N-CSRS 1 c51453nvcsrs.txt FORM N-CSRS 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 RIVERSOURCE 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) Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474 (Name and address of agent for service) Registrant's telephone number, including area code: (612) 671-1947 Date of fiscal year end: 10/31 Date of reporting period: 4/30 Semiannual Report (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2009 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND SEEKS TO PROVIDE SHAREHOLDERS WITH POSITIVE ABSOLUTE RETURN. (ADVANCED ALPHA(R) STRATEGIES ICON) TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Fund Expenses Example.............. 7 Portfolio of Investments........... 9 Statement of Assets and Liabilities...................... 15 Statement of Operations............ 16 Statements of Changes in Net Assets........................... 17 Financial Highlights............... 19 Notes to Financial Statements...... 26 Approval of Investment Management Services Agreement............... 40 Proxy Voting....................... 43
-------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > RiverSource Absolute Return Currency and Income Fund Class A shares declined 1.27% (excluding sales charge) for the six month period ended April 30, 2009. > The Fund underperformed its benchmark, the Citigroup 3-Month U.S. Treasury Bill Index, which rose 0.19% during the same period. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2009) --------------------------------------------------------------------------------
Since inception 6 months* 1 year 6/15/06 ------------------------------------------------------------------ RiverSource Absolute Return Currency and Income Fund Class A (excluding sales charge) -1.27% +1.74% +3.54% ------------------------------------------------------------------ Citigroup 3-month U.S. Treasury Bill Index(1) (unmanaged) +0.19% +1.01% +3.30% ------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary or visiting riversource.com/funds. The 3.00% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The index does not reflect the effects of sales charges, expenses and taxes. It is not possible to invest directly in an index. (1) The Citigroup 3-month U.S. Treasury Bill Index, an unmanaged index, represents the performance of three-month Treasury bills. The index reflects reinvestment of all distributions and changes in market prices. -------------------------------------------------------------------------------- 2 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------
AT APRIL 30, 2009 SINCE Without sales charge 6 MONTHS* 1 YEAR INCEPTION Class A (inception 6/15/06) -1.27% +1.74% +3.54% -------------------------------------------------------------------- Class B (inception 6/15/06) -1.67% +0.88% +2.85% -------------------------------------------------------------------- Class C (inception 6/15/06) -1.67% +0.86% +2.85% -------------------------------------------------------------------- Class I (inception 6/15/06) -1.05% +2.14% +3.97% -------------------------------------------------------------------- Class R4 (inception 6/15/06) -1.16% +2.04% +3.81% -------------------------------------------------------------------- Class R5 (inception 10/18/07) -1.15% +1.91% -0.66% -------------------------------------------------------------------- Class W (inception 12/1/06) -1.37% +1.59% +2.85% -------------------------------------------------------------------- With sales charge Class A (inception 6/15/06) -4.24% -1.30% +1.79% -------------------------------------------------------------------- Class B (inception 6/15/06) -6.56% -4.12% +1.54% -------------------------------------------------------------------- Class C (inception 6/15/06) -2.65% -0.14% +2.85% --------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ----------------------------------------------
AT MARCH 31, 2009 SINCE Without sales charge 6 MONTHS* 1 YEAR INCEPTION Class A (inception 6/15/06) +0.83% +1.87% +3.61% -------------------------------------------------------------------- Class B (inception 6/15/06) +0.46% +1.06% +2.93% -------------------------------------------------------------------- Class C (inception 6/15/06) +0.45% +1.12% +2.94% -------------------------------------------------------------------- Class I (inception 6/15/06) +0.98% +2.19% +4.02% -------------------------------------------------------------------- Class R4 (inception 6/15/06) +0.80% +2.11% +3.84% -------------------------------------------------------------------- Class R5 (inception 10/18/07) +0.97% +2.16% -0.77% -------------------------------------------------------------------- Class W (inception 12/1/06) +0.72% +1.70% +2.90% -------------------------------------------------------------------- With sales charge Class A (inception 6/15/06) -2.18% -1.18% +1.81% -------------------------------------------------------------------- Class B (inception 6/15/06) -4.53% -3.94% +1.59% -------------------------------------------------------------------- Class C (inception 6/15/06) -0.55% +0.12% +2.94% --------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 3.00%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third** years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R4, Class R5 and Class W shares. Class I, Class R4 and Class R5 are available to institutional investors only. Class W shares are offered through qualifying discretionary accounts. *Not annualized. **For Class B shares purchased on or after June 13, 2009 the CDSC percentage for the third year will be 3%. -------------------------------------------------------------------------------- 4 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSE RATIO* (as of the current prospectus) --------------------------------------------------------------------------------
Total fund expenses ----------------------------------------- Class A 1.39% ----------------------------------------- Class B 2.16% ----------------------------------------- Class C 2.15% ----------------------------------------- Class I 1.03% ----------------------------------------- Class R4 1.34% ----------------------------------------- Class R5 1.07% ----------------------------------------- Class W 1.50% -----------------------------------------
* Fund expense ratios are calculated based on the fund's average net assets during the fund's most recently completed fiscal year, and have not been adjusted for current asset levels, including any decrease or increase in assets, which, if adjusted, would result in expense ratios that are higher or lower, respectively, than those that are expressed herein. Any fee waivers/expense caps would limit the impact that any decrease in assets will have on net expense ratios in the current fiscal year. The RiverSource Absolute Return Currency and Income Fund is designed for investors with an above average risk tolerance. Risks associated with the Fund include, but are not limited to, derivatives risk, counterparty risk, interest rate risk, credit risk, and tax risk. Derivative instruments are financial instruments that have a value dependent on the value of something else, such as one or more underlying securities. Gains or losses may be substantial, because a relatively small price movement in an underlying security may result in a substantial gain or loss for the Fund. A counterparty to a financial instrument entered into by the Fund may become bankrupt or otherwise fail to perform its obligations due to financial difficulties. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. The issuer of a security could default or otherwise become unable or unwilling to honor a financial obligation, and the Fund may be unable to recover its investment or may only obtain a limited or delayed recovery. Gains from some of the Fund's foreign currency-denominated positions may not meet Treasury Department regulations for "qualifying income," in which case, the Fund might not qualify as a regulated investment company for one or more years, requiring the Fund's Board of Directors to authorize a significant change in investment strategy or Fund liquidation. A significant portion of the Fund is invested in forward currency contracts, which are subject to a number of risks. Gains and losses may be substantial if prices do not move in the direction anticipated. See the Fund's prospectus for information on these and other risks associated with the Fund. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- SECTOR BREAKDOWN (at April 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Asset-Backed 2.0% ------------------------------------------------ Commercial Mortgage-Backed 0.5% ------------------------------------------------ Consumer Discretionary 1.0% ------------------------------------------------ Energy 0.5% ------------------------------------------------ FDIC-Insured Debt(1) 0.6% ------------------------------------------------ Financials 1.0% ------------------------------------------------ Foreign Government 0.3% ------------------------------------------------ Health Care 0.5% ------------------------------------------------ Industrials 1.0% ------------------------------------------------ Mortgage-Backed 0.2% ------------------------------------------------ Telecommunication 0.5% ------------------------------------------------ Other(2) 91.9% ------------------------------------------------
(1) Debt guaranteed under the FDIC's Temporary Liquidity Guarantee Program (TLGP). (2) Cash & Cash Equivalents. QUALITY BREAKDOWN (at April 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
AAA bonds 3.5% ------------------------------------------------ AA bonds 0.8% ------------------------------------------------ A bonds 2.2% ------------------------------------------------ BBB bonds 1.5% ------------------------------------------------ Non-investment grade bonds 0.1% ------------------------------------------------ A1/P1/F1 short-term securities 91.9% ------------------------------------------------
Bond ratings apply to the underlying holdings of the Fund and not the Fund itself. Whenever possible, the Standard and Poor's rating is used to determine the credit quality of a security. Standard and Poor's rates the creditworthiness of corporate bonds, with 15 categories, ranging from AAA (highest) to D (lowest). Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. If Standard and Poor's doesn't rate a security, then Moody's rating is used. RiverSource Investments, LLC, the Fund's investment manager, rates a security using an internal rating system when Moody's doesn't provide a rating. Ratings for 0.2% of the bond portfolio assets were determined through internal analysis. For short-term securities, A1/P1/F1 represent the rating designation with the highest quality within the Standard and Poor's, Moody's, and Fitch short-term credit rating scales, respectively. -------------------------------------------------------------------------------- 6 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and 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. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended April 30, 2009. 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. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2008 APRIL 30, 2009 THE PERIOD(A) EXPENSE RATIO ------------------------------------------------------------------------------------------- Class A ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 987.30 $ 6.75 1.37% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.00 $ 6.85 1.37% ------------------------------------------------------------------------------------------- Class B ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 983.30 $10.47 2.13% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.23 $10.64 2.13% ------------------------------------------------------------------------------------------- Class C ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 983.30 $10.43 2.12% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.28 $10.59 2.12% ------------------------------------------------------------------------------------------- Class I ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 989.50 $ 4.98 1.01% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.79 $ 5.06 1.01% ------------------------------------------------------------------------------------------- Class R4 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 988.40 $ 6.51 1.32% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.25 $ 6.61 1.32% ------------------------------------------------------------------------------------------- Class R5 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 988.50 $ 5.23 1.06% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.54 $ 5.31 1.06% ------------------------------------------------------------------------------------------- Class W ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 986.30 $ 7.14 1.45% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.60 $ 7.25 1.45% -------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2009: -1.27% for Class A, -1.67% for Class B, -1.67% for Class C, -1.05% for Class I, -1.16% for Class R4, -1.15% for Class R5 and -1.37% for Class W. -------------------------------------------------------------------------------- 8 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
BONDS (8.1%) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) SUPRANATIONAL (0.3%) Inter-American Development Bank 03-16-11 1.52% $2,000,000(c,g) $1,998,812 ------------------------------------------------------------------------------------- ASSET-BACKED (2.2%) Capital Auto Receivables Asset Trust Series 2006-SN1A Cl A4B 03-20-10 0.56 696,605(d,g) 691,711 Capital Auto Receivables Asset Trust Series 2007-SN2 Cl A2 01-15-10 1.34 136,538(d,g) 136,200 Citibank Credit Card Issuance Trust Series 2007-A1 Cl A1 03-22-12 1.22 1,000,000(g) 981,927 Countrywide Home Equity Loan Trust Series 2005-H Cl 2A (FGIC) 12-15-35 0.69 171,013(e,g) 68,403 Ford Credit Floorplan Master Owner Trust Series 2006-3 Cl A 06-15-11 0.63 900,000(g) 859,149 Keycorp Student Loan Trust Series 2003-A Cl 2A2 (MBIA) 10-25-25 1.40 416,962(e,g) 403,867 Northstar Education Finance Series 2007-1 Cl A2 01-29-46 1.09 750,000(g) 733,107 SLC Student Loan Trust Series 2006-A Cl A4 01-15-19 1.25 1,800,000(g) 1,713,938 SLM Student Loan Trust Series 2004-3 Cl A3 04-25-16 1.18 138,327(g) 138,158 SLM Student Loan Trust Series 2005-5 Cl A1 01-25-18 1.09 5,696(g) 5,687 SLM Student Loan Trust Series 2005-5 Cl A2 10-25-21 1.17 1,000,000(g) 970,000 SLM Student Loan Trust Series 2005-8 Cl A2 07-25-22 1.18 1,415,618(g) 1,390,060 SLM Student Loan Trust Series 2005-B Cl A1 12-16-19 1.36 300,953(g) 283,272 SLM Student Loan Trust Series 2006-2 Cl A2 01-25-17 1.09 13,439(g) 13,422 SLM Student Loan Trust Series 2006-5 Cl A2 07-25-17 1.08 294,033(g) 292,517 SLM Student Loan Trust Series 2006-A Cl A1 03-16-20 1.34 774,298(g) 741,149 SLM Student Loan Trust Series 2006-A Cl A2 12-15-20 1.40 2,000,000(g) 1,807,500 SLM Student Loan Trust Series 2006-C Cl A2 09-15-20 1.37 1,000,000(g) 932,969 SLM Student Loan Trust Series 2007-2 Cl A2 07-25-17 1.09 1,000,000(g) 935,781 --------------- Total 13,098,817 ------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE-BACKED (0.5%)(f) GS Mtge Securities II Series 2007-EOP Cl A2 03-06-20 0.62 1,200,000(d,g) 867,776 GS Mtge Securities II Series 2007-EOP Cl A3 03-06-20 0.67 1,770,000(d,g) 1,241,086 Morgan Stanley Dean Witter Capital I Series 2002-TOP7 Cl A1 01-15-39 5.38 971,305 969,554 --------------- Total 3,078,416 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) MORTGAGE-BACKED (0.2%)(f) Deutsche Bank Alternate Mtge Loan Trust Collateralized Mtge Obligation Series 2006-AR6 Cl A3 02-25-37 0.53% $216,212(g) $202,992 Downey Savings & Loan Assn Mtge Loan Trust Collateralized Mtge Obligation Series 2006-AR2 Cl 2AB1 11-19-37 0.54 361,206(j) 304,836 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2006-12 Cl 2A11 01-19-38 0.54 385,786(j) 350,152 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2006-8 Cl 2A1B 08-21-36 0.70 897,065(j) 172,165 --------------- Total 1,030,145 ------------------------------------------------------------------------------------- AUTOMOTIVE (0.4%) American Honda Finance Sr Unsecured 02-05-10 1.63 2,500,000(d,g) 2,462,958 ------------------------------------------------------------------------------------- BANKING (1.0%) ANZ Natl Intl Bank Guaranteed 08-07-09 1.28 750,000(c,d,g) 749,655 Bank of New York Mellon Sr Unsecured 02-05-10 1.63 3,000,000(g) 2,990,416 Citigroup Sr Unsecured 06-09-09 1.42 640,000(g) 637,226 US Bancorp Sr Unsecured 02-04-10 1.63 1,250,000(g) 1,243,290 --------------- Total 5,620,587 ------------------------------------------------------------------------------------- BROKERAGE (--%) Lehman Brothers Holdings Sr Unsecured 10-22-09 0.00 640,000(b,g,i) 89,600 ------------------------------------------------------------------------------------- CONSTRUCTION MACHINERY (1.1%) Caterpillar Financial Services Sr Unsecured 02-08-10 1.69 2,000,000(g) 1,972,144 John Deere Capital Sr Unsecured 01-18-11 1.81 4,500,000(g) 4,376,511 --------------- Total 6,348,655 ------------------------------------------------------------------------------------- HEALTH CARE (0.4%) Cardinal Health Sr Unsecured 10-02-09 1.46 2,080,000(g) 2,048,486 ------------------------------------------------------------------------------------- HEALTH CARE INSURANCE (0.3%) UnitedHealth Group Sr Unsecured 06-21-10 1.41 1,500,000(g) 1,470,227 ------------------------------------------------------------------------------------- INDEPENDENT ENERGY (0.5%) Anadarko Petroleum Sr Unsecured 09-15-09 1.72 3,000,000(g) 2,995,458 ------------------------------------------------------------------------------------- LIFE INSURANCE (0.1%) Pricoa Global Funding I 12-15-09 1.37 400,000(d,g) 376,796 ------------------------------------------------------------------------------------- MEDIA CABLE (0.5%) Comcast 07-14-09 1.44 2,920,000(g) 2,917,676 ------------------------------------------------------------------------------------- RETAILERS (0.1%) Home Depot Sr Unsecured 12-16-09 1.45 750,000(g) 742,624 ------------------------------------------------------------------------------------- WIRELINES (0.5%) Telefonica Emisiones 06-19-09 1.59 3,190,000(c,g) 3,183,474 ------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $50,501,071) $47,462,731 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 10 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
FDIC-INSURED DEBT (0.7%) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) U.S. AGENCIES Bank of America FDIC Govt Guaranty 06-22-12 1.43% $2,000,000(g) $2,001,400 General Electric Capital FDIC Govt Guaranty 03-11-11 1.41 2,000,000(g) 1,995,946 ------------------------------------------------------------------------------------- TOTAL FDIC-INSURED DEBT (Cost: $4,000,000) $3,997,346 -------------------------------------------------------------------------------------
MONEY MARKET FUND (100.1%) ISSUER SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.28% 586,000,971(h) $586,000,971 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $586,000,971) $586,000,971 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $640,502,042)(k) $637,461,048 =====================================================================================
INVESTMENTS IN DERIVATIVES FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT APRIL 30, 2009
CURRENCY TO BE CURRENCY TO BE UNREALIZED UNREALIZED EXCHANGE DATE DELIVERED RECEIVED APPRECIATION DEPRECIATION --------------------------------------------------------------------------------------------- May 28, 2009 69,691,000 56,478,435 $-- $(1,948,868) Canadian Dollar U.S. Dollar --------------------------------------------------------------------------------------------- May 28, 2009 65,180,000 85,548,098 -- (705,639) European Monetary Unit U.S. Dollar --------------------------------------------------------------------------------------------- May 28, 2009 163,349,000 139,454,812 -- (3,704,842) Swiss Franc U.S. Dollar --------------------------------------------------------------------------------------------- May 28, 2009 139,981,778 13,758,249,000 -- (407,052) U.S. Dollar Japanese Yen --------------------------------------------------------------------------------------------- May 28, 2009 58,070,668 102,061,000 (454,578) U.S. Dollar New Zealand Dollar --------------------------------------------------------------------------------------------- May 28, 2009 84,242,338 572,836,000 2,963,696 -- U.S. Dollar Norwegian Krone --------------------------------------------------------------------------------------------- Total $2,963,696 $(7,220,979) ---------------------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 1 to the financial statements. (b) Non-income producing. For long-term debt securities, item identified is in default as to payment of interest and/or principal. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. At April 30, 2009, the value of foreign securities represented 1.0% of net assets. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security may be determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2009, the value of these securities amounted to $6,526,182 or 1.1% of net assets. (e) The following abbreviations are used in the portfolio security descriptions to identify the insurer of the issue: FGIC -- Financial Guaranty Insurance Company MBIA -- MBIA Insurance Corporation
(f) Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and collateralized mortgage obligations. These securities may be issued or guaranteed by U.S. government agencies or instrumentalities, or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. Unless otherwise noted, the coupon rates presented are fixed rates. (g) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on April 30, 2009. (h) Affiliated Money Market Fund -- See Note 5 to the financial statements. The rate shown is the seven-day current annualized yield at April 30, 2009. (i) This position is in bankruptcy. (j) Adjustable rate mortgage; interest rate varies to reflect current market conditions; rate shown is the effective rate on April 30, 2009. (k) At April 30, 2009, the cost of securities for federal income tax purposes was approximately $640,502,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $6,000 Unrealized depreciation (3,047,000) ----------------------------------------------------------- Net unrealized depreciation $(3,041,000) -----------------------------------------------------------
-------------------------------------------------------------------------------- 12 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to implement more uniform reporting relating to the fair valuation of securities for financial statement purposes. Mutual funds are required to implement the requirements of this standard for fiscal years beginning after Nov. 15, 2007. While uniformity of presentation is the objective of the standard, it is likely that there may be a range of practices utilized and it may be some period of time before industry practices become more uniform. For this reason care should be exercised in interpreting this information and/or using it for comparison with other mutual funds. Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.) - Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) Observable inputs are those based on market data obtained from sources independent of the Fund, and unobservable inputs reflect the Fund's own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. The following table is a summary of the inputs used to value the Fund's investments as of April 30, 2009:
FAIR VALUE AT APRIL 30, 2009 --------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL ---------------------------------------------------------------------------------- Investments in securities $586,000,971 $51,109,925 $350,152 $637,461,048 Other financial instruments* -- (4,257,283) -- (4,257,283) ---------------------------------------------------------------------------------- Total $586,000,971 $46,852,642 $350,152 $633,203,765 ----------------------------------------------------------------------------------
* Other financial instruments are derivative instruments, such as forwards, which are valued at the unrealized appreciation (depreciation) on the instrument. The following table is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.
INVESTMENTS IN SECURITIES --------------------------------------------------------------- Balance as of Oct. 31, 2008 $2,389,080 Accrued discounts/premiums 445 Realized gain (loss) (512,642) Change in unrealized appreciation (depreciation) 400,901 Net purchases (sales) (1,927,632) Transfers in and/or out of Level 3 -- --------------------------------------------------------------- Balance as of April 30, 2009 $350,152 ---------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY 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 filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- 14 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- APRIL 30, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers (identified cost $54,501,071) $ 51,460,077 Affiliated money market fund (identified cost $586,000,971) 586,000,971 -------------------------------------------------------------------------------------- Total investments in securities (identified cost $640,502,042) 637,461,048 Capital shares receivable 922,518 Dividends and accrued interest receivable 233,526 Receivable for investment securities sold 3,773,597 Unrealized appreciation on forward foreign currency contracts 2,963,696 -------------------------------------------------------------------------------------- Total assets 645,354,385 -------------------------------------------------------------------------------------- LIABILITIES Capital shares payable 46,245,924 Payable for investment securities purchased 6,494,204 Unrealized depreciation on forward foreign currency contracts 7,220,979 Accrued investment management services fees 14,340 Accrued distribution fees 3,097 Accrued transfer agency fees 1,809 Accrued administrative services fees 1,277 Other accrued expenses 84,066 -------------------------------------------------------------------------------------- Total liabilities 60,065,696 -------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $585,288,689 -------------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 597,692 Additional paid-in capital 597,672,176 Excess of distributions over net investment income (2,135,629) Accumulated net realized gain (loss) (3,547,273) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (7,298,277) -------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $585,288,689 --------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $182,180,287 18,615,651 $9.79(1) Class B $ 4,077,258 418,436 $9.74 Class C $ 10,687,738 1,098,206 $9.73 Class I $179,674,190 18,305,561 $9.82 Class R4 $ 27,399 2,796 $9.80 Class R5 $ 9,242 942 $9.81 Class W $208,632,575 21,327,604 $9.78 -----------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $10.09. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 3.00%. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 15 STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED APRIL 30, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Interest 807,397 Income distributions from affiliated money market fund 1,510,368 ------------------------------------------------------------------------- Total income 2,317,765 ------------------------------------------------------------------------- Expenses: Investment management services fees 2,995,048 Distribution fees Class A 235,016 Class B 20,374 Class C 51,678 Class W 349,635 Transfer agency fees Class A 105,777 Class B 2,431 Class C 5,964 Class R4 6 Class R5 2 Class W 279,708 Administrative services fees 264,778 Plan administration services fees -- Class R4 32 Compensation of board members 11,457 Custodian fees 17,360 Printing and postage 33,890 Registration fees 29,831 Professional fees 23,419 Other 9,117 ------------------------------------------------------------------------- Total expenses 4,435,523 Expenses waived/reimbursed by the Investment Manager and its affiliates (13) Earnings and bank fee credits on cash balances (343) ------------------------------------------------------------------------- Total net expenses 4,435,167 ------------------------------------------------------------------------- Investment income (loss) -- net (2,117,402) ------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (930,780) Foreign currency transactions (6,872,712) ------------------------------------------------------------------------- Net realized gain (loss) on investments (7,803,492) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,390,287 ------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (6,413,205) ------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(8,530,607) -------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 16 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2009 OCT. 31, 2008 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ (2,117,402) $ 7,642,623 Net realized gain (loss) on investments (7,803,492) 8,195,721 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,390,287 (8,644,591) --------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (8,530,607) 7,193,753 --------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (3,686) (1,692,140) Class B -- (6,719) Class C -- (44,738) Class I (38,612) (4,161,402) Class R4 (1) (1,188) Class R5 (2) (203) Class W -- (1,798,725) Net realized gain Class A (1,035,644) (1,516,443) Class B (22,568) (355) Class C (55,949) (52,812) Class I (1,077,400) (4,183,105) Class R4 (115) (1,945) Class R5 (51) (334) Class W (1,582,466) (175) --------------------------------------------------------------------------------------------- Total distributions (3,816,494) (13,460,284) ---------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 17 STATEMENTS OF CHANGES IN NET ASSETS (continued) -------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2009 OCT. 31, 2008 (UNAUDITED) CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 64,910,433 $ 218,918,102 Class B shares 1,802,004 4,089,168 Class C shares 3,259,464 10,433,303 Class I shares 14,403,416 296,949,913 Class R4 shares 10,000 48,000 Class W shares 28,748,253 339,484,475 Reinvestment of distributions at net asset value Class A shares 1,016,629 3,137,018 Class B shares 22,416 6,562 Class C shares 48,467 87,221 Class I shares 1,115,956 8,343,932 Class R4 shares 61 2,560 Class W shares 1,582,439 1,650,890 Payments for redemptions Class A shares (55,956,952) (53,765,268) Class B shares (927,598) (877,774) Class C shares (1,856,322) (1,255,226) Class I shares (34,604,140) (219,491,271) Class R4 shares (3,500) (64,521) Class W shares (120,396,302) (38,075,600) --------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (96,825,276) 569,621,484 --------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (109,172,377) 563,354,953 Net assets at beginning of period 694,461,066 131,106,113 --------------------------------------------------------------------------------------------- Net assets at end of period $ 585,288,689 $ 694,461,066 --------------------------------------------------------------------------------------------- Undistributed (excess of distributions over) net investment income $ (2,135,629) $ 24,074 ---------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 18 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(m) 2008 2007 2006(b) Net asset value, beginning of period $9.97 $10.58 $10.09 $9.98 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.03)(c) .15(c) .41(c) .12 Net gains (losses) (both realized and unrealized) (.10) (.22) .57 .11 -------------------------------------------------------------------------------------------------------------- Total from investment operations (.13) (.07) .98 .23 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.00)(d) (.18) (.39) (.12) Distributions from realized gains (.05) (.36) (.10) -- -------------------------------------------------------------------------------------------------------------- Total distributions (.05) (.54) (.49) (.12) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.79 $9.97 $10.58 $10.09 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $182 $176 $9 $10 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e),(f) 1.37%(g) 1.39% 1.36% 1.59%(g) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f),(h),(i) 1.37%(g) 1.39% 1.36% 1.37%(g) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.69%)(g) 1.50% 3.98% 3.89%(g) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 10% 39% 36% 12% -------------------------------------------------------------------------------------------------------------- Total return(j) (1.27%)(k) (.57%) 9.96%(l) 2.37%(k) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 15, 2006 (when shares became publicly available) to Oct. 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Rounds to zero. (e) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (f) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (g) Adjusted to an annual basis. (h) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (i) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended April 30, 2009 and for the year ended Oct. 31, 2008. (j) Total return does not reflect payment of a sales charge. (k) Not annualized. (l) During the year ended Oct. 31, 2007, Ameriprise Financial reimbursed the Fund for a loss on a trading error. Had the Fund not received this reimbursement, the total return would have been lower by 0.05%. (m) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 19 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(l) 2008 2007 2006(b) Net asset value, beginning of period $9.96 $10.58 $10.09 $9.97 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.07)(c) .04(c) .34(c) .09 Net gains (losses) (both realized and unrealized) (.10) (.18) .59 .12 -------------------------------------------------------------------------------------------------------------- Total from investment operations (.17) (.14) .93 .21 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.12) (.34) (.09) Distributions from realized gains (.05) (.36) (.10) -- -------------------------------------------------------------------------------------------------------------- Total distributions (.05) (.48) (.44) (.09) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.74 $9.96 $10.58 $10.09 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $4 $3 $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 2.13%(f) 2.16% 2.10% 2.38%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 2.13%(f) 2.16% 2.10% 2.16%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) (1.47%)(f) .38% 3.26% 3.11%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 10% 39% 36% 12% -------------------------------------------------------------------------------------------------------------- Total return(i) (1.67%)(j) (1.35%) 9.38%(k) 2.16%(j) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 15, 2006 (when shares became publicly available) to Oct. 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended April 30, 2009 and for the year ended Oct. 31, 2008. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) During the year ended Oct. 31, 2007, Ameriprise Financial reimbursed the Fund for a loss on a trading error. Had the Fund not received this reimbursement, the total return would have been lower by 0.05%. (l) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 20 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(l) 2008 2007 2006(b) Net asset value, beginning of period $9.95 $10.57 $10.09 $9.97 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.07)(c) .06(c) .34(c) .09 Net gains (losses) (both realized and unrealized) (.10) (.20) .58 .12 -------------------------------------------------------------------------------------------------------------- Total from investment operations (.17) (.14) .92 .21 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.12) (.34) (.09) Distributions from realized gains (.05) (.36) (.10) -- -------------------------------------------------------------------------------------------------------------- Total distributions (.05) (.48) (.44) (.09) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.73 $9.95 $10.57 $10.09 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $11 $9 $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 2.12%(f) 2.15% 2.12% 2.38%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 2.12%(f) 2.15% 2.12% 2.16%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) (1.45%)(f) .66% 3.42% 3.11%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 10% 39% 36% 12% -------------------------------------------------------------------------------------------------------------- Total return(i) (1.67%)(j) (1.31%) 9.37%(k) 2.16%(j) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 15, 2006 (when shares became publicly available) to Oct. 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended April 30, 2009 and for the year ended Oct. 31, 2008. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) During the year ended Oct. 31, 2007, Ameriprise Financial reimbursed the Fund for a loss on a trading error. Had the Fund not received this reimbursement, the total return would have been lower by 0.05%. (l) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 21 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(k) 2008 2007 2006(b) Net asset value, beginning of period $9.98 $10.59 $10.10 $9.98 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.02)(c) .21(c) .44(c) .13 Net gains (losses) (both realized and unrealized) (.08) (.24) .59 .12 -------------------------------------------------------------------------------------------------------------- Total from investment operations (.10) (.03) 1.03 .25 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.01) (.22) (.44) (.13) Distributions from realized gains (.05) (.36) (.10) -- -------------------------------------------------------------------------------------------------------------- Total distributions (.06) (.58) (.54) (.13) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.82 $9.98 $10.59 $10.10 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $180 $202 $122 $68 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.01%(f) 1.03% 1.07% 1.34%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.01%(f) 1.03% 1.07% 1.12%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.32%)(f) 2.10% 4.30% 4.37%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 10% 39% 36% 12% -------------------------------------------------------------------------------------------------------------- Total return (1.05%)(i) (.25%) 10.49%(j) 2.56%(i) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 15, 2006 (when shares became publicly available) to Oct. 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended April 30, 2009 and for the year ended Oct. 31, 2008. (i) Not annualized. (j) During the year ended Oct. 31, 2007, Ameriprise Financial reimbursed the Fund for a loss on a trading error. Had the Fund not received this reimbursement, the total return would have been lower by 0.05%. (k) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 22 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(l) 2008 2007 2006(b) Net asset value, beginning of period $9.97 $10.58 $10.09 $9.98 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.03)(c) .22(c) .42(c) .13 Net gains (losses) (both realized and unrealized) (.09) (.26) .59 .11 -------------------------------------------------------------------------------------------------------------- Total from investment operations (.12) (.04) 1.01 .24 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.00)(d) (.21) (.42) (.13) Distributions from realized gains (.05) (.36) (.10) -- -------------------------------------------------------------------------------------------------------------- Total distributions (.05) (.57) (.52) (.13) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.80 $9.97 $10.58 $10.09 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e),(f) 1.32%(g) 1.34% 1.36% 1.45%(g) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f),(h),(i) 1.21%(g) 1.09% 1.31% 1.23%(g) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.55%)(g) 2.27% 4.13% 4.04%(g) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 10% 39% 36% 12% -------------------------------------------------------------------------------------------------------------- Total return (1.16%)(j) (.26%) 10.27%(k) 2.42%(j) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 15, 2006 (when shares became publicly available) to Oct. 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Rounds to zero. (e) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (f) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (g) Adjusted to an annual basis. (h) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (i) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended April 30, 2009 and for the year ended Oct. 31, 2008. (j) Not annualized. (k) During the year ended Oct. 31, 2007, Ameriprise Financial reimbursed the Fund for a loss on a trading error. Had the Fund not received this reimbursement, the total return would have been lower by 0.05%. (l) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 23 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(h) 2008 2007(b) Net asset value, beginning of period $9.98 $10.59 $10.58 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) (.02) .22 .02 Net gains (losses) (both realized and unrealized) (.09) (.26) .03 -------------------------------------------------------------------------------------------------------------- Total from investment operations (.11) (.04) .05 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.01) (.21) (.04) Distributions from realized gains (.05) (.36) -- -------------------------------------------------------------------------------------------------------------- Total distributions (.06) (.57) (.04) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.81 $9.98 $10.59 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- -------------------------------------------------------------------------------------------------------------- Total expenses(d),(e) 1.06%(f) 1.07% 1.06%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.39%)(f) 2.23% 4.43%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 10% 39% 36% -------------------------------------------------------------------------------------------------------------- Total return (1.15%)(g) (.30%) .44%(g) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Oct. 18, 2007 (inception date) to Oct. 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended April 30, 2009 and for the year ended Oct. 31, 2008. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Not annualized. (h) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 24 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS W
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(i) 2008 2007(b) Net asset value, beginning of period $9.97 $10.58 $10.13 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) (.04) .11 .36 Net gains (losses) (both realized and unrealized) (.10) (.19) .55 -------------------------------------------------------------------------------------------------------------- Total from investment operations (.14) (.08) .91 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.17) (.36) Distributions from realized gains (.05) (.36) (.10) -------------------------------------------------------------------------------------------------------------- Total distributions (.05) (.53) (.46) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.78 $9.97 $10.58 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $209 $304 $-- -------------------------------------------------------------------------------------------------------------- Total expenses(d),(e) 1.45%(f) 1.50% 1.54%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.76%)(f) 1.09% 3.88%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 10% 39% 36% -------------------------------------------------------------------------------------------------------------- Total return (1.37%)(g) (.66%) 9.21%(g),(h) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 1, 2006 (inception date) to Oct. 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended April 30, 2009 and for the year ended Oct. 31, 2008. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Not annualized. (h) During the period ended Oct. 31, 2007, Ameriprise Financial reimbursed the Fund for a loss on a trading error. Had the Fund not received this reimbursement, the total return would have been lower by 0.05%. (i) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS TO APRIL 30, 2009) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RiverSource Absolute Return Currency and Income Fund (the Fund) is a series of RiverSource Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a non-diversified, open-end management investment company. RiverSource Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund invests primarily in short-term debt obligations and forward foreign currency contracts. The Fund offers Class A, Class B, Class C, Class I, Class R4, Class R5 and Class W 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 B shares are currently closed to investors for new purchases. - Class I, Class R4 and Class R5 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. - Class W shares are sold without a front-end sales charge or CDSC and are offered through qualifying discretionary accounts. At April 30, 2009, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) and the RiverSource affiliated funds-of-funds owned 100% of Class I shares, and the Investment Manager owned 100% of Class R5 shares. At April 30, 2009, the Investment Manager and the RiverSource affiliated funds-of- funds owned approximately 31% of the total outstanding Fund shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) 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. -------------------------------------------------------------------------------- 26 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- VALUATION OF SECURITIES Effective Nov. 1, 2008, the Fund adopted Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. There was no impact to the Fund's net assets or results of operations upon adoption. The fair valuation measurements disclosure can be found following the Notes to Portfolio of Investments. 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. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange (NYSE) and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the Investment Manager, as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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, which approximates fair value. SECURITIES PURCHASED ON A FORWARD-COMMITMENT BASIS Delivery and payment for securities that have been purchased by the Fund 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 Fund's net assets the same as owned securities. The Fund designates cash or liquid securities at least equal to the amount of its forward- commitments. At April 30, 2009, the Fund had no outstanding forward-commitments. 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. Cash collateral may be collected by the Fund to secure certain over-the-counter options (OTC options) trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. 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. Option contracts, including OTC option contracts, with no readily available market value are valued using quotations obtained from independent brokers as of the close of the NYSE. The Fund will realize a gain or loss when the option transaction expires or is exercised. 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 -------------------------------------------------------------------------------- 28 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- paid. At April 30, 2009, and for the six months then ended, the Fund had no outstanding option contracts. 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. Futures and options on futures are valued daily based upon the last sale price at the close of the market on the principal exchange on which they are traded. 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. At April 30, 2009, the Fund had no outstanding futures contracts. FOREIGN CURRENCY TRANSLATIONS AND FORWARD 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. The Fund will enter into forward foreign currency exchange contracts to produce incremental earnings. 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 counterparty will not complete its contract obligations. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of recognition of unrealized appreciation (depreciation) for certain derivative investments. 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. RECENT ACCOUNTING PRONOUNCEMENTS The Fund has adopted FASB Staff Position No. 133-1 and FIN No. 45-4 (FSP FAS 133-1 and FIN 45-4), "Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45." The amendments to FSP FAS 133-1 and FIN 45-4 require enhanced disclosures about a fund's derivatives and guarantees. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows and (d) the current status of the payment/performance risk of the credit derivative. The amendments to FSP FAS 133-1 and FIN 45-4 also require additional disclosures about the current status of the payment/performance risk of a guarantee. At April 30, 2009, the Fund did not -------------------------------------------------------------------------------- 30 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- own nor was it a party to any credit derivative contracts within the scope of these amendments. In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of April 30, 2009, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items On April 9, 2009, the FASB issued Staff Position No. 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly" (FSP 157-4). FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also requires additional disaggregation of the current SFAS 157 required disclosures. FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Management is currently evaluating the impact that the adoption of FSP 157-4 will have on the amounts and disclosures within the Fund's financial statements. DIVIDENDS TO SHAREHOLDERS Dividends from net investment income, declared daily and payable monthly, 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. 2. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- is a percentage of the Fund's average daily net assets that declines from 0.89% to 0.70% annually as the Fund's assets increase. The management fee for the six months ended April 30, 2009 was 0.89% of the Fund's average daily net assets. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. The fee for the six months ended April 30, 2009 was 0.08% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended April 30, 2009, other expenses paid to this company were $2,910. COMPENSATION OF BOARD MEMBERS 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. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $20.50 for Class A, $21.50 for Class B and $21.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R4 and Class R5 shares and an annual asset-based fee at a rate of 0.20% of the Fund's average daily net assets attributable to Class W shares. The Transfer Agent charges an annual 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 in the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Fund's average daily net assets -------------------------------------------------------------------------------- 32 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- attributable to Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. DISTRIBUTION FEES The Fund has agreements with RiverSource Distributors, Inc. and RiverSource Fund Distributors, Inc. (collectively, 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 of up to 0.25% of the Fund's average daily net assets attributable to Class A and Class W shares and a fee at an annual rate of up to 1.00% of the Fund's average daily net assets attributable to Class B and Class C shares. For Class B and Class C shares, up to 0.75% of the fee is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed expense") was approximately $187,000 and $54,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of April 30, 2009, and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGES Sales charges received by the Distributor for distributing Fund shares were $84,548 for Class A, $720 for Class B and $5,916 for Class C for the six months ended April 30, 2009. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended April 30, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), were as follows: Class R4............................................ 1.21%
The waived/reimbursed fees and expenses for the plan administration services fees at the class level were as follows: Class R4............................................ $13
The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Oct. 31, 2009, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- acquired funds*), will not exceed the following percentage of the class average daily net assets: Class R4............................................ 1.35%
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. EARNINGS AND BANK FEE CREDITS During the six months ended April 30, 2009, the Fund's custodian and transfer agency fees were reduced by $343 as a result of earnings and bank fee credits from overnight cash balances. Effective Dec. 15, 2008, the Fund pays custodian fees to JPMorgan Chase Bank, N.A. For the period from Nov. 1, 2008 to Dec. 15, 2008, the Fund paid custodian fees amounting to $1,555 to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $6,000,000 and $24,367,161, respectively, for the six months ended April 30, 2009. Realized gains and losses are determined on an identified cost basis. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED APRIL 30, 2009 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) ---------------------------------------------------------------------------------- Class A 6,567,827 103,312 (5,681,085) 990,054 Class B 182,564 2,280 (94,574) 90,270 Class C 331,072 4,936 (189,068) 146,940 Class I 1,457,906 113,149 (3,518,345) (1,947,290) Class R4 1,018 6 (356) 668 Class W 2,914,708 160,817 (12,241,848) (9,166,323) ----------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 34 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) ---------------------------------------------------------------------------------- Class A 21,957,179 315,740 (5,483,597) 16,789,322 Class B 416,595 671 (90,100) 327,166 Class C 1,050,240 8,774 (128,574) 930,440 Class I 30,071,137 837,081 (22,170,858) 8,737,360 Class R4 4,723 256 (6,584) (1,605) Class W 34,206,023 168,788 (3,881,378) 30,493,433 ----------------------------------------------------------------------------------
5. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term Cash Fund aggregated $126,353,528 and $122,864,037, respectively, for the six months ended April 30, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short- Term Cash Fund at April 30, 2009, can be found in the Portfolio of Investments. 6. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $475 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $175 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $650 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum, in addition to an upfront fee equal to its pro rata share of 0.02% of the -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 35 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- amount of the credit facility. The Fund had no borrowings during the six months ended April 30, 2009. 7. INVESTMENTS IN STRUCTURED INVESTMENT VEHICLES In 2007 and 2008 structured investment vehicles ("SIVs") generally experienced a significant decrease in liquidity as a result of the reduction in demand for asset-backed commercial paper as well as the lack of liquidity and overall volatility in the markets for the collateral underlying these investment structures. During the six months ended April 30, 2009, the Fund closed its only remaining SIV position which was in WhistleJacket Capital LLC (WJC). As of April 30, 2009, the Fund had no SIV positions remaining. WJC breached a financial covenant on Feb. 11, 2008 relating to the market value of its underlying collateral, resulting in the occurrence of an "enforcement event." This resulted in the appointment of receivers on Feb. 12, 2008. On Feb. 15, 2008, the receivers declared WJC to be insolvent. The Fund's holding in WJC went into default as of its Feb. 25, 2008 maturity date ($3 million). The Fund received a partial payment of $0.7 million from WJC on Oct. 27, 2008, reducing the remaining outstanding principal amount for WJC to $2.3 million. On April 29, 2009, the Fund chose the cash payout option in the restructuring of WJC and received cash proceeds totaling $1.8 million, resulting in a realized loss of $0.5 million on the position which is reflected in the Statement of Operations. 8. RISKS RELATING TO CERTAIN INVESTMENTS DIVERSIFICATION RISK The Fund is non-diversified. A non-diversified fund may invest more of its assets in fewer companies than if it were a diversified fund. The Fund may be more exposed to the risks of loss and volatility than a fund that invests more broadly. FOREIGN CURRENCY RISK The Fund's exposure to foreign currencies subjects the Fund to constantly changing exchange rates and the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of short positions, that the U.S. dollar will decline in value relative to the currency being sold forward. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates and economic or political developments in the U.S. or abroad. GEOGRAPHIC CONCENTRATION RISK The Fund may be particularly susceptible to economic, political or regulatory events affecting companies and countries within the specific geographic region in -------------------------------------------------------------------------------- 36 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- which the Fund focuses its investments. Currency devaluations could occur in countries that have not yet experienced currency devaluation to date, or could continue to occur in countries that have already experienced such devaluations. As a result, the Fund may be more volatile than a more geographically diversified fund. COUNTERPARTY RISK The risk that a counterparty to a financial instrument entered into by the Fund or held by special purpose or structured vehicle becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties. The Fund may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. The Fund may obtain only limited recovery or may obtain no recovery in such circumstances. The Fund will typically enter into financial instrument transactions with counterparties whose credit rating is investment grade, or, if unrated, determined to be of comparable quality by the Investment Manager. 9. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co., Inc. (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (which is now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman is and has been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman will pay $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New -------------------------------------------------------------------------------- 38 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 39 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- RiverSource Investments, LLC ("RiverSource Investments" or the "investment manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), RiverSource Investments provides investment advice and other services to the Fund and all funds in the RiverSource Family of Funds (collectively, the "Funds"). On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. RiverSource Investments prepared detailed reports for the Board and its Contracts Committee in March and April 2009, including reports based on data provided by independent organizations to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource Investments addressing the services RiverSource Investments provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts, Investment Review and Compliance Committees in determining whether to continue the IMS Agreement. At the April 7-8, 2009 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by RiverSource Investments: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource Investments, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource Investments, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, most notably, the large investment made in the acquisition of J. & W. Seligman & Co. Incorporated, including its portfolio management operations, personnel and infrastructure (including the addition of two new offices in New York City and Palo Alto). Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource Investments, the Board considered the quality of the administrative and transfer agency services provided by RiverSource Investments' affiliates to the Fund. The Board also reviewed the financial condition of RiverSource Investments (and its affiliates) and each entity's ability to carry out its responsibilities under the IMS Agreement. Further, the Board considered RiverSource Investments' ability to -------------------------------------------------------------------------------- 40 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- retain key personnel and its expectations in this regard. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by RiverSource Investments). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality, particularly in light of recent market conditions. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that RiverSource Investments and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods, recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2007 to December 2008. The Board observed that the Fund's investment performance was appropriate in light of the particular management style and the exceptionally challenging market conditions involved. Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource Investments and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board observed that there has not yet developed an adequate comparable peer group against which to compare the Fund's expense ratio. The Board took into account that the management services and administrative fee schedules were in line with those applicable to other global fixed income funds in the Fund's family The Board members considered data showing the Fund's contribution to RiverSource Investments' profitability. They also reviewed information in the report comparing the fees charged to the Fund by RiverSource Investments to fees charged to other client accounts (with similar investment strategies to those of the Fund). The Board also considered the expected profitability of RiverSource Investments and its affiliates in connection with RiverSource Investments providing -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 41 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource Investments and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource Investments as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 8, 2009, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement for an additional annual period. -------------------------------------------------------------------------------- 42 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 SEMIANNUAL REPORT 43 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Distributors, Inc., and RiverSource Fund Distributors, Inc., Members FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C)2009 RiverSource Investments, LLC. S-6512 D (6/09)
Semiannual Report (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE EMERGING MARKETS BOND FUND SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2009 RIVERSOURCE EMERGING MARKETS BOND FUND SEEKS TO PROVIDE SHAREHOLDERS WITH HIGH TOTAL RETURN THROUGH CURRENT INCOME AND, SECONDARILY, THROUGH CAPITAL APPRECIATION. (SINGLE STRATEGY FUNDS ICON) TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Fund Expenses Example.............. 8 Portfolio of Investments........... 10 Statement of Assets and Liabilities...................... 17 Statement of Operations............ 19 Statements of Changes in Net Assets........................... 20 Financial Highlights............... 22 Notes to Financial Statements...... 28 Approval of Investment Management Services Agreement............... 45 Proxy Voting....................... 48
-------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > RiverSource Emerging Markets Bond Fund (the Fund) Class A shares increased 25.01% (excluding sales charge) for the six month ended April 30, 2009. > The Fund outperformed its benchmark, the J.P. Morgan Emerging Markets Bond Index-Global (J.P. Morgan EMBI-Global), which rose 20.31%. > The Fund also outperformed the Lipper Emerging Markets Debt Funds Index, representing the Fund's peer group, which gained 13.90%, during the same period. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2009) --------------------------------------------------------------------------------
Since inception 6 months* 1 year 3 years 2/16/06 ---------------------------------------------------------------------- RiverSource Emerging Markets Bond Fund Class A (excluding sales charge) +25.01% -10.26% +1.44% +1.09% ---------------------------------------------------------------------- J.P. Morgan EMBI-Global(1) (unmanaged) +20.31% -4.52% +3.78% +3.24% ---------------------------------------------------------------------- Lipper Emerging Markets Debt Funds Index(2) +13.90% -13.54% +0.06% +0.01% ----------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary or visiting riversource.com/funds. The 4.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. -------------------------------------------------------------------------------- 2 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. (1) The J.P. Morgan Emerging Markets Bond Index-Global (J.P. Morgan EMBI- Global), an unmanaged index, is based on U.S. dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities, such as Brady bonds, Eurobonds and loans. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Emerging Markets Debt Funds Index includes the 10 largest emerging markets debt funds tracked by Lipper Inc. The index's returns include reinvested dividends. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------
AT APRIL 30, 2009 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS INCEPTION Class A (inception 2/16/06) +25.01% -10.26% +1.44% +1.09% ------------------------------------------------------------------------ Class B (inception 2/16/06) +24.44% -10.95% +0.64% +0.33% ------------------------------------------------------------------------ Class C (inception 2/16/06) +24.47% -10.96% +0.65% +0.32% ------------------------------------------------------------------------ Class I (inception 2/16/06) +25.26% -9.84% +1.86% +1.49% ------------------------------------------------------------------------ Class R4 (inception 2/16/06) +25.18% -9.98% +1.74% +1.37% ------------------------------------------------------------------------ Class W (inception 12/1/06) +24.88% -10.26% N/A -1.19% ------------------------------------------------------------------------ With sales charge Class A (inception 2/16/06) +19.10% -14.50% -0.19% -0.45% ------------------------------------------------------------------------ Class B (inception 2/16/06) +19.44% -15.18% -0.51% -0.47% ------------------------------------------------------------------------ Class C (inception 2/16/06) +23.47% -11.81% +0.65% +0.32% ------------------------------------------------------------------------
AT MARCH 31, 2009 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS INCEPTION Class A (inception 2/16/06) -8.43% -15.53% -1.01% -1.24% ------------------------------------------------------------------------ Class B (inception 2/16/06) -8.88% -16.20% -1.79% -1.99% ------------------------------------------------------------------------ Class C (inception 2/16/06) -8.78% -16.20% -1.78% -2.00% ------------------------------------------------------------------------ Class I (inception 2/16/06) -8.30% -15.14% -0.60% -0.85% ------------------------------------------------------------------------ Class R4 (inception 2/16/06) -8.27% -15.22% -0.72% -0.96% ------------------------------------------------------------------------ Class W (inception 12/1/06) -8.52% -15.53% N/A -4.31% ------------------------------------------------------------------------ With sales charge Class A (inception 2/16/06) -12.81% -19.55% -2.60% -2.78% ------------------------------------------------------------------------ Class B (inception 2/16/06) -13.32% -20.16% -2.92% -2.80% ------------------------------------------------------------------------ Class C (inception 2/16/06) -9.67% -16.99% -1.78% -2.00% ------------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 4.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third** years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R4 and Class W shares. Class I and Class R4 are available to institutional investors only. Class W shares are offered through qualifying discretionary accounts. * Not annualized. ** For Class B shares purchased on or after June 13, 2009 the CDSC percentage for the third year will be 3%. -------------------------------------------------------------------------------- 4 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
DURATION SHORT INT. LONG HIGH MEDIUM QUALITY X LOW
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. PORTFOLIO STATISTICS -------------------------------------------------------------------------------- Weighted average life(1) 12.1 years -------------------------------------- Effective duration(2) 6.4 years -------------------------------------- Weighted average bond rating(3) BBB- --------------------------------------
ANNUAL OPERATING EXPENSE RATIO* (as of the current prospectus) --------------------------------------------------------------------------------
Total fund Net fund expenses expenses(a) ----------------------------------------- Class A 1.41% 1.27% ----------------------------------------- Class B 2.19% 2.04% ----------------------------------------- Class C 2.18% 2.03% ----------------------------------------- Class I 0.91% 0.85% ----------------------------------------- Class R4 1.22% 1.15% ----------------------------------------- Class W 1.35% 1.30% -----------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Oct. 31, 2009, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), will not exceed 1.27% for Class A, 2.04% for Class B, 2.03% for Class C, 0.85% for Class I, 1.15% for Class R4, and 1.30% for Class W. (1) 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. (2) 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. (3) WEIGHTED AVERAGE BOND RATING represents the average credit quality of the underlying bonds in the portfolio. * Fund expense ratios are calculated based on the fund's average net assets during the fund's most recently completed fiscal year, and have not been adjusted for current asset levels, including any decrease or increase in assets, which, if adjusted, would result in expense ratios that are higher or lower, respectively, than those that are expressed herein. Any fee waivers/expense caps would limit the impact that any decrease in assets will have on net expense ratios in the current fiscal year. There are risks associated with an investment in a bond funds, including credit risk, interest rate risk, and prepayment and extension risk. See the Fund's prospectus for information on these and other risks associated with the Fund. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. Non-investment grade -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- securities, commonly called "high-yield" or "junk" bonds, generally have more volatile prices and carry more risk to principal and income than investment grade securities. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. COUNTRY DIVERSIFICATION(1) (at April 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Argentina 1.0% ------------------------------------------------ Brazil 13.6% ------------------------------------------------ Cayman Islands 1.4% ------------------------------------------------ Colombia 5.3% ------------------------------------------------ Dominican Republic 1.3% ------------------------------------------------ El Salvador 2.3% ------------------------------------------------ Gabon 0.5% ------------------------------------------------ Indonesia 8.8% ------------------------------------------------ Iraq 1.0% ------------------------------------------------ Kazakhstan 1.8% ------------------------------------------------ Luxembourg 4.9% ------------------------------------------------ Mexico 11.0% ------------------------------------------------ Netherlands 1.7% ------------------------------------------------ Panama 0.4% ------------------------------------------------ Peru 2.2% ------------------------------------------------ Philippine Islands 3.5% ------------------------------------------------ Qatar 1.1% ------------------------------------------------ Russia 7.3% ------------------------------------------------ South Korea 2.5% ------------------------------------------------ Turkey 9.9% ------------------------------------------------ Ukraine 0.4% ------------------------------------------------ United Kingdom 1.3% ------------------------------------------------ Uruguay 2.7% ------------------------------------------------ Venezuela 8.0% ------------------------------------------------ Other(2) 6.1% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral for Securities on Loan) as of April 30, 2009. The Fund's composition is subject to change. (2) Cash & Cash Equivalents. -------------------------------------------------------------------------------- 6 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- QUALITY BREAKDOWN (at April 30, 2009; % of portfolio assets excluding cash equivalents and equities) ---------------------------------------------------------------------
AA bonds 1.2% ------------------------------------------------ A bonds 5.4% ------------------------------------------------ BBB bonds 39.6% ------------------------------------------------ BB bonds 43.6% ------------------------------------------------ B bonds 4.2% ------------------------------------------------ Non-investment grade bonds 1.6% ------------------------------------------------ Non-rated bonds 4.4% ------------------------------------------------
Bond ratings apply to the underlying holdings of the Fund and not the Fund itself. Whenever possible, the Standard and Poor's rating is used to determine the credit quality of a security. Standard and Poor's rates the creditworthiness of corporate bonds, with 15 categories, ranging from AAA (highest) to D (lowest). Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. If Standard and Poor's doesn't rate a security, then Moody's rating is used. RiverSource Investments, LLC, the Fund's investment manager, rates a security using an internal rating system when Moody's doesn't provide a rating. Ratings for 0.5% of the bond portfolio assets were determined through internal analysis. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 7 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, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and 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. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended April 30, 2009. 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. -------------------------------------------------------------------------------- 8 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING Annualized NOV. 1, 2008 APRIL 30, 2009 THE PERIOD(a) expense ratio ------------------------------------------------------------------------------------------- Class A ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,250.10 $ 7.09 1.27% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.50 $ 6.36 1.27% ------------------------------------------------------------------------------------------- Class B ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,244.40 $11.35 2.04% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.68 $10.19 2.04% ------------------------------------------------------------------------------------------- Class C ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,244.70 $11.30 2.03% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.73 $10.14 2.03% ------------------------------------------------------------------------------------------- Class I ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,252.60 $ 4.75 .85% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,020.58 $ 4.26 .85% ------------------------------------------------------------------------------------------- Class R4 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,251.80 $ 6.42 1.15% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.09 $ 5.76 1.15% ------------------------------------------------------------------------------------------- Class W ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,248.80 $ 7.25 1.30% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.35 $ 6.51 1.30% -------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2009: +25.01% for Class A, +24.44% for Class B, +24.47% for Class C, +25.26% for Class I, +25.18% for Class R4 and +24.88% for Class W. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
BONDS (91.8%)(c) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) ARGENTINA (0.9%) Banco Hipotecario Sr Unsecured 04-27-16 9.75% $975,000(d) $336,375 Industrias Metalurgicas Pescarmona Sr Unsecured 10-22-14 11.25 1,100,000(d) 363,000 Republic of Argentina 09-12-13 7.00 1,000,000 377,500 Republic of Argentina Sr Unsecured 12-15-35 0.00 12,950,000(g) 379,435 --------------- Total 1,456,310 ------------------------------------------------------------------------------------- BRAZIL (13.3%) Banco Nacional de Desenvolvimento Economico e Social Sr Unsecured 06-16-18 6.37 5,200,000(d) 5,005,000 Bertin Ltda Sr Unsecured 10-05-16 10.25 580,000(d) 290,000 Federative Republic of Brazil 01-20-34 8.25 600,000 682,500 Federative Republic of Brazil Sr Unsecured 01-17-17 6.00 4,800,000 4,869,600 10-14-19 8.88 3,538,000 4,210,220 Marfrig Overseas 11-16-16 9.63 1,130,000(d) 802,300 Morgan Stanley (Brazilian Real) Sr Unsecured 05-03-17 10.09 4,850,000(d) 1,441,407 Nota do Tesouro Nacional (Brazilian Real) Series F 07-01-10 10.00 139,600 658,498 01-01-12 10.00 320,000 1,465,510 Telemar Norte Leste Sr Unsecured 04-23-19 9.50 900,000(d) 921,375 --------------- Total 20,346,410 ------------------------------------------------------------------------------------- CAYMAN ISLANDS (1.4%) Peru Enhanced Pass-Thru Sr Secured Zero Coupon 05-31-18 5.28 3,472,181(d,j) 2,083,308 ------------------------------------------------------------------------------------- COLOMBIA (5.1%) Republic of Colombia 01-27-17 7.38 650,000 695,500 09-18-37 7.38 4,450,000 4,461,125 Republic of Colombia (Colombian Peso) 10-22-15 12.00 2,168,000,000 1,144,001 Republic of Colombia Sr Nts 03-18-19 7.38 1,000,000 1,051,100 Santa Fe de Bogota (Colombian Peso) Sr Unsecured 07-26-28 9.75 1,377,000,000(d) 534,979 --------------- Total 7,886,705 ------------------------------------------------------------------------------------- DOMINICAN REPUBLIC (1.3%) Aes Dominicana Energia Finance 12-13-15 11.00 1,050,000(d) 698,250 Cerveceria Nacional Dominicana 03-27-12 16.00 1,450,000(d) 1,066,185 EGE Haina Finance 04-26-17 9.50 450,000(d) 231,750 --------------- Total 1,996,185 ------------------------------------------------------------------------------------- EL SALVADOR (2.2%) Republic of El Salvador 04-10-32 8.25 1,850,000(d) 1,581,750 06-15-35 7.65 2,310,000(d) 1,848,000 --------------- Total 3,429,750 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 10 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) GABON (0.5%) Republic of Gabonese 12-12-17 8.20% $1,000,000(d) $800,000 ------------------------------------------------------------------------------------- INDONESIA (8.6%) Govt of Indonesia (Indonesian Rupiah) 10-15-14 11.00 6,000,000,000 559,617 07-15-17 10.00 10,000,000,000 847,690 09-15-19 11.50 9,000,000,000 814,771 07-15-22 10.25 25,200,000,000 2,051,728 Perusahaan Penerbit SBSN 04-23-14 8.80 1,900,000(d) 1,935,806 Republic of Indonesia Sr Unsecured 03-04-19 11.63 1,250,000(d,f) 1,487,500 10-12-35 8.50 2,450,000(d) 2,241,750 02-17-37 6.63 1,450,000(d) 1,102,000 01-17-38 7.75 2,500,000(d) 2,175,000 --------------- Total 13,215,862 ------------------------------------------------------------------------------------- IRAQ (1.0%) Republic of Iraq 01-15-28 5.80 2,900,000(d) 1,566,000 ------------------------------------------------------------------------------------- KAZAKHSTAN (1.8%) Kazkommerts Intl 11-03-15 8.00 450,000(d) 236,250 KazMunaiGaz Finance 07-02-18 9.13 2,645,000(d) 2,231,789 Temir Capital for JSC TemirBank Bank Guaranteed 05-21-14 9.50 850,000(d) 307,547 --------------- Total 2,775,586 ------------------------------------------------------------------------------------- LUXEMBOURG (4.8%) Gaz Capital Secured 11-22-16 6.21 4,350,000(d,f) 3,327,750 08-16-37 7.29 2,950,000(d) 2,006,000 MHP Sr Secured 11-30-11 10.25 850,000(d) 453,688 TNK-BP Finance 03-20-17 6.63 800,000(d) 527,000 03-13-18 7.88 1,525,000(d) 1,067,500 --------------- Total 7,381,938 ------------------------------------------------------------------------------------- MEXICO (10.8%) Controladora Comerical Mexicana (Mexican Peso) 03-30-27 8.70 31,700,000(b,d) 687,479 Mexican Fixed Rate Bonds (Mexican Peso) 12-20-12 9.00 6,100,000 479,370 12-18-14 9.50 24,500,000 1,971,408 Pemex Project Funding Master Trust 03-01-18 5.75 7,500,000(f) 6,787,499 06-15-35 6.63 4,804,000 3,884,558 06-15-38 6.63 1,500,000 1,192,500 Petroleos Mexicanos 05-03-19 8.00 700,000(d) 744,648 Vitro 02-01-17 9.13 2,120,000(b,f) 704,900 --------------- Total 16,452,362 ------------------------------------------------------------------------------------- NETHERLANDS (1.7%) Intergas Finance 05-14-17 6.38 300,000(d) 197,600 Majapahit Holding 10-17-16 7.75 1,600,000(d) 1,368,000 06-28-17 7.25 1,150,000(d) 908,500 06-29-37 7.88 200,000(d) 132,000 --------------- Total 2,606,100 ------------------------------------------------------------------------------------- PANAMA (0.4%) Republic of Panama Sr Unsecured 01-26-36 6.70 600,000 579,000 ------------------------------------------------------------------------------------- PERU (2.1%) Republic of Peru Sr Unsecured 03-30-19 7.13 400,000 431,000 03-14-37 6.55 2,900,000 2,805,170 --------------- Total 3,236,170 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) PHILIPPINE ISLANDS (3.4%) Natl Power 11-02-16 6.88% $900,000(d) $857,026 Republic of Philippines 10-21-24 9.50 621,000 723,465 Republic of Philippines Sr Unsecured 06-17-19 8.38 3,350,000(f) 3,705,938 --------------- Total 5,286,429 ------------------------------------------------------------------------------------- QATAR (1.1%) State of Qatar Sr Nts 04-09-19 6.55 1,600,000(d) 1,651,652 ------------------------------------------------------------------------------------- RUSSIA (7.2%) Gazstream 07-22-13 5.63 493,887(d) 464,254 Russian Federation 03-31-30 7.50 6,106,560(d) 5,923,363 Russian Standard Finance Sr Secured 05-05-11 8.63 850,000(d) 510,000 TransCapitalInvest for Transneft Secured 08-07-18 8.70 4,700,000(d) 4,124,020 --------------- Total 11,021,637 ------------------------------------------------------------------------------------- SOUTH KOREA (2.4%) Export-Import Bank of Korea Sr Nts 01-21-14 8.13 1,100,000 1,160,690 Korea Development Bank Sr Nts 01-23-14 8.00 1,450,000 1,522,866 POSCO 03-26-14 8.75 1,000,000(d) 1,063,822 --------------- Total 3,747,378 ------------------------------------------------------------------------------------- TURKEY (9.8%) Republic of Turkey 03-15-15 7.25 1,500,000 1,530,000 04-03-18 6.75 2,150,000 2,069,375 03-11-19 7.00 2,700,000 2,602,125 06-05-20 7.00 2,600,000 2,470,000 03-17-36 6.88 5,750,000 4,945,001 03-05-38 7.25 600,000 534,000 Republic of Turkey Sr Unsecured 11-07-19 7.50 700,000(e) 694,995 --------------- Total 14,845,496 ------------------------------------------------------------------------------------- UKRAINE (0.4%) Credit Suisse First Boston Intl for Ex-Im Bank of Ukraine Secured 02-09-16 8.40 300,000 126,000 Govt of Ukraine 06-26-12 6.39 850,000(d) 471,750 --------------- Total 597,750 ------------------------------------------------------------------------------------- UNITED KINGDOM (1.2%) UK SPV Credit Finance for JSC Commercial Bank Privatbank Secured 02-06-12 8.00 700,000(d) 252,000 Vedanta Resources Sr Unsecured 07-18-18 9.50 2,300,000(d) 1,644,500 --------------- Total 1,896,500 ------------------------------------------------------------------------------------- URUGUAY (2.6%) Republic of Uruguay 05-17-17 9.25 400,000(f) 433,000 Republic of Uruguay Pay-in-kind 01-15-33 7.88 500(i) 440 Republica Orient Uruguay (Uruguay Peso) 04-05-27 4.25 79,307,067(h) 2,035,097 06-26-37 3.70 16,186,786(h) 356,031 Republica Orient Uruguay Sr Unsecured 03-21-36 7.63 1,383,939 1,183,268 --------------- Total 4,007,836 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 12 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) VENEZUELA (7.8%) Petroleos de Venezuela 04-12-17 5.25% $8,250,000 $3,741,375 Republic of Venezuela 02-26-16 5.75 4,999,500 2,849,715 05-07-23 9.00 5,950,000 3,451,000 03-31-38 7.00 1,800,000 868,500 Republic of Venezuela Sr Unsecured 10-08-14 8.50 1,594,000 1,109,424 --------------- Total 12,020,014 ------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $165,484,625) $140,886,378 -------------------------------------------------------------------------------------
MONEY MARKET FUND (5.9%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.28% 9,091,287(k) $9,091,287 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $9,091,287) $9,091,287 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (2.9%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 4,492,235 $4,492,235 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $4,492,235) $4,492,235 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $179,068,147)(l) $154,469,900 =====================================================================================
INVESTMENTS IN DERIVATIVES CREDIT DEFAULT SWAP CONTRACTS OUTSTANDING AT APRIL 30, 2009
UNAMORTIZED PREMIUM REFERENCED BUY/SELL PAY/RECEIVE EXPIRATION NOTIONAL (PAID) UNREALIZED COUNTERPARTY ENTITY PROTECTION FIXED RATE DATE AMOUNT RECEIVED DEPRECIATION ---------------------------------------------------------------------------------------------------------------------- JPMorgan Chase Bank CDX Emerging Buy 2.65% June 20, 2013 $2,000,000 $(344,620) $(155,939) Markets Index ---------------------------------------------------------------------------------------------------------------------- Merril Lynch Intl CDX Emerging Sell 2.65 June 20, 2013 2,000,000 -- (177,957) Markets Index ---------------------------------------------------------------------------------------------------------------------- Total $(333,896) ----------------------------------------------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies 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. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security may be determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2009, the value of these securities amounted to $59,669,873 or 38.9% of net assets. (e) At April 30, 2009, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $694,995. See Note 1 to the financial statements. (f) At April 30, 2009, security was partially or fully on loan. See Note 5 to the financial statements. (g) This is a variable rate security that entitles holders to receive only interest payments. Interest is paid annually. The interest payment is based on the Gross Domestic Product (GDP) level of the previous year for the respective country. To the extent that the previous year's GDP exceeds the 'base case GDP', an interest payment is made equal to 0.012225 of the difference. (h) Inflation-indexed bonds are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. (i) Pay-in-kind securities are securities in which the issuer makes interest or dividend payments in cash or in additional securities. The securities usually have the same terms as the original holdings. (j) For zero coupons, the interest rate disclosed represents the annualized effective yield on the date of acquisition. (k) Affiliated Money Market Fund -- See Note 6 to the financial statements. The rate shown is the seven-day current annualized yield at April 30, 2009. (l) At April 30, 2009, the cost of securities for federal income tax purposes was approximately $179,068,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $3,209,000 Unrealized depreciation (27,807,000) ----------------------------------------------------------- Net unrealized depreciation $(24,598,000) -----------------------------------------------------------
-------------------------------------------------------------------------------- 14 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to implement more uniform reporting relating to the fair valuation of securities for financial statement purposes. Mutual funds are required to implement the requirements of this standard for fiscal years beginning after Nov. 15, 2007. While uniformity of presentation is the objective of the standard, it is likely that there may be a range of practices utilized and it may be some period of time before industry practices become more uniform. For this reason care should be exercised in interpreting this information and/or using it for comparison with other mutual funds. Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.) - Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) Observable inputs are those based on market data obtained from sources independent of the Fund, and unobservable inputs reflect the Fund's own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. The following table is a summary of the inputs used to value the Fund's investments as of April 30, 2009:
FAIR VALUE AT APRIL 30, 2009 ---------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL ---------------------------------------------------------------------------------- Investments in securities $13,583,522 $136,057,904 $4,828,474 $154,469,900 Other financial instruments* -- (333,896) -- (333,896) ---------------------------------------------------------------------------------- Total $13,583,522 $135,724,008 $4,828,474 $154,136,004 ----------------------------------------------------------------------------------
* Other financial instruments are derivative instruments, such as swap contracts, which are valued at the unrealized appreciation (depreciation) on the instrument. The following table is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.
INVESTMENTS IN OTHER FINANCIAL SECURITIES INSTRUMENTS ------------------------------------------------------------------------ Balance as of Oct. 31, 2008 $4,355,051 $257,106 Accrued discounts/premiums 44,041 -- Realized gain (loss) (43,983) * Change in unrealized appreciation (depreciation) 858,055 (257,106) Net purchases (sales) (384,690) -- Transfers in and/or out of Level 3 -- -- ------------------------------------------------------------------------ Balance as of April 30, 2009 $4,828,474 $-- ------------------------------------------------------------------------
* The realized gain (loss) earned during the period from Nov. 1, 2008 to April 30, 2009 for Other financial instruments was $1,196,000. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY 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 filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- 16 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- APRIL 30, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $165,484,625) $140,886,378 Affiliated money market fund (identified cost $9,091,287) 9,091,287 Investments of cash collateral received for securities on loan (identified cost $4,492,235) 4,492,235 ------------------------------------------------------------------------------- Total investments in securities (identified cost $179,068,147) 154,469,900 Foreign currency holdings (identified cost $52,962) 55,007 Capital shares receivable 305,983 Premiums paid on outstanding credit default swap contracts 344,620 Dividends and accrued interest receivable 2,694,749 Receivable for investment securities sold 1,314,851 Cash deposits and collateral held at broker 700,000 ------------------------------------------------------------------------------- Total assets 159,885,110 ------------------------------------------------------------------------------- LIABILITIES Disbursements in excess of cash 329,937 Capital shares payable 478,593 Payable for investment securities purchased 787,744 Payable upon return of securities loaned 4,492,235 Unrealized depreciation on swap contracts 333,896 Accrued investment management services fees 3,016 Accrued distribution fees 689 Accrued transfer agency fees 556 Accrued administrative services fees 335 Other accrued expenses 58,614 ------------------------------------------------------------------------------- Total liabilities 6,485,615 ------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $153,399,495 ------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 179,959 Additional paid-in capital 193,494,566 Undistributed net investment income 2,302,915 Accumulated net realized gain (loss) (17,662,531) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (24,915,414) ------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $153,399,495 ------------------------------------------------------------------------------- *Including securities on loan, at value $ 4,414,485 -------------------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 17 STATEMENT OF ASSETS AND LIABILITIES (continued) -------------------------------- APRIL 30, 2009 (UNAUDITED)
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $ 8,752,290 1,026,023 $8.53(1) Class B $ 1,508,708 177,059 $8.52 Class C $ 222,515 26,148 $8.51 Class I $57,462,477 6,737,120 $8.53 Class R4 $ 18,739 2,198 $8.53 Class W $85,434,766 10,027,387 $8.52 ----------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $8.96. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 4.75%. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 18 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED APRIL 30, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Interest $ 6,910,880 Income distributions from affiliated money market fund 52,831 Fee income from securities lending 3,024 ------------------------------------------------------------------------------- Total income 6,966,735 ------------------------------------------------------------------------------- Expenses: Investment management services fees 604,866 Distribution fees Class A 10,502 Class B 6,100 Class C 1,008 Class W 122,289 Transfer agency fees Class A 13,013 Class B 2,061 Class C 329 Class R4 4 Class W 97,831 Administrative services fees 67,207 Plan administration services fees -- Class R4 21 Compensation of board members 2,874 Custodian fees 16,370 Printing and postage 8,430 Registration fees 26,312 Professional fees 14,398 Other 3,751 ------------------------------------------------------------------------------- Total expenses 997,366 Expenses waived/reimbursed by the Investment Manager and its affiliates (36,285) ------------------------------------------------------------------------------- Total net expenses 961,081 ------------------------------------------------------------------------------- Investment income (loss) -- net 6,005,654 ------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (13,817,226) Foreign currency transactions (92,976) Swap transactions (928,126) ------------------------------------------------------------------------------- Net realized gain (loss) on investments (14,838,328) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 45,369,007 ------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 30,530,679 ------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 36,536,333 -------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 19 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2009 OCT. 31, 2008 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 6,005,654 $ 10,826,078 Net realized gain (loss) on investments (14,838,328) (1,897,585) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 45,369,007 (75,049,499) -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 36,536,333 (66,121,006) -------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (247,224) (513,077) Class B (35,872) (77,784) Class C (5,916) (12,305) Class I (2,141,973) (6,894,152) Class R4 (563) (1,280) Class W (3,299,504) (2,557,686) Net realized gain Class A -- (47,559) Class B -- (11,052) Class C -- (1,687) Class I -- (1,321,379) Class R4 -- (167) Class W -- (304,713) -------------------------------------------------------------------------------------------------- Total distributions (5,731,052) (11,742,841) --------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 20 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2009 OCT. 31, 2008 (UNAUDITED) CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 6,597,885 $ 11,877,937 Class B shares 286,040 1,305,864 Class C shares 12,383 219,661 Class I shares 3,818,996 30,579,666 Class R4 shares 303 7,982 Class W shares 7,650,181 146,655,956 Reinvestment of distributions at net asset value Class A shares 233,141 534,907 Class B shares 33,542 77,569 Class C shares 5,362 11,620 Class I shares 2,141,705 8,214,784 Class R4 shares 302 692 Class W shares 3,299,381 2,862,056 Payments for redemptions Class A shares (9,265,717) (3,149,341) Class B shares (224,301) (774,759) Class C shares (25,430) (117,014) Class I shares (25,135,785) (89,988,110) Class R4 shares (26) (2,694) Class W shares (47,556,876) (40,766,868) -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (58,128,914) 67,549,908 -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (27,323,633) (10,313,939) Net assets at beginning of period 180,723,128 191,037,067 -------------------------------------------------------------------------------------------------- Net assets at end of period $153,399,495 $180,723,128 -------------------------------------------------------------------------------------------------- Undistributed net investment income $ 2,302,915 $ 2,028,313 --------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 21 FINANCIAL HIGHLIGHTS ----------------------------------------------------------- CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(k) 2008 2007 2006(b) Net asset value, beginning of period $7.05 $10.57 $10.16 $9.98 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .27(c) .61(c) .59(c) .33 Net gains (losses) (both realized and unrealized) 1.46 (3.43) .39 .18 -------------------------------------------------------------------------------------------------------------- Total from investment operations 1.73 (2.82) .98 .51 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.25) (.61) (.55) (.33) Distributions from realized gains -- (.09) (.02) -- -------------------------------------------------------------------------------------------------------------- Total distributions (.25) (.70) (.57) (.33) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.53 $7.05 $10.57 $10.16 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $9 $10 $5 $12 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.44%(f) 1.41% 1.33% 1.81%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.27%(f) 1.40% 1.33% 1.39%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 7.13%(f) 6.31% 5.61% 5.20%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 17% 82% 41% 32% -------------------------------------------------------------------------------------------------------------- Total return(i) 25.01%(j) (28.44%) 9.94% 5.25%(j) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 16, 2006 (when shares became publicly available) to Oct. 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 22 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(k) 2008 2007 2006(b) Net asset value, beginning of period $7.05 $10.55 $10.16 $9.97 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .24(c) .55(c) .52(c) .28 Net gains (losses) (both realized and unrealized) 1.45 (3.42) .37 .19 -------------------------------------------------------------------------------------------------------------- Total from investment operations 1.69 (2.87) .89 .47 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.22) (.54) (.48) (.28) Distributions from realized gains -- (.09) (.02) -- -------------------------------------------------------------------------------------------------------------- Total distributions (.22) (.63) (.50) (.28) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.52 $7.05 $10.55 $10.16 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $1 $1 $1 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 2.22%(f) 2.19% 2.13% 2.62%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 2.04%(f) 2.17% 2.13% 2.20%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 6.22%(f) 5.61% 4.90% 4.51%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 17% 82% 41% 32% -------------------------------------------------------------------------------------------------------------- Total return(i) 24.44%(j) (28.85%) 8.94% 4.80%(j) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 16, 2006 (when shares became publicly available) to Oct. 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 23 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(k) 2008 2007 2006(b) Net asset value, beginning of period $7.04 $10.54 $10.15 $9.97 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .24(c) .55(c) .53(c) .28 Net gains (losses) (both realized and unrealized) 1.45 (3.42) .36 .18 -------------------------------------------------------------------------------------------------------------- Total from investment operations 1.69 (2.87) .89 .46 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.22) (.54) (.48) (.28) Distributions from realized gains -- (.09) (.02) -- -------------------------------------------------------------------------------------------------------------- Total distributions (.22) (.63) (.50) (.28) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.51 $7.04 $10.54 $10.15 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 2.21%(f) 2.18% 2.13% 2.61%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 2.03%(f) 2.16% 2.13% 2.19%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 6.23%(f) 5.64% 5.00% 4.46%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 17% 82% 41% 32% -------------------------------------------------------------------------------------------------------------- Total return(i) 24.47%(j) (28.88%) 8.94% 4.75%(j) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 16, 2006 (when shares became publicly available) to Oct. 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 24 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(j) 2008 2007 2006(b) Net asset value, beginning of period $7.05 $10.57 $10.16 $9.98 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .28(c) .69(c) .65(c) .35 Net gains (losses) (both realized and unrealized) 1.47 (3.46) .38 .17 -------------------------------------------------------------------------------------------------------------- Total from investment operations 1.75 (2.77) 1.03 .52 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.27) (.66) (.60) (.34) Distributions from realized gains -- (.09) (.02) -- -------------------------------------------------------------------------------------------------------------- Total distributions (.27) (.75) (.62) (.34) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.53 $7.05 $10.57 $10.16 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $57 $65 $147 $47 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) .89%(f) .91% .93% 1.52%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .85%(f) .91% .93% 1.10%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 7.43%(f) 6.89% 6.14% 5.70%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 17% 82% 41% 32% -------------------------------------------------------------------------------------------------------------- Total return 25.26%(i) (28.08%) 10.38% 5.44%(i) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 16, 2006 (when shares became publicly available) to Oct. 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (i) Not annualized. (j) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 25 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(j) 2008 2007 2006(b) Net asset value, beginning of period $7.05 $10.56 $10.16 $9.98 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .27(c) .67(c) .60(c) .34 Net gains (losses) (both realized and unrealized) 1.47 (3.43) .39 .18 -------------------------------------------------------------------------------------------------------------- Total from investment operations 1.74 (2.76) .99 .52 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.26) (.66) (.57) (.34) Distributions from realized gains -- (.09) (.02) -- -------------------------------------------------------------------------------------------------------------- Total distributions (.26) (.75) (.59) (.34) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.53 $7.05 $10.56 $10.16 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.19%(f) 1.22% 1.24% 1.67%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.06%(f) .97% 1.24% 1.25%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 7.20%(f) 6.82% 5.75% 5.37%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 17% 82% 41% 32% -------------------------------------------------------------------------------------------------------------- Total return 25.18%(i) (27.98%) 9.97% 5.36%(i) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 16, 2006 (when shares became publicly available) to Oct. 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (i) Not annualized. (j) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 26 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS W
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(j) 2008 2007(b) Net asset value, beginning of period $7.05 $10.55 $10.24 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .26(c) .56 .57 Net gains (losses) (both realized and unrealized) 1.46 (3.36) .28 -------------------------------------------------------------------------------------------------------------- Total from investment operations 1.72 (2.80) .85 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.25) (.61) (.52) Distributions from realized gains -- (.09) (.02) -------------------------------------------------------------------------------------------------------------- Total distributions (.25) (.70) (.54) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.52 $7.05 $10.55 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $85 $104 $38 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.33%(f) 1.35% 1.33%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.30%(f) 1.35% 1.33%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 6.98%(f) 6.08% 5.86%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 17% 82% 41% -------------------------------------------------------------------------------------------------------------- Total return 24.88%(i) (28.29%) 8.49%(i) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 1, 2006 (inception date) to Oct. 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (i) Not annualized. (j) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS ------------------------------------------------- (UNAUDITED AS TO APRIL 30, 2009) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RiverSource Emerging Markets Bond Fund (the Fund) is a series of RiverSource Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a non-diversified, open-end management investment company. RiverSource Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund invests primarily in fixed income securities of emerging market issuers. The Fund offers Class A, Class B, Class C, Class I, Class R4 and Class W shares. - Class A shares are sold with a front-end sales charge. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - Class C shares may be subject to a CDSC. - Class I and Class R4 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. - Class W shares are sold without a front-end sales charge or CDSC and are offered through qualifying discretionary accounts. At April 30, 2009, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) and the RiverSource affiliated funds-of-funds owned 100% of Class I shares. At April 30, 2009, the Investment Manager and the RiverSource affiliated funds-of-funds owned approximately 37% of the total outstanding Fund shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) 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. -------------------------------------------------------------------------------- 28 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- VALUATION OF SECURITIES Effective Nov. 1, 2008, the Fund adopted Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. There was no impact to the Fund's net assets or results of operations upon adoption. The fair valuation measurements disclosure can be found following the Notes to Portfolio of Investments. 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. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange (NYSE) and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the Investment Manager, as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- current market conditions as of the close of the NYSE. Swap transactions are valued through an authorized pricing service, broker, or an internal model. 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, which approximates fair value. SECURITIES PURCHASED ON A FORWARD-COMMITMENT BASIS Delivery and payment for securities that have been purchased by the Fund 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 Fund's net assets the same as owned securities. The Fund designates cash or liquid securities at least equal to the amount of its forward- commitments. At April 30, 2009 the Fund has outstanding when-issued securities of $694,995. The Fund 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 Fund to "roll over" its purchase commitments, the Fund receives negotiated amounts in the form of reductions of the purchase price of the commitment. The Fund records the incremental difference between the forward purchase and sale of each forward roll as realized gain or loss. Losses may arise due to changes in the value of the securities or if a counterparty does not perform under the terms of the agreement. If a counterparty files for bankruptcy or becomes insolvent, the Fund's right to repurchase or sell securities may be limited. The Fund did not enter into any mortgage dollar roll transactions during the six months ended April 30, 2009. 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. Cash collateral may be collected by the Fund to secure certain over-the-counter options (OTC options) trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. 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 -------------------------------------------------------------------------------- 30 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 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. Option contracts, including OTC option contracts, with no readily available market value are valued using quotations obtained from independent brokers as of the close of the NYSE. The Fund will realize a gain or loss when the option transaction expires or is exercised. 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. At April 30, 2009, and for the year then ended, the Fund had no outstanding option contracts. 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. Futures and options on futures are valued daily based upon the last sale price at the close of the market on the principal exchange on which they are traded. 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. At April 30, 2009, the Fund had no outstanding futures contracts. FOREIGN CURRENCY TRANSLATIONS AND FORWARD 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 -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At April 30, 2009, foreign currency holdings were entirely comprised of Mexican pesos. The Fund may enter into forward foreign currency 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 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 counterparty will not complete its contract obligations. At April 30, 2009, the Fund had no outstanding forward foreign currency contracts. CREDIT DEFAULT SWAP TRANSACTIONS The Fund may enter into credit default swap contracts to increase or decrease its credit exposure to an issuer, obligation, portfolio, or index of issuers or obligations, to hedge its exposure on an obligation that it owns or in lieu of selling such obligations. As the purchaser of a credit default swap contract, the Fund purchases protection by paying a periodic interest rate on the notional amount to the counterparty. The interest amount is accrued daily as a component of unrealized appreciation (depreciation) and is recorded as a realized loss upon payment. If the credit event specified in the contract occurs, the Fund will be required to deliver either the referenced obligation or an equivalent cash amount to the protection seller and in exchange the Fund will receive the notional amount from the seller. The difference between the value of the obligation delivered and the notional amount received will be recorded as a realized gain (loss). As the seller of a credit default swap contract, the Fund sells protection to a buyer and will generally receive a periodic interest rate on the notional amount. The interest amount is accrued daily as a component of unrealized appreciation (depreciation) and is recorded as a realized gain upon receipt of the payment. If the credit event specified in the contract occurs, the Fund will receive the referenced obligation or an equivalent cash amount in exchange for the payment of the notional amount to the protection buyer. The difference between the value of the obligation received and the notional amount paid will be recorded as a realized gain (loss). As a protection seller, the maximum amount of the payment that may be made by the Fund may equal the notional amount (shown in the Credit Default Swap Contracts Outstanding table following the Portfolio of Investments), at par, of the underlying index or security as a result of the related credit event. -------------------------------------------------------------------------------- 32 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- The notional amounts of credit default swap contracts are not recorded in the financial statements. Any premium paid or received by the Fund upon entering into a credit default swap contract is recorded as an asset or liability and amortized daily as a component of realized gain (loss) on the Statement of Operations. Credit default swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time a realized gain (loss) is recorded. Credit default swap contracts can involve greater risks than if a fund had invested in the referenced obligation directly since, in addition to general market risks, credit default swaps are subject to counterparty credit risk, leverage risk, hedging risk, correlation risk and liquidity risk. The Fund will enter into credit default swap agreements only with counterparties that meet certain standards of creditworthiness. INTEREST RATE SWAP TRANSACTIONS The Fund may enter into interest rate swap agreements to produce incremental earnings, to gain exposure to or protect itself from market changes, or to synthetically add or subtract principal exposure to the municipal market. Interest rate swaps are agreements between two parties that involve the exchange of one type of interest rate for another type of interest rate cash flow on specified dates in the future, based on a predetermined, specified notional amount. Certain interest rate swaps are considered forward-starting; whereby the accrual for the exchange of cash flows does not begin until a specified date in the future (the "effective date"). The net cash flow for a standard interest rate swap transaction is generally the difference between a floating market interest rate versus a fixed interest rate. Interest rate swaps are valued daily and unrealized appreciation (depreciation) is recorded. Certain interest rate swaps may accrue periodic interest on a daily basis as a component of unrealized appreciation (depreciation); the Fund will realize a gain or loss upon the payment or receipt of accrued interest. The Fund will realize a gain or a loss when the interest rate swap is terminated. Risks of entering into an interest rate swap include a lack of correlation between swaps and the portfolio of municipal bonds the swaps are designed to hedge or replicate. A lack of correlation may cause the interest rate swap to experience adverse changes in value relative to expectations. In addition, interest rate swaps are subject to the risk of default of a counterparty, and the risk of adverse movements in market interest rates relative to the interest rate swap positions entered. At April 30, 2009, the Fund had no outstanding interest rate swap contracts. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of recognition of unrealized appreciation (depreciation) for certain derivative investments and losses deferred due to wash sales. 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 Funds. RECENT ACCOUNTING PRONOUNCEMENTS The Fund has adopted FASB Staff Position No. 133-1 and FIN No. 45-4 (FSP FAS 133-1 and FIN 45-4), "Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45." The amendments to FSP FAS 133-1 and FIN 45-4 require enhanced disclosures about a fund's derivatives and guarantees. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows and (d) the current status of the payment/performance risk of the credit derivative. The amendments to FSP FAS 133-1 and -------------------------------------------------------------------------------- 34 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FIN 45-4 also require additional disclosures about the current status of the payment/performance risk of a guarantee. In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of April 30, 2009, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. On April 9, 2009, the FASB issued Staff Position No. 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly" (FSP 157-4). FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also requires additional disaggregation of the current SFAS 157 required disclosures. FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Management is currently evaluating the impact that the adoption of FSP 157-4 will have on the amounts and disclosures within the Fund's financial statements. DIVIDENDS TO SHAREHOLDERS Dividends from net investment income, declared daily and payable monthly, 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, if any, is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 35 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- is a percentage of the Fund's average daily net assets that declines from 0.72% to 0.52% annually as the Fund's assets increase. The management fee for the six months ended April 30, 2009 was 0.72% of the Fund's average daily net assets. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. The fee for the six months ended April 30, 2009 was 0.08% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended April 30, 2009, other expenses paid to this company were $717. COMPENSATION OF BOARD MEMBERS 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. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $20.50 for Class A, $21.50 for Class B and $21.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R4 shares and an annual asset- based fee at a rate of 0.20% of the Fund's average daily net assets attributable to Class W shares. The Transfer Agent charges an annual 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 in the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Fund's average daily net assets -------------------------------------------------------------------------------- 36 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- attributable to Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. DISTRIBUTION FEES The Fund has agreements with RiverSource Distributors, Inc. and RiverSource Fund Distributors, Inc. (collectively, 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 of up to 0.25% of the Fund's average daily net assets attributable to Class A and Class W shares and a fee at an annual rate of up to 1.00% of the Fund's average daily net assets attributable to Class B and Class C shares. For Class B and Class C shares, up to 0.75% of the fee is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed expense") was approximately $65,000 and $18,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of April 30, 2009, and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGES Sales charges received by the Distributor for distributing Fund shares were $7,813 for Class A and $624 for Class B for the six months ended April 30, 2009. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended April 30, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), were as follows: Class A............................................. 1.27% Class B............................................. 2.04 Class C............................................. 2.03 Class I............................................. 0.85 Class R4............................................ 1.06 Class W............................................. 1.30
