the Portfolio 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 Trustees of the portfolios, Ameriprise Financial utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with these procedures. If a development or event is so significant that there is a reasonably high degree of certainty that the effect of the development or event has actually caused the closing price to no longer reflect the actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the New York Stock Exchange. Significant events include material movements in the U.S. securities markets prior to the opening of foreign markets on the following trading day. FVP results in an estimated price that reasonably reflects the current market conditions in order to value the portfolio holdings such that shareholder transactions receive a fair net asset value. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. 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. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with all sections of the Internal Revenue Code that apply to regulated investment companies and to distribute substantially all of its taxable income to the shareholders. No provision for income or excise taxes is thus required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes, and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. - -------------------------------------------------------------------------------- 28 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT On the statement of assets and liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been increased by $2,220,414 and accumulated net realized loss has been increased by $8,654 resulting in a net reclassification adjustment to decrease paid-in capital by $2,211,760. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED OCT. 31, 2005 2004 - ---------------------------------------------------------------------------------------- CLASS A Distributions paid from: Ordinary income $-- $-- Long-term capital gain -- -- CLASS B Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- CLASS C Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- CLASS I* Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- CLASS Y Distributions paid from: Ordinary income -- -- Long-term capital gain -- --
* Inception date is July 15, 2004. At Oct. 31, 2005, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ -- Accumulated long-term gain (loss) $(386,068,821) Unrealized appreciation (depreciation) $ 6,712,430
DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. - -------------------------------------------------------------------------------- 29 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT 2. EXPENSES AND SALES CHARGES In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund has an agreement with Ameriprise Financial to provide administrative services. Under the current Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% annually as the Fund's assets increase. Prior to Oct. 1, 2005, the fee percentage of the Fund's average daily net assets declined from 0.06% to 0.035% annually as the Fund's assets increased. A minor portion of additional administrative service expenses paid by the Fund are consultants' fees and fund office expenses. Under this agreement, the Fund also pays taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees and any other expenses properly payable by the Fund and approved by the Board. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. Under a separate Transfer Agency Agreement, RiverSource Service Corporation (formerly American Express Client Service Corporation) (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual fee per shareholder account for this service as follows: - - Class A $19.50 - - Class B $20.50 - - Class C $20.00 - - Class Y $17.50 The incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. Class I pays a transfer agency fee at an annual rate per shareholder account of $1. This amount is included in the transfer agency fee on the statement of operations. Beginning May 20, 2005, the Transfer Agent is entitled to charge an annual closed account fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the statement of operations. The Fund has agreements with Ameriprise Financial Services, Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B and Class C shares. Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. - -------------------------------------------------------------------------------- 30 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT Sales charges received by the Distributor for distributing Fund shares were $228,669 for Class A, $99,646 for Class B and $455 for Class C for the year ended Oct. 31, 2005. The Investment Manager and its affiliates have agreed to waive certain fees and expenses until Oct. 31, 2005. Under this agreement, net expenses will not exceed 1.82% for Class A, 2.59% for Class B, 2.59% for Class C, 1.13% for Class I and 1.63% for Class Y of the Fund's average daily net assets. Beginning Oct. 1, 2005, a new agreement to waive certain fees and expenses is effective until Oct. 31, 2006, such that net expenses, before giving effect to any performance incentive adjustment, will not exceed 1.82% for Class A, 2.59% for Class B, 2.59% for Class C, 1.13% for Class I and 1.63% for Class Y of the Fund's average daily net assets. During the year ended Oct. 31, 2005, the Fund's transfer agency fees were reduced by $8,334 as a result of earnings credits from overnight cash balances. 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
YEAR ENDED OCT. 31, 2005 CLASS A CLASS B CLASS C CLASS I CLASS Y - ------------------------------------------------------------------------------------------------------------------------ Sold 7,304,774 2,511,332 218,828 -- 76,170 Issued for reinvested distributions -- -- -- -- -- Redeemed (27,230,471) (12,759,119) (847,115) -- (138,673) - ------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) (19,925,697) (10,247,787) (628,287) -- (62,503) - ------------------------------------------------------------------------------------------------------------------------ YEAR ENDED OCT. 31, 2004 CLASS A CLASS B CLASS C CLASS I* CLASS Y - ------------------------------------------------------------------------------------------------------------------------ Sold 18,015,801 5,496,488 686,163 5,882 199,393 Issued for reinvested distributions -- -- -- -- -- Redeemed (22,398,814) (10,688,097) (844,370) -- (106,886) - ------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) (4,383,013) (5,191,609) (158,207) 5,882 92,507 - ------------------------------------------------------------------------------------------------------------------------
* Inception date is July 15, 2004. 4. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The agreement went into effect Sept. 20, 2005. The Fund must maintain asset coverage for borrowings of at least 300%. The agreement, which enables the Fund to participate with other RiverSource funds, permits borrowings up to $500 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to either the higher of the Federal Funds Effective Rate plus 0.40% or the JPMCB Prime Commercial Lending Rate. Borrowings are payable within 60 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.07% per annum. Prior to this agreement, the Fund had a revolving credit agreement that permitted borrowings up to $500 million with The Bank of New York. The Fund had no borrowings outstanding during the year ended Oct. 31, 2005. - -------------------------------------------------------------------------------- 31 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT 5. CAPITAL LOSS CARRY-OVER For federal income tax purposes the Fund had a capital loss carry-over of $386,068,821 at Oct. 31, 2005, that if not offset by capital gains will expire as follows:
2009 2010 $304,769,594 $81,299,227
It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. 6. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results. CLASS A
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $1.83 $ 1.72 $ 1.03 $ 1.60 $ 5.26 - ---------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.02) (.03) (.02) (.03) (.02) Net gains (losses) (both realized and unrealized) .18 .14 .71 (.54) (3.64) - ---------------------------------------------------------------------------------------------------------------------- Total from investment operations .16 .11 .69 (.57) (3.66) - ---------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $1.99 $ 1.83 $ 1.72 $ 1.03 $ 1.60 - ---------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 120 $ 146 $ 145 $ 81 $ 146 - ---------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(b) 1.75% 1.74% 1.94% 1.91% 1.63% - ---------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets (.92%) (1.48%) (1.47%) (1.65%) (.99%) - ---------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 115% 349% 546% 391% 233% - ---------------------------------------------------------------------------------------------------------------------- Total return(c) 8.74% 6.40% 66.99% (35.62%) (69.58%) - ----------------------------------------------------------------------------------------------------------------------
(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 a sales charge. - -------------------------------------------------------------------------------- 32 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT CLASS B
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $ 1.60 $ 1.53 $ .92 $ 1.44 $ 4.77 - ---------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.03) (.04) (.03) (.04) (.04) Net gains (losses) (both realized and unrealized) .17 .11 .64 (.48) (3.29) - ---------------------------------------------------------------------------------------------------------------------- Total from investment operations .14 .07 .61 (.52) (3.33) - ---------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 1.74 $ 1.60 $ 1.53 $ .92 $ 1.44 - ---------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 46 $ 59 $ 64 $ 38 $ 67 - ---------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(b) 2.53% 2.52% 2.75% 2.71% 2.42% - ---------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets (1.71%) (2.26%) (2.27%) (2.45%) (1.78%) - ---------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 115% 349% 546% 391% 233% - ---------------------------------------------------------------------------------------------------------------------- Total return(c) 8.75% 4.58% 66.30% (36.11%) (69.81%) - ----------------------------------------------------------------------------------------------------------------------
(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 a sales charge. CLASS C