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class A........................................... $5,853 Class B........................................... 895 Class C........................................... 146
-------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- The waived/reimbursed fees and expenses for the plan administration services fees at the class level were as follows: Class R4............................................. $7
The management fees waived/reimbursed at the Fund level were $29,384. The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Oct. 31, 2009, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*), will not exceed the following percentage of the class average daily net assets: Class A............................................. 1.27% Class B............................................. 2.04 Class C............................................. 2.03 Class I............................................. 0.85 Class R4............................................ 1.15 Class W............................................. 1.30
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. CUSTODIAN FEES Effective Dec. 15, 2008, the Fund pays custodian fees to JPMorgan Chase Bank, N.A. For the period Nov. 1, 2008 to Dec. 15, 2008, the Fund paid custodian fees amounting to $2,446 to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $25,165,040 and $60,764,874, respectively, for the six months ended April 30, 2009. Realized gains and losses are determined on an identified cost basis. -------------------------------------------------------------------------------- 38 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED APRIL 30, 2009 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) ---------------------------------------------------------------------------------- Class A 853,625 30,590 (1,229,159) (344,944) Class B 35,106 4,390 (29,615) 9,881 Class C 1,541 704 (3,220) (975) Class I 500,930 280,842 (3,298,934) (2,517,162) Class R4 40 39 (3) 76 Class W 993,022 433,819 (6,212,528) (4,785,687) ---------------------------------------------------------------------------------- YEAR ENDED OCT. 31, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) ---------------------------------------------------------------------------------- Class A 1,206,737 54,556 (332,734) 928,559 Class B 131,117 7,815 (80,424) 58,508 Class C 21,942 1,173 (12,061) 11,054 Class I 3,444,578 822,959 (8,936,995) (4,669,458) Class R4 781 70 (264) 587 Class W 15,118,235 298,553 (4,196,818) 11,219,970 ----------------------------------------------------------------------------------
5. LENDING OF PORTFOLIO SECURITIES Effective Dec. 1, 2008, the Fund has entered into a Master Securities Lending Agreement ("the Agreement") with JPMorgan Chase Bank, National Association ("JPMorgan"). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments, and any uninvested cash collateral balance, are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At April 30, 2009, securities valued at $4,414,485 were on loan, secured by cash collateral of $4,492,235 invested in short-term securities or in cash equivalents. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Income of $3,024 earned from securities lending from Dec. 1, 2008 through April 30, 2009, is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Fund or the borrower at any time, and are, therefore, not considered to be illiquid investments. Prior to Dec. 1, 2008, the Investment Manager served as securities lending agent for the Fund under the Securities Lending Agency Agreement. For the period from Nov. 1, 2008, through Nov. 30, 2008, the Fund had no securities on loan. 6. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term Cash Fund aggregated $36,577,655 and $61,498,626, respectively, for the six months ended April 30, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short- Term Cash Fund at April 30, 2009, can be found in the Portfolio of Investments. 7. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $475 million. The -------------------------------------------------------------------------------- 40 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $175 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $650 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum, in addition to an upfront fee equal to its pro rata share of 0.02% of the amount of the credit facility. The Fund had no borrowings during the six months ended April 30, 2009. 7. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund had a capital loss carry-over of $2,399,388 at Oct. 31, 2008, that if not offset by capital gains will expire in 2016. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. 8. RISKS RELATING TO CERTAIN INVESTMENTS DIVERSIFICATION RISK The Fund is non-diversified. A non-diversified fund may invest more of its assets in fewer companies than if it were a diversified fund. The Fund may be more exposed to the risks of loss and volatility than a fund that invests more broadly. FOREIGN/EMERGING MARKETS RISK Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging markets may accentuate these risks. 9. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co., Inc. (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman -------------------------------------------------------------------------------- 42 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (which is now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman is and has been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman will pay $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 43 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- 44 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- RiverSource Investments, LLC ("RiverSource Investments" or the "investment manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), RiverSource Investments provides investment advice and other services to the Fund and all funds in the RiverSource Family of Funds (collectively, the "Funds"). On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. RiverSource Investments prepared detailed reports for the Board and its Contracts Committee in March and April 2009, including reports based on data provided by independent organizations to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource Investments addressing the services RiverSource Investments provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts, Investment Review and Compliance Committees in determining whether to continue the IMS Agreement. At the April 7-8, 2009 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by RiverSource Investments: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource Investments, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource Investments, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, most notably, the large investment made in the acquisition of J. & W. Seligman & Co. Incorporated, including its portfolio management operations, personnel and infrastructure (including the addition of two new offices in New York City and Palo Alto). Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource Investments, the Board considered the quality of the administrative and transfer agency services provided by RiverSource Investments' affiliates to the Fund. The Board also reviewed the financial condition of RiverSource Investments (and its affiliates) and each entity's ability to carry out its responsibilities under the IMS Agreement. Further, the Board considered RiverSource Investments' ability to -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 45 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- retain key personnel and its expectations in this regard. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by RiverSource Investments). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality, particularly in light of recent market conditions. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that RiverSource Investments and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods, recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2007 to December 2008. The Board observed that the Fund's investment performance was appropriate in light of the particular management style and the exceptionally challenging market conditions involved. Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource Investments and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to RiverSource Investments' profitability. They also reviewed information in the report comparing the fees charged to the Fund by RiverSource Investments to fees charged to other client accounts (with similar investment strategies to those of the Fund). The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product -------------------------------------------------------------------------------- 46 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- lines in the Funds' family, while assuring that the overall fees for each fund are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund (excluding the effect of a performance incentive adjustment, if applicable), with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) approximated the peer group's median ratio. The Board also considered the expected profitability of RiverSource Investments and its affiliates in connection with RiverSource Investments providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource Investments and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource Investments as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 8, 2009, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement for an additional annual period. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT 47 PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- 48 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 SEMIANNUAL REPORT RIVERSOURCE EMERGING MARKETS BOND FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Distributors, Inc., and RiverSource Fund Distributors, Inc., Members FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C)2009 RiverSource Investments, LLC. S-6511 E (6/09)
Semiannual Report (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE GLOBAL BOND FUND SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2009 RIVERSOURCE GLOBAL BOND FUND SEEKS TO PROVIDE SHAREHOLDERS WITH HIGH TOTAL RETURN THROUGH INCOME AND GROWTH OF CAPITAL. (SINGLE STRATEGY FUNDS ICON) TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Fund Expenses Example.............. 8 Portfolio of Investments........... 10 Statement of Assets and Liabilities...................... 26 Statement of Operations............ 28 Statements of Changes in Net Assets........................... 29 Financial Highlights............... 31 Notes to Financial Statements...... 37 Approval of Investment Management Services Agreement............... 53 Proxy Voting....................... 56
-------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > RiverSource Global Bond Fund (the Fund) Class A shares increased 7.50% (excluding sales charge) for the six month period ended April 30, 2009. > The Fund outperformed its benchmark, the Barclays Capital Global Aggregate Index, which rose 6.68%. > The Fund also outperformed its peer group, the Lipper Global Income Funds Index, which increased 4.03% during the same period. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2009) --------------------------------------------------------------------------------
6 months* 1 year 3 years 5 years 10 years ------------------------------------------------------------------------ RiverSource Global Bond Fund Class A (excluding sales charge) +7.50% -4.50% +3.59% +3.78% +4.49% ------------------------------------------------------------------------ Barclays Capital Global Aggregate Index(1) (unmanaged) +6.68% -2.20% +5.47% +4.87% +5.32% ------------------------------------------------------------------------ Lipper Global Income Funds Index(2) +4.03% -8.76% +1.43% +2.88% +4.17% ------------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary or visiting riversource.com/funds. The 4.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. -------------------------------------------------------------------------------- 2 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- (1) The Barclays Capital 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. (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. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------
AT APRIL 30, 2009 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 3/20/89) +7.50% -4.50% +3.59% +3.78% +4.49% N/A -------------------------------------------------------------------------------------- Class B (inception 3/20/95) +7.06% -5.15% +2.81% +2.98% +3.70% N/A -------------------------------------------------------------------------------------- Class C (inception 6/26/00) +7.12% -5.16% +2.82% +3.01% N/A +4.77% -------------------------------------------------------------------------------------- Class I (inception 3/4/04) +7.80% -4.06% +3.98% +4.22% N/A +3.79% -------------------------------------------------------------------------------------- Class R4 (inception 3/20/95) +7.61% -4.18% +3.89% +4.06% +4.72% N/A -------------------------------------------------------------------------------------- Class W (inception 12/1/06) +7.58% -4.44% N/A N/A N/A +2.07% -------------------------------------------------------------------------------------- With sales charge Class A (inception 3/20/89) +2.35% -9.04% +1.94% +2.78% +3.96% N/A -------------------------------------------------------------------------------------- Class B (inception 3/20/95) +2.06% -9.61% +1.58% +2.64% +3.70% N/A -------------------------------------------------------------------------------------- Class C (inception 6/26/00) +6.12% -6.05% +2.82% +3.01% N/A +4.77% --------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 4 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
AT MARCH 31, 2009 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 3/20/89) -0.53% -6.98% +3.73% +2.65% +4.34% N/A -------------------------------------------------------------------------------------- Class B (inception 3/20/95) -1.01% -7.72% +2.95% +1.86% +3.54% N/A -------------------------------------------------------------------------------------- Class C (inception 6/26/00) -1.01% -7.74% +2.95% +1.88% N/A +4.61% -------------------------------------------------------------------------------------- Class I (inception 3/4/04) -0.27% -6.55% +4.18% +3.09% N/A +3.49% -------------------------------------------------------------------------------------- Class R4 (inception 3/20/95) -0.43% -6.67% +4.04% +2.92% +4.57% N/A -------------------------------------------------------------------------------------- Class W (inception 12/1/06) -0.46% -6.92% N/A N/A N/A +1.36% -------------------------------------------------------------------------------------- With sales charge Class A (inception 3/20/89) -5.30% -11.37% +2.04% +1.66% +3.80% N/A -------------------------------------------------------------------------------------- Class B (inception 3/20/95) -5.69% -12.06% +1.71% +1.52% +3.54% N/A -------------------------------------------------------------------------------------- Class C (inception 6/26/00) -1.95% -8.61% +2.95% +1.88% N/A +4.61% --------------------------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 4.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third*** years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R4 and Class W shares. Class I and Class R4 are available to institutional investors only. Class W shares are offered through qualifying discretionary accounts. *Not annualized. **For classes with less than 10 years performance. ***For Class B shares purchased on or after June 13, 2009 the CDSC percentage for the third year will be 3%. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
DURATION SHORT INT. LONG X X HIGH MEDIUM QUALITY LOW
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. PORTFOLIO STATISTICS -------------------------------------------------------------------------------- Weighted average life(1) 6.8 years -------------------------------------- Effective duration(2) 5.2 years -------------------------------------- Weighted average bond rating(3) AA- --------------------------------------
ANNUAL OPERATING EXPENSE RATIO* (as of the current prospectus) --------------------------------------------------------------------------------
Total fund Net fund expenses expenses(a) ----------------------------------------- Class A 1.32% 1.25% ----------------------------------------- Class B 2.09% 2.01% ----------------------------------------- Class C 2.08% 2.01% ----------------------------------------- Class I 0.85% 0.82% ----------------------------------------- Class R4 1.14% 1.12% ----------------------------------------- Class W 1.30% 1.27% -----------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Oct. 31, 2009, unless sooner terminated at the discretion of the Fund's board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds) will not exceed 1.25% for Class A, 2.01% for Class B, 2.01% for Class C, 0.82% for Class I, 1.12% for Class R4 and 1.27% for Class W. (1) 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. (2) 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. (3) WEIGHTED AVERAGE BOND RATING represents the average credit quality of the underlying bonds in the portfolio. * Fund expense ratios are calculated based on the fund's average net assets during the fund's most recently completed fiscal year, and have not been adjusted for current asset levels, including any decrease or increase in assets, which, if adjusted, would result in expense ratios that are higher or lower, respectively, than those that are expressed herein. Any fee waivers/expense caps would limit the impact that any decrease in assets will have on net expense ratios in the current fiscal year. There are risks associated with an investment in a bond funds, including credit risk, interest rate risk, and prepayment and extension risk. See the Fund's prospectus for information on these and other risks associated with the Fund. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. Non-investment grade -------------------------------------------------------------------------------- 6 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- securities, commonly called "high-yield" or "junk" bonds, generally have more volatile prices and carry more risk to principal and income than investment grade securities. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. SECTOR BREAKDOWN(1) (at April 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Asset-Backed 0.9% ------------------------------------------------ Commercial Mortgage-Backed 4.4% ------------------------------------------------ Consumer Discretionary 0.9% ------------------------------------------------ Consumer Staples 0.5% ------------------------------------------------ Energy 2.6% ------------------------------------------------ Financials 8.3% ------------------------------------------------ Foreign Government 51.7% ------------------------------------------------ Health Care 0.5% ------------------------------------------------ Industrials 0.9% ------------------------------------------------ Materials 0.3% ------------------------------------------------ Mortgage-Backed 10.5% ------------------------------------------------ Telecommunication 5.5% ------------------------------------------------ U.S. Government Obligations & Agencies 6.0% ------------------------------------------------ Utilities 6.0% ------------------------------------------------ Other(2) 1.0% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral for Securities on Loan) as of April 30, 2009. The Fund's composition is subject to change. (2) Cash & Cash Equivalents. TOP TEN COUNTRIES (at April 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
United States 41.1% ------------------------------------------------ Japan 11.6% ------------------------------------------------ Germany 7.7% ------------------------------------------------ Netherlands 5.1% ------------------------------------------------ United Kingdom 4.6% ------------------------------------------------ Canada 4.1% ------------------------------------------------ Italy 4.0% ------------------------------------------------ France 3.7% ------------------------------------------------ Spain 2.7% ------------------------------------------------ Belgium 2.2% ------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 7 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, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and 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. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended April 30, 2009. 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. -------------------------------------------------------------------------------- 8 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING Annualized NOV. 1, 2008 APRIL 30, 2009 THE PERIOD(a) expense ratio ------------------------------------------------------------------------------------------- Class A ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,075.00 $ 6.43 1.25% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.60 $ 6.26 1.25% ------------------------------------------------------------------------------------------- Class B ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,070.60 $10.32 2.01% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.83 $10.04 2.01% ------------------------------------------------------------------------------------------- Class C ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,071.20 $10.32 2.01% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.83 $10.04 2.01% ------------------------------------------------------------------------------------------- Class I ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,078.00 $ 4.22 .82% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,020.73 $ 4.11 .82% ------------------------------------------------------------------------------------------- Class R4 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,076.10 $ 5.77 1.12% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.24 $ 5.61 1.12% ------------------------------------------------------------------------------------------- Class W ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,075.80 $ 6.54 1.27% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.50 $ 6.36 1.27% -------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2009: +7.50% for Class A, +7.06% for Class B, +7.12% for Class C, +7.80% for Class I, +7.61% for Class R4 and +7.58% for Class W. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
BONDS (95.5%)(c) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) ARGENTINA (0.1%) Republic of Argentina 09-12-13 7.00% $748,000 $282,370 Republic of Argentina Sr Unsecured 12-15-35 0.00 2,900,000(j) 84,970 --------------- Total 367,340 ------------------------------------------------------------------------------------- AUSTRALIA (2.0%) Commonwealth Bank of Australia (European Monetary Unit) Sr Unsub 11-12-09 3.38 745,000 985,844 New South Wales Treasury (Australian Dollar) 05-01-12 6.00 6,300,000 4,786,336 Queensland Treasury (Australian Dollar) 07-14-09 6.00 3,265,000 2,386,453 Telstra Sr Unsecured 04-01-12 6.38 500,000(r) 505,016 --------------- Total 8,663,649 ------------------------------------------------------------------------------------- AUSTRIA (1.4%) Republic of Austria (European Monetary Unit) 07-15-14 4.30 4,295,000 5,992,410 ------------------------------------------------------------------------------------- BELGIUM (2.1%) Fortis Bank (European Monetary Unit) Sr Unsecured 05-30-14 4.50 420,000 542,221 Kingdom of Belgium (European Monetary Unit) 03-28-10 3.00 3,965,000 5,334,491 09-28-12 5.00 2,185,000 3,144,639 --------------- Total 9,021,351 ------------------------------------------------------------------------------------- BERMUDA (0.2%) Intelsat Subsidiary Holding 01-15-15 8.88 95,000(d) 94,050 Weatherford Intl 03-01-19 9.63 895,000(r) 965,907 --------------- Total 1,059,957 ------------------------------------------------------------------------------------- BRAZIL (0.9%) Banco Nacional de Desenvolvimento Economico e Social Sr Unsecured 06-16-18 6.37 535,000(d) 514,938 Federative Republic of Brazil 01-15-18 8.00 299,000 322,920 Federative Republic of Brazil Sr Unsecured 01-17-17 6.00 307,000 311,452 Nota do Tesouro Nacional (Brazilian Real) Series F 07-01-10 10.00 579,000 2,731,162 --------------- Total 3,880,472 ------------------------------------------------------------------------------------- CANADA (4.0%) Canadian Natural Resources Sr Unsecured 02-01-39 6.75 310,000 270,825 Canadian Pacific Railway (Canadian Dollar) 06-15-10 4.90 380,000(d) 323,612 EnCana Sr Unsecured 11-01-11 6.30 1,140,000 1,191,209 Govt of Canada (Canadian Dollar) 06-01-18 4.25 1,330,000 1,229,309 Nexen Sr Unsecured 05-15-37 6.40 1,970,000 1,433,374 Petro-Canada Sr Unsecured 05-15-38 6.80 1,630,000(r) 1,275,765
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 10 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) CANADA (CONT.) Province of British Columbia (Canadian Dollar) 06-18-14 5.30% 1,640,000 $1,536,618 Province of Ontario (Canadian Dollar) 03-08-14 5.00 3,635,000 3,358,887 Province of Quebec (Canadian Dollar) 12-01-17 4.50 1,500,000 1,285,403 Royal Bank of Canada (European Monetary Unit) Sr Unsecured 01-18-13 3.25 630,000 818,567 TELUS Sr Unsecured 06-01-11 8.00 980,000 1,040,809 Thomson Reuters 10-01-14 5.70 2,465,000 2,425,451 07-15-18 6.50 150,000(r) 143,744 Toronto-Dominion Bank (European Monetary Unit) Sr Unsecured 05-14-15 5.38 600,000 820,037 Videotron 04-15-18 9.13 130,000 135,037 04-15-18 9.13 70,000(d) 72,713 --------------- Total 17,361,360 ------------------------------------------------------------------------------------- COLOMBIA (0.1%) Republic of Colombia 01-27-17 7.38 230,000 246,100 09-18-37 7.38 260,000 260,650 --------------- Total 506,750 ------------------------------------------------------------------------------------- CZECH REPUBLIC (0.5%) Czech Republic (Czech Koruna) 10-18-10 2.55 17,510,000 862,664 06-16-13 3.70 27,500,000 1,317,914 --------------- Total 2,180,578 ------------------------------------------------------------------------------------- DENMARK (0.9%) Danske Bank (European Monetary Unit) 03-16-10 1.70 750,000(h) 990,659 Nykredit Realkredit (Danish Krone) 04-01-28 5.00 10,802,574 1,915,441 Nykredit Realkredit (European Monetary Unit) 01-01-10 5.00 750,000 1,011,903 --------------- Total 3,918,003 ------------------------------------------------------------------------------------- FRANCE (3.8%) BNP Paribas (European Monetary Unit) Sr Sub Nts 12-17-12 5.25 555,000 754,608 Caisse Refinance Hypothe (European Monetary Unit) 10-11-10 4.38 700,000 948,226 Credit Agricole (European Monetary Unit) Sr Unsecured 06-24-13 6.00 550,000 793,573 Electricite de France (European Monetary Unit) Sr Unsecured 02-05-18 5.00 750,000 994,256 France Telecom (European Monetary Unit) Sr Unsecured 02-21-17 4.75 1,180,000 1,570,592 Govt of France (European Monetary Unit) 04-25-12 5.00 2,365,000 3,403,600 04-25-13 4.00 5,420,000 7,604,335 10-25-16 5.00 80,000 117,935 Veolia Environnement (European Monetary Unit) 01-16-17 4.38 225,000 269,188 --------------- Total 16,456,313 ------------------------------------------------------------------------------------- GERMANY (7.5%) Bayerische Landesbank (Japanese Yen) Sr Nts 04-22-13 1.40 300,000,000 2,940,958 Bundesrepublik Deutschland (European Monetary Unit) 07-04-10 5.25 4,015,000 5,567,535 07-04-27 6.50 4,650,000 8,039,392 07-04-28 4.75 2,225,000 3,212,719 07-04-34 4.75 4,585,000 6,653,131
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) GERMANY (CONT.) Corealcredit Bank (European Monetary Unit) Series 501 09-02-09 5.00% 1,800,000(d) $2,396,319 DEPFA Deutsche Pfandbriefbank (European Monetary Unit) Series G6 01-15-10 5.50 1,375,000 1,839,199 Rheinische Hypothekenbank (European Monetary Unit) Series 803 07-05-10 5.75 1,305,000(d) 1,796,209 --------------- Total 32,445,462 ------------------------------------------------------------------------------------- GREECE (1.1%) Hellenic Republic (European Monetary Unit) 08-20-12 4.10 1,545,000 2,070,866 Hellenic Republic (European Monetary Unit) Sr Unsub 10-22-22 5.90 2,010,000 2,817,691 --------------- Total 4,888,557 ------------------------------------------------------------------------------------- INDONESIA (0.6%) Govt of Indonesia (Indonesian Rupiah) 07-15-22 10.25 21,944,000,000 1,786,633 Republic of Indonesia Sr Unsecured 01-17-18 6.88 500,000(d) 452,500 10-12-35 8.50 190,000(d) 173,850 --------------- Total 2,412,983 ------------------------------------------------------------------------------------- ITALY (3.8%) Buoni Poliennali Del Tesoro (European Monetary Unit) 01-15-10 3.00 3,140,000 4,210,454 04-15-12 4.00 1,970,000 2,721,026 02-01-19 4.25 420,000 559,586 11-01-26 7.25 2,536,283 4,257,240 11-01-27 6.50 1,025,000 1,590,973 Intesa Sanpaolo (European Monetary Unit) Sr Unsecured 12-19-13 5.38 400,000 556,453 Telecom Italia Capital 11-15-13 5.25 $2,870,000 $2,721,363 --------------- Total 16,617,095 ------------------------------------------------------------------------------------- JAPAN (11.3%) Development Bank of Japan (Japanese Yen) 06-20-12 1.40 417,000,000 4,286,888 Govt of Japan CPI Linked (Japanese Yen) 12-10-17 1.20 429,429,000(g) 3,771,522 03-10-18 1.40 464,665,000(g) 4,149,180 Govt of Japan (Japanese Yen) 09-20-10 0.80 185,000,000 1,889,582 06-20-12 1.40 280,000,000 2,915,849 12-20-12 1.00 913,000,000 9,381,956 12-20-14 1.30 120,000,000 1,241,622 09-20-17 1.70 641,000,000 6,733,994 12-20-22 1.40 306,000,000 2,968,717 12-20-26 2.10 884,000,000 9,055,677 12-20-34 2.40 203,000,000 2,160,494 --------------- Total 48,555,481 ------------------------------------------------------------------------------------- JERSEY (0.3%) ASIF III Jersey (Japanese Yen) Sr Secured 10-15-09 0.95 130,000,000 1,269,265 ------------------------------------------------------------------------------------- LUXEMBOURG (--%) Gaz Capital Secured 08-16-37 7.29 230,000(d,r) 156,400 ------------------------------------------------------------------------------------- MALAYSIA (0.3%) Petronas Capital 05-22-12 7.00 1,350,000(d) 1,470,123 ------------------------------------------------------------------------------------- MEXICO (1.3%) Mexican Fixed Rate Bonds (Mexican Peso) 12-20-12 9.00 24,060,000 1,890,763 12-17-15 8.00 41,010,000 3,073,533 Pemex Project Funding Master Trust 03-01-18 5.75 617,000 558,385
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 12 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) MEXICO (CONT.) United Mexican States Sr Unsecured 09-27-34 6.75% $270,000 $262,170 --------------- Total 5,784,851 ------------------------------------------------------------------------------------- NETHERLANDS (5.0%) Allianz Finance II (European Monetary Unit) 11-23-16 4.00 400,000 507,092 BMW Finance (European Monetary Unit) 09-19-13 8.88 650,000 952,091 Deutsche Telekom Intl Finance (European Monetary Unit) 01-19-15 4.00 1,335,000 1,730,439 E.ON Intl Finance (European Monetary Unit) 10-02-17 5.50 535,000 737,347 Govt of Netherlands (European Monetary Unit) 07-15-12 5.00 2,880,000 4,146,175 07-15-13 4.25 5,545,000 7,841,057 07-15-16 4.00 1,500,000 2,074,150 ING Groep (European Monetary Unit) Sr Unsecured 05-31-17 4.75 1,205,000 1,425,099 Nederlandse Waterschapsbank (British Pound) Sr Unsub 06-07-10 5.38 850,000 1,301,554 Rabobank Nederland (European Monetary Unit) Sr Unsub 04-04-12 4.13 600,000 813,171 --------------- Total 21,528,175 ------------------------------------------------------------------------------------- NEW ZEALAND (0.6%) Govt of New Zealand (New Zealand Dollar) 04-15-13 6.50 4,300,000 2,625,336 ------------------------------------------------------------------------------------- NORWAY (0.9%) Govt of Norway (Norwegian Krone) 05-16-11 6.00 23,000,000 3,768,275 ------------------------------------------------------------------------------------- PHILIPPINE ISLANDS (0.1%) Republic of Philippines 01-15-16 8.00 100,000 109,250 01-14-31 7.75 190,000 192,613 --------------- Total 301,863 ------------------------------------------------------------------------------------- POLAND (1.3%) Govt of Poland (Polish Zloty) 03-24-10 5.75 18,330,000 5,540,314 ------------------------------------------------------------------------------------- QATAR (0.1%) State of Qatar Sr Nts 04-09-19 6.55 550,000(d,r) 567,756 ------------------------------------------------------------------------------------- RUSSIA (--%) Russian Federation 03-31-30 7.50 139,200(d) 135,024 ------------------------------------------------------------------------------------- SOUTH AFRICA (0.3%) Republic of South Africa (South African Rand) 08-31-10 13.00 9,782,500(r) 1,251,427 ------------------------------------------------------------------------------------- SOUTH KOREA (0.4%) Korea Development Bank (Japanese Yen) 06-28-10 0.87 200,000,000 1,933,298 ------------------------------------------------------------------------------------- SPAIN (2.6%) AyT Cedulas Cajas Global (European Monetary Unit) 06-14-18 4.25 1,500,000 1,749,819 Caja de Ahorros y Monte de Piedad de Madrid (European Monetary Unit) 03-25-11 3.50 1,800,000 2,390,733 Govt of Spain (European Monetary Unit) 07-30-17 5.50 2,050,000 3,065,672 Instituto de Credito Oficial (European Monetary Unit) 06-30-09 3.50 1,400,000 1,858,194 Santander Intl Debt (European Monetary Unit) Bank Guaranteed 04-11-11 5.13 1,200,000 1,640,935
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) SPAIN (CONT.) Telefonica Emisiones SAU (European Monetary Unit) 02-02-16 4.38% 550,000 $699,907 --------------- Total 11,405,260 ------------------------------------------------------------------------------------- SUPRA-NATIONAL (0.7%) European Investment Bank (British Pound) Sr Unsecured 12-07-11 5.50 1,945,000 3,117,465 ------------------------------------------------------------------------------------- SWEDEN (0.7%) Govt of Sweden (Swedish Krona) 03-15-11 5.25 14,300,000 1,913,740 05-05-14 6.75 7,570,000 1,130,321 --------------- Total 3,044,061 ------------------------------------------------------------------------------------- TUNISIA (0.4%) Banque Centrale de Tunisie (Japanese Yen) 08-02-10 3.30 190,000,000 1,929,961 ------------------------------------------------------------------------------------- TURKEY (0.2%) Republic of Turkey 04-03-18 6.75 204,000 196,350 03-17-36 6.88 540,000 464,400 --------------- Total 660,750 ------------------------------------------------------------------------------------- UKRAINE (--%) Govt of Ukraine Sr Unsecured 11-14-17 6.75 230,000(d) 135,700 ------------------------------------------------------------------------------------- UNITED KINGDOM (4.4%) Abbey Natl Treasury Services (European Monetary Unit) Bank Guaranteed 05-27-09 1.97 850,000(h) 1,123,260 BT Group Sr Unsecured 12-15-10 8.63 550,000 574,762 SABMiller 01-15-14 5.70 1,275,000(d) 1,227,457 United Kingdom Treasury (British Pound) 03-07-12 5.00 840,000 1,346,795 09-07-14 5.00 3,890,000 6,508,129 03-07-18 5.00 1,260,000 2,108,628 03-07-25 5.00 660,000 1,063,157 12-07-27 4.25 1,100,000 1,619,779 03-07-36 4.25 880,000 1,268,743 12-07-38 4.75 1,090,000 1,718,309 12-07-49 4.25 400,000 575,429 --------------- Total 19,134,448 ------------------------------------------------------------------------------------- UNITED STATES (35.3%) AmeriCredit Automobile Receivables Trust Series 2007-DF Cl A3A (FSA) 07-06-12 5.49 912,302(o) 894,800 Anadarko Petroleum Sr Unsecured 09-15-16 5.95 970,000 877,606 AT&T Sr Unsecured 01-15-38 6.30 400,000 372,356 02-15-39 6.55 1,485,000 1,428,150 Banc of America Commercial Mtge Series 2007-1 Cl A3 01-15-49 5.45 2,075,000(f) 1,599,056 Bank of America Sr Unsecured 05-01-18 5.65 1,290,000 1,050,558 Bear Stearns Commercial Mtge Securities Series 2003-T10 Cl A1 03-13-40 4.00 277,446(f) 268,960 CC Holdings GS V LLC Sr Secured 05-01-17 7.75 45,000(d,m) 45,450 05-01-17 7.75 775,000(d) 782,750 CenterPoint Energy Houston Electric LLC Series U 03-01-14 7.00 605,000 639,023 CenterPoint Energy Resources Sr Unsecured 02-15-11 7.75 1,230,000 1,268,228
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 14 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) UNITED STATES (CONT.) Chesapeake Energy 01-15-16 6.63% $150,000 $133,500 Citigroup Commercial Mtge Trust Series 2006-C5 Cl A4 10-15-49 5.43 1,700,000(f) 1,396,547 Citigroup Mtge Loan Trust Collateralized Mtge Obligation Series 2005-7 Cl 2A3A 09-25-35 5.17 3,610,054(f,i) 2,147,517 Citigroup (European Monetary Unit) Sr Unsecured 08-02-19 5.00 595,000 564,304 Citigroup Sr Unsecured 05-15-18 6.13 170,000 142,871 Cleveland Electric Illuminating 1st Mtge 11-15-18 8.88 750,000 845,231 Colorado Interstate Gas Sr Unsecured 11-15-15 6.80 1,570,000 1,559,866 Comcast 03-15-37 6.45 160,000 148,304 Commercial Mtge Pass-Through Ctfs Series 2006-CN2A Cl BFL 02-05-19 0.80 400,000(d,f,h) 186,019 Community Health Systems 07-15-15 8.88 450,000 447,750 Cott Beverages USA 12-15-11 8.00 271,000 200,540 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-6CB Cl 1A1 04-25-35 7.50 697,284(f) 448,888 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2006-22R Cl 1A2 05-25-36 6.00 1,189,586(f) 1,030,545 Coventry Health Care Sr Unsecured 08-15-14 6.30 460,000 338,103 CPS Auto Trust Series 2007-A Cl A3 (MBIA) 09-15-11 5.04 811,266(d,o) 791,343 CS First Boston Mtge Securities Series 2004-C2 Cl A1 05-15-36 3.82 768,590(f) 734,303 CSC Holdings Sr Unsecured 04-15-14 8.50 580,000(d) 591,600 CSX Sr Unsecured 04-01-15 6.25 1,000,000 1,000,503 Denbury Resources 03-01-16 9.75 310,000 314,650 DIRECTV Holdings LLC/Financing 05-15-16 7.63 425,000(r) 420,750 DISH DBS 10-01-14 6.63 740,000 688,200 Dr Pepper Snapple Group 05-01-18 6.82 490,000 477,196 Duke Energy Indiana 1st Mtge 08-15-38 6.35 940,000 978,010 Dunkin Securitization Series 2006-1 Cl A2 (AMBAC) 06-20-31 5.78 1,600,000(d,o) 1,108,832 El Paso Sr Unsecured 12-12-13 12.00 555,000 599,400 Erac USA Finance 10-15-17 6.38 2,395,000(d) 1,755,715 Exelon Sr Unsecured 06-15-10 4.45 1,000,000 988,515 Federal Home Loan Mtge Corp #A11799 08-01-33 6.50 186,621(f) 199,425 Federal Home Loan Mtge Corp #A15881 11-01-33 5.00 1,100,358(f) 1,141,790 Federal Home Loan Mtge Corp #E91486 09-01-17 6.50 135,478(f) 143,059 Federal Home Loan Mtge Corp #E99684 10-01-18 5.00 477,623(f) 496,777
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) UNITED STATES (CONT.) Federal Natl Mtge Assn 10-15-14 4.63% $3,880,000(r) $4,268,904 11-15-30 6.63 2,300,000(r) 2,900,916 Federal Natl Mtge Assn #254686 04-01-18 5.50 565,961(f) 592,734 Federal Natl Mtge Assn #254722 05-01-18 5.50 578,701(f) 606,076 Federal Natl Mtge Assn #545874 08-01-32 6.50 187,643(f) 202,453 Federal Natl Mtge Assn #555528 04-01-33 6.00 846,030(f) 892,644 Federal Natl Mtge Assn #555734 07-01-23 5.00 757,164(f) 783,347 Federal Natl Mtge Assn #555740 08-01-18 4.50 1,016,533(f) 1,054,693 Federal Natl Mtge Assn #555851 01-01-33 6.50 977,482(f) 1,048,518 Federal Natl Mtge Assn #575487 04-01-17 6.50 472,138(f) 502,908 Federal Natl Mtge Assn #621581 12-01-31 6.50 233,263(f) 251,478 Federal Natl Mtge Assn #633966 03-01-17 6.00 103,768(f) 109,506 Federal Natl Mtge Assn #634749 03-01-17 5.50 502,103(f) 526,869 Federal Natl Mtge Assn #640996 05-01-32 7.50 401,718(f) 435,424 Federal Natl Mtge Assn #643381 06-01-17 6.00 263,195(f) 277,747 Federal Natl Mtge Assn #645053 05-01-32 7.00 690,753(f) 744,741 Federal Natl Mtge Assn #646147 06-01-32 7.00 307,489(f) 333,539 Federal Natl Mtge Assn #652284 08-01-32 6.50 314,304(f) 336,753 Federal Natl Mtge Assn #653145 07-01-17 6.00 170,537(f) 179,248 Federal Natl Mtge Assn #653730 09-01-32 6.50 143,901(f) 154,930 Federal Natl Mtge Assn #655589 08-01-32 6.50 1,203,048(f) 1,300,109 Federal Natl Mtge Assn #666424 08-01-32 6.50 231,567(f) 248,106 Federal Natl Mtge Assn #670461 11-01-32 7.50 165,757(f) 179,665 Federal Natl Mtge Assn #677333 01-01-33 6.00 3,341,287(f) 3,525,381 Federal Natl Mtge Assn #688034 03-01-33 5.50 402,698(f) 421,039 Federal Natl Mtge Assn #688691 03-01-33 5.50 698,738(f) 726,974 Federal Natl Mtge Assn #711503 06-01-33 5.50 890,086(f) 928,946 Federal Natl Mtge Assn #735029 09-01-13 5.32 618,968(f) 647,543 Federal Natl Mtge Assn #741850 09-01-33 5.50 1,600,437(f) 1,665,110 Federal Natl Mtge Assn #753507 12-01-18 5.00 1,775,662(f) 1,848,337 Federal Natl Mtge Assn #755498 11-01-18 5.50 832,230(f) 872,973 Federal Natl Mtge Assn #756236 01-01-34 6.00 3,286,508(f,k) 3,498,173 Federal Natl Mtge Assn #756788 11-01-33 6.50 214,812(f) 228,812 Federal Natl Mtge Assn #845229 11-01-35 5.50 1,430,424(f) 1,485,768 Federal Natl Mtge Assn #928019 01-01-37 5.50 1,853,048(f,k) 1,922,428 Forest Oil Sr Nts 02-15-14 8.50 320,000(d) 310,400 Freeport-McMoRan Copper & Gold Sr Unsecured 04-01-17 8.38 435,000 426,300 Frontier Communications Sr Unsecured 05-01-14 8.25 400,000 393,000 General Electric Capital Assurance Series 2003-1 Cl A4 05-12-35 5.25 450,000(d,f) 432,781 General Electric Capital (New Zealand Dollar) Sr Unsecured 02-04-10 6.63 3,450,000 1,962,156
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 16 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) UNITED STATES (CONT.) General Electric Capital Sr Unsecured 01-10-39 6.88% $615,000 $481,876 Genworth Financial Assurance Holdings (Japanese Yen) Sr Unsecured 06-20-11 1.60 198,000,000 713,512 Georgia-Pacific LLC 05-01-16 8.25 285,000(d) 285,000 Goldman Sachs Group (European Monetary Unit) Sr Unsecured 05-02-18 6.38 350,000 433,326 Goldman Sachs Group Sr Unsecured 02-15-19 7.50 530,000 546,751 Govt Natl Mtge Assn #604708 10-15-33 5.50 839,140(f) 875,834 Govt Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2002-80 Cl CI 01-20-32 626.02 372,156(e,f) 4,285 Greenwich Capital Commercial Funding Series 2003-C1 Cl A3 07-05-35 3.86 725,000(f) 686,140 Greenwich Capital Commercial Funding Series 2004-GG1 Cl A5 06-10-36 4.88 500,000(f) 471,470 GS Mtge Securities II Series 2007-EOP Cl J 03-06-20 1.34 1,250,000(d,f,h) 790,865 GS Mtge Securities II Series 2007-GG10 Cl 08-10-45 5.99 775,000(f) 105,897 GSR Mtge Loan Trust Collateralized Mtge Obligation Series 2004-10F Cl 6A1 09-25-34 5.00 3,924,863(f) 3,330,003 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2004-1 Cl A4 04-19-34 4.78 2,098,164(f,i) 1,765,424 HCA Sr Secured 02-15-17 9.88 675,000(d,r) 691,031 Indiana Michigan Power Sr Nts 03-15-19 7.00 800,000 804,173 Indiana Michigan Power Sr Unsecured 03-15-37 6.05 850,000 685,703 INVISTA Sr Unsecured 05-01-12 9.25 500,000(d) 453,750 Jarden Sr Unsecured 05-01-16 8.00 80,000(m) 78,000 05-01-16 8.00 220,000 214,500 JPMorgan Chase & Co Sr Unsecured 01-15-18 6.00 720,000 700,008 JPMorgan Chase Commercial Mtge Securities Series 2003-LN1 Cl A1 10-15-37 4.13 210,336(f) 200,678 JPMorgan Chase Commercial Mtge Securities Series 2003-ML1A Cl A1 03-12-39 3.97 146,648(f) 137,738 JPMorgan Chase Commercial Mtge Securities Series 2003-ML1A Cl A2 03-12-39 4.77 1,200,000(f) 1,092,078 JPMorgan Chase Commercial Mtge Securities Series 2005-LDP4 Cl AM 10-15-42 5.00 2,425,000(f) 1,446,008 JPMorgan Chase Commercial Mtge Securities Series 2007-CB20 Cl E 02-12-51 6.40 675,000(d,f) 41,425 Lamar Media 08-15-15 6.63 560,000 439,600 Lamar Media Sr Nts 04-01-14 9.75 255,000(d) 254,363 LB-UBS Commercial Mtge Trust Series 2004-C2 Cl A3 03-15-29 3.97 750,000(f) 693,926
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) UNITED STATES (CONT.) LB-UBS Commercial Mtge Trust Series 2006-C4 Cl AAB 06-15-32 6.05% $750,000(f) $689,826 LB-UBS Commercial Mtge Trust Series 2006-C6 Cl A4 09-15-39 5.37 800,000(f) 635,296 Lehman Brothers Holdings Sr Unsecured 05-02-18 6.88 1,320,000(b,p) 196,350 Liberty Media LLC Sr Unsecured 05-15-13 5.70 395,000 331,804 Manufacturers & Traders Trust Sub Nts 12-01-21 5.63 1,500,000 1,029,825 Metropolitan Life Global Funding I Sr Secured 04-10-13 5.13 915,000(d) 872,089 Morgan Stanley Capital I Series 2003-T11 Cl A2 06-13-41 4.34 261,271(f) 259,008 Morgan Stanley Capital I Series 2004-HQ4 Cl A5 04-14-40 4.59 750,000(f) 709,483 Morgan Stanley Capital I Series 2006-T23 Cl AAB 08-12-41 5.97 575,000(f) 544,360 Morgan Stanley (European Monetary Unit) Sr Unsecured 10-02-17 5.50 625,000 656,999 Morgan Stanley Sr Unsecured 04-01-18 6.63 205,000 195,090 Natl Collegiate Student Loan Trust Collateralized Mtge Obligation Interest Only Series 2006-3 Cl AIO 01-25-12 5.88 2,400,000(e) 399,000 NewPage Sr Secured 05-01-12 10.00 380,000 178,600 News America 11-15-37 6.65 430,000 341,310 Nextel Communications Series D 08-01-15 7.38 785,000 560,294 Nielsen Finance LLC 08-01-14 10.00 200,000 188,000 NiSource Finance 01-15-19 6.80 700,000 607,063 Northern States Power 1st Mtge Series B 08-28-12 8.00 515,000 576,849 Northwest Pipeline Sr Unsecured 04-15-17 5.95 1,085,000 999,378 NRG Energy 02-01-16 7.38 875,000 842,188 Omnicare 12-15-13 6.75 305,000 288,988 12-15-15 6.88 60,000 56,250 PacifiCorp 1st Mtge 07-15-38 6.35 750,000 769,869 PetroHawk Energy Sr Nts 08-01-14 10.50 480,000(d) 482,400 Potomac Electric Power 1st Mtge 12-15-38 7.90 460,000 537,125 PPL Electric Utilities 1st Mtge 11-30-13 7.13 2,850,000 3,168,786 Pricoa Global Funding I Sr Secured 10-18-12 5.40 1,310,000(d) 1,196,251 Principal Life Income Funding Trusts Sr Secured 12-14-12 5.30 1,370,000 1,266,373 Quicksilver Resources 08-01-15 8.25 870,000 691,650 Qwest Sr Unsecured 10-01-14 7.50 175,000 168,875
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 18 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) UNITED STATES (CONT.) Renaissance Home Equity Loan Trust Series 2005-4 Cl A3 02-25-36 5.57% $505,418 $481,210 RR Donnelley & Sons Sr Unsecured 01-15-17 6.13 2,940,000 2,214,088 SandRidge Energy 06-01-18 8.00 370,000(d) 321,900 Select Medical 02-01-15 7.63 290,000 220,400 Seneca Gaming Sr Unsecured 05-01-12 7.25 95,000 66,975 Sierra Pacific Power Series M 05-15-16 6.00 2,935,000 2,817,452 Southern California Gas 1st Mtge 03-15-14 5.50 845,000 916,326 Southern Natural Gas Sr Unsecured 04-01-17 5.90 790,000(d,r) 718,902 Starwood Hotels & Resorts Worldwide Sr Unsecured 10-15-14 7.88 300,000(m) 288,855 Structured Asset Securities Collateralized Mtge Obligation Series 2003-33H Cl 1A1 10-25-33 5.50 1,320,190(f) 1,206,221 Toledo Edison Sr Unsecured 05-15-37 6.15 450,000 363,834 Toyota Motor Credit (European Monetary Unit) 02-12-10 4.00 150,000 199,877 Transcontinental Gas Pipe Line Sr Unsecured 04-15-16 6.40 3,590,000 3,516,405 U.S. Treasury 04-15-12 1.38 600,000(r) 600,186 04-30-14 1.88 4,335,000 4,305,522 02-15-15 4.00 1,600,000 1,750,374 02-15-19 2.75 2,320,000(r) 2,247,129 05-15-38 4.50 2,385,000 2,566,484 U.S. Treasury Inflation-Indexed Bond 01-15-14 2.00 5,677,849(g) 5,785,267 01-15-15 1.63 538,879(g) 536,276 Verizon New York Sr Unsecured Series A 04-01-12 6.88 2,380,000 2,480,147 Visant 10-01-12 7.63 55,000(r) 53,350 Wachovia Bank Commercial Mtge Trust Series 2003-C8 Cl A2 11-15-35 3.89 777,247(f) 776,163 Wachovia Bank Commercial Mtge Trust Series 2005-C20 Cl A5 07-15-42 5.09 800,000(f) 683,630 Wachovia Bank Commercial Mtge Trust Series 2006-C24 Cl APB 03-15-45 5.58 500,000(f) 469,337 Wachovia Bank Commercial Mtge Trust Series 2006-C27 Cl APB 07-15-45 5.73 900,000(f) 814,743 Waste Management 03-11-19 7.38 275,000 278,877 Wells Fargo & Co (European Monetary Unit) Sr Unsecured 11-03-16 4.13 200,000 216,387 Wells Fargo & Co Sr Unsecured 12-11-17 5.63 720,000 671,268 Wells Fargo Mtge Backed Securities Trust Collateralized Mtge Obligation Series 2005-14 Cl 2A1 12-25-35 5.50 4,185,535(f) 3,426,579 West Corp 10-15-14 9.50 72,000 62,460 Windstream 08-01-16 8.63 215,000 213,925 03-15-19 7.00 40,000 37,600
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 19 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) UNITED STATES (CONT.) XTO Energy Sr Unsecured 01-31-15 5.00% $720,000 $701,266 06-30-15 5.30 1,880,000 1,821,756 --------------- Total 152,168,333 ------------------------------------------------------------------------------------- URUGUAY (0.1%) Republica Orient Uruguay Sr Unsecured 03-21-36 7.63 275,000 235,125 ------------------------------------------------------------------------------------- VENEZUELA (0.2%) Petroleos de Venezuela 04-12-17 5.25 770,000 349,195 Republic of Venezuela 02-26-16 5.75 290,000 165,300 05-07-23 9.00 346,000 200,680 Republic of Venezuela Sr Unsecured 10-08-14 8.50 160,000 111,360 --------------- Total 826,535 ------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $432,803,309) $413,317,506 ------------------------------------------------------------------------------------- SENIOR LOANS (0.4%)(l) COUPON PRINCIPAL BORROWER RATE AMOUNT VALUE(a) UNITED STATES Charter Communications Operating LLC Incremental Term Loan 03-05-14 5.23-6.25% $1,224,206 $1,036,205 Fairpoint Communications Tranche B Term Loan TBD TBD 1,160,000(m,n) 584,350 ------------------------------------------------------------------------------------- TOTAL SENIOR LOANS (Cost: $1,767,826) $1,620,555 -------------------------------------------------------------------------------------
MONEY MARKET FUND (0.9%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.28% 4,098,747(q) $4,098,747 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $4,098,747) $4,098,747 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (3.3%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 14,268,837 $14,268,837 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $14,268,837) $14,268,837 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $452,938,719)(s) $433,305,645 =====================================================================================
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 20 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- INVESTMENTS IN DERIVATIVES FUTURES CONTRACTS OUTSTANDING AT APRIL 30, 2009
NUMBER OF UNREALIZED CONTRACTS NOTIONAL EXPIRATION APPRECIATION CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION) ------------------------------------------------------------------------------------- Euro-Bobl, 5-year 12 $1,841,783 June 2009 $(12,883) Euro-Bund, 10-year 64 10,377,591 June 2009 (88,723) Japanese Govt Bond, 10- 6 8,336,190 June 2009 (117,267) year United Kingdom Long GILT, 13 2,319,529 June 2009 (17,643) 10-year U.S. Long Bond, 20-year 41 5,025,063 June 2009 (136,978) U.S. Treasury Note, 2- 46 10,007,157 July 2009 15,000 year U.S. Treasury Note, 5- (95) (11,128,360) July 2009 99,286 year U.S. Treasury Note, 10- (4) (483,750) June 2009 10,556 year ------------------------------------------------------------------------------------- Total $(248,652) -------------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT APRIL 30, 2009
CURRENCY TO BE CURRENCY TO BE UNREALIZED UNREALIZED EXCHANGE DATE DELIVERED RECEIVED APPRECIATION DEPRECIATION ----------------------------------------------------------------------------------------------- May 5, 2009 238,711 42,478 $58 $-- Danish Krone U.S. Dollar ----------------------------------------------------------------------------------------------- May 5, 2009 139,750 79,434 461 -- New Zealand Dollar U.S. Dollar ----------------------------------------------------------------------------------------------- May 6, 2009 44,700,000 2,272,612 57,995 -- Czech Koruna U.S. Dollar ----------------------------------------------------------------------------------------------- May 7, 2009 4,200,000 42,674 77 -- Japanese Yen U.S. Dollar ----------------------------------------------------------------------------------------------- May 14, 2009 12,630,000 3,779,966 -- (1,715) Polish Zloty U.S. Dollar ----------------------------------------------------------------------------------------------- May 15, 2009 527,000 698,470 1,073 -- European Monetary Unit U.S. Dollar ----------------------------------------------------------------------------------------------- May 18, 2009 27,470,000 2,085,627 98,164 -- Mexican Peso U.S. Dollar ----------------------------------------------------------------------------------------------- May 19, 2009 1,817,737 2,230,000 51,950 -- U.S. Dollar Canadian Dollar ----------------------------------------------------------------------------------------------- May 22, 2009 1,470,000 1,000,000 9,613 U.S. Dollar British Pound ----------------------------------------------------------------------------------------------- May 28, 2009 23,953,242 2,364,185,000 30,949 -- U.S. Dollar Japanese Yen ----------------------------------------------------------------------------------------------- May 29, 2009 2,324,655 3,500,000 39,512 -- U.S. Dollar Singapore Dollar ----------------------------------------------------------------------------------------------- June 2, 2009 10,710,000 1,606,797 -- (23,079) Norwegian Krone U.S. Dollar -----------------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 21 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT APRIL 30, 2009 (CONTINUED)
CURRENCY TO BE CURRENCY TO BE UNREALIZED UNREALIZED EXCHANGE DATE DELIVERED RECEIVED APPRECIATION DEPRECIATION ----------------------------------------------------------------------------------------------- June 2, 2009 1,606,797 1,222,393 $10,808 $-- U.S. Dollar European Monetary Unit ----------------------------------------------------------------------------------------------- Total $300,660 $(24,794) -----------------------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies 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 may be determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2009, the value of these securities amounted to $21,629,517 or 5.0% of net assets. (e) Interest only represents securities that entitle holders to receive only interest payments on the underlying mortgages. The yield to maturity of an interest only is extremely sensitive to the rate of principal payments on the underlying mortgage assets. A rapid (slow) rate of principal repayments may have an adverse (positive) effect on yield to maturity. The principal amount shown is the notional amount of the underlying mortgages. The interest rate disclosed represents yield based upon the estimated timing and amount of future cash flows at April 30, 2009. (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) 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) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on April 30, 2009. (i) Adjustable rate mortgage; interest rate varies to reflect current market conditions; rate shown is the effective rate on April 30, 2009. -------------------------------------------------------------------------------- 22 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (j) This is a variable rate security that entitles holders to receive only interest payments. Interest is paid annually. The interest payment is based on the Gross Domestic Product (GDP) level of the previous year for the respective country. To the extent that the previous year's GDP exceeds the 'base case GDP', an interest payment is made equal to 0.012225 of the difference. (k) At April 30, 2009, investments in securities included securities valued at $1,050,861 that were partially pledged as collateral to cover initial margin deposits on open interest rate futures contracts. (l) Senior loans have rates of interest that float periodically based primarily on the London Interbank Offered Rate ("LIBOR") and other short-term rates. Remaining maturities of senior loans may be less than the stated maturities shown as a result of contractual or optional prepayments by the borrower. Such prepayments cannot be predicted with certainty. (m) At April 30, 2009, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $1,032,284. See Note 1 to the financial statements. (n) Represents a senior loan purchased on a when-issued or delayed-delivery basis. Certain details associated with this purchase are not known prior to the settlement date of the transaction. In addition, senior loans typically trade without accrued interest and therefore a weighted average coupon rate is not available prior to settlement. At settlement, if still unknown, the borrower or counterparty will provide the Fund with the final weighted average coupon rate and maturity date. (o) The following abbreviations are used in the portfolio security descriptions to identify the insurer of the issue: AMBAC -- Ambac Assurance Corporation FSA -- Financial Security Assurance MBIA -- MBIA Insurance Corporation