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $ 1.61 $ 1.53 $ .92 $ 1.44 $ 4.77 - ---------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.03) (.04) (.03) (.04) (.04) Net gains (losses) (both realized and unrealized) .16 .12 .64 (.48) (3.29) - ---------------------------------------------------------------------------------------------------------------------- Total from investment operations .13 .08 .61 (.52) (3.33) - ---------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 1.74 $ 1.61 $ 1.53 $ .92 $ 1.44 - ---------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 3 $ 4 $ 4 $ 2 $ 4 - ---------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(b) 2.52% 2.49% 2.72% 2.69% 2.42% - ---------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets (1.69%) (2.23%) (2.26%) (2.39%) (1.84%) - ---------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 115% 349% 546% 391% 233% - ---------------------------------------------------------------------------------------------------------------------- Total return(c) 8.07% 5.23% 66.30% (36.11%) (69.81%) - ----------------------------------------------------------------------------------------------------------------------
(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 a sales charge. - -------------------------------------------------------------------------------- 33 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT CLASS I
FISCAL PERIOD ENDED OCT. 31, 2005 2004(b) PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $1.83 $1.70 - ---------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01) (.02) Net gains (losses) (both realized and unrealized) .19 .15 - ---------------------------------------------------------------------------------------------------------------------- Total from investment operations .18 .13 - ---------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $2.01 $1.83 - ---------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ -- $ -- - ---------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c) 1.04% 1.03%(d) - ---------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets (.21%) (.73%)(d) - ---------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 115% 349% - ---------------------------------------------------------------------------------------------------------------------- Total return(e) 9.84% 7.65%(f) - ----------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date is July 15, 2004. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. (f) Not annualized. CLASS Y
FISCAL PERIOD ENDED OCT. 31, 2005 2004 2003 2002 2001 PER SHARE INCOME AND CAPITAL CHANGES(a) Net asset value, beginning of period $1.83 $ 1.72 $ 1.03 $ 1.60 $ 5.25 - ---------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.02) (.02) (.02) (.03) (.02) Net gains (losses) (both realized and unrealized) .19 .13 .71 (.54) (3.63) - ---------------------------------------------------------------------------------------------------------------------- Total from investment operations .17 .11 .69 (.57) (3.65) - ---------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $2.00 $ 1.83 $ 1.72 $ 1.03 $ 1.60 - ---------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ -- $ -- $ -- $ -- $ -- - ---------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(b) 1.54% 1.55% 1.69% 1.72% 1.49% - ---------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets (.73%) (1.28%) (1.25%) (1.61%) (.89%) - ---------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 115% 349% 546% 391% 233% - ---------------------------------------------------------------------------------------------------------------------- Total return(c) 9.29% 6.40% 66.99% (35.63%) (69.52%) - ----------------------------------------------------------------------------------------------------------------------
(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 a sales charge. - -------------------------------------------------------------------------------- 34 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM THE BOARD AND SHAREHOLDERS AXP GLOBAL SERIES, INC. We have audited the accompanying statement of assets and liabilities of RiverSource Global Technology Fund (a series of AXP Global Series, Inc.) as of October 31, 2005, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended October 31, 2005, and the financial highlights for each of the years in the five-year period ended October 31, 2005. These financial statements and the financial highlights are the responsibility of fund management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 Global Technology Fund as of October 31, 2005, and the results of its operations, changes in its net assets and the financial highlights for each of the periods stated in the first paragraph above, in conformity with U.S. generally accepted accounting principles. KPMG LLP Minneapolis, Minnesota December 20, 2005 - -------------------------------------------------------------------------------- 35 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT FUND EXPENSES EXAMPLE (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Oct. 31, 2005. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 36 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED MAY 1, 2005 OCT. 31, 2005 THE PERIOD(a) EXPENSE RATIO Class A Actual(b) $1,000 $1,137.10 $ 9.42(c) 1.74% Hypothetical (5% return before expenses) $1,000 $1,016.52 $ 8.89(c) 1.74% Class B Actual(b) $1,000 $1,137.30 $13.65(c) 2.52% Hypothetical (5% return before expenses) $1,000 $1,012.57 $12.85(c) 2.52% Class C Actual(b) $1,000 $1,129.90 $13.49(c) 2.50% Hypothetical (5% return before expenses) $1,000 $1,012.67 $12.75(c) 2.50% Class I Actual(b) $1,000 $1,142.00 $ 5.48(c) 1.01% Hypothetical (5% return before expenses) $1,000 $1,020.22 $ 5.17(c) 1.01% Class Y Actual(b) $1,000 $1,136.40 $ 8.18(c) 1.51% Hypothetical (5% return before expenses) $1,000 $1,017.69 $ 7.72(c) 1.51%