(p) This position is in bankruptcy. (q) Affiliated Money Market Fund -- See Note 6 to the financial statements. The rate shown is the seven-day current annualized yield at April 30, 2009. (r) At April 30, 2009, security was partially or fully on loan. See Note 5 to the financial statements. (s) At April 30, 2009, the cost of securities for federal income tax purposes was approximately $452,939,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $13,736,000 Unrealized depreciation (33,369,000) ----------------------------------------------------------- Net unrealized depreciation $(19,633,000) -----------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 23 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to implement more uniform reporting relating to the fair valuation of securities for financial statement purposes. Mutual funds are required to implement the requirements of this standard for fiscal years beginning after Nov. 15, 2007. While uniformity of presentation is the objective of the standard, it is likely that there may be a range of practices utilized and it may be some period of time before industry practices become more uniform. For this reason care should be exercised in interpreting this information and/or using it for comparison with other mutual funds. Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.) - Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) Observable inputs are those based on market data obtained from sources independent of the Fund, and unobservable inputs reflect the Fund's own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. The following table is a summary of the inputs used to value the Fund's investments as of April 30, 2009:
FAIR VALUE AT APRIL 30, 2009 ---------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL ---------------------------------------------------------------------------------- Investments in securities $39,832,131 $387,645,133 $5,828,381 $433,305,645 Other financial instruments* (248,652) 275,866 -- 27,214 ---------------------------------------------------------------------------------- Total $39,583,479 $387,920,999 $5,828,381 $433,332,859 ----------------------------------------------------------------------------------
* Other financial instruments are derivative instruments, such as futures and forwards, which are valued at the unrealized appreciation (depreciation) on the instrument. The following table is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.
INVESTMENTS IN OTHER FINANCIAL SECURITIES INSTRUMENTS ------------------------------------------------------------------------ Balance as of Oct. 31, 2008 $4,636,313 $28,672 Accrued discounts/premiums 12,538 -- Realized gain (loss) (64,190) * Change in unrealized appreciation (depreciation) (122,578) (28,672) Net purchases (sales) (1,535,818) -- Transfers in and/or out of Level 3 2,902,116 -- ------------------------------------------------------------------------ Balance as of April 30, 2009 $5,828,381 $-- ------------------------------------------------------------------------
* The realized gain (loss) earned during the period from Nov. 1, 2008 to April 30, 2009 for Other financial instruments was $14,423,970. -------------------------------------------------------------------------------- 24 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY 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 filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 25 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- APRIL 30, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $434,571,135) $414,938,061 Affiliated money market fund (identified cost $4,098,747) 4,098,747 Investments of cash collateral received for securities on loan (identified cost $14,268,837) 14,268,837 ------------------------------------------------------------------------------- Total investments in securities (identified cost $452,938,719) 433,305,645 Cash 118,757 Foreign currency holdings (identified cost $8,060,233) 8,180,316 Capital shares receivable 260,036 Dividends and accrued interest receivable 6,488,564 Receivable for investment securities sold 806,360 Unrealized appreciation on forward foreign currency contracts 300,660 ------------------------------------------------------------------------------- Total assets 449,460,338 ------------------------------------------------------------------------------- LIABILITIES Capital shares payable 854,405 Payable for investment securities purchased 1,428,480 Payable upon return of securities loaned 14,268,837 Variation margin payable on futures contracts 78,034 Unrealized depreciation on forward foreign currency contracts 24,794 Accrued investment management services fees 8,431 Accrued distribution fees 2,878 Accrued transfer agency fees 2,114 Accrued administrative services fees 951 Accrued plan administration services fees 1 Other accrued expenses 134,356 ------------------------------------------------------------------------------- Total liabilities 16,803,281 ------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $432,657,057 ------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 691,808 Additional paid-in capital 480,120,112 Excess of distributions over net investment income (8,178,579) Accumulated net realized gain (loss) (20,438,223) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (19,538,061) ------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $432,657,057 ------------------------------------------------------------------------------- *Including securities on loan, at value $ 22,659,223 -------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 26 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $225,559,084 36,079,192 $6.25(1) Class B $ 36,750,784 5,822,253 $6.31 Class C $ 4,140,182 661,354 $6.26 Class I $136,444,964 21,854,224 $6.24 Class R4 $ 128,056 20,475 $6.25 Class W $ 29,633,987 4,743,340 $6.25 -----------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $6.56. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 4.75%. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 27 STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED APRIL 30, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Interest $ 10,825,377 Income distributions from affiliated money market fund 15,090 Fee income from securities lending 24,978 ------------------------------------------------------------------------------- Total income 10,865,445 ------------------------------------------------------------------------------- Expenses: Investment management services fees 1,804,633 Distribution fees Class A 294,818 Class B 199,025 Class C 21,156 Class W 75,397 Transfer agency fees Class A 309,392 Class B 55,315 Class C 5,697 Class R4 30 Class W 60,318 Administrative services fees 203,750 Plan administration services fees -- Class R4 153 Compensation of board members 8,709 Custodian fees 116,450 Printing and postage 38,250 Registration fees 29,753 Professional fees 20,065 Other 8,959 ------------------------------------------------------------------------------- Total expenses 3,251,870 Expenses waived/reimbursed by the Investment Manager and its affiliates (241,551) ------------------------------------------------------------------------------- Total net expenses 3,010,319 ------------------------------------------------------------------------------- Investment income (loss) -- net 7,855,126 ------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (11,839,696) Foreign currency transactions 1,559,264 Futures contracts (5,591) ------------------------------------------------------------------------------- Net realized gain (loss) on investments (10,286,023) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 44,024,762 ------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 33,738,739 ------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 41,593,865 -------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 28 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2009 OCT. 31, 2008 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 7,855,126 $ 24,285,681 Net realized gain (loss) on investments (10,286,023) 9,721,813 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 44,024,762 (100,650,487) -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 41,593,865 (66,642,993) -------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (14,451,166) (8,771,172) Class B (2,363,546) (1,230,738) Class C (247,912) (86,601) Class I (12,198,283) (7,773,703) Class R4 (7,374) (4,806) Class W (5,231,186) (4,581,936) -------------------------------------------------------------------------------------------------- Total distributions (34,499,467) (22,448,956) --------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 29 STATEMENTS OF CHANGES IN NET ASSETS (continued) --------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2009 OCT. 31, 2008 (UNAUDITED) CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 11,159,821 $ 103,694,288 Class B shares 2,189,396 26,745,270 Class C shares 386,292 4,044,562 Class I shares 8,769,890 171,903,867 Class R4 shares 7,520 95,770 Class W shares 5,097,598 259,629,317 Reinvestment of distributions at net asset value Class A shares 13,585,257 8,236,440 Class B shares 2,243,075 1,157,449 Class C shares 228,357 78,743 Class I shares 12,197,728 7,773,342 Class R4 shares 7,374 4,806 Class W shares 5,230,912 4,581,771 Payments for redemptions Class A shares (50,968,379) (90,849,153) Class B shares (10,495,046) (27,193,143) Class C shares (818,379) (1,808,860) Class I shares (92,633,872) (106,857,080) Class R4 shares (7,000) (79,105) Class W shares (117,133,788) (155,446,712) -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (210,953,244) 205,711,572 -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (203,858,846) 116,619,623 Net assets at beginning of period 636,515,903 519,896,280 -------------------------------------------------------------------------------------------------- Net assets at end of period $ 432,657,057 $ 636,515,903 -------------------------------------------------------------------------------------------------- Undistributed (excess of distributions over) net investment income $ (8,178,579) $ 18,465,762 --------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 30 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(j) 2008 2007 2006 2005 Net asset value, beginning of period $6.16 $6.89 $6.60 $6.59 $7.02 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09(b) .22(b) .20(b) .19 .16 Net gains (losses) (both realized and unrealized) .38 (.73) .35 .14 (.23) -------------------------------------------------------------------------------------------------------------- Total from investment operations .47 (.51) .55 .33 (.07) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.38) (.22) (.26) (.32) (.36) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.25 $6.16 $6.89 $6.60 $6.59 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $226 $249 $259 $276 $353 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.39%(e) 1.32% 1.37% 1.39% 1.37% -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) 1.25%(e) 1.25% 1.25% 1.25% 1.35% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.99%(e) 3.26% 3.08% 2.77% 2.42% -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 23% 75% 77% 68% 73% -------------------------------------------------------------------------------------------------------------- Total return(h) 7.50%(i) (7.66%) 8.63% 5.17% (1.18%) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (g) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 31 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(j) 2008 2007 2006 2005 Net asset value, beginning of period $6.23 $6.96 $6.67 $6.59 $7.02 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .07(b) .17(b) .15(b) .13 .10 Net gains (losses) (both realized and unrealized) .38 (.73) .35 .16 (.23) -------------------------------------------------------------------------------------------------------------- Total from investment operations .45 (.56) .50 .29 (.13) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.37) (.17) (.21) (.21) (.30) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.31 $6.23 $6.96 $6.67 $6.59 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $37 $42 $47 $63 $111 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 2.15%(e) 2.09% 2.13% 2.16% 2.13% -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) 2.01%(e) 2.01% 2.01% 2.02% 2.12% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.22%(e) 2.49% 2.30% 1.98% 1.65% -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 23% 75% 77% 68% 73% -------------------------------------------------------------------------------------------------------------- Total return(h) 7.06%(i) (8.28%) 7.68% 4.45% (1.98%) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (g) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 32 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(j) 2008 2007 2006 2005 Net asset value, beginning of period $6.18 $6.91 $6.62 $6.57 $6.99 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .07(b) .17(b) .15(b) .14 .11 Net gains (losses) (both realized and unrealized) .38 (.73) .35 .13 (.22) -------------------------------------------------------------------------------------------------------------- Total from investment operations .45 (.56) .50 .27 (.11) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.37) (.17) (.21) (.22) (.31) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.26 $6.18 $6.91 $6.62 $6.57 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $4 $4 $3 $3 $4 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 2.14%(e) 2.08% 2.13% 2.16% 2.14% -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) 2.01%(e) 2.01% 2.01% 2.02% 2.12% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.23%(e) 2.51% 2.32% 2.00% 1.65% -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 23% 75% 77% 68% 73% -------------------------------------------------------------------------------------------------------------- Total return(h) 7.12%(i) (8.27%) 7.75% 4.25% (1.83%) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (g) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 33 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(i) 2008 2007 2006 2005 Net asset value, beginning of period $6.14 $6.87 $6.59 $6.61 $7.03 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .10(b) .25(b) .23(b) .21 .19 Net gains (losses) (both realized and unrealized) .38 (.73) .34 .14 (.22) -------------------------------------------------------------------------------------------------------------- Total from investment operations .48 (.48) .57 .35 (.03) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.38) (.25) (.29) (.37) (.39) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.24 $6.14 $6.87 $6.59 $6.61 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $136 $206 $157 $145 $89 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) .87%(e) .85% .87% .88% .91% -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) .82%(e) .82% .87% .88% .91% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.42%(e) 3.68% 3.47% 3.18% 2.87% -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 23% 75% 77% 68% 73% -------------------------------------------------------------------------------------------------------------- Total return 7.80%(h) (7.30%) 8.91% 5.52% (.56%) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (g) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (h) Not annualized. (i) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 34 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(i) 2008 2007 2006 2005 Net asset value, beginning of period $6.16 $6.89 $6.60 $6.61 $7.04 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .10(b) .25(b) .22(b) .20 .16 Net gains (losses) (both realized and unrealized) .37 (.72) .35 .13 (.22) -------------------------------------------------------------------------------------------------------------- Total from investment operations .47 (.47) .57 .33 (.06) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.38) (.26) (.28) (.34) (.37) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.25 $6.16 $6.89 $6.60 $6.61 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.17%(e) 1.14% 1.17% 1.20% 1.20% -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) .99%(e) .87% 1.08% 1.08% 1.18% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.25%(e) 3.64% 3.27% 2.95% 2.60% -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 23% 75% 77% 68% 73% -------------------------------------------------------------------------------------------------------------- Total return 7.61%(h) (7.19%) 8.84% 5.29% (1.00%) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (g) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (h) Not annualized. (i) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 35 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS W
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(j) 2008 2007(b) Net asset value, beginning of period $6.15 $6.88 $6.79 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .09 .22 .20 Net gains (losses) (both realized and unrealized) .38 (.73) .17 -------------------------------------------------------------------------------------------------------------- Total from investment operations .47 (.51) .37 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.37) (.22) (.28) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.25 $6.15 $6.88 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $30 $135 $54 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.31%(f) 1.30% 1.35%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.27%(f) 1.27% 1.26%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.99%(f) 3.27% 3.34%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 23% 75% 77% -------------------------------------------------------------------------------------------------------------- Total return 7.58%(i) (7.62%) 5.71%(i) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 1, 2006 (inception date) to Oct. 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (i) Not annualized. (j) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 36 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS ------------------------------------------------- (UNAUDITED AS TO APRIL 30, 2009) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RiverSource Global Bond Fund (the Fund) is a series of RiverSource Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a non-diversified, open-end management investment company. RiverSource Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund invests primarily in debt obligations of U.S. and foreign issuers. The Fund offers Class A, Class B, Class C, Class I, Class R4 and Class W shares. - Class A shares are sold with a front-end sales charge. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - Class C shares may be subject to a CDSC. - Class I and Class R4 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. - Class W shares are sold without a front-end sales charge or CDSC and are offered through qualifying discretionary accounts. At April 30, 2009, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) and the RiverSource affiliated funds-of-funds owned 100% of Class I shares. At April 30, 2009, the Investment Manager and the RiverSource affiliated funds-of-funds owned approximately 32% of the total outstanding Fund shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- VALUATION OF SECURITIES Effective Nov. 1, 2008, the Fund adopted Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. There was no impact to the Fund's net assets or results of operations upon adoption. The fair valuation measurements disclosure can be found following the Notes to Portfolio of Investments. 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. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange (NYSE) and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the Investment Manager, as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the -------------------------------------------------------------------------------- 38 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- current market conditions as of the close of the NYSE. Swap transactions are valued through an authorized pricing service, broker, or an internal model. 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, which approximates fair value. SECURITIES PURCHASED ON A FORWARD-COMMITMENT BASIS Delivery and payment for securities that have been purchased by the Fund 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 Fund's net assets the same as owned securities. The Fund designates cash or liquid securities at least equal to the amount of its forward- commitments. At April 30, 2009, the Fund has outstanding when-issued securities of $411,684 and other forward-commitments of $620,600. The Fund 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 Fund to "roll over" its purchase commitments, the Fund receives negotiated amounts in the form of reductions of the purchase price of the commitment. The Fund records the incremental difference between the forward purchase and sale of each forward roll as realized gain or loss. Losses may arise due to changes in the value of the securities or if a counterparty does not perform under the terms of the agreement. If a counterparty files for bankruptcy or becomes insolvent, the Fund's right to repurchase or sell securities may be limited. The Fund did not enter into any mortgage dollar roll transactions during the six months ended April 30, 2009. 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. Cash collateral may be collected by the Fund to secure certain over-the-counter options (OTC options) trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. 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 -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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. Option contracts, including OTC option contracts, with no readily available market value are valued using quotations obtained from independent brokers as of the close of the NYSE. The Fund will realize a gain or loss when the option transaction expires or is exercised. When options on debt securities or futures are exercised, the Fund will realize a gain or loss. When other options are 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. At April 30, 2009, and for the year then ended, the Fund had no outstanding option contracts. 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. Futures and options on futures are valued daily based upon the last sale price at the close of the market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. FOREIGN CURRENCY TRANSLATIONS AND FORWARD 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 -------------------------------------------------------------------------------- 40 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At April 30, 2009, foreign currency holdings consisted of multiple denominations, primarily British pounds. The Fund may enter into forward foreign currency 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 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 counterparty will not complete its contract obligations. CMBS TOTAL RETURN SWAP TRANSACTIONS The Fund may enter into swap agreements to earn the total return on a specified security or index of fixed income securities. CMBS total return swaps are bilateral financial contracts designed to replicate synthetically the total returns of commercial mortgage-backed securities. Under the terms of the swaps, the Fund either receives or pays the total return on a reference security or index applied to a notional principal amount. In return, the Fund 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). Swap agreements may be subject to liquidity risk, which exists when a particular swap is difficult to purchase or sell. It may not be possible for the Fund to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses. Total return swaps are subject to the risk that the counterparty will default on its obligation to pay net amounts due to the Fund. At April 30, 2009, the Fund had no outstanding CMBS total return swap contracts. 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 -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of futures and options contracts, foreign currency transactions, recognition of unrealized appreciation (depreciation) for certain derivative investments and losses deferred due to wash sales. 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. RECENT ACCOUNTING PRONOUNCEMENTS The Fund has adopted FASB Staff Position No. 133-1 and FIN No. 45-4 (FSP FAS 133-1 and FIN 45-4), "Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45." The amendments to FSP FAS 133-1 and FIN 45-4 require enhanced disclosures about a fund's derivatives and guarantees. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows and (d) the current status of the payment/performance risk of the credit derivative. The amendments to FSP FAS 133-1 and FIN 45-4 also require additional disclosures about the current status of the payment/performance risk of a guarantee. In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires -------------------------------------------------------------------------------- 42 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- enhanced disclosures about a fund's derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of April 30, 2009, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. On April 9, 2009, the FASB issued Staff Position No. 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly" (FSP 157-4). FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also requires additional disaggregation of the current SFAS 157 required disclosures. FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Management is currently evaluating the impact that the adoption of FSP 157-4 will have on the amounts and disclosures within the Fund's financial statements. 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, if any, is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.72% to 0.52% annually as the Fund's assets increase. The management fee for the six months ended April 30, 2009 was 0.70% of the Fund's average daily net assets. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 43 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. The fee for the six months ended April 30, 2009 was 0.08% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended April 30, 2009, other expenses paid to this company were $2,991. COMPENSATION OF BOARD MEMBERS 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. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $20.50 for Class A, $21.50 for Class B and $21.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R4 shares and an annual asset- based fee at a rate of 0.20% of the Fund's average daily net assets attributable to Class W shares. The Transfer Agent charges an annual 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 in the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Fund's average daily net assets attributable to Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. -------------------------------------------------------------------------------- 44 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- DISTRIBUTION FEES The Fund has agreements with RiverSource Distributors, Inc. and RiverSource Fund Distributors, Inc. (collectively, 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 of up to 0.25% of the Fund's average daily net assets attributable to Class A and Class W shares and a fee at an annual rate of up to 1.00% of the Fund's average daily net assets attributable to Class B and Class C shares. For Class B and Class C shares, up to 0.75% of the fee is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed expense") was approximately $1,204,000 and $36,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of April 30, 2009, and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGES Sales charges received by the Distributor for distributing Fund shares were $70,131 for Class A, $15,648 for Class B and $319 for Class C for the six months ended April 30, 2009. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended April 30, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*) were as follows: Class A............................................. 1.25% Class B............................................. 2.01 Class C............................................. 2.01 Class I............................................. 0.82 Class R4............................................ 0.99 Class W............................................. 1.27
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class A........................................... $96,638 Class B........................................... 17,272 Class C........................................... 1,733
The waived/reimbursed fees and expenses for plan administration services fees at the class level were as follows: Class R4............................................ $77
-------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 45 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- The management fees waived/reimbursed at the Fund level were $125,831. The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Oct. 31, 2009, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed the following percentage of the class average daily net assets: Class A............................................. 1.25% Class B............................................. 2.01 Class C............................................. 2.01 Class I............................................. 0.82 Class R4............................................ 1.12 Class W............................................. 1.27
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. CUSTODIAN FEES Effective Dec. 15, 2008, the Fund pays custodian fees to JPMorgan Chase Bank, N.A. For the period from Nov. 1, 2008 to Dec. 15, 2008, the Fund paid custodian fees amounting to $13,048 to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $113,909,635 and $351,806,217, respectively, for the six months ended April 30, 2009. Realized gains and losses are determined on an identified cost basis. -------------------------------------------------------------------------------- 46 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED APRIL 30, 2009 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) ---------------------------------------------------------------------------------- Class A 1,808,766 2,146,170 (8,270,357) (4,315,421) Class B 351,382 349,934 (1,689,487) (988,171) Class C 62,531 35,905 (132,370) (33,934) Class I 1,418,299 1,933,079 (14,994,823) (11,643,445) Class R4 1,221 1,165 (1,140) 1,246 Class W 829,086 826,368 (18,900,654) (17,245,200) ----------------------------------------------------------------------------------
YEAR ENDED OCT. 31, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) ---------------------------------------------------------------------------------- Class A 14,979,267 1,211,499 (13,367,693) 2,823,073 Class B 3,822,733 168,457 (3,926,341) 64,849 Class C 583,922 11,530 (267,833) 327,619 Class I 25,302,709 1,145,677 (15,862,285) 10,586,101 Class R4 13,757 706 (11,545) 2,918 Class W 37,609,351 674,090 (24,172,875) 14,110,566 ----------------------------------------------------------------------------------
5. LENDING OF PORTFOLIO SECURITIES Effective Dec. 1, 2008, the Fund has entered into a Master Securities Lending Agreement ("the Agreement") with JPMorgan Chase Bank, National Association ("JPMorgan"). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments, and any uninvested cash collateral balance, are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At April 30, 2009, securities valued at $22,659,223 were on loan, secured by -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 47 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- U.S. government securities valued at $8,873,321 and by cash collateral of $14,268,837 invested in short-term securities or in cash equivalents. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Income of $24,978 earned from securities lending from Dec. 1, 2008 through April 30, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Funds or the borrower at any time, and are, therefore, not considered to be illiquid investments. Prior to Dec. 1, 2008, the Investment Manager served as securities lending agent for the Fund under the Securities Lending Agency Agreement. For the period from Nov. 1, 2008 through Nov. 30, 2008, the Fund had no securities on loan. 6. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term Cash Fund aggregated $105,298,465 and $108,122,821, respectively, for the six months ended April 30, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short- Term Cash Fund at April 30, 2009, can be found in the Portfolio of Investments. 7. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility agreement, which is a -------------------------------------------------------------------------------- 48 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $475 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $175 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $650 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum, in addition to an upfront fee equal to its pro rata share of 0.02% of the amount of the credit facility. The Fund had no borrowings during the six months ended April 30, 2009. 8. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund had a capital loss carry-over of $6,492,562 at Oct. 31, 2008, that if not offset by capital gains will expire as follows:
2010 2014 2016 $3,665,053 $498,771 $2,328,738
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. RISKS RELATING TO CERTAIN INVESTMENTS DIVERSIFICATION RISK The Fund is non-diversified. A non-diversified fund may invest more of its assets in fewer companies than if it were a diversified fund. The Fund may be more exposed to the risks of loss and volatility than a fund that invests more broadly. FOREIGN/EMERGING MARKETS RISK Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging markets may accentuate these risks. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 49 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 10. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co., Inc. (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual -------------------------------------------------------------------------------- 50 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (which is now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman is and has been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman will pay $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 51 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- 52 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- RiverSource Investments, LLC ("RiverSource Investments" or the "investment manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), RiverSource Investments provides investment advice and other services to the Fund and all funds in the RiverSource Family of Funds (collectively, the "Funds"). On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. RiverSource Investments prepared detailed reports for the Board and its Contracts Committee in March and April 2009, including reports based on data provided by independent organizations to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource Investments addressing the services RiverSource Investments provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts, Investment Review and Compliance Committees in determining whether to continue the IMS Agreement. At the April 7-8, 2009 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by RiverSource Investments: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource Investments, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource Investments, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, most notably, the large investment made in the acquisition of J. & W. Seligman & Co. Incorporated, including its portfolio management operations, personnel and infrastructure (including the addition of two new offices in New York City and Palo Alto). Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource Investments, the Board considered the quality of the administrative and transfer agency services provided by RiverSource Investments' affiliates to the Fund. The Board also reviewed the financial condition of RiverSource Investments (and its affiliates) and each entity's ability to carry out its responsibilities under the IMS Agreement. Further, the Board considered RiverSource Investments' ability to -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 53 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- retain key personnel and its expectations in this regard. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by RiverSource Investments). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality, particularly in light of recent market conditions. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that RiverSource Investments and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods, recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2007 to December 2008. The Board observed that the Fund's investment performance met expectations. Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource Investments and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to RiverSource Investments' profitability. They also reviewed information in the report comparing the fees charged to the Fund by RiverSource Investments to fees charged to other client accounts (with similar investment strategies to those of the Fund). The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund are generally in line with the "pricing philosophy" (i.e., that the total expense ratio -------------------------------------------------------------------------------- 54 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- of each fund (excluding the effect of a performance incentive adjustment, if applicable), with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) approximated the peer group's median expense ratio. The Board also considered the expected profitability of RiverSource Investments and its affiliates in connection with RiverSource Investments providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource Investments and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource Investments as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 8, 2009, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement for an additional annual period. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT 55 PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- 56 RIVERSOURCE GLOBAL BOND FUND -- 2009 SEMIANNUAL REPORT RIVERSOURCE GLOBAL BOND FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Distributors, Inc., and RiverSource Fund Distributors, Inc., Members FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C)2009 RiverSource Investments, LLC. S-6339 Y (6/09)
Semiannual Report (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE GLOBAL TECHNOLOGY FUND SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2009 RIVERSOURCE GLOBAL TECHNOLOGY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. (SINGLE STRATEGY FUNDS ICON) TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Fund Expenses Example.............. 7 Portfolio of Investments........... 9 Statement of Assets and Liabilities...................... 12 Statement of Operations............ 13 Statements of Changes in Net Assets........................... 14 Financial Highlights............... 15 Notes to Financial Statements...... 20 Approval of Investment Management Services Agreement............... 34 Proxy Voting....................... 37
-------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > RiverSource Global Technology Fund (the Fund) Class A shares rose 6.59% (excluding sales charge) for the six months ended April 30, 2009. > The Fund outperformed its benchmark, the unmanaged Morgan Stanley Capital International (MSCI) World Index, which declined 5.09% during the same six month period. > The Fund also outperformed the unmanaged Morgan Stanley Capital International (MSCI) World Information Technology (IT) Index, which returned 5.01% for the same period. > The Fund underperformed the unmanaged S&P North American Technology Sector Index(TM) (S&P NATS Index), which returned 7.36%, during the same six month period. > The Fund also underperformed its peer group, represented by the Lipper Global Science and Technology Funds Index, which returned 12.04% during the same period. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2009) --------------------------------------------------------------------------------
6 months* 1 year 3 years 5 years 10 years ------------------------------------------------------------------------------ RiverSource Global Technology Fund Class A (excluding sales charge) +6.59% -30.20% -8.58% +0.57% -3.44% ------------------------------------------------------------------------------ MSCI World Index(1) (unmanaged) -5.09% -38.91% -11.04% -0.49% -1.12% ------------------------------------------------------------------------------ MSCI World IT Index(2) (unmanaged) +5.01% -31.01% -9.18% -2.55% -6.17% ------------------------------------------------------------------------------ S&P NATS Index(3) (unmanaged) +7.36% -26.23% -6.11% -0.66% -4.84% ------------------------------------------------------------------------------ Lipper Global Science and Technology Funds Index(4) +12.04% -28.98% -9.30% -0.77% N/A ------------------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your -------------------------------------------------------------------------------- 2 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary or visiting riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. (1) The Morgan Stanley Capital International (MSCI) World Index, an unmanaged index, is a free float-adjusted market capitalization index that is designed to measure global developed market equity performance. The index reflects reinvestment of all distributions and changes in market prices. (2) The Morgan Stanley Capital International (MSCI) World Information Technology (IT) Index, an unmanaged index, is a free float-adjusted market capitalization index designed to measure information technology stock performance in the global developed equity market. The index reflects reinvestment of all distributions and changes in market prices. (3) The S&P North American Technology Sector Index(TM) (S&P NATS Index), formerly known as the S&P GSTI Composite Index, an unmanaged index, is a market capitalization-weighted index of approximately 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. (4) The Lipper Global Science and Technology Funds Index includes the 10 largest global 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. The Fund's investment manager recommended to the Fund that the Fund change its comparative index from the S&P North American Technology Sector Index(TM) (S&P NATS Index) to the MSCI World Index. The investment manager made this recommendation because the new index more closely aligns to the Fund's investment strategy. Based on this recommendation, on Nov. 17, 2008, the S&P NATS Index was replaced with the MSCI World Index, which will be used as the Fund's primary benchmark going forward. Information on both indexes will be included for a one year transition period. In the future, however, only the MSCI World Index will be included. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------
AT APRIL 30, 2009 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 11/13/96) +6.59% -30.20% -8.58% +0.57% -3.44% N/A ------------------------------------------------------------------------------------- Class B (inception 11/13/96) +5.59% -30.73% -9.24% -0.26% -4.20% N/A ------------------------------------------------------------------------------------- Class C (inception 6/26/00) +6.29% -30.28% -9.19% -0.13% N/A -12.70% ------------------------------------------------------------------------------------- Class I (inception 7/15/04) +6.98% -29.50% -7.96% N/A N/A +1.67% ------------------------------------------------------------------------------------- Class R4 (inception 11/13/96) +7.06% -29.46% -8.04% +1.02% -3.23% N/A ------------------------------------------------------------------------------------- With sales charge Class A (inception 11/13/96) +0.57% -34.32% -10.35% -0.66% -3.93% N/A ------------------------------------------------------------------------------------- Class B (inception 11/13/96) +0.59% -34.20% -10.47% -0.66% -4.20% N/A ------------------------------------------------------------------------------------- Class C (inception 6/26/00) +5.29% -30.97% -9.19% -0.13% N/A -12.70% -------------------------------------------------------------------------------------
AT MARCH 31, 2009 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 11/13/96) -21.57% -32.49% -11.39% -3.17% -4.67% N/A ------------------------------------------------------------------------------------- Class B (inception 11/13/96) -21.84% -33.00% -12.06% -3.91% -5.40% N/A ------------------------------------------------------------------------------------- Class C (inception 6/26/00) -21.84% -33.00% -12.21% -4.02% N/A -13.91% ------------------------------------------------------------------------------------- Class I (inception 7/15/04) -20.95% -31.69% -10.69% N/A N/A -0.50% ------------------------------------------------------------------------------------- Class R4 (inception 11/13/96) -21.26% -32.08% -11.10% -2.92% -4.49% N/A ------------------------------------------------------------------------------------- With sales charge Class A (inception 11/13/96) -25.93% -36.26% -13.12% -4.27% -5.15% N/A ------------------------------------------------------------------------------------- Class B (inception 11/13/96) -25.75% -36.35% -13.25% -4.30% -5.40% N/A ------------------------------------------------------------------------------------- Class C (inception 6/26/00) -22.62% -33.67% -12.21% -4.02% N/A -13.91% -------------------------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third*** years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I and Class R4 shares. Class I and Class R4 shares are available to institutional investors only. *Not annualized. **For classes with less than 10 years performance. ***For Class B shares purchased on or after June 13, 2009 the CDSC percentage for the third year will be 3%. -------------------------------------------------------------------------------- 4 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH X LARGE X MEDIUM SIZE X SMALL
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. ANNUAL OPERATING EXPENSE RATIO* (as of the current prospectus) --------------------------------------------------------------------------------
Total fund expenses ---------------------------------------- Class A 1.45% ---------------------------------------- Class B 2.22% ---------------------------------------- Class C 2.21% ---------------------------------------- Class I 0.81% ---------------------------------------- Class R4 1.12% ----------------------------------------
* Fund expense ratios are calculated based on the fund's average net assets during the fund's most recently completed fiscal year, and have not been adjusted for current asset levels, including any decrease or increase in assets, which, if adjusted, would result in expense ratios that are higher or lower, respectively, than those that are expressed herein. Any fee waivers/expense caps would limit the impact that any decrease in assets will have on net expense ratios in the current fiscal year. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. The RiverSource Global Technology Fund is a narrowly-focused sector fund and it may exhibit higher volatility than funds with broader investment objectives. See the Fund's prospectus for specific risks associated with the Fund. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- SECTOR DIVERSIFICATION(1) (at April 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Health Care 0.2% ------------------------------------------------ Information Technology 87.8% ------------------------------------------------ Telecommunication Services 1.0% ------------------------------------------------ Other(2) 11.0% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral for Securities on Loan) as of April 30, 2009. The Fund's composition is subject to change. (2) Cash & Cash Equivalents. The sectors identified above are based on the Global Industry Classification Standard (GICS), which 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. TOP TEN HOLDINGS (at April 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Check Point Software Technologies 4.2% ------------------------------------------------ Amdocs 4.1% ------------------------------------------------ McAfee 4.1% ------------------------------------------------ Symantec 4.0% ------------------------------------------------ QUALCOMM 3.9% ------------------------------------------------ Synopsys 3.8% ------------------------------------------------ Cisco Systems 3.7% ------------------------------------------------ Apple 3.6% ------------------------------------------------ Hewlett-Packard 3.5% ------------------------------------------------ NetApp 3.1% ------------------------------------------------
For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- 6 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and 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. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended April 30, 2009. 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. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2008 APRIL 30, 2009 THE PERIOD(A) EXPENSE RATIO ------------------------------------------------------------------------------------------- Class A ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,065.90 $10.09 1.97% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,015.03 $ 9.84 1.97% ------------------------------------------------------------------------------------------- Class B ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,055.90 $14.02 2.75% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,011.16 $13.71 2.75% ------------------------------------------------------------------------------------------- Class C ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,062.90 $13.96 2.73% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,011.26 $13.61 2.73% ------------------------------------------------------------------------------------------- Class I ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,069.80 $ 5.49 1.07% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.49 $ 5.36 1.07% ------------------------------------------------------------------------------------------- Class R4 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,070.60 $ 7.03 1.37% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.00 $ 6.85 1.37% -------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2009: +6.59% for Class A, +5.59% for Class B, +6.29% for Class C, +6.98% for Class I and +7.06% for Class R4. -------------------------------------------------------------------------------- 8 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (91.2%) ISSUER SHARES VALUE(a) COMMUNICATIONS EQUIPMENT (13.3%) Cisco Systems 242,002(b,e) $4,675,479 NICE Systems ADR 76,300(b,c,e) 1,954,043 QUALCOMM 116,273 4,920,673 Riverbed Technology 92,500(b,e) 1,694,600 Tandberg 60,600(c) 864,949 --------------- Total 14,109,744 ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (20.5%) Acer 25,000(c) 47,866 Apple 35,703(b,e) 4,492,509 Electronics for Imaging 78,600(b) 771,852 EMC 294,100(b,e) 3,685,073 Hewlett-Packard 123,141(e) 4,430,613 HTC 167,000(c) 2,262,969 IBM 15,641(e) 1,614,308 NetApp 209,300(b,e) 3,830,190 Toshiba 177,000(c) 603,170 --------------- Total 21,738,550 ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.7%) Koninklijke (Royal) KPN 64,437(c) 776,748 ------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (3.8%) Hirose Electric 6,600(c) 684,774 Ibiden 16,100(c,e) 467,003 LG Display 32,890(c) 803,071 Murata Mfg 15,100(c) 607,988 Nidec 11,400(c) 625,503 Tripod Technology 194,000(c) 319,803 Unimicron Technology 827,000(c) 559,071 --------------- Total 4,067,213 ------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (6.7%) GigaMedia 49,300(b,c) 327,845 Google Cl A 2,000(b,e) 791,940 Open Text 114,200(b,c) 3,749,186 SonicWALL 242,000(b) 1,314,060 Yahoo! 64,900(b) 927,421 --------------- Total 7,110,452 ------------------------------------------------------------------------------------- IT SERVICES (0.8%) Fiserv 22,400(b) 835,968 ------------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (0.2%) PerkinElmer 17,500 254,975 ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (5.1%) Marvell Technology Group 229,624(b,c,e) 2,521,271 Maxim Integrated Products 145,000 1,964,750 Taiwan Semiconductor Mfg 522,000(c) 871,553 --------------- Total 5,357,574 ------------------------------------------------------------------------------------- SOFTWARE (39.8%) Activision Blizzard 200,600(b,e) 2,160,462 Amdocs 247,400(b,c,e) 5,178,082 Aspen Technology 148,800(b) 1,168,080 BMC Software 63,800(b) 2,211,946 Cadence Design Systems 235,200(b) 1,312,416 Check Point Software Technologies 226,100(b,c,e) 5,238,737 Magma Design Automation 134,600(b,e) 239,588 McAfee 135,517(b,e) 5,087,307 Mentor Graphics 195,900(b) 1,316,448 Micro Focus Intl 312,519(c) 1,474,947 Microsoft 127,254 2,578,166 Parametric Technology 200,800(b,e) 2,238,920 Perfect World ADR 24,100(b,c,e) 437,656 Symantec 290,226(b,e) 5,006,399 Synopsys 220,000(b,e) 4,791,600 Ubisoft Entertainment 41,653(b,c,e) 821,309 VanceInfo Technologies ADR 116,300(b,c) 925,748 --------------- Total 42,187,811 ------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.3%) Vodafone Group 169,081(c) 311,940 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $84,920,002) $96,750,975 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
MONEY MARKET FUND (11.2%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.28% 11,901,585(d) $11,901,585 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $11,901,585) $11,901,585 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (15.2%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 16,154,555 $16,154,555 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $16,154,555) $16,154,555 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $112,976,142)(f) $124,807,115 =====================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At April 30, 2009, the value of foreign securities represented 30.6% of net assets. (d) Affiliated Money Market Fund -- See Note 6 to the financial statements. The rate shown is the seven-day current annualized yield at April 30, 2009. (e) At April 30, 2009, security was partially or fully on loan. See Note 5 to the financial statements. (f) At April 30, 2009, the cost of securities for federal income tax purposes was approximately $112,976,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $13,748,000 Unrealized depreciation (1,917,000) ----------------------------------------------------------- Net unrealized appreciation $11,831,000 -----------------------------------------------------------
The industries identified above are based on the Global Industry Classification Standard (GICS), which 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. -------------------------------------------------------------------------------- 10 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to implement more uniform reporting relating to the fair valuation of securities for financial statement purposes. Mutual funds are required to implement the requirements of this standard for fiscal years beginning after Nov. 15, 2007. While uniformity of presentation is the objective of the standard, it is likely that there may be a range of practices utilized and it may be some period of time before industry practices become more uniform. For this reason care should be exercised in interpreting this information and/or using it for comparison with other mutual funds. Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.) - Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) Observable inputs are those based on market data obtained from sources independent of the Fund, and unobservable inputs reflect the Fund's own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. The following table is a summary of the inputs used to value the Fund's investments as of April 30, 2009:
FAIR VALUE AT APRIL 30, 2009 --------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL ----------------------------------------------------------------------------------- Investments in securities $124,807,115 $-- $-- $124,807,115
HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY 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 filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT 11 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- APRIL 30, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $84,920,002) $ 96,750,975 Affiliated money market fund (identified cost $11,901,585) 11,901,585 Investments of cash collateral received for securities on loan (identified cost $16,154,555) 16,154,555 -------------------------------------------------------------------------------- Total investments in securities (identified cost $112,976,142) 124,807,115 Foreign currency holdings (identified cost $179,611) 179,611 Capital shares receivable 254,570 Dividends and accrued interest receivable 23,788 Receivable for investment securities sold 1,930,188 -------------------------------------------------------------------------------- Total assets 127,195,272 -------------------------------------------------------------------------------- LIABILITIES Capital shares payable 68,343 Payable for investment securities purchased 4,821,703 Payable upon return of securities loaned 16,154,555 Accrued investment management services fees 2,068 Accrued distribution fees 956 Accrued transfer agency fees 1,328 Accrued administrative services fees 172 Accrued plan administration services fees 1 Other accrued expenses 57,745 -------------------------------------------------------------------------------- Total liabilities 21,106,871 -------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 106,088,401 -------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 610,024 Additional paid-in capital 480,447,150 Excess of distributions over net investment income (553,481) Accumulated net realized gain (loss) (386,245,260) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 11,829,968 -------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 106,088,401 -------------------------------------------------------------------------------- *Including securities on loan, at value $ 15,811,848 --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $70,450,436 39,563,703 $1.78(1) Class B $15,472,499 10,237,138 $1.51 Class C $ 2,235,390 1,474,433 $1.52 Class I $17,750,532 9,628,407 $1.84 Class R4 $ 179,544 98,685 $1.82 ----------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $1.89. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 5.75%. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 12 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED APRIL 30, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Dividends 217,848 Interest 24,033 Income distributions from affiliated money market fund 15,811 Fee income from securities lending 9,410 Less foreign taxes withheld (5,617) ------------------------------------------------------------------------------- Total income 261,485 ------------------------------------------------------------------------------- Expenses: Investment management services fees 307,430 Distribution fees Class A 74,560 Class B 66,232 Class C 8,865 Transfer agency fees Class A 193,911 Class B 45,047 Class C 5,893 Class R4 26 Administrative services fees 23,459 Plan administration services fees -- Class R4 130 Compensation of board members 1,419 Custodian fees 13,100 Printing and postage 25,485 Registration fees 27,210 Professional fees 17,895 Other 3,020 ------------------------------------------------------------------------------- Total expenses 813,682 Expenses waived/reimbursed by the Investment Manager and its affiliates (64) ------------------------------------------------------------------------------- Total net expenses 813,618 ------------------------------------------------------------------------------- Investment income (loss) -- net (552,133) ------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (35,532,972) Foreign currency transactions (101,891) ------------------------------------------------------------------------------- Net realized gain (loss) on investments (35,634,863) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 42,308,179 ------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 6,673,316 ------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 6,121,183 -------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT 13 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2009 OCT. 31, 2008 (UNAUDITED) OPERATIONS Investment income (loss) -- net $ (552,133) $ (720,428) Net realized gain (loss) on investments (35,634,863) (18,357,358) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 42,308,179 (58,394,053) -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 6,121,183 (77,471,839) -------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares 6,617,647 21,369,521 Class B shares 1,109,362 2,136,740 Class C shares 408,498 522,248 Class I shares 16,156,087 -- Class R4 shares 141,396 122,848 Payments for redemptions Class A shares (8,604,213) (31,405,834) Class B shares (1,489,485) (13,779,456) Class C shares (257,612) (833,165) Class I shares (40,549) (7,015) Class R4 shares (65,071) (115,949) -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 13,976,060 (21,990,062) -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 20,097,243 (99,461,901) Net assets at beginning of period 85,991,158 185,453,059 -------------------------------------------------------------------------------------------------- Net assets at end of period $106,088,401 $ 85,991,158 -------------------------------------------------------------------------------------------------- Excess of distributions over net investment income $ (553,481) $ (1,348) --------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 14 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(h) 2008 2007 2006 2005 Net asset value, beginning of period $1.67 $3.04 $2.42 $1.99 $1.83 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01)(b) (.01)(b) (.02)(b) (.02) (.02) Net gains (losses) (both realized and unrealized) .12 (1.36) .64 .45 .18 -------------------------------------------------------------------------------------------------------------- Total from investment operations .11 (1.37) .62 .43 .16 -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $1.78 $1.67 $3.04 $2.42 $1.99 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $70 $69 $139 $123 $120 -------------------------------------------------------------------------------------------------------------- Total expenses(c),(d) 1.97%(e) 1.45% 1.60% 1.69% 1.75% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) (1.29%)(e) (.34%) (.80%) (.89%) (.92%) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 142% 81% 167% 196% 115% -------------------------------------------------------------------------------------------------------------- Total return(f) 6.59%(g) (45.07%) 25.62% 21.61% 8.74% --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in periods in which they occurred were less than 0.01% of average net assets. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of a sales charge. (g) Not annualized. (h) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT 15 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(h) 2008 2007 2006 2005 Net asset value, beginning of period $1.43 $2.61 $2.09 $1.74 $1.60 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01)(b) (.02)(b) (.04)(b) (.03) (.03) Net gains (losses) (both realized and unrealized) .09 (1.16) .56 .38 .17 -------------------------------------------------------------------------------------------------------------- Total from investment operations .08 (1.18) .52 .35 .14 -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $1.51 $1.43 $2.61 $2.09 $1.74 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $15 $15 $43 $42 $46 -------------------------------------------------------------------------------------------------------------- Total expenses(c),(d) 2.75%(e) 2.22% 2.38% 2.47% 2.53% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) (2.08%)(e) (1.09%) (1.58%) (1.66%) (1.71%) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 142% 81% 167% 196% 115% -------------------------------------------------------------------------------------------------------------- Total return(f) 5.59%(g) (45.21%) 24.88% 20.12% 8.75% --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in periods in which they occurred were less than 0.01% of average net assets. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of a sales charge. (g) Not annualized. (h) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 16 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(h) 2008 2007 2006 2005 Net asset value, beginning of period $1.43 $2.62 $2.10 $1.74 $1.61 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01)(b) (.02)(b) (.04)(b) (.03) (.03) Net gains (losses) (both realized and unrealized) .10 (1.17) .56 .39 .16 -------------------------------------------------------------------------------------------------------------- Total from investment operations .09 (1.19) .52 .36 .13 -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $1.52 $1.43 $2.62 $2.10 $1.74 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $2 $4 $3 $3 -------------------------------------------------------------------------------------------------------------- Total expenses(c),(d) 2.73%(e) 2.21% 2.36% 2.45% 2.52% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) (2.07%)(e) (1.10%) (1.56%) (1.66%) (1.69%) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 142% 81% 167% 196% 115% -------------------------------------------------------------------------------------------------------------- Total return(f) 6.29%(g) (45.42%) 24.76% 20.69% 8.07% --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in periods in which they occurred were less than 0.01% of average net assets. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of a sales charge. (g) Not annualized. (h) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT 17 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(h) 2008 2007 2006 2005 Net asset value, beginning of period $1.72 $3.11 $2.46 $2.01 $1.83 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .00(b),(c) .01(b) (.01)(b) (.01) (.01) Net gains (losses) (both realized and unrealized) .12 (1.40) .66 .46 .19 -------------------------------------------------------------------------------------------------------------- Total from investment operations .12 (1.39) .65 .45 .18 -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $1.84 $1.72 $3.11 $2.46 $2.01 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $18 $-- $-- $-- $-- -------------------------------------------------------------------------------------------------------------- Total expenses(d),(e) 1.07%(f) .81% .99% 1.01% 1.04% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.56%)(f) .31% (.19%) (.22%) (.21%) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 142% 81% 167% 196% 115% -------------------------------------------------------------------------------------------------------------- Total return 6.98%(g) (44.69%) 26.42% 22.39% 9.84% --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Rounds to zero. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in periods in which they occurred were less than 0.01% of average net assets. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Not annualized. (h) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 18 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(i) 2008 2007 2006 2005 Net asset value, beginning of period $1.70 $3.07 $2.43 $2.00 $1.83 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01)(b) .01(b) (.01)(b) (.02) (.02) Net gains (losses) (both realized and unrealized) .13 (1.38) .65 .45 .19 -------------------------------------------------------------------------------------------------------------- Total from investment operations .12 (1.37) .64 .43 .17 -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $1.82 $1.70 $3.07 $2.43 $2.00 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $1 $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement()c,(d) 1.37%(e) 1.12% 1.34% 1.47% 1.54% -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) 1.25%(e) .87% 1.34% 1.47% 1.54% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.65%)(e) .22% (.52%) (.68%) (.73%) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 142% 81% 167% 196% 115% -------------------------------------------------------------------------------------------------------------- Total return 7.06%(h) (44.63%) 26.34% 21.50% 9.29% --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occured were less than 0.01% of average net assets. (h) Not annualized. (i) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT 19 NOTES TO FINANCIAL STATEMENTS ------------------------------------------------- (UNAUDITED AS TO APRIL 30, 2009) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RiverSource Global Technology Fund (the Fund) is a series of RiverSource Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund focuses on equity securities of companies in the information technology industry throughout the world. The Fund offers Class A, Class B, Class C, Class I and Class R4 shares. - Class A shares are sold with a front-end sales charge. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - Class C shares may be subject to a CDSC. - Class I and Class R4 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. At April 30, 2009, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) and the RiverSource affiliated funds-of-funds owned 100% of Class I shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) 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 Effective Nov. 1, 2008, the Fund adopted Statement of Financial Accounting Standards No. 157 "Fair Value Measurement" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the -------------------------------------------------------------------------------- 20 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. There was no impact to the Fund's net assets or results of operations upon adoption. The fair valuation measurements disclosure can be found following the Notes to Portfolio of Investments. 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. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange (NYSE) and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the Investment Manager, as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. 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, which approximates fair value. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT 21 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 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 obligations depends upon the credit standing of the other party. Cash collateral may be collected by the Fund to secure certain over-the-counter options (OTC options) trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. 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. Options contracts, including OTC contracts, with no readily available market value are valued using quotations obtained from independent brokers as of the close of the NYSE. The Fund will realize a gain or loss when the option transaction expires or is exercised. 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. At April 30, 2009, and for the six months then ended, the Fund had no outstanding option contracts. 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. Futures and options on futures are valued daily based upon the last sale price at the close of the market on the principal exchange on which they are traded. 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 -------------------------------------------------------------------------------- 22 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 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. At April 30, 2009, the Fund had no outstanding futures contracts. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At April 30, 2009, foreign currency holdings were entirely comprised of Taiwan dollars. 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 counterparty will not complete its contract obligations. At April 30, 2009, the Fund had no outstanding forward foreign currency contracts. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to the shareholders. No provision for income or excise taxes is thus required. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of options contracts, foreign currency transactions and losses deferred due to wash sales. 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. RECENT ACCOUNTING PRONOUNCEMENTS The Fund has adopted FASB Staff Position No. 133-1 and FIN No. 45-4 (FSP FAS 133-1 and FIN 45-4), "Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45." The amendments to FSP FAS 133-1 and FIN 45-4 require enhanced disclosures about a fund's derivatives and guarantees. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows and (d) the current status of the payment/performance risk of the credit derivative. The amendments to FSP FAS 133-1 and FIN 45-4 also require additional disclosures about the current status of the payment/performance risk of a guarantee. At April 30, 2009, the Fund did not own nor was it a party to any credit derivative contracts within the scope of these amendments. In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of April 30, 2009, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. On April 9, 2009, the FASB issued Staff Position No. 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly" -------------------------------------------------------------------------------- 24 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- (FSP 157-4). FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also requires additional disaggregation of the current SFAS 157 required disclosures. FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Management is currently evaluating the impact that the adoption of FSP 157-4 will have on the amounts and disclosures within the Fund's financial statements. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.72% to 0.595% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment determined monthly by measuring the percentage difference over a rolling 12-month period between the annualized performance of one Class A share of the Fund and the annualized performance of the Lipper Global 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 management fee by $25,922 for the six months ended April 30, 2009. The management fee for the six months ended April 30, 2009 was 0.79% of the Fund's average daily net assets, including the adjustment under the terms of the performance incentive arrangement. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% annually as the Fund's assets increase. The fee for the six months ended April 30, 2009 was 0.06% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended April 30, 2009, other expenses paid to this company were $292. COMPENSATION OF BOARD MEMBERS 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. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50 for Class B and $20.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R4 shares. The Transfer Agent charges an annual 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 in the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Funds average daily net assets attributable to Class R4 shares for the provision of various administrative, record keeping, communication and educational services. DISTRIBUTION FEES The Fund has agreements with RiverSource Distributors, Inc. and RiverSource Fund Distributors, Inc. (collectively, Distributor) for distribution and shareholder -------------------------------------------------------------------------------- 26 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class A shares and a fee at an annual rate of up to 1.00% of the Fund's average daily net assets attributable to Class B and Class C shares. For Class B and Class C shares, up to 0.75% of the fee is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed expense") was approximately $467,000 and $28,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of April 30, 2009, and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGES Sales charges received by the Distributor for distributing Fund shares were $64,805 for Class A, $4,881 for Class B and $334 for Class C for the six months ended April 30, 2009. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended April 30, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), including the adjustment under the terms of a performance incentive arrangement, were as follows: Class R4............................................ 1.25%
The waived/reimbursed fees and expenses for the plan administration services fee at the class level were as follows: Class R4............................................ $64
The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Oct. 31, 2009, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any performance incentive adjustment, will not exceed 1.41% for Class R4 of the class average daily net assets. * In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- CUSTODIAN FEES Effective Dec. 15, 2008, the Fund pays custodian fees to JPMorgan Chase Bank, N.A. For the period from Nov. 1, 2008 to Dec. 15, 2008, the Fund paid custodian fees amounting to $4,225 to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $115,116,213 and $108,134,411 respectively, for the six months ended April 30, 2009. Realized gains and losses are determined on an identified cost basis. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED APRIL 30, 2009 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) ---------------------------------------------------------------------------------- Class A 4,183,590 -- (5,765,307) (1,581,717) Class B 825,841 -- (1,164,300) (338,459) Class C 300,688 -- (201,083) 99,605 Class I 9,648,311 -- (22,689) 9,625,622 Class R4 91,359 -- (39,856) 51,503 ---------------------------------------------------------------------------------- YEAR ENDED OCT. 31, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) ---------------------------------------------------------------------------------- Class A 8,799,565 -- (13,224,262) (4,424,697) Class B 993,451 -- (6,754,597) (5,761,146) Class C 254,027 -- (411,849) (157,822) Class I -- -- (3,097) (3,097) Class R4 48,279 -- (56,646) (8,367) ----------------------------------------------------------------------------------
5. LENDING OF PORTFOLIO SECURITIES Effective Dec. 1, 2008, the Fund has entered into a Master Securities Lending Agreement ("the Agreement") with JPMorgan Chase Bank, National Association ("JPMorgan"). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured -------------------------------------------------------------------------------- 28 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and uninvested cash collateral balance, are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At April 30, 2009, securities valued at $15,811,848 were on loan, secured by cash collateral of $16,154,555 invested in short-term securities or in cash equivalents. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Income of $9,410 earned from securities lending from Dec. 1, 2008 through April 30, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Fund or the borrower at any time, and are, therefore, not considered to be illiquid investments. Prior to Dec. 1, 2008, the Investment Manager served as securities lending agent for the Fund under the Securities Lending Agency Agreement. For the period from Nov. 1, 2008 through Nov. 30, 2008, the Fund had no securities on loan. 6. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term Cash Fund aggregated $53,115,365 and $44,062,632, respectively, for the six months ended April 30, 2009. The income distributions received with respect -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short- Term Cash Fund at April 30, 2009, can be found in the Portfolio of Investments. 7. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $475 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $175 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $650 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum, in addition to an upfront fee equal to its pro rata share of 0.02% of the amount of the credit facility. The Fund had no borrowings during the six months ended April 30, 2009. 8. CAPITAL LOSS CARRY-OVER For federal income tax purposes the Fund had a capital loss carry-over of $348,953,680 at Oct. 31, 2008, that if not offset by capital gains will expire as follows:
2009 2010 2016 $250,345,326 $81,299,277 $17,309,127
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. RISKS RELATING TO CERTAIN INVESTMENTS SECTOR RISK The Fund invests a significant part of its total assets in securities of companies primarily engaged in the technology, media and telecommunications sectors. This may result in greater fluctuations in value than would be the case for a fund -------------------------------------------------------------------------------- 30 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- invested in a wider variety of unrelated industries. As these sectors increase or decrease in favor with the investing public, the price of securities of companies that rely heavily on those sectors could become increasingly sensitive to downswings in the economy. FOREIGN RISK Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. 10. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Count). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co., Inc. (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (which is now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman is and has been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman will pay $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially -------------------------------------------------------------------------------- 32 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. 11. SUBSEQUENT EVENT At a shareholder meeting on June 2, 2009, shareholders approved the merger of the Fund into Seligman Global Technology Fund. The merger is anticipated to take place as of the close of business on Sept. 11, 2009. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT 33 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- RiverSource Investments, LLC ("RiverSource Investments" or the "investment manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), RiverSource Investments provides investment advice and other services to the Fund and all funds in the RiverSource Family of Funds (collectively, the "Funds"). On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. RiverSource Investments prepared detailed reports for the Board and its Contracts Committee in March and April 2009, including reports based on data provided by independent organizations to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource Investments addressing the services RiverSource Investments provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts, Investment Review and Compliance Committees in determining whether to continue the IMS Agreement. At the April 7-8, 2009 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by RiverSource Investments: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource Investments, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource Investments, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, most notably, the large investment made in the acquisition of J. & W. Seligman & Co. Incorporated, including its portfolio management operations, personnel and infrastructure (including the addition of two new offices in New York City and Palo Alto). Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource Investments, the Board considered the quality of the administrative and transfer agency services provided by RiverSource Investments' affiliates to the Fund. The Board also reviewed the financial condition of RiverSource Investments (and its affiliates) and each entity's ability to carry out its responsibilities under the IMS -------------------------------------------------------------------------------- 34 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Agreement. Further, the Board considered RiverSource Investments' ability to retain key personnel and its expectations in this regard. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by RiverSource Investments). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality, particularly in light of recent market conditions. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that RiverSource Investments and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods, recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2007 to December 2008. The Board observed that the Fund's investment performance met expectations. Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource Investments and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to RiverSource Investments' profitability. They also reviewed information in the report comparing the fees charged to the Fund by RiverSource Investments to fees charged to other client accounts (with similar investment strategies to those of the Fund). The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund are -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT 35 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund (excluding the effect of a performance incentive adjustment, if applicable), with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) approximated the peer group's median expense ratio. The Board also considered the Fund's performance incentive adjustment and noted its continued appropriateness. The Board also considered the expected profitability of RiverSource Investments and its affiliates in connection with RiverSource Investments providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource Investments and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource Investments as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 8, 2009, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement for an additional annual period. -------------------------------------------------------------------------------- 36 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2009 SEMIANNUAL REPORT 37 RIVERSOURCE GLOBAL TECHNOLOGY FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Distributors, Inc., and RiverSource Fund Distributors, Inc., Members FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C)2009 RiverSource Investments, LLC. S-6396 L (6/09)
Semiannual Report (THREADNEEDLE LOGO) THREADNEEDLE EMERGING MARKETS FUND SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2009 THREADNEEDLE EMERGING MARKETS FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. (SINGLE STRATEGY FUNDS ICON) TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Fund Expenses Example.............. 7 Portfolio of Investments........... 9 Statement of Assets and Liabilities...................... 16 Statement of Operations............ 18 Statements of Changes in Net Assets........................... 19 Financial Highlights............... 21 Notes to Financial Statements...... 27 Approval of Investment Management Services Agreement............... 42 Proxy Voting....................... 45
RIVERSOURCE FAMILY OF FUNDS Threadneedle Funds are a part of the RiverSource family of funds that includes funds branded "RiverSource," "RiverSource Partners," "Seligman" and "Threadneedle." These funds share the same Board of Directors/Trustees and officers. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 1 YOUR FUND AT A GLANCE -------------------------------- (UNAUDITED) FUND SUMMARY ------------------------------------------------------ > Threadneedle Emerging Markets Fund (the Fund) Class A shares rose 11.29% (excluding sales charge) for the six months ended April 30, 2009. > The Fund underperformed its benchmark, the Morgan Stanley Capital International (MSCI) Emerging Markets Index, which returned 17.52%. > The Fund also underperformed its peer group, the Lipper Emerging Markets Funds Index, which gained 11.51% for the period. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2009) --------------------------------------------------------------------------------
6 months* 1 year 3 years 5 years 10 years ------------------------------------------------------------------------ Threadneedle Emerging Markets Fund Class A (excluding sales charge) +11.29% -46.67% -7.84% +8.82% +6.81% ------------------------------------------------------------------------ MSCI Emerging Markets Index(1) (unmanaged) +17.52% -42.71% -5.23% +11.46% +8.54% ------------------------------------------------------------------------ Lipper Emerging Markets Funds Index(2) +11.51% -46.10% -8.45% +8.94% +7.76% ------------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary or visiting riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. (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 -------------------------------------------------------------------------------- 2 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- emerging markets. The index reflects reinvestment of all distributions and changes in market prices. (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. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------
AT APRIL 30, 2009 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 11/13/96) +11.29% -46.67% -7.84% +8.82% +6.81% N/A ------------------------------------------------------------------------------------- Class B (inception 11/13/96) +11.06% -47.04% -8.54% +8.01% +5.99% N/A ------------------------------------------------------------------------------------- Class C (inception 6/26/00) +11.04% -47.05% -8.55% +8.00% N/A +4.48% ------------------------------------------------------------------------------------- Class I (inception 3/4/04) +11.72% -46.34% -7.39% +9.36% N/A +7.12% ------------------------------------------------------------------------------------- Class R4 (inception 11/13/96) +11.67% -46.36% -7.50% +9.14% +7.10% N/A ------------------------------------------------------------------------------------- Class R5 (inception 8/1/08) +11.89% N/A N/A N/A N/A -38.41%* ------------------------------------------------------------------------------------- With sales charge Class A (inception 11/13/96) +4.94% -49.73% -9.65% +7.54% +6.27% N/A ------------------------------------------------------------------------------------- Class B (inception 11/13/96) +6.06% -49.69% -9.28% +7.75% +5.99% N/A ------------------------------------------------------------------------------------- Class C (inception 6/26/00) +10.04% -47.58% -8.55% +8.00% N/A +4.48% -------------------------------------------------------------------------------------
AT MARCH 31, 2009 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 11/13/96) -29.84% -50.00% -9.93% +3.97% +6.97% N/A ------------------------------------------------------------------------------------ Class B (inception 11/13/96) -30.08% -50.40% -10.61% +3.19% +6.15% N/A ------------------------------------------------------------------------------------ Class C (inception 6/26/00) -30.03% -50.35% -10.58% +3.23% N/A +2.94% ------------------------------------------------------------------------------------ Class I (inception 3/4/04) -29.62% -49.75% -9.48% +4.49% N/A +4.39% ------------------------------------------------------------------------------------ Class R4 (inception 11/13/96) -29.64% -49.75% -9.61% +4.29% +7.26% N/A ------------------------------------------------------------------------------------ Class R5 (inception 8/1/08) -29.64% N/A N/A N/A N/A -46.24%* ------------------------------------------------------------------------------------ With sales charge Class A (inception 11/13/96) -33.88% -52.88% -11.68% +2.76% +6.44% N/A ------------------------------------------------------------------------------------ Class B (inception 11/13/96) -33.58% -52.88% -11.33% +2.94% +6.15% N/A ------------------------------------------------------------------------------------ Class C (inception 6/26/00) -30.73% -50.84% -10.58% +3.23% N/A +2.94% ------------------------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third*** years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R4 and Class R5 shares. Class I, Class R4 and Class R5 shares are available to institutional investors only. *Not annualized. **For classes with less than 10 years performance. ***For Class B shares purchased on or after June 13, 2009 the CDSC percentage for the third year will be 3%. -------------------------------------------------------------------------------- 4 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- STYLE MATRIX -----------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. ANNUAL OPERATING EXPENSE RATIO* (as of the current prospectus) --------------------------------------------------------------------------------
Total fund Net fund expenses expenses ---------------------------------------- Class A 1.87% 1.87% ---------------------------------------- Class B 2.62% 2.62% ---------------------------------------- Class C 2.63% 2.63% ---------------------------------------- Class I 1.42% 1.42% ---------------------------------------- Class R4 1.73% 1.72%(a) ---------------------------------------- Class R5 1.47% 1.47% ----------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Oct. 31, 2009, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment (that increased the management fee by 0.08% for the year ended Oct. 31, 2008), will not exceed 1.64% for Class R4. * Fund expense ratios are calculated based on the fund's average net assets during the fund's most recently completed fiscal year, and have not been adjusted for current asset levels, including any decrease or increase in assets, which, if adjusted, would result in expense ratios that are higher or lower, respectively, than those that are expressed herein. Any fee waivers/expense caps would limit the impact that any decrease in assets will have on net expense ratios in the current fiscal year. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- COUNTRY DIVERSIFICATION(1) (at April 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Brazil 16.1% ------------------------------------------------ Chile 0.1% ------------------------------------------------ China 13.7% ------------------------------------------------ Hong Kong 7.7% ------------------------------------------------ India 7.7% ------------------------------------------------ Indonesia 0.3% ------------------------------------------------ Israel 3.2% ------------------------------------------------ Malaysia 0.6% ------------------------------------------------ Mexico 4.7% ------------------------------------------------ Russia 10.1% ------------------------------------------------ South Africa 5.7% ------------------------------------------------ South Korea 12.5% ------------------------------------------------ Taiwan 11.4% ------------------------------------------------ Thailand 0.9% ------------------------------------------------ Turkey 1.8% ------------------------------------------------ United Kingdom 1.2% ------------------------------------------------ United States 0.7% ------------------------------------------------ Other(2) 1.6% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral for Securities on Loan) as of April 30, 2009. The Fund's composition is subject to change. (2) Cash & Cash Equivalents. TOP TEN HOLDINGS (at April 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Petroleo Brasileiro ADR (Brazil) 3.8% ------------------------------------------------ Samsung Electronics (South Korea) 3.4% ------------------------------------------------ Industrial & Commercial Bank of China (China) 3.0% ------------------------------------------------ Companhia Vale do Rio Doce ADR (Brazil) 2.9% ------------------------------------------------ China Life Insurance (China) 2.7% ------------------------------------------------ CNOOC ADR (Hong Kong) 2.6% ------------------------------------------------ Infosys Technologies (India) 2.5% ------------------------------------------------ Teva Pharmaceutical Inds ADR (Israel) 2.5% ------------------------------------------------ Taiwan Semiconductor Mfg (Taiwan) 2.3% ------------------------------------------------ Hon Hai Precision Industry (Taiwan) 2.3% ------------------------------------------------
For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- 6 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and 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. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended April 30, 2009. 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. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2008 APRIL 30, 2009 THE PERIOD(A) EXPENSE RATIO ------------------------------------------------------------------------------------------- Class A ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,112.90 $10.90 2.08% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.48 $10.39 2.08% ------------------------------------------------------------------------------------------- Class B ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,110.60 $14.97 2.86% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,110.40 $14.80 2.86% ------------------------------------------------------------------------------------------- Class C ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,107.90 $14.84 2.84% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,010.71 $14.16 2.84% ------------------------------------------------------------------------------------------- Class I ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,117.20 $ 7.45 1.42% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.75 $ 7.10 1.42% ------------------------------------------------------------------------------------------- Class R4 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,116.70 $ 8.50 1.62% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.76 $ 8.10 1.62% ------------------------------------------------------------------------------------------- Class R5 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,118.90 $ 7.57 1.44% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.65 $ 7.20 1.44% -------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2009: +11.29% for Class A, +11.06% for Class B, +11.04% for Class C, +11.72% for Class I, +11.67% for Class R4 and +11.89% for Class R5. -------------------------------------------------------------------------------- 8 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (97.5%)(c) ISSUER SHARES VALUE(a) BRAZIL (16.0%) BM&F BOVESPA 402,200 $1,655,069 Companhia Siderurgica Nacional ADR 223,681 4,142,572 Companhia Vale do Rio Doce ADR 500,234 8,258,863 Itau Unibanco Banco Multiplo 355,300 4,938,561 Lojas Renner 273,800 2,486,247 Multiplan Empreendimentos Imobiliarios 358,200(b) 2,789,149 Natura Cosmeticos 61,000 725,162 OGX Petroleo e Gas Participacoes 3,000 1,260,560 PDG Realty 37,500 357,666 Petroleo Brasileiro ADR 318,127 10,679,524 Redecard 423,200 5,330,879 Vivo Participacoes ADR 150,916 2,408,619 --------------- Total 45,032,871 ------------------------------------------------------------------------------------- CHILE (0.1%) SQM ADR 9,868 310,941 ------------------------------------------------------------------------------------- CHINA (13.6%) Anhui Conch Cement Cl H 268,000(b) 1,796,488 Bank of China Series H 9,540,000 3,569,853 China Construction Bank Series H 6,978,000 4,069,802 China Life Insurance Series H 2,161,000 7,626,337 China Petroleum & Chemical Series H 3,622,000 2,841,554 China Shenhua Energy Series H 723,500 2,030,494 Industrial & Commercial Bank of China Series H 14,699,000 8,459,147 Li Ning 1,324,000(f) 2,733,455 Ping An Insurance Group of China Series H 806,000 5,044,065 --------------- Total 38,171,195 ------------------------------------------------------------------------------------- HONG KONG (7.6%) Agile Property Holdings 3,440,000 2,596,679 China Mobile 652,000 5,661,957 China Overseas Land & Investment 2,529,280 4,464,645 China Resources Land 744,000 1,347,857 CNOOC ADR 65,599 7,304,449 --------------- Total 21,375,587 ------------------------------------------------------------------------------------- INDIA (7.6%) Bharat Heavy Electricals 81,217 2,705,517 Bharti Airtel 199,355(b) 3,019,838 Housing Development Finance 126,768 4,406,713 Infosys Technologies 235,342 7,156,911 Reliance Inds 114,040 4,154,288 --------------- Total 21,443,267 ------------------------------------------------------------------------------------- INDONESIA (0.3%) Bumi Resources 6,918,000(g) 965,909 ------------------------------------------------------------------------------------- ISRAEL (3.2%) Israel Chemicals 244,961 2,060,103 Teva Pharmaceutical Inds ADR 158,406 6,952,439 --------------- Total 9,012,542 ------------------------------------------------------------------------------------- MALAYSIA (0.6%) IOI 1,432,300 1,731,484 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) MEXICO (4.7%) America Movil ADR Series L 180,119 $5,916,909 Desarrolladora Homex ADR 126,936(b) 2,359,740 Grupo Televisa ADR 118,554 1,835,216 Wal-Mart de Mexico Series V 1,121,400(f) 3,051,750 --------------- Total 13,163,615 ------------------------------------------------------------------------------------- RUSSIA (10.0%) Eurasia Drilling GDR 236,717(d,e) 1,739,870 Gazprom ADR 233,481 4,126,777 LUKOIL ADR 91,917 4,099,498 NovaTek GDR 56,683(d,e) 2,012,247 Pharmstandard 72,811(b) 2,071,473 Rosneft Oil GDR 533,968(d) 2,867,408 Sberbank Cl S 3,566,194 3,004,518 Sibirskiy Cement 24,589 243,431 Vimpel-Communications ADR 299,604 2,822,270 Wimm-Bill-Dann Foods ADR 34,074(b) 1,522,086 X5 Retail Group GDR 267,918(b,d,e) 3,590,101 --------------- Total 28,099,679 ------------------------------------------------------------------------------------- SOUTH AFRICA (5.7%) AngloGold Ashanti 61,280 1,895,396 Aquarius Platinum 341,594 1,313,992 Gold Fields 248,082 2,589,484 MTN Group 335,511 4,399,884 Murray & Roberts Holdings 255,341 1,440,474 Sasol 138,260 4,214,322 Standard Bank Group 19,992 194,860 --------------- Total 16,048,412 ------------------------------------------------------------------------------------- SOUTH KOREA (12.4%) Hyundai Department Store 19,648 1,218,516 Hyundai Engineering & Construction 17,678 834,323 Hyundai Mobis 44,903 3,439,796 KT&G 25,832 1,422,684 LG Display 136,290 3,327,777 Samsung Electronics 25,312 9,709,481 Samsung Fire & Marine Insurance 29,126 3,976,168 Samsung Securities 54,922 2,823,434 Shinhan Financial Group 149,370(b) 3,693,758 SK Telecom 9,926 1,420,876 Yuhan 18,855 2,912,310 --------------- Total 34,779,123 ------------------------------------------------------------------------------------- TAIWAN (11.3%) Asia Cement 1,550,000 1,598,712 Asustek Computer 1,468,062 1,947,144 Cathay Financial Holding 1,615,000 1,809,860 Chunghwa Telecom 728,659(b) 1,388,510 Far Eastern Textile 899,000 838,878 Fubon Financial Holding 1,267,000 984,904 Hon Hai Precision Industry 2,204,250 6,373,865 HTC 56,000 758,840 MediaTek 382,000 3,980,492 Taiwan Semiconductor Mfg 3,868,000 6,458,173 Tripod Technology 1,227,155 2,022,926 U-Ming Marine Transport 1,204,000 2,177,769 Yuanta Financial Holding 2,599,000 1,525,078 --------------- Total 31,865,151 ------------------------------------------------------------------------------------- THAILAND (0.8%) Siam Commercial Bank 1,389,400 2,374,790 ------------------------------------------------------------------------------------- TURKEY (1.7%) BIM Birlesik Magazalar 49,488 1,361,941 Turkiye Garanti Bankasi 1,682,554(b) 3,536,015 --------------- Total 4,897,956 ------------------------------------------------------------------------------------- UNITED KINGDOM (1.2%) Standard Chartered 209,167 3,274,071 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 10 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) UNITED STATES (0.7%) Southern Copper 107,494 $1,996,164 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $277,716,107) $274,542,757 ------------------------------------------------------------------------------------- MONEY MARKET FUND (1.6%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.28% 4,590,322(h) $4,590,322 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $4,590,322) $4,590,322 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (1.3%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 3,549,611 $3,549,611 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $3,549,611) $3,549,611 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $285,856,040)(i) $282,682,690 =====================================================================================
SUMMARY OF INVESTMENTS IN SECURITIES BY INDUSTRY The following table represents the portfolio investments of the Fund by industry classifications as a percentage of total net assets at April 30, 2009:
PERCENTAGE OF INDUSTRY NET ASSETS VALUE ------------------------------------------------------------------------ Auto Components 1.2% $3,439,796 Capital Markets 1.0 2,823,434 Chemicals 0.8 2,371,044 Commercial Banks 13.1 37,115,375 Computers & Peripherals 1.0 2,705,984 Construction & Engineering 0.8 2,274,797 Construction Materials 1.2 3,395,200 Diversified Financial Services 1.5 4,165,051 Diversified Telecommunication Services 1.5 4,210,780 Electrical Equipment 1.0 2,705,517 Electronic Equipment, Instruments & Components 4.2 11,724,568 Energy Equipment & Services 0.6 1,739,870 Food & Staples Retailing 2.8 8,003,792 Food Products 1.2 3,253,570 Household Durables 1.0 2,717,406 Industrial Conglomerates 0.3 838,878 Insurance 6.6 18,456,430 IT Services 4.4 12,487,790 Leisure Equipment & Products 1.0 2,733,455 Marine 0.8 2,177,769 Media 0.7 1,835,216 Metals & Mining 7.2 20,196,471 Multiline Retail 1.3 3,704,763 Multi-Utilities 0.1 243,431
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
PERCENTAGE OF INDUSTRY NET ASSETS VALUE ------------------------------------------------------------------------ Oil, Gas & Consumable Fuels 16.4% $46,557,030 Personal Products 0.3 725,162 Pharmaceuticals 4.2 11,936,222 Real Estate Management & Development 4.0 11,198,330 Semiconductors & Semiconductor Equipment 7.2 20,148,146 Thrifts & Mortgage Finance 1.6 4,406,713 Tobacco 0.5 1,422,684 Wireless Telecommunication Services 8.0 22,828,083 Other(1) 2.9 8,139,933 ------------------------------------------------------------------------ Total $282,682,690 ------------------------------------------------------------------------
(1) Cash & Cash Equivalents. INVESTMENTS IN DERIVATIVES FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT APRIL 30, 2009
CURRENCY TO BE CURRENCY TO BE UNREALIZED UNREALIZED EXCHANGE DATE DELIVERED RECEIVED APPRECIATION DEPRECIATION ----------------------------------------------------------------------------------------- May 5, 2009 11,500,000 1,297,149 $-- $(61,163) South African Rand U.S. Dollar
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies 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 may be determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2009, the value of these securities amounted to $10,209,626 or 3.6% of net assets. -------------------------------------------------------------------------------- 12 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (e) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). The aggregate value of such securities at April 30, 2009, was $7,342,218 representing 2.6% of net assets. Information concerning such security holdings at April 30, 2009, is as follows:
ACQUISITION SECURITY DATES COST --------------------------------------------------------------------------- Eurasia Drilling GDR* 11-02-07 thru 04-15-08 $5,578,172 NovaTek GDR* 02-09-09 thru 04-22-09 1,608,185 X5 Retail Group GDR* 12-16-08 thru 01-28-09 2,444,987
* Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. (f) At April 30, 2009, security was partially or fully on loan. See Note 5 to the financial statements. (g) Security valued by management at fair value according to procedures approved, in good faith, by the Board. (h) Affiliated Money Market Fund -- See Note 6 to the financial statements. The rate shown is the seven-day current annualized yield at April 30, 2009. (i) At April 30, 2009, the cost of securities for federal income tax purposes was approximately $285,856,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $26,553,000 Unrealized depreciation (29,726,000) ----------------------------------------------------------- Net unrealized depreciation $(3,173,000) -----------------------------------------------------------
The industries identified above are based on the Global Industry Classification Standard (GICS), which 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. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to implement more uniform reporting relating to the fair valuation of securities for financial statement purposes. Mutual funds are required to implement the requirements of this standard for fiscal years beginning after Nov. 15, 2007. While uniformity of presentation is the objective of the standard, it is likely that there may be a range of practices utilized and it may be some period of time before industry practices become more uniform. For this reason care should be exercised in interpreting this information and/or using it for comparison with other mutual funds. Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.) - Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) Observable inputs are those based on market data obtained from sources independent of the Fund, and unobservable inputs reflect the Fund's own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the NYSE or require adjustment, as described in Note 1 to the financial statements -- Valuation of securities. The following table is a summary of the inputs used to value the Fund's investments as of April 30, 2009:
FAIR VALUE AT APRIL 30, 2009 --------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL ---------------------------------------------------------------------------------- Investments in securities $258,372,015 $24,310,675 $-- $282,682,690 Other financial instruments* -- (61,163) -- (61,163) ---------------------------------------------------------------------------------- Total $258,372,015 $24,249,512 $-- $282,621,527 ----------------------------------------------------------------------------------
* Other financial instruments are derivative instruments, such as forwards, which are valued at the unrealized appreciation (depreciation) on the instrument. -------------------------------------------------------------------------------- 14 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY 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 filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 15 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- APRIL 30, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $277,716,107) $ 274,542,757 Affiliated money market fund (identified cost $4,590,322) 4,590,322 Investments of cash collateral received for securities on loan (identified cost $3,549,611) 3,549,611 -------------------------------------------------------------------------------- Total investments in securities (identified cost $285,856,040) 282,682,690 Foreign currency holdings (identified cost $2,046,665) 2,054,381 Capital shares receivable 311,306 Dividends and accrued interest receivable 580,750 Receivable for investment securities sold 8,733,833 -------------------------------------------------------------------------------- Total assets 294,362,960 -------------------------------------------------------------------------------- LIABILITIES Capital shares payable 287,478 Payable for investment securities purchased 8,567,484 Payable upon return of securities loaned 3,549,611 Unrealized depreciation on forward foreign currency contracts 61,163 Accrued investment management services fees 8,330 Accrued distribution fees 2,536 Accrued transfer agency fees 2,761 Accrued administrative services fees 607 Accrued plan administration services fees 5 Other accrued expenses 344,997 -------------------------------------------------------------------------------- Total liabilities 12,824,972 -------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 281,537,988 -------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 517,050 Additional paid-in capital 429,585,991 Undistributed net investment income 96,063 Accumulated net realized gain (loss) (145,484,099) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (3,177,017) -------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 281,537,988 -------------------------------------------------------------------------------- *Including securities on loan, at value $ 3,477,064 --------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 16 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $248,915,953 45,095,614 $5.52(1) Class B $ 28,110,285 5,714,419 $4.92 Class C $ 3,803,531 771,575 $4.93 Class I $ 8,907 1,558 $5.72 Class R4 $ 696,243 121,347 $5.74 Class R5 $ 3,069 535 $5.74 -----------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $5.86. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 5.75%. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 17 STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED APRIL 30, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Dividends $ 3,136,368 Interest 718 Income distributions from affiliated money market fund 18,768 Fee income from securities lending 50,847 Less foreign taxes withheld (388,401) -------------------------------------------------------------------------------- Total income 2,818,300 -------------------------------------------------------------------------------- Expenses: Investment management services fees 1,354,629 Distribution fees Class A 276,898 Class B 125,296 Class C 15,745 Transfer agency fees Class A 454,748 Class B 54,810 Class C 6,683 Class R4 163 Administrative services fees 100,155 Plan administration services fees -- Class R4 815 Compensation of board members 4,379 Custodian fees 208,000 Printing and postage 73,160 Registration fees 19,010 Professional fees 23,290 Other 51 -------------------------------------------------------------------------------- Total expenses 2,717,832 Expenses waived/reimbursed by the Investment Manager and its affiliates (765) -------------------------------------------------------------------------------- Total net expenses 2,717,067 -------------------------------------------------------------------------------- Investment income (loss) -- net 101,233 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (123,986,283) Foreign currency transactions (789,996) -------------------------------------------------------------------------------- Net realized gain (loss) on investments (124,776,279) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 150,669,990 -------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 25,893,711 -------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 25,994,944 --------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 18 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2009 OCT. 31, 2008 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 101,233 $ 4,436,377 Net realized gain (loss) on investments (124,776,279) (19,657,824) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 150,669,990 (421,981,869) -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 25,994,944 (437,203,316) -------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A -- (7,733,781) Class B -- (584,169) Class C -- (60,487) Class I -- (828,121) Class R4 -- (23,143) Net realized gain Class A -- (117,775,823) Class B -- (18,510,075) Class C -- (1,520,014) Class I -- (9,800,247) Class R4 -- (416,434) -------------------------------------------------------------------------------------------------- Total distributions -- (157,252,294) --------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 19 STATEMENTS OF CHANGES IN NET ASSETS (continued) --------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2009 OCT. 31, 2008 (UNAUDITED) CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 18,571,536 $ 109,825,373 Class B shares 1,918,455 12,474,577 Class C shares 786,511 2,616,649 Class I shares -- 30,164,283 Class R4 shares 54,161 642,913 Class R5 shares -- 5,000 Reinvestment of distributions at net asset value Class A shares -- 124,102,560 Class B shares -- 18,787,330 Class C shares -- 1,531,576 Class I shares -- 10,623,826 Class R4 shares -- 439,576 Payments for redemptions Class A shares (42,791,848) (148,388,977) Class B shares (4,485,899) (31,272,815) Class C shares (529,465) (2,462,810) Class I shares -- (72,065,208) Class R4 shares (203,913) (921,454) -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (26,680,462) 56,102,399 -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (685,518) (538,353,211) Net assets at beginning of period 282,223,506 820,576,717 -------------------------------------------------------------------------------------------------- Net assets at end of period $ 281,537,988 $ 282,223,506 -------------------------------------------------------------------------------------------------- Undistributed (excess of distributions over) net investment income $ 96,063 $ (5,170) --------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 20 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(h) 2008 2007 2006 2005 Net asset value, beginning of period $4.96 $14.99 $11.32 $8.23 $6.27 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) --(b) .08(b) .04(b) .01 .04 Net gains (losses) (both realized and unrealized) .56 (7.24) 6.27 3.10 1.95 -------------------------------------------------------------------------------------------------------------- Total from investment operations .56 (7.16) 6.31 3.11 1.99 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.18) -- (.02) (.03) Distributions from realized gains -- (2.69) (2.64) -- -- -------------------------------------------------------------------------------------------------------------- Total distributions -- (2.87) (2.64) (.02) (.03) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.52 $4.96 $14.99 $11.32 $8.23 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $249 $250 $661 $425 $295 -------------------------------------------------------------------------------------------------------------- Total expenses(c),(d) 2.08%(e) 1.87% 1.83% 1.81% 1.79% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .17%(e) .78% .31% .19% .54% -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 95% 133% 125% 145% 124% -------------------------------------------------------------------------------------------------------------- Total return(f) 11.29%(g) (57.79%) 68.21% 37.85% 31.83% --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of a sales charge. (g) Not annualized. (h) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 21 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(i) 2008 2007 2006 2005 Net asset value, beginning of period $4.43 $13.73 $10.63 $7.77 $5.95 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01)(b) .00(b),(c) (.05)(b) (.05) (.01) Net gains (losses) (both realized and unrealized) .50 (6.53) 5.79 2.91 1.83 -------------------------------------------------------------------------------------------------------------- Total from investment operations .49 (6.53) 5.74 2.86 1.82 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.08) -- -- -- Distributions from realized gains -- (2.69) (2.64) -- -- -------------------------------------------------------------------------------------------------------------- Total distributions -- (2.77) (2.64) -- -- -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.92 $4.43 $13.73 $10.63 $7.77 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $28 $28 $94 $77 $74 -------------------------------------------------------------------------------------------------------------- Total expenses(d),(e) 2.86%(f) 2.62% 2.58% 2.57% 2.55% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.61%)(f) .02% (.48%) (.55%) (.24%) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 95% 133% 125% 145% 124% -------------------------------------------------------------------------------------------------------------- Total return(g) 11.06%(h) (58.08%) 66.95% 36.81% 30.59% --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Rounds to zero. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Total return does not reflect payment of a sales charge. (h) Not annualized. (i) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 22 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(i) 2008 2007 2006 2005 Net asset value, beginning of period $4.44 $13.78 $10.66 $7.79 $5.97 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01)(b) .00(b),(c) (.05)(b) (.06) -- Net gains (losses) (both realized and unrealized) .50 (6.54) 5.81 2.93 1.82 -------------------------------------------------------------------------------------------------------------- Total from investment operations .49 (6.54) 5.76 2.87 1.82 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.11) -- -- -- Distributions from realized gains -- (2.69) (2.64) -- -- -------------------------------------------------------------------------------------------------------------- Total distributions -- (2.80) (2.64) -- -- -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.93 $4.44 $13.78 $10.66 $7.79 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $4 $3 $8 $5 $3 -------------------------------------------------------------------------------------------------------------- Total expenses(d),(e) 2.84%(f) 2.63% 2.59% 2.58% 2.56% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.58%)(f) .03% (.48%) (.57%) (.19%) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 95% 133% 125% 145% 124% -------------------------------------------------------------------------------------------------------------- Total return(g) 11.04%(h) (58.15%) 67.03% 36.84% 30.54% --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Rounds to zero. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Total return does not reflect payment of a sales charge. (h) Not annualized. (i) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 23 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(g) 2008 2007 2006 2005 Net asset value, beginning of period $5.12 $15.38 $11.50 $8.35 $6.36 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02(b) .11(b) .09(b) .03 .06 Net gains (losses) (both realized and unrealized) .58 (7.45) 6.43 3.16 1.98 -------------------------------------------------------------------------------------------------------------- Total from investment operations .60 (7.34) 6.52 3.19 2.04 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.23) -- (.04) (.05) Distributions from realized gains -- (2.69) (2.64) -- -- -------------------------------------------------------------------------------------------------------------- Total distributions -- (2.92) (2.64) (.04) (.05) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.72 $5.12 $15.38 $11.50 $8.35 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $56 $41 $19 -------------------------------------------------------------------------------------------------------------- Total expenses(c),(d) 1.42%(e) 1.42% 1.39% 1.35% 1.30% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .84%(e) .97% .75% .63% .97% -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 95% 133% 125% 145% 124% -------------------------------------------------------------------------------------------------------------- Total return 11.72%(f) (57.63%) 69.07% 38.36% 32.32% --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Not annualized. (g) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 24 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(i) 2008 2007 2006 2005 Net asset value, beginning of period $5.14 $15.32 $11.50 $8.33 $6.35 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02(b) .11(b) .05(b) .03 .05 Net gains (losses) (both realized and unrealized) .58 (7.45) 6.41 3.14 1.97 -------------------------------------------------------------------------------------------------------------- Total from investment operations .60 (7.34) 6.46 3.17 2.02 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.15) -- -- (.04) Distributions from realized gains -- (2.69) (2.64) -- -- -------------------------------------------------------------------------------------------------------------- Total distributions -- (2.84) (2.64) -- (.04) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.74 $5.14 $15.32 $11.50 $8.33 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $1 $2 $6 $2 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.73%(e) 1.73% 1.65% 1.63% 1.59% -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) 1.49%(e) 1.47% 1.65% 1.63% 1.59% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .77%(e) 1.12% .45% .41% .81% -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 95% 133% 125% 145% 124% -------------------------------------------------------------------------------------------------------------- Total return 11.67%(h) (57.58%) 68.51% 38.06% 31.87% --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (h) Not annualized. (i) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 25 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(h) 2008(b) Net asset value, beginning of period $5.13 $9.32 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .02 .03 Net gains (losses) (both realized and unrealized) .59 (4.22) -------------------------------------------------------------------------------------------------------------- Total from investment operations .61 (4.19) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.74 $5.13 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- -------------------------------------------------------------------------------------------------------------- Total expenses(d),(e) 1.44%(f) 1.47%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .81%(f) 1.57%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 95% 133% -------------------------------------------------------------------------------------------------------------- Total return 11.89%(g) (44.96%)(g) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Not annualized. (h) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 26 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS ------------------------------------------------- (UNAUDITED AS TO APRIL 30, 2009) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Threadneedle Emerging Markets Fund (the Fund) is a series of RiverSource Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund invests primarily in equity securities of emerging markets companies. The Fund offers Class A, Class B, Class C, Class I, Class R4 and Class R5 shares. - Class A shares are sold with a front-end sales charge. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - Class C shares may be subject to a CDSC. - Class I, Class R4 and Class R5 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. At April 30, 2009, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) owned 100% of Class I and Class R5 shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) 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 Effective Nov. 1, 2008, the Fund adopted Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. There was no impact to the Fund's net assets or results of operations upon adoption. The fair valuation measurements disclosure can be found following the Notes to Portfolio of Investments. 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. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange (NYSE) and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the Investment Manager, as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. 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, which approximates fair value. -------------------------------------------------------------------------------- 28 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- ILLIQUID SECURITIES At April 30, 2009, investments in securities included issues that are illiquid which the Fund currently limits to 15% of net assets, at market value, at the time of purchase. The aggregate value of such securities at April 30, 2009 was $7,342,218 representing 2.61% of net assets. Certain illiquid securities may be valued by management at fair value according to procedures approved, in good faith, by the Board. According to Board guidelines, certain unregistered securities are determined to be liquid and are not included within the 15% 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. Cash collateral may be collected by the Fund to secure certain over-the-counter options (OTC options) trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. 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. Options contracts, including OTC option contracts, with no readily available market value are valued using quotations obtained from independent brokers as of the close of the NYSE. The Fund will realize a gain or loss when the option transaction expires or is exercised. 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. At April 30, 2009, and for the six months then ended, the Fund had no outstanding option contracts. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 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. Futures and options on futures are valued daily based upon the last sale price at the close of the market on the principal exchange on which they are traded. 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. At April 30, 2009, the Fund had no outstanding futures contracts. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At April 30, 2009, foreign currency holdings consisted of multiple denominations, primarily Indian rupees and South Korean wons. The Fund may enter into forward foreign currency 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 counterparty 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 -------------------------------------------------------------------------------- 30 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of foreign currency transactions, passive foreign investment company (PFIC) holdings, and losses deferred due to wash sales. 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. RECENT ACCOUNTING PRONOUNCEMENTS The Fund has adopted FASB Staff Position No. 133-1 and FIN No. 45-4 (FSP FAS 133-1 and FIN 45-4), "Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45." The amendments to FSP FAS 133-1 and FIN 45-4 require enhanced disclosures about a fund's derivatives and guarantees. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows and (d) the current status of the payment/performance risk of the credit derivative. The amendments to FSP FAS 133-1 and FIN 45-4 also require additional disclosures about the current status of the payment/performance risk of a guarantee. At April 30, 2009, the Fund did not own nor was it a party to any credit derivative contracts within the scope of these amendments. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of April 30, 2009, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. On April 9, 2009, the FASB issued Staff Position No. 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly" (FSP 157-4). FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also requires additional disaggregation of the current SFAS 157 required disclosures. FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Management is currently evaluating the impact that the adoption of FSP 157-4 will have on the amounts and disclosures within the Fund's financial statements. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 1.10% to 0.90% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment determined monthly by -------------------------------------------------------------------------------- 32 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- measuring the percentage difference over a rolling 12-month period between the annualized performance of one Class A share of the Fund and the annualized performance of 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 management fee by $21,610 for the six months ended April 30, 2009. The management fee for the six months ended April 30, 2009 was 1.08% of the Fund's average daily net assets, including the adjustment under the terms of the performance incentive arrangement. SUBADVISORY AGREEMENT The Investment Manager has a Subadvisory Agreement with Threadneedle International Limited (Threadneedle), an affiliate of the Investment Manager and an indirect wholly-owned subsidiary of Ameriprise Financial, to subadvise the assets of the Fund. The Investment Manager contracts with and compensates Threadneedle to manage the investment of the Fund's assets. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines 0.08% to 0.05% annually as the Fund's assets increase. The fee for the six months ended April 30, 2009 was 0.08% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended April 30, 2009, other expenses paid to this company were $1,098. COMPENSATION OF BOARD MEMBERS 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. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50 for Class B and $20.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average net assets attributable to Class R4 and Class R5 shares. The Transfer Agent charges an annual 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 in the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Fund's average daily net assets attributable to Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. DISTRIBUTION FEES The Fund has agreements with RiverSource Distributors, Inc. and RiverSource Fund Distributors, Inc. (collectively, 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 of up to 0.25% of the Fund's average daily net assets attributable to Class A shares and a fee at an annual rate of up to 1.00% of the Fund's average daily net assets attributable to Class B and Class C shares. For Class B and Class C shares, up to 0.75% of the fee is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed expense") was approximately $981,000 and $44,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of April 30, 2009, and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGES Sales charges received by the Distributor for distributing Fund shares were $158,518 for Class A, $11,391 for Class B and $418 for Class C for the six months ended April 30, 2009. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended April 30, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses -------------------------------------------------------------------------------- 34 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- (excluding fees and expenses of acquired funds*), including the adjustment under the terms of a performance incentive arrangement, were as follows: Class R4............................................ 1.49%
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class R4........................................... $163
The waived/reimbursed fees and expenses for the plan administration services fees at the class level were as follows: Class R4........................................... $602
The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Oct. 31, 2009, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any performance incentive adjustment, will not exceed the following percentage of the class average daily net assets: Class R4............................................ 1.64%
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. CUSTODIAN FEES Effective Dec. 15, 2008, the Fund pays custodian fees to JPMorgan Chase Bank, N.A. For the period from Nov. 1, 2008 to Dec. 15, 2008, the Fund paid custodian fees amounting to $3,133 to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $236,997,543 and $259,653,495, respectively, for the six months ended April 30, 2009. Realized gains and losses are determined on an identified cost basis. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 35 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED APRIL 30, 2009 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) ---------------------------------------------------------------------------------- Class A 3,896,552 -- (9,254,316) (5,357,764) Class B 445,121 -- (1,085,214) (640,093) Class C 185,904 -- (126,176) 59,728 Class R4 11,054 -- (41,922) (30,868) ---------------------------------------------------------------------------------- YEAR ENDED OCT. 31, 2008* ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) ---------------------------------------------------------------------------------- Class A 11,082,775 11,944,431 (16,677,659) 6,349,547 Class B 1,336,871 2,007,193 (3,818,705) (474,641) Class C 296,342 163,281 (305,438) 154,185 Class I 2,894,086 993,810 (7,495,922) (3,608,026) Class R4 56,860 40,967 (95,990) 1,837 Class R5 535 -- -- 535 ----------------------------------------------------------------------------------
* Class R5 is for the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. 5. LENDING OF PORTFOLIO SECURITIES Effective Dec. 1, 2008, the Fund has entered into a Master Securities Lending Agreement ("the Agreement") with JPMorgan Chase Bank, National Association ("JPMorgan"). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments, and any uninvested cash collateral balance, are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At April 30, 2009, securities valued at $3,477,064 were on loan, secured by cash collateral of $3,549,611 invested in short-term securities or in cash equivalents. -------------------------------------------------------------------------------- 36 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Income of $50,847 earned from securities lending from Dec. 1, 2008 through April 30, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Funds or the borrower at any time, and are, therefore, not considered to be illiquid investments. Prior to Dec. 1, 2008, the Investment Manager served as securities lending agent for the Fund under the Securities Lending Agency Agreement. For the period from Nov. 1, 2008 through Nov. 30, 2008, the Fund had no securities on loan. 6. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term Cash Fund aggregated $100,055,098 and $108,986,137, respectively, for the six months ended April 30, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short- Term Cash Fund at April 30, 2009, can be found in the Portfolio of Investments. 7. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $475 million. The -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $175 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $650 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum, in addition to an upfront fee equal to its pro rata share of 0.02% of the amount of the credit facility. The Fund had no borrowings during the six months ended April 30, 2009. 8. CAPITAL LOSS CARRY-OVER For federal tax purposes, the Fund had a capital loss carry-over of $8,838,403 at Oct. 31, 2008, that if not offset by capital gains will expire in 2016. 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. RISKS RELATING TO CERTAIN INVESTMENTS FOREIGN/EMERGING MARKETS RISK Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging markets may accentuate these risks. 10. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed -------------------------------------------------------------------------------- 38 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co., Inc. (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (which is now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman is and has been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman will pay $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the -------------------------------------------------------------------------------- 40 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 41 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- RiverSource Investments, LLC ("RiverSource Investments" or the "investment manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), RiverSource Investments provides investment advice and other services to the Fund and all funds in the RiverSource Family of Funds (collectively, the "Funds"). In addition, under the subadvisory agreement (the "Subadvisory Agreement") between RiverSource Investments and Threadneedle International Limited (the "Subadviser"), the Subadviser performs portfolio management and related services for the Fund. On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of each of the IMS Agreement and the Subadvisory Agreement (together, the "Advisory Agreements"). RiverSource Investments prepared detailed reports for the Board and its Contracts Committee in March and April 2009, including reports based on data provided by independent organizations to assist the Board in making these determinations. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource Investments addressing the services RiverSource Investments provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts, Investment Review and Compliance Committees in determining whether to continue the Advisory Agreements. At the April 7-8, 2009 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory and subadvisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the Advisory Agreements. Nature, Extent and Quality of Services Provided by RiverSource Investments and the Subadviser: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource Investments and the Subadviser, as well as their expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource Investments, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, most notably, the large investment made in the acquisition of J. & W. Seligman & Co. Incorporated, including its portfolio management operations, personnel and infrastructure (including the addition of two new offices in New York City and Palo Alto). Further, in connection with the Board's evaluation of the overall -------------------------------------------------------------------------------- 42 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- package of services provided by RiverSource Investments, the Board considered the quality of the administrative and transfer agency services provided by RiverSource Investments' affiliates to the Fund. The Board also reviewed the financial condition of RiverSource Investments (and its affiliates including the Subadviser), and each entity's ability to carry out its responsibilities under the Advisory Agreements. Further, the Board considered RiverSource Investments' ability to retain key personnel and its expectations in this regard. The Board also discussed the acceptability of the terms of the Advisory Agreements (including the relatively broad scope of services required to be performed by RiverSource Investments). The Board concluded that the services being performed under the Advisory Agreements were of a reasonably high quality, particularly in light of recent market conditions. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that RiverSource Investments and its affiliates including the Subadviser, were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the Advisory Agreements, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods, recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2007 to December 2008. The Board observed that the Fund's investment performance met expectations. Additionally, the Board reviewed the performance of the Subadviser and RiverSource Investments' processes for monitoring the Subadviser. The Board considered, in particular, management's rationale for recommending the continued retention of the Subadviser. Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource Investments and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the Advisory Agreements. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 43 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- funds in its peer group, as well as data showing the Fund's contribution to RiverSource Investments' profitability. They also reviewed information in the report comparing the fees charged to the Fund by RiverSource Investments to fees charged to other client accounts of the investment manager (or Subadviser) (with similar investment strategies to those of the Fund). The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund (excluding the effect of a performance incentive adjustment, if applicable), with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) was slightly below the peer group's median expense ratio shown in the reports. The Board also considered the Fund's performance incentive adjustment and noted its continued appropriateness. The Board also considered the expected profitability of RiverSource Investments and its affiliates in connection with RiverSource Investments providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource Investments and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource Investments as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. -------------------------------------------------------------------------------- 44 THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees and subadvisory fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 8, 2009, the Board, including all of the Independent Directors, approved the renewal of the Advisory Agreements for an additional annual period. PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 SEMIANNUAL REPORT 45 THREADNEEDLE EMERGING MARKETS FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource Investments employs Threadneedle as a subadviser. Threadneedle(R) mutual funds are distributed by RiverSource Distributors, Inc., and RiverSource Fund Distributors, Inc., Members FINRA, and managed by RiverSource Investments, LLC. RiverSource and Threadneedle are part of Ameriprise Financial, Inc. (THREADNEEDLE LOGO) (C)2009 RiverSource Investments, LLC. S-6344 P (6/09)
Semiannual Report (THREADNEEDLE LOGO) THREADNEEDLE GLOBAL EQUITY FUND SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2009 THREADNEEDLE GLOBAL EQUITY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. (SINGLE STRATEGY FUNDS ICON) TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Fund Expenses Example.............. 10 Portfolio of Investments........... 13 Statement of Assets and Liabilities...................... 20 Statement of Operations............ 22 Statements of Changes in Net Assets........................... 24 Financial Highlights............... 25 Notes to Financial Statements...... 34 Approval of Investment Management Services Agreement............... 49 Proxy Voting....................... 52
RIVERSOURCE FAMILY OF FUNDS Threadneedle Funds are a part of the RiverSource family of funds that includes funds branded "RiverSource," "RiverSource Partners," "Seligman" and "Threadneedle." These funds share the same Board of Directors/Trustees and officers. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > Threadneedle Global Equity Fund (the Fund) Class A shares declined 3.02% (excluding sales charge) for the six months ended April 30, 2009. > The Fund underperformed its benchmark, the Morgan Stanley Capital International (MSCI) All Country World Index, which fell 3.00% for the six month period. > The Lipper Global Funds Index, representing the Fund's peer group, declined 3.98% over the same timeframe. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2009) --------------------------------------------------------------------------------
6 months* 1 year 3 years 5 years 10 years ------------------------------------------------------------------------ Threadneedle Global Equity Fund Class A (excluding sales charge) -3.02% -40.07% -11.66% +1.20% -2.53% ------------------------------------------------------------------------ MSCI All Country World Index(1) (unmanaged) -3.00% -39.35% -10.51% +0.32% -0.56% ------------------------------------------------------------------------ Lipper Global Funds Index(2) -3.98% -36.72% -10.52% -0.06% +0.40% ------------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary or visiting riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. -------------------------------------------------------------------------------- 2 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- (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. (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. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------
AT APRIL 30, 2009 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 5/29/90) -3.02% -40.07% -11.66% +1.20% -2.53% N/A --------------------------------------------------------------------------------- Class B (inception 3/20/95) -3.29% -40.46% -12.32% +0.44% -3.27% N/A --------------------------------------------------------------------------------- Class C (inception 6/26/00) -3.31% -40.43% -12.30% +0.43% N/A -5.62% --------------------------------------------------------------------------------- Class I (inception 8/1/08) -2.51% N/A N/A N/A N/A -31.48%* --------------------------------------------------------------------------------- Class R2 (inception 12/11/06) -2.94% -40.00% N/A N/A N/A -16.37% --------------------------------------------------------------------------------- Class R3 (inception 12/11/06) -2.83% -39.89% N/A N/A N/A -16.19% --------------------------------------------------------------------------------- Class R4 (inception 3/20/95) -2.73% -39.81% -11.49% +1.40% -2.34% N/A --------------------------------------------------------------------------------- Class R5 (inception 12/11/06) -2.58% -39.69% N/A N/A N/A -15.93% --------------------------------------------------------------------------------- Class W (inception 12/1/06) -2.74% -39.95% N/A N/A N/A -15.81% --------------------------------------------------------------------------------- With sales charge Class A (inception 5/29/90) -8.64% -43.49% -13.38% 0.00% -3.03% N/A --------------------------------------------------------------------------------- Class B (inception 3/20/95) -8.12% -43.43% -13.50% +0.04% -3.27% N/A --------------------------------------------------------------------------------- Class C (inception 6/26/00) -4.28% -41.03% -12.30% +0.43% N/A -5.62% ---------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 4 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
AT MARCH 31, 2009 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 5/29/90) -27.31% -41.98% -13.15% -1.07% -3.01% N/A --------------------------------------------------------------------------------- Class B (inception 3/20/95) -27.67% -42.44% -13.85% -1.86% -3.76% N/A --------------------------------------------------------------------------------- Class C (inception 6/26/00) -27.61% -42.44% -13.80% -1.84% N/A -6.55% --------------------------------------------------------------------------------- Class I (inception 8/1/08) -27.06% N/A N/A N/A N/A -36.92%* --------------------------------------------------------------------------------- Class R2 (inception 12/11/06) -27.33% -42.03% N/A N/A N/A -19.84% --------------------------------------------------------------------------------- Class R3 (inception 12/11/06) -27.18% -41.80% N/A N/A N/A -19.58% --------------------------------------------------------------------------------- Class R4 (inception 3/20/95) -27.17% -41.83% -13.03% -0.90% -2.83% N/A --------------------------------------------------------------------------------- Class R5 (inception 12/11/06) -27.11% -41.73% N/A N/A N/A -19.40% --------------------------------------------------------------------------------- Class W (inception 12/1/06) -27.29% -41.90% N/A N/A N/A -19.24% --------------------------------------------------------------------------------- With sales charge Class A (inception 5/29/90) -31.48% -45.32% -14.85% -2.25% -3.51% N/A --------------------------------------------------------------------------------- Class B (inception 3/20/95) -31.28% -45.32% -15.01% -2.26% -3.76% N/A --------------------------------------------------------------------------------- Class C (inception 6/26/00) -28.33% -43.01% -13.80% -1.84% N/A -6.55% ---------------------------------------------------------------------------------
*Not annualized. **For classes with less than 10 years performance. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- Class A share performance reflects the maximum sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third* years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R2, Class R3, Class R4, Class R5 and Class W shares. Class I, Class R2, Class R3, Class R4 and Class R5 are available to institutional investors only. Class W shares are offered through qualifying discretionary accounts. * For Class B shares purchased on or after June 13, 2009 the CDSC percentage for the third year will be 3%. -------------------------------------------------------------------------------- 6 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. ANNUAL OPERATING EXPENSE RATIO* (as of the current prospectus) --------------------------------------------------------------------------------
Total fund expenses ---------------------------------------- Class A 1.46% ---------------------------------------- Class B 2.23% ---------------------------------------- Class C 2.22% ---------------------------------------- Class I 0.85% ---------------------------------------- Class R2 1.79% ---------------------------------------- Class R3 1.54% ---------------------------------------- Class R4 1.29%(a) ---------------------------------------- Class R5 1.04% ---------------------------------------- Class W 1.43% ----------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Oct. 31, 2009, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment (that increased the management fee by 0.06% for the year ended Oct. 31, 2008), will not exceed 1.27% for Class R4. * Fund expense ratios are calculated based on the fund's average net assets during the fund's most recently completed fiscal year, and have not been adjusted for current asset levels, including any decrease or increase in assets, which, if adjusted, would result in expense ratios that are higher or lower, respectively, than those that are expressed herein. Any fee waivers/expense caps would limit the impact that any decrease in assets will have on net expense ratios in the current fiscal year. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 7 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- COUNTRY DIVERSIFICATION(1) (at April 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Australia 1.5% ------------------------------------------------ Bermuda 1.9% ------------------------------------------------ Brazil 1.7% ------------------------------------------------ Canada 2.3% ------------------------------------------------ Denmark 1.1% ------------------------------------------------ Finland 1.1% ------------------------------------------------ France 0.9% ------------------------------------------------ Germany 6.5% ------------------------------------------------ Hong Kong 3.1% ------------------------------------------------ Japan 5.3% ------------------------------------------------ Luxembourg 0.8% ------------------------------------------------ Mexico 1.4% ------------------------------------------------ Netherlands 0.4% ------------------------------------------------ Portugal 0.7% ------------------------------------------------ Singapore 1.2% ------------------------------------------------ South Korea 1.0% ------------------------------------------------ Spain 1.5% ------------------------------------------------ Switzerland 7.4% ------------------------------------------------ United Kingdom 10.7% ------------------------------------------------ United States 48.7% ------------------------------------------------ Other(2) 0.8% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral for Securities on Loan) as of April 30, 2009. The Fund's composition is subject to change. (2) Cash & Cash Equivalents. -------------------------------------------------------------------------------- 8 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- TOP TEN HOLDINGS (at April 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Nestle (Switzerland) 2.8% ------------------------------------------------ Microsoft (United States) 2.8% ------------------------------------------------ IBM (United States) 2.5% ------------------------------------------------ Johnson & Johnson ( United States) 2.3% ------------------------------------------------ Roche Holding (Switzerland) 2.0% ------------------------------------------------ Vodafone Group (United Kingdom) 2.0% ------------------------------------------------ Oracle (United States) 1.9% ------------------------------------------------ JPMorgan Chase & Co (United States) 1.9% ------------------------------------------------ Google Cl A (United States) 1.8% ------------------------------------------------ Travelers Companies (United States) 1.8% ------------------------------------------------
For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 9 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, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and 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. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended April 30, 2009. 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. -------------------------------------------------------------------------------- 10 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2008 APRIL 30, 2009 THE PERIOD(A) EXPENSE RATIO ------------------------------------------------------------------------------------------- Class A ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 969.80 $ 7.08 1.45% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.60 $ 7.25 1.45% ------------------------------------------------------------------------------------------- Class B ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 967.10 $10.83 2.22% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,013.79 $11.08 2.22% ------------------------------------------------------------------------------------------- Class C ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 966.90 $10.78 2.21% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,013.84 $11.03 2.21% ------------------------------------------------------------------------------------------- Class I ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 974.90 $ 3.57 .73% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,021.17 $ 3.66 .73% ------------------------------------------------------------------------------------------- Class R2 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 970.60 $ 7.92 1.62% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.76 $ 8.10 1.62% ------------------------------------------------------------------------------------------- Class R3 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 971.70 $ 6.36 1.30% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.35 $ 6.51 1.30% ------------------------------------------------------------------------------------------- Class R4 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 972.70 $ 5.48 1.12% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.24 $ 5.61 1.12% ------------------------------------------------------------------------------------------- Class R5 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 974.20 $ 3.96 .81% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,020.78 $ 4.06 .81% -------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 11 FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2008 APRIL 30, 2009 THE PERIOD(A) EXPENSE RATIO ------------------------------------------------------------------------------------------- Class W ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 972.60 $ 6.11 1.25% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.60 $ 6.26 1.25% -------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2009: -3.02% for Class A, -3.29% for Class B, -3.31% for Class C, -2.51% for Class I, -2.94% for Class R2, -2.83% for Class R3, -2.73% for Class R4, -2.58% for Class R5 and -2.74% for Class W. -------------------------------------------------------------------------------- 12 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (98.6%)(c) ISSUER SHARES VALUE(a) AUSTRALIA (1.5%) CSL 243,953 $6,100,402 ------------------------------------------------------------------------------------- BERMUDA (1.9%) Accenture Cl A 130,713 3,846,884 PartnerRe 59,008 4,023,756 --------------- Total 7,870,640 ------------------------------------------------------------------------------------- BRAZIL (1.7%) Petroleo Brasileiro ADR 173,209 5,814,626 Redecard 86,900 1,094,644 --------------- Total 6,909,270 ------------------------------------------------------------------------------------- CANADA (2.3%) Barrick Gold 161,158 4,689,698 First Uranium 533,200(b,d) 2,870,323 Research In Motion 25,776(b) 1,791,432 --------------- Total 9,351,453 ------------------------------------------------------------------------------------- DENMARK (1.1%) Vestas Wind Systems 66,464(b,d) 4,387,764 ------------------------------------------------------------------------------------- FINLAND (1.1%) Nokia 229,577(d) 3,320,647 Talvivaara Mining 457,779(b) 1,401,959 --------------- Total 4,722,606 ------------------------------------------------------------------------------------- FRANCE (0.9%) France Telecom 169,200 3,777,370 ------------------------------------------------------------------------------------- GERMANY (6.4%) Allianz 71,261(d) 6,576,699 E.ON 115,822(d) 3,929,916 K+S 36,976(d) 2,228,858 Linde 58,509(d) 4,671,219 MTU Aero Engines Holding 81,070 2,735,738 Siemens 95,049(d) 6,418,703 --------------- Total 26,561,133 ------------------------------------------------------------------------------------- HONG KONG (3.0%) Esprit Holdings 351,200 2,168,405 Great Eagle Holdings 2,234,607 3,108,306 Hongkong & Shanghai Hotels 2,828,000 2,156,606 Sun Hung Kai Properties 496,000 5,168,067 --------------- Total 12,601,384 ------------------------------------------------------------------------------------- JAPAN (5.3%) Canon 64,100(d) 1,917,819 GOLDCREST 31,350 716,987 Honda Motor 92,500(d) 2,669,018 KDDI 602 2,698,648 Mitsubishi Estate 315,000(d) 4,098,875 Nintendo 23,300 6,217,335 Sony Financial Holdings 1,160(d) 3,635,331 --------------- Total 21,954,013 ------------------------------------------------------------------------------------- LUXEMBOURG (0.8%) Millicom Intl Cellular 64,404 3,121,018 ------------------------------------------------------------------------------------- MEXICO (1.4%) America Movil ADR Series L 171,941 5,648,262 ------------------------------------------------------------------------------------- NETHERLANDS (0.4%) Fugro 46,713 1,688,547 ------------------------------------------------------------------------------------- PORTUGAL (0.7%) Galp Energia Series B 207,367 2,771,629 ------------------------------------------------------------------------------------- SINGAPORE (1.2%) DBS Group Holdings 803,000 5,156,134 ------------------------------------------------------------------------------------- SOUTH KOREA (1.0%) Samsung Electronics 8,905 4,112,458 ------------------------------------------------------------------------------------- SPAIN (1.5%) Inditex 51,726 2,217,144 Telefonica 200,618 3,825,675 --------------- Total 6,042,819 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) SWITZERLAND (7.4%) Nestle 351,870 $11,518,385 Novartis 167,733 6,378,385 Roche Holding 65,192(d) 8,254,002 Syngenta 20,202 4,336,735 --------------- Total 30,487,507 ------------------------------------------------------------------------------------- UNITED KINGDOM (10.6%) 3i Group 373,060 1,771,711 Autonomy 220,077(b) 4,659,330 BG Group 396,370 6,409,588 Home Retail Group 491,937 1,832,265 HSBC Holdings 828,230 5,887,807 Intl Power 727,169 2,673,443 SOCO Intl 81,373(b) 1,490,425 Tesco 805,913 4,020,545 Tullow Oil 585,770 6,989,413 Vodafone Group 4,375,066 8,071,612 --------------- Total 43,806,139 ------------------------------------------------------------------------------------- UNITED STATES (48.4%) Adobe Systems 170,506(b) 4,663,339 American Tower Cl A 93,528(b) 2,970,449 Aon 84,147 3,551,003 Arch Coal 120,855 1,688,344 Bank of America 184,947 1,651,577 Cisco Systems 266,876(b) 5,156,043 Cliffs Natural Resources 66,884 1,542,345 Coca-Cola 138,464 5,960,875 Comcast Cl A 264,698 4,092,231 CVS Caremark 119,558 3,799,553 Devon Energy 69,380 3,597,353 Diamond Offshore Drilling 25,081 1,816,115 DIRECTV Group 87,581(b) 2,165,878 eBay 100,216(b) 1,650,558 ENSCO Intl 43,229 1,222,516 Genzyme 82,401(b) 4,394,446 Gilead Sciences 79,175(b) 3,626,215 Goldman Sachs Group 26,713 3,432,621 Google Cl A 18,415(b) 7,291,787 Humana 92,641(b) 2,666,208 IBM 97,457 10,058,537 Johnson & Johnson 179,460 9,396,525 JPMorgan Chase & Co 231,656 7,644,648 Juniper Networks 128,204(b) 2,775,617 KeyCorp 202,214 1,243,616 Laboratory Corp of America Holdings 79,579(b) 5,104,993 Lockheed Martin 41,173 3,233,316 Lowe's Companies 210,094 4,517,021 McAfee 108,181(b) 4,061,115 Merck & Co 71,477 1,732,602 Microsoft 564,155 11,429,779 Norfolk Southern 50,695 1,808,798 Oracle 413,632 7,999,643 PepsiCo 105,278 5,238,633 Philip Morris Intl 80,913 2,929,051 Plum Creek Timber 72,720 2,510,294 Procter & Gamble 129,703 6,412,516 QUALCOMM 83,080 3,515,946 Republic Services 146,266 3,071,586 Schering-Plough 147,736 3,400,883 St. Jude Medical 45,876(b) 1,537,764 Thermo Fisher Scientific 129,193(b) 4,532,090 Travelers Companies 177,118 7,286,635 Ultra Petroleum 56,477(b) 2,417,216 Valero Energy 176,145 3,494,717 Walgreen 97,392 3,061,031 Wal-Mart Stores 133,190 6,712,776 Walt Disney 145,340 3,182,946 WellPoint 67,228(b) 2,874,669 --------------- Total 200,124,419 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $506,104,391) $407,194,967 ------------------------------------------------------------------------------------- MONEY MARKET FUND (0.8%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.28% 3,297,171(e) $3,297,171 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $3,297,171) $3,297,171 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 14 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (8.6%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 35,676,279 $35,676,279 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $35,676,279) $35,676,279 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $545,077,841)(f) $446,168,417 =====================================================================================
SUMMARY OF INVESTMENTS IN SECURITIES BY INDUSTRY The following table represents the portfolio investments of the Fund by industry classifications as a percentage of total net assets at April 30, 2009:
PERCENTAGE OF INDUSTRY NET ASSETS VALUE ------------------------------------------------------------------------ Aerospace & Defense 1.4% $5,969,054 Automobiles 0.6 2,669,018 Beverages 2.7 11,199,508 Biotechnology 3.4 14,121,063 Capital Markets 1.3 5,204,332 Chemicals 2.7 11,236,812 Commercial Banks 3.0 12,287,557 Commercial Services & Supplies 0.7 3,071,586 Communications Equipment 4.0 16,559,685 Computers & Peripherals 2.4 10,058,537 Diversified Financial Services 2.3 9,296,225 Diversified Telecommunication 7,603,045 Services 1.8 Electric Utilities 1.0 3,929,916 Electrical Equipment 1.1 4,387,764 Energy Equipment & Services 1.1 4,727,178 Food & Staples Retailing 4.3 17,593,905 Food Products 2.8 11,518,385 Health Care Equipment & Supplies 0.4 1,537,764 Health Care Providers & Services 2.6 10,645,870 Hotels, Restaurants & Leisure 0.5 2,156,606 Household Durables 0.2 716,987 Household Products 1.6 6,412,516 Independent Power Producers & Energy 2,673,443 Traders 0.6 Industrial Conglomerates 1.6 6,418,703 Insurance 6.1 25,073,424 Internet & Catalog Retail 0.4 1,832,265
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
PERCENTAGE OF INDUSTRY NET ASSETS VALUE ------------------------------------------------------------------------ Internet Software & Services 2.2% $8,942,345 IT Services 1.2 4,941,528 Life Sciences Tools & Services 1.1 4,532,090 Media 2.3 9,441,055 Metals & Mining 2.5 10,504,325 Office Electronics 0.5 1,917,819 Oil, Gas & Consumable Fuels 8.4 34,673,311 Pharmaceuticals 7.1 29,162,397 Real Estate Investment Trusts (REITs) 0.6 2,510,294 Real Estate Management & Development 3.0 12,375,248 Road & Rail 0.4 1,808,798 Semiconductors & Semiconductor 4,112,458 Equipment 1.0 Software 9.4 39,030,541 Specialty Retail 2.2 8,902,570 Tobacco 0.7 2,929,051 Wireless Telecommunication Services 5.4 22,509,989 Other(1) 9.4 38,973,450 ------------------------------------------------------------------------ Total $446,168,417 ------------------------------------------------------------------------
(1) Cash & Cash Equivalents. INVESTMENTS IN DERIVATIVES FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT APRIL 30, 2009
CURRENCY TO BE CURRENCY TO BE UNREALIZED UNREALIZED EXCHANGE DATE DELIVERED RECEIVED APPRECIATION DEPRECIATION ---------------------------------------------------------------------------------------- May 1, 2009 45,000,000 468,799 $12,405 $-- Japanese Yen U.S. Dollar ---------------------------------------------------------------------------------------- May 5, 2009 110,000 74,506 156 -- Singapore Dollar U.S. Dollar ---------------------------------------------------------------------------------------- Total $12,561 $-- ----------------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. (d) At April 30, 2009, security was partially or fully on loan. See Note 5 to the financial statements. -------------------------------------------------------------------------------- 16 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (e) Affiliated Money Market Fund -- See Note 6 to the financial statements. The rate shown is the seven-day current annualized yield at April 30, 2009. (f) At April 30, 2009, the cost of securities for federal income tax purposes was approximately $545,078,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $12,024,000 Unrealized depreciation (110,934,000) ----------------------------------------------------------- Net unrealized depreciation $(98,910,000) -----------------------------------------------------------
The industries identified above are based on the Global Industry Classification Standard (GICS), which 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. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to implement more uniform reporting relating to the fair valuation of securities for financial statement purposes. Mutual funds are required to implement the requirements of this standard for fiscal years beginning after Nov. 15, 2007. While uniformity of presentation is the objective of the standard, it is likely that there may be a range of practices utilized and it may be some period of time before industry practices become more uniform. For this reason care should be exercised in interpreting this information and/or using it for comparison with other mutual funds. Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.) - Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) Observable inputs are those based on market data obtained from sources independent of the Fund, and unobservable inputs reflect the Fund's own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the NYSE or require adjustment, as described in Note 1 to the financial statements -- Valuation of securities. The following table is a summary of the inputs used to value the Fund's investments as of April 30, 2009:
FAIR VALUE AT APRIL 30, 2009 --------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL ----------------------------------------------------------------------------------- Investments in securities $446,168,417 $-- $-- $446,168,417 Other financial instruments* -- 12,561 -- 12,561 ----------------------------------------------------------------------------------- Total $446,168,417 $12,561 $-- $446,180,978 -----------------------------------------------------------------------------------