(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 185/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended Oct. 31, 2005: +13.71% for Class A, +13.73% for Class B, +12.99% for Class C, +14.20% for Class I and +13.64% for Class Y. (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. The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Oct. 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 1.82% for Class A; 2.59% for Class B; 2.59% for Class C; 1.13% for Class I; and 1.63% for Class Y. 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 Oct. 31, 2005, the actual and hypothetical expenses paid would have been the same as those presented above. - -------------------------------------------------------------------------------- 37 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 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 5_ 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 may retire after her 75th birthday. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ----------------------------------------------------------------------------------------------------------------- Arne H. Carlson Board member Chair, Board Services 901 S. Marquette Ave. since 1999 Corporation (provides Minneapolis, MN 55402 administrative services Age 71 to boards); former Governor of Minnesota Philip J. Carroll, Jr.* Board member Retired Chairman and Scottish Power PLC, 901 S. Marquette Ave. since 2002 CEO, Fluor Corporation Vulcan Materials Minneapolis, MN 55402 (engineering and Company, Inc. Age 67 construction) (construction materials/chemicals) Patricia M. Flynn Board member Trustee Professor of 901 S. Marquette Ave. since 2004 Economics and Minneapolis, MN 55402 Management, Bentley Age 54 College; former Dean, McCallum Graduate School of Business, Bentley College Anne P. Jones Board member Attorney and Consultant 901 S. Marquette Ave. since 1985 Minneapolis, MN 55402 Age 70 Jeffrey Laikind Board member Former Managing American Progressive 901 S. Marquette Ave. since 2005 Director, Shikiar Asset Insurance Minneapolis, MN 55402 Management Age 70 Stephen R. Lewis, Jr. Board member President Emeritus and Valmont Industries, Inc. 901 S. Marquette Ave. since 2002 Professor of Economics, (manufactures irrigation Minneapolis, MN 55402 Carleton College systems) Age 65
* Phillip J. Carroll, Jr. retired as a member of the Board, effective Nov. 10, 2005. - -------------------------------------------------------------------------------- 38 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ----------------------------------------------------------------------------------------------------------------- Catherine James Paglia Board member Director, Enterprise Strategic Distribution, 901 S. Marquette Ave. since 2004 Asset Management, Inc. Inc. (transportation, Minneapolis, MN 55402 (private real estate and distribution and logistics Age 53 asset management company) consultants) Alan K. Simpson Board member Former three-term United 1201 Sunshine Ave. since 1997 States Senator for Wyoming Cody, WY 82414 Age 74 Alison Taunton-Rigby Board member Chief Executive Officer, Hybridon, Inc. 901 S. Marquette Ave. since 2002 RiboNovix, Inc. since 2003 (biotechnology) and Minneapolis, MN 55402 (biotechnology); former American Healthways, Inc. Age 61 President, Forester (health management Biotech programs)
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS**
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ----------------------------------------------------------------------------------------------------------------- William F. Truscott Board member President - U.S. Asset 53600 Ameriprise Financial Center since 2001, Management and Chief Minneapolis, MN 55474 Vice President Investment Officer, Age 45 since 2002 Ameriprise Financial, Inc. and President, Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC since 2005; Senior Vice President - Chief Investment Officer, Ameriprise Financial, Inc. and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001-2005; former Chief Investment Officer and Managing Director, Zurich Scudder Investments
** Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments. - -------------------------------------------------------------------------------- 39 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ----------------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer Vice President - 105 Ameriprise Financial Center since 2002 Investment Accounting, Minneapolis, MN 55474 Ameriprise Financial, Age 50 Inc., since 2002; Vice President - Finance, American Express Company, 2000-2002; Vice President - Corporate Controller, Ameriprise Financial, Inc., 1996-2000 Paula R. Meyer President Senior Vice President - 596 Ameriprise Financial Center since 2002 Mutual Funds, Ameriprise Minneapolis, MN 55474 Financial, Inc., since Age 51 2002 and Senior Vice 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 901 S. Marquette Ave. General Counsel, Services Corporation Minneapolis, MN 55402 and Secretary Age 67 since 1978 Beth E. Weimer Chief Compliance Vice President and Chief 172 Ameriprise Financial Center Officer since 2004 Compliance Officer, Minneapolis, MN 55474 Ameriprise Financial, Age 52 Inc., since 2001 and Chief Compliance 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. - -------------------------------------------------------------------------------- 40 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT RiverSource Investments, LLC (RiverSource), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial, formerly American Express Financial Corporation), serves as the investment manager to the Fund. Under an investment management services agreement (the IMS Agreement), the investment manager provides investment advice and other services to the Fund. Throughout the year, the Fund's Board of Directors (the Board) and the Board's Investment Review and Contracts Committees monitor these services. Ameriprise Financial had served as investment manager to the Fund until Sept. 29, 2005. On that date, and pursuant to the consent of the Board, Ameriprise Financial transferred its rights, title, and interest and its burdens and obligations under the IMS Agreement to RiverSource, its wholly-owned subsidiary. Each year, the Board determines whether to continue the IMS Agreement by evaluating the quality and level of services received and the costs associated with those services. To assist the Board in making this determination, the investment manager prepares detailed reports for the Board and its Contracts Committee in March and April and provides data prepared by independent organizations. The Board gives considerable weight to the work, deliberations and conclusions of the Contracts and Investment Review Committees in determining whether to continue the IMS Agreement. BACKGROUND This past year, prior to the Board's annual review process, on Feb. 1, 2005, American Express Company, the former parent of Ameriprise Financial, announced its intention to pursue a spin-off of Ameriprise Financial by distributing shares of the common stock of Ameriprise Financial to shareholders of American Express Company. Following this announcement, the Board determined to proceed with its annual review process and, after thorough review of the reports and data provided, at a meeting held in person on April 14, 2005, the Board, including all of its independent members, determined that the quality and level of advisory services provided pursuant to the IMS Agreement were satisfactory and that fees were fair and reasonable. However, in light of the announced plans of the spin-off, the Board approved continuation of the IMS Agreement with Ameriprise Financial for only an interim period ending on the later of (i) the effective date of the spin-off; or (ii) the approval of a new IMS Agreement with Ameriprise Financial (or its subsidiary) by the shareholders of the Fund, but in no event for a period longer than one year. During the course of the six-month period following the April 2005 meeting, the Board evaluated whether to approve new investment management services agreements for each of the funds within the Ameriprise Financial fund complex (together, the Funds) with post-spin Ameriprise Financial (or RiverSource). Independent counsel, Schulte Roth & Zabel LLP (Schulte), assisted the Boards in fulfilling their statutory and other responsibilities associated with the spin-off and the resulting consideration of new contracts, including the new IMS Agreement. The Board and its committees were provided with a wealth of written and oral information in this regard. Furthermore, in connection with the Board's considerations as to whether post-spin Ameriprise Financial, as an entity independent from American Express Company, would be capable of continuing to provide a high quality of services to the Funds, - -------------------------------------------------------------------------------- 41 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT the Board's independent members retained their own financial adviser, Credit Suisse First Boston LLC (CSFB), to assist them in analyzing the capital adequacy of post-spin Ameriprise Financial. (The costs of independent counsel and CSFB and of additional meetings of the Boards were borne by Ameriprise Financial as part of the commitment of American Express Company to ensure a complete and thorough review of the proposed spin-off and its effect on the services provided by Ameriprise Financial and its subsidiaries.) At a meeting of the Board held on Sept. 8, 2005, the Board, including all of its independent members, approved, and recommended that shareholders approve, a proposed new IMS Agreement with RiverSource (the New IMS Agreement). A meeting of the Fund's shareholders is expected to be held on Feb. 15, 2006 to consider approval of the New IMS Agreement. If approved, the New IMS Agreement would take effect shortly after the shareholder meeting. The following section, "Board Considerations Related to the New IMS Agreement," provides a detailed discussion of the Board's considerations and determinations respecting the New IMS Agreement. BOARD CONSIDERATIONS RELATED TO THE NEW IMS AGREEMENT In carrying out its legal responsibilities associated with the consideration of the New IMS Agreement, the Board evaluated the following factors: NATURE, EXTENT AND QUALITY OF SERVICES TO BE PROVIDED BY POST-SPIN AMERIPRISE FINANCIAL (AND ITS SUBSIDIARIES) The Board recognized that only a few months had passed since its April 2005 conclusion that the nature, extent and quality of services provided by Ameriprise Financial were satisfactory and consistent with those that would be expected for a fund family of the size of the Funds and its determination to renew the IMS Agreement for the interim period. However, the Board also recognized the need to supplement this assessment with an evaluation of whether the spin-off or other factors would result in changes to the advisory services being provided under the current IMS Agreement. The Board focused its evaluation on the following factors potentially impacting the nature, extent and quality of advisory services