* Other financial instruments are derivative instruments, such as forwards, which are valued at the unrealized appreciation (depreciation) on the instrument. -------------------------------------------------------------------------------- 18 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY 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 filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 19 STATEMENT OF ASSETS AND LIABILITIES ------------------------------------------- APRIL 30, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $506,104,391) $ 407,194,967 Affiliated money market fund (identified cost $3,297,171) 3,297,171 Investments of cash collateral received for securities on loan (identified cost $35,676,279) 35,676,279 -------------------------------------------------------------------------------- Total investments in securities (identified cost $545,077,841) 446,168,417 Foreign currency holdings (identified cost $1,260,106) 1,271,705 Capital shares receivable 334,412 Dividends receivable 948,104 Receivable for investment securities sold 460,666 Reclaims receivable 524,453 Unrealized appreciation on forward foreign currency contracts 12,561 -------------------------------------------------------------------------------- Total assets 449,720,318 -------------------------------------------------------------------------------- LIABILITIES Disbursements in excess of cash 677,225 Capital shares payable 453,966 Payable upon return of securities loaned 35,676,279 Accrued investment management services fees 8,909 Accrued distribution fees 3,358 Accrued transfer agency fees 3,657 Accrued administrative services fees 902 Accrued plan administration services fees 33 Other accrued expenses 124,056 -------------------------------------------------------------------------------- Total liabilities 36,948,385 -------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 412,771,933 -------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 828,098 Additional paid-in capital 995,825,635 Undistributed net investment income 1,949,580 Accumulated net realized gain (loss) (486,992,260) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (98,839,120) -------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 412,771,933 -------------------------------------------------------------------------------- *Including securities on loan, at value $ 44,828,873 --------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 20 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $330,077,673 65,834,505 $5.01(1) Class B $ 36,028,030 7,647,765 $4.71 Class C $ 4,316,744 925,190 $4.67 Class I $ 37,389,063 7,421,355 $5.04 Class R2 $ 7,510 1,493 $5.03 Class R3 $ 3,190 634 $5.03 Class R4 $ 4,943,310 977,543 $5.06 Class R5 $ 3,195 634 $5.04 Class W $ 3,218 639 $5.04 -----------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $5.32. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 5.75%. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 21 STATEMENT OF OPERATIONS ------------------------------------------------------- SIX MONTHS ENDED APRIL 30, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Dividends 5,635,292 Interest 1,110 Income distributions from affiliated money market fund 9,561 Fee income from securities lending 79,339 Less foreign taxes withheld (374,202) ------------------------------------------------------------------------------- Total income 5,351,100 ------------------------------------------------------------------------------- Expenses: Investment management services fees 1,230,184 Distribution fees Class A 412,371 Class B 181,306 Class C 20,943 Class R2 12 Class R3 4 Class W 4 Transfer agency fees Class A 612,972 Class B 71,706 Class C 8,024 Class R2 1 Class R4 1,141 Class W 3 Administrative services fees 152,884 Plan administration services fees Class R2 6 Class R3 4 Class R4 5,707 Compensation of board members 6,749 Custodian fees 58,680 Printing and postage 57,830 Registration fees 35,460 Professional fees 24,973 Other 7,448 ------------------------------------------------------------------------------- Total expenses 2,888,412 Expenses waived/reimbursed by the Investment Manager and its affiliates (155) Earnings and bank fee credits on cash balances (80) ------------------------------------------------------------------------------- Total net expenses 2,888,177 ------------------------------------------------------------------------------- Investment income (loss) -- net 2,462,923 -------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 22 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $(78,575,591) Foreign currency transactions (129,618) ------------------------------------------------------------------------------- Net realized gain (loss) on investments (78,705,209) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 61,636,370 ------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (17,068,839) ------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(14,605,916) -------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 23 STATEMENTS OF CHANGES IN NET ASSETS -------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2009 OCT. 31, 2008 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 2,462,923 $ 3,912,229 Net realized gain (loss) on investments (78,705,209) (64,341,389) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 61,636,370 (324,354,761) -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (14,605,916) (384,783,921) -------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (2,998,257) (2,895,413) Class I (51) -- Class R2 (30) (16) Class R3 (39) (28) Class R4 (51,643) (51,464) Class R5 (46) (43) Class W (29) (24) -------------------------------------------------------------------------------------------------- Total distributions (3,050,095) (2,946,988) -------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares 25,058,763 122,218,532 Class B shares 2,190,599 19,744,662 Class C shares 748,360 2,778,659 Class I shares 35,603,782 5,000 Class R2 shares 3,873 -- Class R4 shares 706,630 2,142,353 Reinvestment of distributions at net asset value Class A shares 2,935,531 2,842,402 Class R2 shares 1 -- Class R4 shares 51,643 51,464 Payments for redemptions Class A shares (60,970,138) (144,969,040) Class B shares (6,562,302) (38,846,306) Class C shares (993,804) (2,137,746) Class I shares (89,564) -- Class R4 shares (690,521) (2,469,638) -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (2,007,147) (38,639,658) -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (19,663,158) (426,370,567) Net assets at beginning of period 432,435,091 858,805,658 -------------------------------------------------------------------------------------------------- Net assets at end of period $412,771,933 $ 432,435,091 -------------------------------------------------------------------------------------------------- Undistributed net investment income $ 1,949,580 $ 2,536,752 --------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 24 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(h) 2008 2007 2006 2005 Net asset value, beginning of period $5.21 $9.61 $7.52 $6.23 $5.16 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(b) .05(b) .02(b) .01 .02 Net gains (losses) (both realized and unrealized) (.19) (4.41) 2.13 1.30 1.08 -------------------------------------------------------------------------------------------------------------- Total from investment operations (.16) (4.36) 2.15 1.31 1.10 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.04) (.06) (.02) (.03) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.01 $5.21 $9.61 $7.52 $6.23 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $330 $380 $737 $608 $446 -------------------------------------------------------------------------------------------------------------- Total expenses(c),(d) 1.45%(e) 1.46% 1.39% 1.51% 1.57% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.32%(e) .65% .28% .23% .33% -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 34% 97% 100% 112% 93% -------------------------------------------------------------------------------------------------------------- Total return(f) (3.02%)(g) (45.55%) 28.82% 21.01% 21.48% --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of a sales charge. (g) Not annualized. (h) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 25 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(i) 2008 2007 2006 2005 Net asset value, beginning of period $4.87 $9.02 $7.06 $5.88 $4.87 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .01(b) (.01)(b) (.04)(b) (.01) (.02) Net gains (losses) (both realized and unrealized) (.17) (4.14) 2.00 1.19 1.03 -------------------------------------------------------------------------------------------------------------- Total from investment operations (.16) (4.15) 1.96 1.18 1.01 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- -- .00(c) -- -- -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.71 $4.87 $9.02 $7.06 $5.88 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $36 $42 $104 $110 $102 -------------------------------------------------------------------------------------------------------------- Total expenses(d),(e) 2.22%(f) 2.23% 2.15% 2.28% 2.34% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .54%(f) (.11%) (.45%) (.54%) (.41%) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 34% 97% 100% 112% 93% -------------------------------------------------------------------------------------------------------------- Total return(g) (3.29%)(h) (46.01%) 27.81% 20.07% 20.74% --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Rounds to zero. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Total return does not reflect payment of a sales charge. (h) Not annualized. (i) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 26 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(h) 2008 2007 2006 2005 Net asset value, beginning of period $4.83 $8.93 $7.02 $5.85 $4.85 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .01(b) (.01)(b) (.04)(b) (.01) (.02) Net gains (losses) (both realized and unrealized) (.17) (4.09) 1.98 1.18 1.03 -------------------------------------------------------------------------------------------------------------- Total from investment operations (.16) (4.10) 1.94 1.17 1.01 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- -- (.03) -- (.01) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.67 $4.83 $8.93 $7.02 $5.85 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $4 $5 $8 $6 $2 -------------------------------------------------------------------------------------------------------------- Total expenses(c),(d) 2.21%(e) 2.22% 2.15% 2.27% 2.33% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .57%(e) (.09%) (.48%) (.50%) (.53%) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 34% 97% 100% 112% 93% -------------------------------------------------------------------------------------------------------------- Total return(f) (3.31%)(g) (45.91%) 27.76% 20.03% 20.89% --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of a sales charge. (g) Not annualized. (h) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 27 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(h) 2008(b) Net asset value, beginning of period $5.25 $7.47 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .09 .03 Net gains (losses) (both realized and unrealized) (.22) (2.25) -------------------------------------------------------------------------------------------------------------- Total from investment operations (.13) (2.22) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) -- -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.04 $5.25 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $37 $-- -------------------------------------------------------------------------------------------------------------- Total expenses(d),(e) .73%(f) .85%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.74%(f) 1.55%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 34% 97% -------------------------------------------------------------------------------------------------------------- Total return (2.51%)(g) (29.72%)(g) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Not annualized. (h) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 28 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS R2
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(j) 2008 2007(b) Net asset value, beginning of period $5.23 $9.62 $7.89 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .03 .05 (.01) Net gains (losses) (both realized and unrealized) (.18) (4.42) 1.84 -------------------------------------------------------------------------------------------------------------- Total from investment operations (.15) (4.37) 1.83 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.02) (.10) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.03 $5.23 $9.62 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.62%(f) 1.79% 1.74%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.54%(f) 1.54% 1.74%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.48%(f) .57% (.13%)(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 34% 97% 100% -------------------------------------------------------------------------------------------------------------- Total return (2.94%)(i) (45.48%) 23.41%(i) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to Oct. 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (i) Not annualized. (j) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 29 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS R3
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(j) 2008 2007(b) Net asset value, beginning of period $5.24 $9.65 $7.89 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .04 .06 .01 Net gains (losses) (both realized and unrealized) (.19) (4.43) 1.85 -------------------------------------------------------------------------------------------------------------- Total from investment operations (.15) (4.37) 1.86 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.04) (.10) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.03 $5.24 $9.65 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.30%(f) 1.54% 1.49%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.17%(f) 1.29% 1.49%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.63%(f) .82% .12%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 34% 97% 100% -------------------------------------------------------------------------------------------------------------- Total return (2.83%)(i) (45.43%) 23.80%(i) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to Oct. 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (i) Not annualized. (j) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 30 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(i) 2008 2007 2006 2005 Net asset value, beginning of period $5.26 $9.70 $7.60 $6.29 $5.20 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04(b) .07(b) .04(b) .02 .04 Net gains (losses) (both realized and unrealized) (.18) (4.46) 2.13 1.31 1.09 -------------------------------------------------------------------------------------------------------------- Total from investment operations (.14) (4.39) 2.17 1.33 1.13 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.05) (.07) (.02) (.04) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.06 $5.26 $9.70 $7.60 $6.29 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $5 $5 $10 $9 $6 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.12%(e) 1.29% 1.23% 1.32% 1.38% -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) 1.12%(e) 1.28% 1.23% 1.32% 1.38% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.68%(e) .83% .45% .44% .49% -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 34% 97% 100% 112% 93% -------------------------------------------------------------------------------------------------------------- Total return (2.73%)(h) (45.47%) 28.85% 21.26% 21.90% --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (h) Not annualized. (i) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 31 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(h) 2008 2007(b) Net asset value, beginning of period $5.25 $9.69 $7.89 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .05 .08 .05 Net gains (losses) (both realized and unrealized) (.19) (4.45) 1.85 -------------------------------------------------------------------------------------------------------------- Total from investment operations (.14) (4.37) 1.90 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.07) (.10) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.04 $5.25 $9.69 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- -------------------------------------------------------------------------------------------------------------- Total expenses(d),(e) .81%(f) 1.04% .99%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.99%(f) 1.07% .62%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 34% 97% 100% -------------------------------------------------------------------------------------------------------------- Total return (2.58%)(g) (45.40%) 24.33%(g) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to Oct. 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Not annualized. (h) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 32 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS W
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(h) 2008 2007(b) Net asset value, beginning of period $5.23 $9.66 $7.83 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .04 .05 .02 Net gains (losses) (both realized and unrealized) (.18) (4.44) 1.91 -------------------------------------------------------------------------------------------------------------- Total from investment operations (.14) (4.39) 1.93 -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.04) (.10) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.04 $5.23 $9.66 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- -------------------------------------------------------------------------------------------------------------- Total expenses(d),(e) 1.25%(f) 1.43% 1.39%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.54%(f) .68% .20%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 34% 97% 100% -------------------------------------------------------------------------------------------------------------- Total return (2.74%)(g) (45.62%) 24.87%(g) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 1, 2006 (inception date) to Oct. 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits in the periods in which they occurred were less than 0.01% of average net assets. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Not annualized. (h) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS ------------------------------------------------- (UNAUDITED AS TO APRIL 30, 2009) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Threadneedle Global Equity Fund (the Fund) is a series of RiverSource Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). Under normal market conditions, at least 80% of the Fund's net assets will be invested in equity securities, including companies located in developed and emerging countries. The Fund offers Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4, Class R5 and Class W shares. - Class A shares are sold with a front-end sales charge. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - Class C shares may be subject to a CDSC. - Class I, Class R2, Class R3, Class R4 and Class R5 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. - Class W shares are sold without a front-end sales charge or CDSC and are offered through qualifying discretionary accounts. At April 30, 2009, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) and the RiverSource affiliated funds-of-funds owned 100% of Class I shares, and the Investment Manager owned 100% of Class R3, Class R5 and Class W shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) 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, -------------------------------------------------------------------------------- 34 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES Effective Nov. 1, 2008, the Fund adopted Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. There was no impact to the Fund's net assets or results of operations upon adoption. The fair valuation measurements disclosure can be found following the Notes to Portfolio of Investments. 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. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange (NYSE) and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the Investment Manager, as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 35 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. 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, which approximates fair value. 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. Cash collateral may be collected by the Fund to secure certain over-the-counter options (OTC options) trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. 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. Option contracts, including OTC option contracts, with no readily available market value are valued using quotations obtained from independent brokers as of the close of the NYSE. The Fund will realize a gain or loss when the option transaction expires or is exercised. 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. At April 30, 2009, and for the six months then ended, the Fund had no outstanding option contracts. 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 future contracts. Risks of entering into futures contracts and related options include the possibility of an -------------------------------------------------------------------------------- 36 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 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. Futures and options on futures are valued daily based upon the last sale price at the close of the market on the principal exchange on which they are traded. 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. At April 30, 2009, the Fund had no outstanding futures contracts. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At April 30, 2009, foreign currency holdings consisted of multiple denominations, primarily European monetary units. The Fund may enter into forward foreign currency 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 counterparty 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. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of foreign currency transactions, passive foreign investment company (PFIC) holdings, re- characterization of REIT distributions and losses deferred due to wash sales. 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. RECENT ACCOUNTING PRONOUNCEMENTS The Fund has adopted FASB Staff Position No. 133-1 and FIN No. 45-4 (FSP FAS 133-1 and FIN 45-4), "Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45." The amendments to FSP FAS 133-1 and FIN 45-4 require enhanced disclosures about a fund's derivatives and guarantees. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows and (d) the current status of the payment/performance risk of the credit derivative. The amendments to FSP FAS 133-1 and FIN 45-4 also require additional disclosures about the current status of the payment/performance risk of a guarantee. At April 30, 2009, the Fund did not own nor was it party to any credit derivative contracts within the scope of these amendments. In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods -------------------------------------------------------------------------------- 38 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- beginning after Nov. 15, 2008. As of April 30, 2009, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. On April 9, 2009, the FASB issued Staff Position No. 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly" (FSP 157-4). FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also requires additional disaggregation of the current SFAS 157 required disclosures. FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Management is currently evaluating the impact that the adoption of FSP 157-4 will have on the amounts and disclosures within the Fund's financial statements. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.80% to 0.57% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment determined monthly by measuring the percentage difference over a rolling 12-month period between the annualized performance of one Class A share of the Fund and the annualized performance of 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 -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- zero. The adjustment decreased the management fee by $281,841 for the six months ended April 30, 2009. The management fee for the six months ended April 30, 2009 was 0.64% of the Fund's average daily net assets, including the adjustment under the terms of the performance incentive arrangement. SUBADVISORY AGREEMENT The Investment Manager has a Subadvisory Agreement with Threadneedle International Limited (Threadneedle), an affiliate of the Investment Manager and an indirect wholly-owned subsidiary of Ameriprise Financial, to subadvise the assets of the Fund. The Investment Manager contracts with and compensates Threadneedle to manage the investment of the Fund's assets. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. The fee for the six months ended April 30, 2009 was 0.08% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended April 30, 2009, other expenses paid to this company were $1,731. COMPENSATION OF BOARD MEMBERS 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. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50 for Class B and $20.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R2, Class R3, Class R4 and -------------------------------------------------------------------------------- 40 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Class R5 shares and an annual asset-based fee at a rate of 0.20% of the Fund's average daily net assets attributable to Class W shares. The Transfer Agent charges an annual 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 in the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Fund's average daily net assets attributable to Class R2, Class R3 and Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. DISTRIBUTION FEES The Fund has agreements with RiverSource Distributors, Inc. and RiverSource Fund Distributors, Inc. (collectively, 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 of up to 0.25% of the Fund's average daily net assets attributable to Class A, Class R3 and Class W shares, a fee at an annual rate of up to 0.50% of the Fund's average daily net assets attributable to Class R2 shares and a fee at an annual rate of up to 1.00% of the Fund's average daily net assets attributable to Class B and Class C shares. For Class B and Class C shares, up to 0.75% of the fee is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed expense") was approximately $1,532,000 and $63,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as April 30, 2009, and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGES Sales charges received by the Distributor for distributing Fund shares were $178,569 for Class A, $16,662 for Class B and $840 for Class C for the six months ended April 30, 2009. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended April 30, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- (excluding fees and expenses of acquired funds*), including the adjustment under the terms of a performance incentive arrangement, were as follows: Class R2............................................ 1.54% Class R3............................................ 1.17 Class R4............................................ 1.12
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class R4............................................ $26
The waived/reimbursed fees and expenses for the plan administration services fees at the class level were as follows: Class R2........................................... $ 2 Class R3........................................... 2 Class R4........................................... 125
The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Oct. 31, 2009, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any performance incentive adjustment, will not exceed the following percentage of the class average daily net assets: Class R4............................................ 1.27%
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. EARNINGS AND BANK FEE CREDITS During the six months ended April 30, 2009, the Fund's transfer agency fees were reduced by $80 as a result of bank fee credits from overnight cash balances. CUSTODIAN FEES Effective Dec. 15, 2008, the Fund pays custodian fees to JPMorgan Chase Bank, N.A. For the period from Nov. 1, 2008 to Dec. 15, 2008, the Fund paid custodian fees amounting to $4,966 to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $133,895,175 and $136,958,904, respectively, for the six -------------------------------------------------------------------------------- 42 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- months ended April 30, 2009. Realized gains and losses are determined on an identified cost basis. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED APRIL 30, 2009 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) ---------------------------------------------------------------------------------- Class A 5,221,383 593,037 (13,020,305) (7,205,885) Class B 489,826 -- (1,496,723) (1,006,897) Class C 169,475 -- (229,736) (60,261) Class I 7,438,916 -- (18,227) 7,420,689 Class R2 859 -- -- 859 Class R4 148,458 10,349 (144,838) 13,969 ---------------------------------------------------------------------------------- YEAR ENDED OCT. 31, 2008* ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) ---------------------------------------------------------------------------------- Class A 15,480,435 328,601 (19,420,602) (3,611,566) Class B 2,606,662 -- (5,461,285) (2,854,623) Class C 381,563 -- (318,939) 62,624 Class I 666 -- -- 666 Class R4 264,404 5,909 (319,876) (49,563) ----------------------------------------------------------------------------------
* Class I is for the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. 5. LENDING OF PORTFOLIO SECURITIES Effective Dec. 1, 2008, the Fund has entered into a Master Securities Lending Agreement ("the Agreement") with JPMorgan Chase Bank, National Association ("JPMorgan"). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and any uninvested cash collateral balance, are disclosed in the Statement of Assets and Liabilities along with the -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 43 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- related obligation to return the collateral upon return of the securities loaned. At April 30, 2009, securities valued at $44,828,873 were on loan, secured by U.S. government securities valued at $10,444,975 and by cash collateral of $35,676,279 invested in short-term securities or in cash equivalents. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Income of $79,339 earned from securities lending from Dec. 1, 2008 through April 30, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Funds or the borrower at any time, and are, therefore, not considered to be illiquid investments. Prior to Dec. 1, 2008, the Investment Manager served as securities lending agent for the Fund under the Securities Lending Agency Agreement. For the period from Nov. 1, 2008 through Nov. 30, 2008, the Fund had no securities on loan. 6. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term Cash Fund aggregated $88,572,187 and $91,898,575, respectively, for the six months ended April 30, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short- Term Cash Fund at April 30, 2009, can be found in the Portfolio of Investments. 7. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the -------------------------------------------------------------------------------- 44 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $475 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $175 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $650 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum, in addition to an upfront fee equal to its pro rata share of 0.02% of the amount of the credit facility. The Fund had no borrowings during the six months ended April 30, 2009. 8. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund had a capital loss carry-over of $404,243,287 at Oct. 31, 2008, that if not offset by capital gains will expire as follows:
2009 2010 2011 2016 $170,490,067 $143,634,885 $30,509,951 $59,608,384
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. RISKS RELATING TO CERTAIN INVESTMENTS FOREIGN/EMERGING MARKETS RISK Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging markets may accentuate these risks. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 45 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 10. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co., Inc. (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual -------------------------------------------------------------------------------- 46 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (which is now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman is and has been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman will pay $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 47 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- 48 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- RiverSource Investments, LLC ("RiverSource Investments" or the "investment manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), RiverSource Investments provides investment advice and other services to the Fund and all funds in the RiverSource Family of Funds (collectively, the "Funds"). In addition, under the subadvisory agreement (the "Subadvisory Agreement") between RiverSource Investments and Threadneedle International Limited (the "Subadviser"), the Subadviser performs portfolio management and related services for the Fund. On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of each of the IMS Agreement and the Subadvisory Agreement (together, the "Advisory Agreements"). RiverSource Investments prepared detailed reports for the Board and its Contracts Committee in March and April 2009, including reports based on data provided by independent organizations to assist the Board in making these determinations. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource Investments addressing the services RiverSource Investments provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts, Investment Review and Compliance Committees in determining whether to continue the Advisory Agreements. At the April 7-8, 2009 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory and subadvisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the Advisory Agreements. Nature, Extent and Quality of Services Provided by RiverSource Investments and the Subadviser: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource Investments and the Subadviser, as well as their expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource Investments, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, most notably, the large investment made in the acquisition of J. & W. Seligman & Co. Incorporated, including its portfolio management operations, personnel and infrastructure (including the addition of two new offices in New York City and Palo Alto). Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource Investments, the Board considered -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 49 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- the quality of the administrative and transfer agency services provided by RiverSource Investments' affiliates to the Fund. The Board also reviewed the financial condition of RiverSource Investments (and its affiliates, including the Subadviser), and each entity's ability to carry out its responsibilities under the Advisory Agreements. Further, the Board considered RiverSource Investments' ability to retain key personnel and its expectations in this regard. The Board also discussed the acceptability of the terms of the Advisory Agreements (including the relatively broad scope of services required to be performed by RiverSource Investments). The Board concluded that the services being performed under the Advisory Agreements were of a reasonably high quality, particularly in light of recent market conditions. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that RiverSource Investments and its affiliates, including the Subadviser, were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the Advisory Agreements, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods, recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2007 to December 2008. The Board observed that the Fund's investment performance was appropriate in light of the particular management style and the exceptionally challenging market conditions involved. Further, the Board noted that the portfolio management team's long-term track record remains solid. Additionally, the Board reviewed the performance of the Subadviser and RiverSource Investments' processes for monitoring the Subadviser. The Board considered, in particular, management's rationale for recommending the continued retention of the Subadviser. Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource Investments and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the Advisory Agreements. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) -------------------------------------------------------------------------------- 50 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to RiverSource Investments' profitability. The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund (excluding the effect of a performance incentive adjustment, if applicable), with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) approximated the peer group's median expense ratio. The Board also considered the Fund's performance incentive adjustment and noted its continued appropriateness. The Board also considered the expected profitability of RiverSource Investments and its affiliates in connection with RiverSource Investments providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource Investments and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource Investments as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees and subadvisory fees were fair and reasonable in light of the extent and quality of services provided. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 51 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- In reaching this conclusion, no single factor was determinative. On April 8, 2009, the Board, including all of the Independent Directors, approved the renewal of the Advisory Agreements for an additional annual period. PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- 52 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 SEMIANNUAL REPORT THREADNEEDLE GLOBAL EQUITY FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource Investments employs Threadneedle as a subadviser. Threadneedle(R) mutual funds are distributed by RiverSource Distributors, Inc., and RiverSource Fund Distributors, Inc., Members FINRA, and managed by RiverSource Investments, LLC. RiverSource and Threadneedle are part of Ameriprise Financial, Inc. (THREADNEEDLE LOGO) (C)2009 RiverSource Investments, LLC. S-6451 X (6/09)
Semiannual Report (THREADNEEDLE LOGO) THREADNEEDLE GLOBAL EQUITY INCOME FUND SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2009 THREADNEEDLE GLOBAL EQUITY INCOME FUND SEEKS TO PROVIDE SHAREHOLDERS WITH A HIGH LEVEL OF CURRENT INCOME AND SECONDARILY, GROWTH OF CAPITAL. (SINGLE STRATEGY FUNDS ICON) TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Fund Expenses Example.............. 8 Portfolio of Investments........... 10 Statement of Assets and Liabilities...................... 16 Statement of Operations............ 18 Statements of Changes in Net Assets........................... 20 Financial Highlights............... 22 Notes to Financial Statements...... 30 Proxy Voting....................... 45
RIVERSOURCE FAMILY OF FUNDS Threadneedle Funds are a part of the RiverSource family of funds that includes funds branded "RiverSource," "RiverSource Partners," "Seligman" and "Threadneedle." These funds share the same Board of Directors/Trustees and officers. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > Threadneedle Global Equity Income Fund (the Fund) Class A shares declined 6.39% (excluding sales charge) for the six months ended April 30, 2009. > The Fund underperformed its benchmark, the Morgan Stanley Capital International (MSCI) All Country World Index, which fell 3.00% for the six month period. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2009) --------------------------------------------------------------------------------
Since inception* 6 months* 8/1/08 ----------------------------------------------------------------- Threadneedle Global Equity Income Fund Class A (excluding sales charge) -6.39% -31.78% ----------------------------------------------------------------- MSCI All Country World Index(1) (unmanaged) -3.00% -32.60% -----------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary or visiting riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The index does not reflect the effects of sales charges, expenses and taxes. It is not possible to invest directly in an index. (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. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. -------------------------------------------------------------------------------- 2 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------
AT APRIL 30, 2009 SINCE Without sales charge 6 MONTHS* INCEPTION* Class A (inception 8/1/08) -6.39% -31.78% ------------------------------------------------------------------ Class B (inception 8/1/08) -6.78% -32.09% ------------------------------------------------------------------ Class C (inception 8/1/08) -6.76% -32.10% ------------------------------------------------------------------ Class I (inception 8/1/08) -6.24% -31.56% ------------------------------------------------------------------ Class R2 (inception 8/1/08) -6.51% -31.84% ------------------------------------------------------------------ Class R3 (inception 8/1/08) -6.38% -31.73% ------------------------------------------------------------------ Class R4 (inception 8/1/08) -6.31% -31.65% ------------------------------------------------------------------ Class R5 (inception 8/1/08) -6.27% -31.59% ------------------------------------------------------------------ With sales charge Class A (inception 8/1/08) -11.73% -35.72% ------------------------------------------------------------------ Class B (inception 8/1/08) -11.42% -35.47% ------------------------------------------------------------------ Class C (inception 8/1/08) -7.69% -32.78% ------------------------------------------------------------------
-------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ----------------------------------------------
AT MARCH 31, 2009 SINCE Without sales charge 6 MONTHS* INCEPTION* Class A (inception 8/1/08) -28.81% -37.15% ------------------------------------------------------------------ Class B (inception 8/1/08) -29.11% -37.45% ------------------------------------------------------------------ Class C (inception 8/1/08) -29.10% -37.46% ------------------------------------------------------------------ Class I (inception 8/1/08) -28.71% -37.05% ------------------------------------------------------------------ Class R2 (inception 8/1/08) -28.90% -37.30% ------------------------------------------------------------------ Class R3 (inception 8/1/08) -28.81% -37.20% ------------------------------------------------------------------ Class R4 (inception 8/1/08) -28.76% -37.12% ------------------------------------------------------------------ Class R5 (inception 8/1/08) -28.73% -37.07% ------------------------------------------------------------------ With sales charge Class A (inception 8/1/08) -32.94% -40.78% ------------------------------------------------------------------ Class B (inception 8/1/08) -32.64% -40.56% ------------------------------------------------------------------ Class C (inception 8/1/08) -29.81% -38.08% ------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third** years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R2, Class R3, Class R4 and Class R5 shares. Class I, Class R2, Class R3, Class R4 and Class R5 are available to institutional investors only. *Not annualized. **For Class B shares purchased on or after June 13, 2009 the CDSC percentage for the third year will be 3%. -------------------------------------------------------------------------------- 4 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. ANNUAL OPERATING EXPENSE RATIO* (as of the current prospectus) --------------------------------------------------------------------------------
Total fund Net fund expenses expenses ---------------------------------------- Class A 4.62% 1.45% ---------------------------------------- Class B 5.38% 2.21% ---------------------------------------- Class C 5.37% 2.20% ---------------------------------------- Class I 4.12% 1.05% ---------------------------------------- Class R2 4.92% 1.85% ---------------------------------------- Class R3 4.67% 1.60% ---------------------------------------- Class R4 4.44% 1.35% ---------------------------------------- Class R5 4.17% 1.10% ---------------------------------------- ----------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Oct. 31, 2009, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment, will not exceed 1.45% for Class A, 2.21% for Class B, 2.20% for Class C, 1.05% for Class I, 1.85% for Class R2, 1.60% for Class R3, 1.35% for Class R4 and 1.10% for Class R5. * Fund expense ratios are calculated based on the fund's average net assets during the fund's most recently completed fiscal year, and have not been adjusted for current asset levels, including any decrease or increase in assets, which, if adjusted, would result in expense ratios that are higher or lower, respectively, than those that are expressed herein. Any fee waivers/expense caps would limit the impact that any decrease in assets will have on net expense ratios in the current fiscal year. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- COUNTRY DIVERSIFICATION(1) (at April 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Australia 1.2% ------------------------------------------------ Brazil 4.0% ------------------------------------------------ Czech Republic 0.5% ------------------------------------------------ Denmark 0.4% ------------------------------------------------ Finland 5.2% ------------------------------------------------ France 4.2% ------------------------------------------------ Germany 6.7% ------------------------------------------------ Greece 1.1% ------------------------------------------------ Hong Kong 7.0% ------------------------------------------------ Italy 3.0% ------------------------------------------------ Japan 4.6% ------------------------------------------------ Jersey 1.4% ------------------------------------------------ Mexico 1.1% ------------------------------------------------ Netherlands 1.8% ------------------------------------------------ Norway 0.8% ------------------------------------------------ Singapore 2.0% ------------------------------------------------ Spain 2.8% ------------------------------------------------ Sweden 3.4% ------------------------------------------------ Taiwan 4.3% ------------------------------------------------ United Kingdom 17.1% ------------------------------------------------ United States 25.6% ------------------------------------------------ Other(2) 1.8% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral for Securities on Loan) as of April 30, 2009. The Fund's composition is subject to change. (2) Cash & Cash Equivalents. -------------------------------------------------------------------------------- 6 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- TOP TEN HOLDINGS (at April 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Packaging Corp of America (United States) 2.4% ------------------------------------------------ BP (United Kingdom) 2.3% ------------------------------------------------ BP Prudhoe Bay Royalty Trust (United States) 2.1% ------------------------------------------------ Ono Pharmaceutical (Japan) 2.0% ------------------------------------------------ DBS Group Holdings (Singapore) 1.8% ------------------------------------------------ Admiral Group (United Kingdom) 1.7% ------------------------------------------------ Bristol-Myers Squibb (United States) 1.7% ------------------------------------------------ Kinder Morgan Energy Partners LP (United States) 1.7% ------------------------------------------------ Eni (Italy) 1.6% ------------------------------------------------ Pearson (United Kingdom) 1.6% ------------------------------------------------
For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 7 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, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and 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. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended April 30, 2009. 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. -------------------------------------------------------------------------------- 8 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2008 APRIL 30, 2009 THE PERIOD(A) EXPENSE RATIO ------------------------------------------------------------------------------------------- Class A ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 936.10 $ 7.10 1.48% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.46 $ 7.40 1.48% ------------------------------------------------------------------------------------------- Class B ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 932.20 $10.73 2.24% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,013.69 $11.18 2.24% ------------------------------------------------------------------------------------------- Class C ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 932.40 $10.68 2.23% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,013.74 $11.13 2.23% ------------------------------------------------------------------------------------------- Class I ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 937.60 $ 5.14 1.07% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.49 $ 5.36 1.07% ------------------------------------------------------------------------------------------- Class R2 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 934.90 $ 8.97 1.87% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,015.52 $ 9.35 1.87% ------------------------------------------------------------------------------------------- Class R3 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 936.20 $ 7.78 1.62% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.76 $ 8.10 1.62% ------------------------------------------------------------------------------------------- Class R4 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 936.90 $ 6.58 1.37% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.00 $ 6.85 1.37% ------------------------------------------------------------------------------------------- Class R5 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 937.30 $ 5.38 1.12% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.24 $ 5.61 1.12% -------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2009: -6.39% for Class A, -6.78% for Class B, -6.76% for Class C, -6.24% for Class I, -6.51% for Class R2, -6.38% for Class R3, -6.31% for Class R4 and -6.27% for Class R5. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (93.1%)(c) ISSUER SHARES VALUE(a) AUSTRALIA (1.2%) Telstra 101,667 $245,961 ------------------------------------------------------------------------------------- BRAZIL (4.0%) Cia de Bebidas das Americas 6,600 371,328 Cia Vale do Rio Doce ADR 21,076 289,373 Petroleo Brasileiro 7,800 105,636 Redecard 6,400 80,618 --------------- Total 846,955 ------------------------------------------------------------------------------------- CZECH REPUBLIC (0.5%) Telefonica O2 Czech Republic GDR 4,722 101,776 ------------------------------------------------------------------------------------- DENMARK (0.4%) TrygVesta 1,687 93,234 ------------------------------------------------------------------------------------- FINLAND (3.6%) Nokia 13,647(e) 197,393 Sampo Series A 18,987 357,549 Wartsila 6,295 210,261 --------------- Total 765,203 ------------------------------------------------------------------------------------- FRANCE (4.1%) France Telecom 8,548 190,833 Total 5,979 303,397 Vivendi 13,959(e) 378,134 --------------- Total 872,364 ------------------------------------------------------------------------------------- GERMANY (6.6%) Allianz 3,294(e) 304,004 BASF 7,810(e) 295,281 Bayer 4,162(e) 207,147 Deutsche Telekom 13,917(e) 168,332 E.ON 7,177(e) 243,520 K+S 3,157(e) 190,299 --------------- Total 1,408,583 ------------------------------------------------------------------------------------- GREECE (1.1%) OPAP 7,508 232,893 ------------------------------------------------------------------------------------- HONG KONG (6.9%) Champion REIT 872,000(e) 201,406 CNOOC 264,000(e) 296,024 Esprit Holdings 59,200 365,517 Great Eagle Holdings 118,000 164,136 Hang Lung Properties 60,000 170,712 Sun Hung Kai Properties 26,000 270,907 --------------- Total 1,468,702 ------------------------------------------------------------------------------------- ITALY (2.8%) Eni 18,091 393,824 Snam Rete Gas 24,069 95,555 Telecom Italia 92,158 117,445 --------------- Total 606,824 ------------------------------------------------------------------------------------- JAPAN (4.5%) Nintendo 1,100 293,522 Ono Pharmaceutical 11,400(e) 483,291 Oracle Japan 5,500(e) 193,562 --------------- Total 970,375 ------------------------------------------------------------------------------------- MEXICO (1.0%) Grupo Continental 124,300 220,099 ------------------------------------------------------------------------------------- NETHERLANDS (1.7%) Aegon 33,314 171,935 Royal Dutch Shell Series B 8,731 201,123 --------------- Total 373,058 ------------------------------------------------------------------------------------- NORWAY (0.8%) StatoilHydro 9,100(e) 173,180 ------------------------------------------------------------------------------------- SINGAPORE (2.0%) DBS Group Holdings 66,500 427,003 ------------------------------------------------------------------------------------- SPAIN (2.8%) Inditex 5,589 239,563 Telefonica 18,330 349,543 --------------- Total 589,106 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 10 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) SWEDEN (3.4%) Holmen Series B 6,474(e) $144,563 Skanska Series B 20,313 221,738 SKF Group Series B 32,001(e) 355,297 --------------- Total 721,598 ------------------------------------------------------------------------------------- TAIWAN (4.2%) Chunghwa Telecom ADR 14,468 273,445 Delta Electronics 102,000 222,752 HTC 12,000 162,609 Hung Poo Real Estate Development 252,000 233,623 --------------- Total 892,429 ------------------------------------------------------------------------------------- UNITED KINGDOM (16.8%) Admiral Group 29,823 401,956 AstraZeneca 5,598 197,529 BP 76,969 549,443 British American Tobacco 12,648 306,697 Cable & Wireless 66,991 148,668 GlaxoSmithKline 15,683 243,396 Home Retail Group 48,141 179,306 Intl Power 63,895 234,911 Natl Grid 31,152 260,171 Pearson 36,581 382,364 RSA Insurance Group 58,508 113,569 Vodafone Group 172,017 317,356 Wincanton 106,124 251,213 --------------- Total 3,586,579 ------------------------------------------------------------------------------------- UNITED STATES (24.7%) AllianceBernstein Holding LP 3,383 59,270 Altria Group 20,371 332,659 AT&T 14,661 375,615 BP Prudhoe Bay Royalty Trust 7,827 504,843 Bristol-Myers Squibb 20,924 401,741 CenturyTel 10,401 282,387 Coca-Cola 5,601 241,123 Diamond Offshore Drilling 3,784 273,999 Jabil Circuit 28,530 231,093 KeyCorp 26,603 163,608 Kinder Morgan Energy Partners LP 8,329 397,793 Merck & Co 15,338 371,793 Packaging Corp of America 35,668 566,051 Parkway Properties 6,566 91,070 Pfizer 18,214 243,339 Philip Morris Intl 8,405 304,261 Plum Creek Timber 4,956 171,082 Reynolds American 6,741 256,023 --------------- Total 5,267,750 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $21,271,032) $19,863,672 ------------------------------------------------------------------------------------- OTHER (0.1%)(c) ISSUER SHARES VALUE(a) BRAZIL (--%) Cia de Bebidas das Americas Rights 20(b) $257 ------------------------------------------------------------------------------------- ITALY (0.1%) Snam Rete Gas Rights 22,055(b) 16,928 ------------------------------------------------------------------------------------- TOTAL OTHER (Cost: $20,990) $17,185 -------------------------------------------------------------------------------------
BONDS (3.4%)(c) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) FINLAND (1.5%) Talvivaara Mining Sr Unsecured (European Monetary Unit) Cv 05-20-13 5.25% 500,000 $322,567 ------------------------------------------------------------------------------------- JERSEY (1.4%) Intl Power Finance III (European Monetary Unit) Cv 06-05-15 4.75 300,000 296,284 ------------------------------------------------------------------------------------- UNITED STATES (0.5%) Micron Technology 06-01-14 1.88 $200,000 114,000 ------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $614,294) $732,851 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
MONEY MARKET FUND (1.8%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.28% 373,939(d) $373,939 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $373,939) $373,939 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (14.2%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 3,025,558 $3,025,558 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $3,025,558) $3,025,558 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $25,305,813)(f) $24,013,205 =====================================================================================
SUMMARY OF INVESTMENTS IN SECURITIES BY INDUSTRY The following table represents the portfolio investments of the Fund by industry classifications as a percentage of total net assets at April 30, 2009:
PERCENTAGE OF INDUSTRY NET ASSETS VALUE ----------------------------------------------------------------------- Air Freight & Logistics 1.2% $251,213 Beverages 3.9 832,807 Capital Markets 0.3 59,270 Chemicals 2.3 485,580 Commercial Banks 2.8 590,611 Communications Equipment 0.9 197,393 Computers & Peripherals 0.8 162,609 Construction & Engineering 1.0 221,738 Containers & Packaging 2.6 566,051 Diversified Telecommunication Services 10.6 2,254,005 Electric 1.4 296,284 Electric Utilities 1.1 243,520 Electronic Equipment, Instruments & Components 2.1 453,845 Energy Equipment & Services 1.3 273,999 Gas Utilities 0.5 112,483 Hotels, Restaurants & Leisure 1.1 232,893 Independent Power Producers & Energy Traders 1.1 234,911 Insurance 6.8 1,442,247 Internet & Catalog Retail 0.8 179,306 IT Services 0.4 80,618 Machinery 2.7 565,558 Media 3.6 760,498 Metals 1.5 322,567 Metals & Mining 1.4 289,373 Multi-Utilities 1.2 260,171 Oil, Gas & Consumable Fuels 13.7 2,925,263
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 12 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
PERCENTAGE OF INDUSTRY NET ASSETS VALUE ----------------------------------------------------------------------- Paper & Forest Products 0.7% $144,563 Pharmaceuticals 10.1 2,148,236 Real Estate Investment Trusts (REITs) 2.2 463,558 Real Estate Management & Development 3.9 839,378 Software 2.3 487,084 Specialty Retail 2.8 605,080 Technology 0.5 114,000 Tobacco 5.6 1,199,640 Wireless Telecommunication Services 1.5 317,356 Other(1) 15.9 3,399,497 ----------------------------------------------------------------------- Total $24,013,205 -----------------------------------------------------------------------
(1) Cash & Cash Equivalents. INVESTMENTS IN DERIVATIVES FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT APRIL 30, 2009
CURRENCY TO BE CURRENCY TO BE UNREALIZED UNREALIZED EXCHANGE DATE DELIVERED RECEIVED APPRECIATION DEPRECIATION ----------------------------------------------------------------------------------------- May 5, 2009 14,193 10,356 $45 $-- Australian Dollar U.S. Dollar
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 1 to the financial statements. (b) Non-income producing. (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) Affiliated Money Market Fund -- See Note 6 to the financial statements. The rate shown is the seven-day current annualized yield at April 30, 2009. (e) At April 30, 2009, security was partially or fully on loan. See Note 5 to the financial statements. (f) At April 30, 2009, the cost of securities for federal income tax purposes was approximately $25,306,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $789,000 Unrealized depreciation (2,082,000) ----------------------------------------------------------- Net unrealized depreciation $(1,293,000) -----------------------------------------------------------
The industries identified above are based on the Global Industry Classification Standard (GICS), which 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. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to implement more uniform reporting relating to the fair valuation of securities for financial statement purposes. Mutual funds are required to implement the requirements of this standard for fiscal years beginning after Nov. 15, 2007. While uniformity of presentation is the objective of the standard, it is likely that there may be a range of practices utilized and it may be some period of time before industry practices become more uniform. For this reason care should be exercised in interpreting this information and/or using it for comparison with other mutual funds. Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.) - Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) Observable inputs are those based on market data obtained from sources independent of the Fund, and unobservable inputs reflect the Fund's own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the NYSE or require adjustment, as described in Note 1 to the financial statements -- Valuation of securities. The following table is a summary of the inputs used to value the Fund's investments as of April 30, 2009:
FAIR VALUE AT APRIL 30, 2009 -------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL ----------------------------------------------------------------------------------- Investments in securities $23,178,578 $512,061 $322,566 $24,013,205 Other financial instruments* -- 45 -- 45 ----------------------------------------------------------------------------------- Total $23,178,578 $512,106 $322,566 $24,013,250 -----------------------------------------------------------------------------------
* Other financial instruments are derivative instruments, such as forwards, which are valued at the unrealized appreciation (depreciation) on the instrument. The following table is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.