to be provided by Ameriprise Financial: (i) Ameriprise Financial's projected capital structure and capital adequacy as a stand-alone entity; (ii) its legal and regulatory risks; (iii) its ability to retain and attract personnel; and (iv) its ability to successfully re-brand its products and services. Based on extensive presentations and reports by Ameriprise Financial, CSFB and Schulte, the Board concluded that the proposed capital structure (which includes certain indemnification commitments made by American Express Company) should enable RiverSource to continue to provide a high quality and level of advisory services to the Fund. In making this determination, the Board took into account representations by management of Ameriprise Financial that projected capital levels would allow Ameriprise Financial and RiverSource to meet legal and compliance responsibilities, build their distribution network, pursue technological upgrades, make capital commitments necessary to retain and attract key personnel devoted to legal and compliance responsibilities, portfolio management and distribution, and pursue smaller asset management acquisitions to help grow the asset management business. The Board accorded significant weight to CSFB's confirmation as to the reasonableness of the proposed capital structure. The Board also considered the fact that there were no expected departures of key personnel involved in the portfolio management, operations and marketing of the Funds as a result of the announcement of the spin-off. - -------------------------------------------------------------------------------- 42 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT The Board concluded that, based on all of the materials and information provided, post-spin Ameriprise Financial (including RiverSource) would be in a position to continue to provide a high quality and level of advisory services to the Fund. INVESTMENT PERFORMANCE The Board next focused on investment performance. The Board reviewed reports documenting the Fund's performance over one-, three- and/or five-year periods, as well as the entire period during which its current portfolio manager has managed the Fund, and compared to relevant Lipper and market indices. The Board took into account its determination in April 2005 that investment performance met expectations. The Board also considered that it had been receiving monthly performance reports for the Fund and that there had been no significant deviations from April's overall performance data. COST OF SERVICES PROVIDED The Board evaluated comparative fees and the costs of services under the current IMS Agreement and the New IMS Agreement, including fees charged by Ameriprise Financial (including RiverSource and other subsidiaries) to institutional clients. The Board studied RiverSource's effort (i.e., its "pricing philosophy") to set substantially all Funds' total expense ratios at or below the median expense ratio of comparable mutual funds (as compiled by Lipper). The Board observed that the proposed advisory fee changes are designed to work in tandem with proposed changes to administrative services fees. It also noted that RiverSource has agreed to voluntarily impose expense caps or waivers to achieve this pricing objective whenever the expense ratio exceeded the median expense ratio by more than three basis points (unless the higher ratio was due to the impact of the performance fee adjustment). The Board considered that advisory fees under the New IMS Agreement would stay the same. The Board also took into account the effect of the proposed performance incentive adjustment on the advisory fee. In this regard, the Board recalled its past determinations regarding the appropriateness of (i) the use of the relevant index for the performance comparison; (ii) the methodology for determining when the Board may change an index used to calculate the performance incentive adjustment; (iii) the periods used for averaging the Fund's assets and computing investment performance; and (iv) the length of the period over which performance is computed. The Board next considered the expected profitability to Ameriprise Financial and RiverSource derived from their relationship with the Fund, recalling the April 2005 determination that the profitability level was appropriate. The Board noted that projected profitability of Ameriprise Financial would allow it to operate effectively and, at the same time, reinvest in RiverSource and its other asset management businesses. The Board also considered that the proposed changes in advisory fees and the mergers of certain other Funds would result in revenue gains to Ameriprise Financial, but that these increases would not materially alter profit margins due to expected increases in costs associated with the spin-off, particularly re-branding and separation. CSFB also reported that Ameriprise Financial's projected level of return on equity was generally reasonable in light of the returns on equity of its industry competitors. In evaluating profitability, the Board also considered the benefits Ameriprise Financial obtains through the use of commission dollars paid on portfolio transactions for the Fund and from other business relationships that result from managing the Fund. The Board also considered the fees charged by Ameriprise Financial (and its subsidiaries) to institutional clients as well as the fees paid to, - -------------------------------------------------------------------------------- 43 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT and charged by, subadvisers, noting the differences in services provided in each case. In light of these considerations, the Board concluded that projected profitability levels were appropriate. ECONOMIES OF SCALE The Board also considered the "breakpoints" in fees that would be triggered as Fund net asset levels grew and the extent to which shareholders would benefit from such growth. The Board observed that the revised fee schedules under the proposed New IMS Agreement would continue to provide breakpoints similar to those in place pursuant to the current IMS Agreement. Accordingly, the Board concluded that the proposed New IMS Agreement provides adequate opportunity for shareholders to realize benefits as Fund assets grow. OTHER CONSIDERATIONS In addition, the Board accorded weight to the fact that, under the New IMS Agreement, RiverSource Investments is held to a higher standard of care than under the current IMS Agreement. The Board also noted Ameriprise Financial's commitment to a culture that adheres to ethical business practice, assigns accountability to senior management and seeks to identify conflicts and propose appropriate action to minimize the risks posed by the conflicts. Furthermore, the Board recognized that it was not limited to considering management's proposed New IMS Agreement. In this regard, the Board evaluated the circumstances under which it would consider the retention of an investment adviser different from RiverSource Investments. The Board concluded, based on its consultation with independent counsel, that pursuing the retention of a different adviser was not necessary, primarily because, in its best judgment, Ameriprise Financial continues to be basically the same organization (from a functional and managerial standpoint) as it was prior to the spin-off. The Board reasoned that shareholders purchased shares of the Fund with an expectation that the current investment advisory organization would be servicing the Fund. - -------------------------------------------------------------------------------- 44 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT PROXY VOTING The policy of the Board is to vote all proxies of the companies in which the Fund holds investments. The procedures are stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling (800) 862-7919; by looking at the website www.riversource.com/funds; 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 the Fund's administrator, Board Services Corporation, collect at (612) 330-9283; by looking at the website www.riversource.com/funds; or by searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- 45 -- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2005 ANNUAL REPORT [RIVERSOURCE(SM) INVESTMENTS LOGO] RIVERSOURCE INVESTMENTS 200 AMERIPRISE FINANCIAL CENTER MINNEAPOLIS, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. RiverSource Funds are managed by RiverSource Investments, LLC and distributed by Ameriprise Financial Services, Inc., Member NASD. Both companies are part of Ameriprise Financial, Inc. S-6395 K (12/05) 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 Oct. 31, to KPMG LLP for professional services rendered for the audits of the annual financial statements for AXP Global Series, Inc. were as follows: 2005 - $55,550; 2004 - $51,512 (b) Audit - Related Fees. The fees paid for the years ended Oct. 31, to KPMG LLP for additional professional services rendered in connection with the registrant's security count pursuant to Rule 17f-2 and a 2003 private equity security review for AXP Global Series, Inc. were as follows: 2005 - $400; 2004 - $354 (c) Tax Fees. The fees paid for the years ended Oct. 31, to KPMG LLP for tax compliance related services for AXP Global Series, Inc. were as follows: 2005 - $15,118; 2004 - $12,883 (d) All Other Fees. The fees paid for the years ended Oct. 31, to KPMG LLP for additional professional services rendered for AXP Global Series, Inc. were as follows: 2005 - $1,190; 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 Oct. 31, by the registrant for non-audit services to KPMG LLP were as follows: 2005 - $103,308; 2004 - $139,783 The fees paid for the years ended Oct. 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 for item (g) above during 2005 and 2004 were pre-approved by the audit committee. *2004 represents bills paid 11/1/03 - 10/31/04 2005 represents bills paid 11/1/04 - 10/31/05 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 GLOBAL SERIES, INC. By /s/ Paula R. Meyer ------------------ Paula R. Meyer President and Principal Executive Officer Date January 3, 2006 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ Paula R. Meyer ------------------ Paula R. Meyer President and Principal Executive Officer Date January 3, 2006 By /s/ Jeffrey P. Fox ------------------ Jeffrey P. Fox Treasurer and Principal Financial Officer Date January 3, 2006 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 Global 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: December 16, 2005 Name: /s/ Paula R. Meyer ------------------- 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 Global 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: December 16, 2005 Name: /s/ Jeffrey P. Fox ------------------- 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 Global 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: December 16, 2005 /s/ Paula R. Meyer ------------------ Paula R. Meyer President and Chief Executive Officer Date: December 16, 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-----