INVESTMENTS IN SECURITIES --------------------------------------------------------------- Balance as of Oct. 31, 2008 $-- Accrued discounts/premiums 14,532 Realized gain (loss) -- Change in unrealized appreciation (depreciation) 55,707 Net purchases (sales) 252,327 Transfers in and/or out of Level 3 -- --------------------------------------------------------------- Balance as of April 30, 2009 $322,566 ---------------------------------------------------------------
-------------------------------------------------------------------------------- 14 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY 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 filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 15 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- APRIL 30, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $21,906,316) $20,613,708 Affiliated money market fund (identified cost $373,939) 373,939 Investments of cash collateral received for securities on loan (identified cost $3,025,558) 3,025,558 ------------------------------------------------------------------------------ Total investments in securities (identified cost $25,305,813) 24,013,205 Cash 53,503 Foreign currency holdings (identified cost $243,717) 247,233 Capital shares receivable 24,983 Dividends and accrued interest receivable 166,923 Unrealized appreciation on forward foreign currency contracts 45 ------------------------------------------------------------------------------ Total assets 24,505,892 ------------------------------------------------------------------------------ LIABILITIES Capital shares payable 8,823 Payable for investment securities purchased 52,085 Payable upon return of securities loaned 3,025,558 Accrued investment management services fees 462 Accrued distribution fees 167 Accrued transfer agency fees 110 Accrued administrative services fees 46 Other accrued expenses 84,593 ------------------------------------------------------------------------------ Total liabilities 3,171,844 ------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $21,334,048 ------------------------------------------------------------------------------ REPRESENTED BY Capital stock -- $.01 par value $ 31,681 Additional paid-in capital 24,447,059 Undistributed net investment income 209,675 Accumulated net realized gain (loss) (2,066,413) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (1,287,954) ------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $21,334,048 ------------------------------------------------------------------------------ *Including securities on loan, at value $ 2,936,066 ------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 16 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $15,768,644 2,341,589 $6.73(1) Class B $ 1,951,989 290,472 $6.72 Class C $ 260,802 38,805 $6.72 Class I $ 3,324,298 493,000 $6.74 Class R2 $ 6,739 1,000 $6.74 Class R3 $ 6,740 1,000 $6.74 Class R4 $ 8,094 1,201 $6.74 Class R5 $ 6,742 1,000 $6.74 ----------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $7.14. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 5.75%. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 17 STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED APRIL 30, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Dividends $ 424,725 Interest 44,634 Income distributions from affiliated money market fund 1,632 Fee income from securities lending 9,866 Less foreign taxes withheld (27,847) ------------------------------------------------------------------------- Total income 453,010 ------------------------------------------------------------------------- Expenses: Investment management services fees 68,268 Distribution fees Class A 14,822 Class B 6,412 Class C 871 Class R2 16 Class R3 8 Transfer agency fees Class A 13,678 Class B 1,589 Class C 208 Class R2 2 Class R3 2 Class R4 3 Class R5 2 Administrative services fees 6,610 Plan administration services fees Class R2 8 Class R3 8 Class R4 13 Compensation of board members 305 Custodian fees 75,632 Printing and postage 26,640 Registration fees 20,158 Professional fees 19,706 Other 3,732 ------------------------------------------------------------------------- Total expenses 258,693 Expenses waived/reimbursed by the Investment Manager and its affiliates (137,486) ------------------------------------------------------------------------- Total net expenses 121,207 ------------------------------------------------------------------------- Investment income (loss) -- net 331,803 -------------------------------------------------------------------------
-------------------------------------------------------------------------------- 18 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $(1,836,321) Foreign currency transactions (16,248) ------------------------------------------------------------------------- Net realized gain (loss) on investments (1,852,569) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,112,982 ------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (739,587) ------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (407,784) -------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 19 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
FOR THE PERIOD FROM SIX MONTHS ENDED AUG. 1, 2008* TO APRIL 30, 2009 OCT. 31, 2008 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 331,803 $ 73,347 Net realized gain (loss) on investments (1,852,569) (267,462) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,112,982 (2,378,855) --------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (407,784) (2,572,970) --------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (86,761) (10,316) Class B (5,338) (993) Class C (805) (166) Class I (28,086) (12,568) Class R2 (39) (13) Class R3 (47) (17) Class R4 (63) (25) Class R5 (55) (25) Tax return of capital Class A -- (506) Class B -- (59) Class C -- (12) Class I -- (555) Class R2 -- (1) Class R3 -- (1) Class R4 -- (1) Class R5 -- (1) --------------------------------------------------------------------------------------------------- Total distributions (121,194) (25,259) ---------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 20 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
FOR THE PERIOD FROM SIX MONTHS ENDED AUG. 1, 2008* TO APRIL 30, 2009 OCT. 31, 2008 (UNAUDITED) CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $12,336,902 $ 6,965,441 Class B shares 1,364,080 763,341 Class C shares 222,687 96,736 Class R4 shares 6,500 2,000 Reinvestment of distributions at net asset value Class A shares 85,396 10,418 Class B shares 5,308 1,033 Class C shares 691 161 Class R4 shares 11 4 Payments for redemptions Class A shares (1,801,422) (459,003) Class B shares (70,316) -- Class C shares (20,168) (22,899) Class R4 shares (5,717) -- --------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 12,123,952 7,357,232 --------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 11,594,974 4,759,003 Net assets at beginning of period 9,739,074 4,980,071** --------------------------------------------------------------------------------------------------- Net assets at end of period $21,334,048 $ 9,739,074 --------------------------------------------------------------------------------------------------- Undistributed (excess of distributions over) net investment income $ 209,675 $ (934) ---------------------------------------------------------------------------------------------------
* When shares became publicly available. ** Initial capital of $5,000,000 was contributed on July 24, 2008. The Fund had a decrease in net assets resulting from operations of $19,929 during the period from July 24, 2008 to Aug. 1, 2008 (when shares became publicly available). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 21 FINANCIAL HIGHLIGHTS ----------------------------------------------------------- CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(j) 2008(b) Net asset value, beginning of period $7.24 $9.96 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .13 .07 Net gains (losses) (both realized and unrealized) (.59) (2.77) -------------------------------------------------------------------------------------------------------------- Total from investment operations (.46) (2.70) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.02) Tax return of capital -- (.00)(d) -------------------------------------------------------------------------------------------------------------- Total distributions (.05) (.02) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.73 $7.24 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $16 $5 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e) 3.19%(f) 4.71%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g) 1.48%(f) 1.45%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 4.01%(f) 3.78%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 26% 10% -------------------------------------------------------------------------------------------------------------- Total return(h) (6.39%)(i) (27.12%)(i) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Rounds to zero. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 22 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(j) 2008(b) Net asset value, beginning of period $7.24 $9.96 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .11 .06 Net gains (losses) (both realized and unrealized) (.60) (2.76) -------------------------------------------------------------------------------------------------------------- Total from investment operations (.49) (2.70) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.03) (.02) Tax return of capital -- (.00)(d) -------------------------------------------------------------------------------------------------------------- Total distributions (.03) (.02) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.72 $7.24 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $1 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e) 4.07%(f) 5.48%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g) 2.24%(f) 2.21%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.53%(f) 3.11%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 26% 10% -------------------------------------------------------------------------------------------------------------- Total return(h) (6.78%)(i) (27.15%)(i) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Rounds to zero. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 23 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(j) 2008(b) Net asset value, beginning of period $7.24 $9.96 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .11 .07 Net gains (losses) (both realized and unrealized) (.60) (2.77) -------------------------------------------------------------------------------------------------------------- Total from investment operations (.49) (2.70) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.03) (.02) Tax return of capital -- (.00)(d) -------------------------------------------------------------------------------------------------------------- Total distributions (.03) (.02) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.72 $7.24 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e) 4.02%(f) 5.15%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g) 2.23%(f) 2.21%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.39%(f) 3.31%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 26% 10% -------------------------------------------------------------------------------------------------------------- Total return(h) (6.76%)(i) (27.18%)(i) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Rounds to zero. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 24 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(i) 2008(b) Net asset value, beginning of period $7.25 $9.96 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .14 .09 Net gains (losses) (both realized and unrealized) (.59) (2.77) -------------------------------------------------------------------------------------------------------------- Total from investment operations (.45) (2.68) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.03) Tax return of capital -- (.00)(d) -------------------------------------------------------------------------------------------------------------- Total distributions (.06) (.03) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.74 $7.25 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $3 $4 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e) 2.49%(f) 4.12%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g) 1.07%(f) 1.07%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 4.25%(f) 3.95%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 26% 10% -------------------------------------------------------------------------------------------------------------- Total return (6.24%)(h) (27.00%)(h) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Rounds to zero. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Not annualized. (i) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 25 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS R2
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(i) 2008(b) Net asset value, beginning of period $7.25 $9.96 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .12 .07 Net gains (losses) (both realized and unrealized) (.59) (2.77) -------------------------------------------------------------------------------------------------------------- Total from investment operations (.47) (2.70) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.01) Tax return of capital -- (.00)(d) -------------------------------------------------------------------------------------------------------------- Total distributions (.04) (.01) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.74 $7.25 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e) 3.29%(f) 4.92%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g) 1.73%(f) 1.72%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.59%(f) 3.36%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 26% 10% -------------------------------------------------------------------------------------------------------------- Total return (6.51%)(h) (27.10%)(h) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Rounds to zero. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Not annualized. (i) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 26 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS R3
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(i) 2008(b) Net asset value, beginning of period $7.25 $9.96 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .12 .08 Net gains (losses) (both realized and unrealized) (.58) (2.77) -------------------------------------------------------------------------------------------------------------- Total from investment operations (.46) (2.69) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.02) Tax return of capital -- (.00)(d) -------------------------------------------------------------------------------------------------------------- Total distributions (.05) (.02) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.74 $7.25 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e) 3.04%(f) 4.68%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g) 1.48%(f) 1.47%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.84%(f) 3.61%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 26% 10% -------------------------------------------------------------------------------------------------------------- Total return (6.38%)(h) (27.07%)(h) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Rounds to zero. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Not annualized. (i) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 27 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(i) 2008(b) Net asset value, beginning of period $7.25 $9.96 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .12 .08 Net gains (losses) (both realized and unrealized) (.58) (2.77) -------------------------------------------------------------------------------------------------------------- Total from investment operations (.46) (2.69) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.02) Tax return of capital -- (.00)(d) -------------------------------------------------------------------------------------------------------------- Total distributions (.05) (.02) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.74 $7.25 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e) 2.64%(f) 4.42%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g) 1.27%(f) 1.24%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.70%(f) 3.89%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 26% 10% -------------------------------------------------------------------------------------------------------------- Total return (6.31%)(h) (27.04%)(h) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Rounds to zero. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Not annualized. (i) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 28 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(i) 2008(b) Net asset value, beginning of period $7.25 $9.96 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .14 .09 Net gains (losses) (both realized and unrealized) (.59) (2.77) -------------------------------------------------------------------------------------------------------------- Total from investment operations (.45) (2.68) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.03) Tax return of capital -- (.00)(d) -------------------------------------------------------------------------------------------------------------- Total distributions (.06) (.03) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.74 $7.25 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e) 2.54%(f) 4.17%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g) 1.12%(f) 1.12%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 4.20%(f) 3.91%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 26% 10% -------------------------------------------------------------------------------------------------------------- Total return (6.27%)(h) (27.00%)(h) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Rounds to zero. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Not annualized. (i) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS TO APRIL 30, 2009) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Threadneedle Global Equity Income Fund (the Fund) is a series of RiverSource Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). Under normal market conditions, at least 80% of the Fund's net assets will be invested in equity securities. At least 40% of the Fund's net assets will normally be invested in companies located in (non-U.S.) developed and emerging countries. On July 24, 2008, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) a subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), invested $5,000,000 in the Fund (1,000 shares for Class A, 1,000 shares for Class B, 1,000 shares for Class C, 493,000 shares for Class I, 1,000 shares for Class R2, 1,000 shares for Class R3, 1,000 shares for Class R4 and 1,000 shares for Class R5), which represented the initial capital for each class at $10 per share. Shares of the Fund were first offered to the public on Aug. 1, 2008. The Fund offers Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4 and Class R5 shares. - Class A shares are sold with a front-end sales charge. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - Class C shares may be subject to a CDSC. - Class I, Class R2, Class R3, Class R4 and Class R5 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. At April 30, 2009, the Investment Manager owned 100% of Class I, Class R2, Class R3 and Class R5 shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) 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. -------------------------------------------------------------------------------- 30 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 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. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange (NYSE) and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. 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 -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- rates; those maturing in 60 days or less are valued at amortized cost, which approximates fair value. 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. Cash collateral may be collected by the Fund to secure certain over-the-counter options (OTC options) trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. 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. Option contracts, including OTC option contracts, with no readily available market value are valued using quotations obtained from independent brokers as of the close of the NYSE. The Fund will realize a gain or loss when the option transaction expires or is exercised. 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. At April 30, 2009, and for the six months then ended, the Fund had no outstanding option contracts. 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. Futures and options on futures are valued daily based upon the last sale price at the close of the market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or -------------------------------------------------------------------------------- 32 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 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. At April 30, 2009, the Fund had no outstanding futures contracts. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At April 30, 2009, foreign currency holdings consisted of multiple denominations, primarily Taiwan dollars. The Fund may enter into forward foreign currency 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 counterparty 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 Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of foreign currency transactions, passive foreign investment company (PFIC) holdings, re- characterization of REIT distributions, investments in partnerships, and losses deferred due to wash sales. 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. RECENT ACCOUNTING PRONOUNCEMENTS The Fund has adopted FASB Staff Position No. 133-1 and FIN No. 45-4 (FSP FAS 133-1 and FIN 45-4), "Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45." The amendments to FSP FAS 133-1 and FIN 45-4 require enhanced disclosures about a fund's derivatives and guarantees. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows and (d) the current status of the payment/performance risk of the credit derivative. The amendments to FSP FAS 133-1 and FIN 45-4 also require additional disclosures about the current status of the payment/performance risk of a guarantee. At April 30, 2009, the Fund did not own nor was it a party to any credit derivative contracts within the scope of these amendments. In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of April 30, 2009, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. -------------------------------------------------------------------------------- 34 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- On April 9, 2009, the FASB issued Staff Position No. 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly" (FSP 157-4). FSP 157-4 provides additional guidance for estimating fair value in accordance with Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157) when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also requires additional disaggregation of the current SFAS 157 required disclosures. FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Management is currently evaluating the impact that the adoption of FSP 157-4 will have on the amounts and disclosures within the Fund's financial statements. 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. 2. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.80% to 0.57% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment determined monthly by measuring the percentage difference over a rolling 12-month period between the annualized performance of one Class A share of the Fund and the annualized performance of the MSCI All Country World 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 management fee by $2,171 for the six months ended April 30, 2009. The management fee for the six months ended April 30, -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 35 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 2009 was 0.83% of the Fund's average daily net assets, including the adjustment under the terms of the performance incentive arrangement. SUBADVISORY AGREEMENT The Investment Manager has a Subadvisory Agreement with Threadneedle International Limited (Threadneedle), an affiliate of the Investment Manager and an indirect wholly-owned subsidiary of Ameriprise Financial, to subadvise the assets of the Fund. The Investment Manager contracts with and compensates Threadneedle to manage the investment of the Fund's assets. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. The fee for the six months ended April 30, 2009 was 0.08% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended April 30, 2009, there were no expenses incurred for these particular items. COMPENSATION OF BOARD MEMBERS 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. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50 for Class B and $20.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R2, Class R3, Class R4 and Class R5 shares. -------------------------------------------------------------------------------- 36 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- The Transfer Agent charges an annual 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 in the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Fund's average daily net assets attributable to Class R2, Class R3 and Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. DISTRIBUTION FEES The Fund has agreements with RiverSource Distributors, Inc. and RiverSource Fund Distributors, Inc. (collectively, 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 of up to 0.25% of the Fund's average daily net assets attributable to Class A and Class R3 shares, a fee at an annual rate of up to 0.50% of the Fund's average daily net assets attributable to Class R2 shares and a fee at an annual rate of up to 1.00% of the Fund's average daily net assets attributable to Class B and Class C shares. For Class B and Class C shares, up to 0.75% of the fee is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed expense") was approximately $102,000 and $5,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of April 30, 2009, and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGES Sales charges received by the Distributor for distributing Fund shares were $23,449 for Class A and $5 for Class B for the six months ended April 30, 2009. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended April 30, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- (excluding fees and expenses of acquired funds*), including the adjustment under the terms of a performance incentive arrangement, were as follows: Class A............................................. 1.48% Class B............................................. 2.24 Class C............................................. 2.23 Class I............................................. 1.07 Class R2............................................ 1.73 Class R3............................................ 1.48 Class R4............................................ 1.27 Class R5............................................ 1.12
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class A........................................... $4,771 Class B........................................... 559 Class C........................................... 76
The waived/reimbursed fees and expenses for the plan administration services fees at the class level were as follows: Class R2............................................. $4 Class R3............................................. 4 Class R4............................................. 5
The management fees and other Fund level expenses waived/reimbursed were $132,067. The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Oct. 31, 2009, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any performance incentive adjustment, will not exceed the following percentage of the class average daily net assets: Class A............................................. 1.45% Class B............................................. 2.21 Class C............................................. 2.20 Class I............................................. 1.05 Class R2............................................ 1.85 Class R3............................................ 1.60 Class R4............................................ 1.35 Class R5............................................ 1.10
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own -------------------------------------------------------------------------------- 38 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $16,241,613 and $4,026,076, respectively, for the six months ended April 30, 2009. Realized gains and losses are determined on an identified cost basis. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED APRIL 30, 2009 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) ------------------------------------------------------------------------------ Class A 1,866,854 12,603 (287,449) 1,592,008 Class B 211,393 773 (11,324) 200,842 Class C 33,866 100 (3,137) 30,829 Class R4 921 2 (921) 2 ------------------------------------------------------------------------------ PERIOD FROM AUG. 1, 2008* TO OCT. 31, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) ------------------------------------------------------------------------------ Class A 806,221 1,124 (58,764) 748,581 Class B 88,519 111 -- 88,630 Class C 10,230 17 (3,271) 6,976 Class R4 199 -- -- 199 ------------------------------------------------------------------------------
* When shares became publicly available. 5. LENDING OF PORTFOLIO SECURITIES Effective Dec. 1, 2008, the Fund has entered into a Master Securities Lending Agreement ("the Agreement") with JPMorgan Chase Bank, National Association ("JPMorgan"). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments, and any uninvested cash collateral balance, are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At April 30, 2009, securities valued at $2,936,066 were on loan, secured by cash collateral of $3,025,558 invested in short-term securities or in cash equivalents. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Income of $9,866 earned from securities lending from Dec. 1, 2008 through April 30, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Fund or the borrower at any time, and are, therefore, not considered to be illiquid investments. Prior to Dec. 1, 2008, the Investment Manager served as securities lending agent for the Fund under the Securities Lending Agency Agreement. For the period from Nov. 1, 2008 through Nov. 30, 2008, the Fund had no securities on loan. 6. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term Cash Fund aggregated $7,915,717 and $7,541,778, respectively, for the six months ended April 30, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short- Term Cash Fund at April 30, 2009, can be found in the Portfolio of Investments. -------------------------------------------------------------------------------- 40 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 7. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $475 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $175 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $650 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum, in addition to an upfront fee equal to its pro rata share of 0.02% of the amount of the credit facility. The Fund had no borrowings during the six months ended April 30, 2009. 8. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund had a capital loss carry-over of $182,867 at Oct. 31, 2008, that if not offset by capital gains will expire in 2016. 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. RISKS RELATING TO CERTAIN INVESTMENTS FOREIGN/EMERGING MARKETS RISK Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging markets may accentuate these risks. 10. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co., Inc. (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In -------------------------------------------------------------------------------- 42 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (which is now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman is and has been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman will pay $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 43 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- 44 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 SEMIANNUAL REPORT 45 THREADNEEDLE GLOBAL EQUITY INCOME FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource Investments employs Threadneedle as a subadviser. Threadneedle(R) mutual funds are distributed by RiverSource Distributors, Inc., and RiverSource Fund Distributors, Inc., Members FINRA, and managed by RiverSource Investments, LLC. RiverSource and Threadneedle are part of Ameriprise Financial, Inc. (THREADNEEDLE LOGO) (C)2009 RiverSource Investments, LLC. S-6531 A (6/09)
Semiannual Report (THREADNEEDLE LOGO) THREADNEEDLE GLOBAL EXTENDED ALPHA FUND SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2009 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. (ADVANCED ALPHA STRATEGIES ICON) TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Fund Expenses Example.............. 9 Portfolio of Investments........... 11 Statement of Assets and Liabilities...................... 18 Statement of Operations............ 20 Statements of Changes in Net Assets........................... 22 Financial Highlights............... 23 Notes to Financial Statements...... 31 Proxy Voting....................... 47
RIVERSOURCE FAMILY OF FUNDS Threadneedle Funds are a part of the RiverSource family of funds that includes funds branded "RiverSource," "RiverSource Partners," "Seligman" and "Threadneedle." These funds share the same Board of Directors/Trustees and officers. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > Threadneedle Global Extended Alpha Fund (the Fund) Class A shares declined 1.15% (excluding sales charge) for the six months ended April 30, 2009. > The Fund outperformed its benchmark, the Morgan Stanley Capital International All Country World Index, which fell 3.00% for the six month period. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2009) --------------------------------------------------------------------------------
Since inception* 6 months* 8/1/08 ----------------------------------------------------------------- Threadneedle Global Extended Alpha Fund Class A (excluding sales charge) -1.15% -30.95% ----------------------------------------------------------------- MSCI All Country World Index(1) (unmanaged) -3.00% -32.60% -----------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary or visiting riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The index does not reflect the effects of sales charges, expenses and taxes. It is not possible to invest directly in an index. (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. The Fund's performance will be measured against this index for purposes of determining the performance incentive adjustment. -------------------------------------------------------------------------------- 2 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------
AT APRIL 30, 2009 SINCE Without sales charge 6 MONTHS* INCEPTION Class A (inception 8/1/08) -1.15% -30.95% ------------------------------------------------------------------ Class B (inception 8/1/08) -1.58% -31.40% ------------------------------------------------------------------ Class C (inception 8/1/08) -1.51% -31.35% ------------------------------------------------------------------ Class I (inception 8/1/08) -1.00% -30.80% ------------------------------------------------------------------ Class R2 (inception 8/1/08) -1.36% -31.15% ------------------------------------------------------------------ Class R3 (inception 8/1/08) -1.22% -31.00% ------------------------------------------------------------------ Class R4 (inception 8/1/08) -1.14% -30.90% ------------------------------------------------------------------ Class R5 (inception 8/1/08) -1.07% -30.85% ------------------------------------------------------------------ With sales charge Class A (inception 8/1/08) -6.82% -34.92% ------------------------------------------------------------------ Class B (inception 8/1/08) -6.50% -34.83% ------------------------------------------------------------------ Class C (inception 8/1/08) -2.49% -32.04% ------------------------------------------------------------------
-------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ----------------------------------------------
AT MARCH 31, 2009 SINCE Without sales charge 6 MONTHS* INCEPTION Class A (inception 8/1/08) -26.00% -36.10% ------------------------------------------------------------------ Class B (inception 8/1/08) -26.28% -36.45% ------------------------------------------------------------------ Class C (inception 8/1/08) -26.28% -36.45% ------------------------------------------------------------------ Class I (inception 8/1/08) -25.88% -36.00% ------------------------------------------------------------------ Class R2 (inception 8/1/08) -26.09% -36.25% ------------------------------------------------------------------ Class R3 (inception 8/1/08) -25.97% -36.15% ------------------------------------------------------------------ Class R4 (inception 8/1/08) -25.90% -36.05% ------------------------------------------------------------------ Class R5 (inception 8/1/08) -25.88% -36.00% ------------------------------------------------------------------ With sales charge Class A (inception 8/1/08) -30.24% -39.77% ------------------------------------------------------------------ Class B (inception 8/1/08) -29.96% -39.63% ------------------------------------------------------------------ Class C (inception 8/1/08) -27.01% -37.09% ------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third** years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R2, Class R3, Class R4 and Class R5 shares. Class I, Class R2, Class R3, Class R4 and Class R5 are available to institutional investors only. *Not annualized. **For Class B shares purchased on or after June 13, 2009 the CDSC percentage for the third year will be 3%. -------------------------------------------------------------------------------- 4 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. ANNUAL OPERATING EXPENSE RATIO* (as of the current prospectus) --------------------------------------------------------------------------------
Total fund Net fund expenses expenses(a) ----------------------------------------- Class A 5.55% 1.55% ----------------------------------------- Class B 6.33% 2.31% ----------------------------------------- Class C 6.22% 2.30% ----------------------------------------- Class I 4.94% 1.22% ----------------------------------------- Class R2 5.74% 2.02% ----------------------------------------- Class R3 5.49% 1.77% ----------------------------------------- Class R4 5.38% 1.52% ----------------------------------------- Class R5 4.99% 1.27% -----------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Oct. 31, 2009, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment, will not exceed 1.55% for Class A, 2.31% for Class B, 2.30% for Class C, 1.22% for Class I, 2.02% for Class R2, 1.77% for Class R3, 1.52% for Class R4 and 1.27% for Class R5. * Fund expense ratios are calculated based on the fund's average net assets during the fund's most recently completed fiscal year, and have not been adjusted for current asset levels, including any decrease or increase in assets, which, if adjusted, would result in expense ratios that are higher or lower, respectively, than those that are expressed herein. Any fee waivers/expense caps would limit the impact that any decrease in assets will have on net expense ratios in the current fiscal year. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. Threadneedle Global Extended Alpha Fund may make short sales, which involves selling a security the Fund does not own in anticipation that the security's price will decline. The Fund's potential losses could exceed those of other mutual funds which hold only long security positions if the -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- value of the securities held long decrease and the value of the securities sold short increase. The Fund's use of short sales in effect "leverages" the Fund, as the Fund intends to use the cash proceeds from the short sales to invest in additional long securities. Leveraging potentially exposes the Fund to greater risks due to unanticipated market movements, which may magnify losses and increase volatility of returns. There is no assurance that a leveraging strategy will be successful. Both long and short positions may be obtained through buying or selling individual securities or creating similar long or short exposure through the use of derivative instruments. See the Fund's prospectus for information on these and other risks associated with the Fund. -------------------------------------------------------------------------------- 6 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- PORTFOLIO BREAKDOWN BY COUNTRY(1) (at April 30, 2009; % of portfolio and portfolio swap(2)) --------------------------------------------------------------------------------
LONG SHORT(3) NET Australia 1.8% 0.0% 1.8% ------------------------------------------------------------------ Bermuda 4.6% 0.0% 4.6% ------------------------------------------------------------------ Brazil 2.8% 0.0% 2.8% ------------------------------------------------------------------ Canada 3.7% 0.0% 3.7% ------------------------------------------------------------------ Denmark 1.3% 0.0% 1.3% ------------------------------------------------------------------ Finland 0.8% 0.0% 0.8% ------------------------------------------------------------------ France 1.6% -1.4% 0.2% ------------------------------------------------------------------ Germany 4.2% 0.0% 4.2% ------------------------------------------------------------------ Hong Kong 4.1% 0.0% 4.1% ------------------------------------------------------------------ Japan 3.2% -1.1% 2.1% ------------------------------------------------------------------ Luxembourg 1.1% -0.4% 0.7% ------------------------------------------------------------------ Mexico 1.7% 0.0% 1.7% ------------------------------------------------------------------ Netherlands 0.6% -1.2% -0.6% ------------------------------------------------------------------ Portugal 0.4% 0.0% 0.4% ------------------------------------------------------------------ Russia 0.8% 0.0% 0.8% ------------------------------------------------------------------ Singapore 1.5% 0.0% 1.5% ------------------------------------------------------------------ South Korea 1.1% 0.0% 1.1% ------------------------------------------------------------------ Spain 2.3% 0.0% 2.3% ------------------------------------------------------------------ Switzerland 8.1% 0.0% 8.1% ------------------------------------------------------------------ United Kingdom 13.3% 0.0% 13.3% ------------------------------------------------------------------ United States 52.1% -7.2% 44.9% ------------------------------------------------------------------ Other(4) 0.2% 0.0% 0.2% ------------------------------------------------------------------ 111.3% -11.3% 100.0% ------------------------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding investments of Cash Collateral for Securities on Loan) as of April 30, 2009. The Fund's composition is subject to change. (2) The Fund has entered into a portfolio swap agreement. A portfolio swap allows the Fund to obtain exposure to a custom basket of securities and foreign markets (both long and short exposures) without owning or taking physical custody of such securities. The portfolio breakdown by country for each underlying position in the custom basket has been estimated by multiplying the notional amount of each security by its April 30, 2009 closing market price as obtained from an authorized pricing source. The notional amounts and the market values of the positions in the custom basket are not presented in the financial statements. (3) At April 30, 2009, the Fund had no short positions. However, the Fund had entered into a portfolio swap in order to gain short exposure to foreign equity markets. See Portfolio Swap Outstanding at April 30, 2009 following the Portfolio of Investments, and Note 1 to the financial statements. (4) Cash & Cash Equivalents. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 7 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- Top ten holdings do not include notional exposure to holdings the Fund has through its use of a portfolio swap. For more information regarding the Fund's portfolio swap, see "Portfolio of Investments" page 14. TOP TEN HOLDINGS (at April 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Nestle (Switzerland) 3.7% ------------------------------------------------ Oracle (United States) 2.9% ------------------------------------------------ Linde (Germany) 2.7% ------------------------------------------------ BG Group (United Kingdom) 2.4% ------------------------------------------------ Vodafone Group (United Kingdom) 2.3% ------------------------------------------------ Johnson & Johnson (United States) 2.1% ------------------------------------------------ Travelers Companies (United States) 2.0% ------------------------------------------------ Tullow Oil (United Kingdom) 2.0% ------------------------------------------------ PepsiCo (United States) 1.9% ------------------------------------------------ IBM (United States) 1.9% ------------------------------------------------
For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- 8 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and 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. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended April 30, 2009. 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. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 9 FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2008 APRIL 30, 2009 THE PERIOD(A) EXPENSE RATIO ------------------------------------------------------------------------------------------- Class A ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 988.50 $ 7.64 1.55% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.11 $ 7.75 1.55% ------------------------------------------------------------------------------------------- Class B ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 984.20 $11.36 2.31% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,013.34 $11.53 2.31% ------------------------------------------------------------------------------------------- Class C ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 984.90 $11.32 2.30% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,013.39 $11.48 2.30% ------------------------------------------------------------------------------------------- Class I ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 990.00 $ 6.02 1.22% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.74 $ 6.11 1.22% ------------------------------------------------------------------------------------------- Class R2 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 986.40 $ 9.95 2.02% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.78 $10.09 2.02% ------------------------------------------------------------------------------------------- Class R3 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 987.80 $ 8.72 1.77% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.02 $ 8.85 1.77% ------------------------------------------------------------------------------------------- Class R4 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 988.60 $ 7.49 1.52% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.26 $ 7.60 1.52% ------------------------------------------------------------------------------------------- Class R5 ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 989.30 $ 6.26 1.27% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.50 $ 6.36 1.27% -------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2009: -1.15% for Class A, -1.58% for Class B, -1.51% for Class C, -1.00% for Class I, -1.36% for Class R2, -1.22% for Class R3, -1.14% for Class R4 and -1.07% for Class R5. -------------------------------------------------------------------------------- 10 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (99.5%)(c) ISSUER SHARES VALUE(a) AUSTRALIA (1.8%) CSL 2,830 $70,768 InterOil 1,050(b) 33,905 --------------- Total 104,673 ------------------------------------------------------------------------------------- BERMUDA (3.6%) Accenture Cl A 2,646 77,872 Ingersoll-Rand Cl A 2,400 52,248 PartnerRe 1,075 73,304 --------------- Total 203,424 ------------------------------------------------------------------------------------- BRAZIL (0.6%) Redecard 2,800 35,270 ------------------------------------------------------------------------------------- CANADA (2.5%) Barrick Gold 3,300 95,602 First Uranium 8,000(b,f) 43,066 --------------- Total 138,668 ------------------------------------------------------------------------------------- DENMARK (1.3%) Vestas Wind Systems 1,150(b,f) 75,920 ------------------------------------------------------------------------------------- FINLAND (0.9%) Talvivaara Mining 15,830(b) 48,480 ------------------------------------------------------------------------------------- FRANCE (1.6%) France Telecom 4,185 93,430 ------------------------------------------------------------------------------------- GERMANY (4.4%) Linde 2,090 166,860 Siemens 1,217(f) 82,185 --------------- Total 249,045 ------------------------------------------------------------------------------------- HONG KONG (4.2%) Esprit Holdings 6,000 37,046 Great Eagle Holdings 50,000 69,549 Hongkong & Shanghai Hotels 80,000 61,007 Sun Hung Kai Properties 7,000(f) 72,937 --------------- Total 240,539 ------------------------------------------------------------------------------------- JAPAN (3.3%) Canon 1,000(f) 29,919 Honda Motor 1,800(f) 51,938 Nintendo 300 80,052 Sony Financial Holdings 8 25,071 --------------- Total 186,980 ------------------------------------------------------------------------------------- LUXEMBOURG (1.1%) Millicom Intl Cellular 1,310 63,483 ------------------------------------------------------------------------------------- MEXICO (1.8%) America Movil ADR Series L 3,125 102,656 ------------------------------------------------------------------------------------- NETHERLANDS (0.6%) Fugro 880 31,810 ------------------------------------------------------------------------------------- RUSSIA (0.9%) NovaTek GDR 1,400(d,e) 49,700 ------------------------------------------------------------------------------------- SINGAPORE (1.6%) DBS Group Holdings 14,000(f) 89,895 ------------------------------------------------------------------------------------- SOUTH KOREA (1.1%) Samsung Electronics 140 64,654 ------------------------------------------------------------------------------------- SPAIN (1.4%) Telefonica 4,226 80,587 ------------------------------------------------------------------------------------- SWITZERLAND (8.4%) Mettler Toledo Intl 600(b) 36,978 Nestle 6,950 227,507 Novartis 1,610 61,223 Roche Holding 700(f) 88,628 Syngenta 283(f) 60,751 --------------- Total 475,087 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) UNITED KINGDOM (11.2%) 3i Group 5,620 $26,690 Autonomy 5,350(b) 113,267 BG Group 9,000 145,536 Tesco 18,600 92,792 Tullow Oil 10,000 119,320 Vodafone Group 75,200 138,737 --------------- Total 636,342 ------------------------------------------------------------------------------------- UNITED STATES (47.2%) Adobe Systems 1,400(b) 38,290 Altria Group 2,500 40,825 American Tower Cl A 2,800(b) 88,928 Amphenol Cl A 1,400 47,376 Aon 1,500 63,300 Bank of America 3,500 31,255 Coca-Cola 2,050 88,253 Comcast Cl A 4,040 62,458 CommScope 2,400(b) 60,240 CVS Caremark 2,800 88,984 DIRECTV Group 2,000(b) 49,460 Genzyme 560(b) 29,865 Goldman Sachs Group 300 38,550 Google Cl A 250(b) 98,993 HCC Insurance Holdings 3,400 81,328 Humana 2,200(b) 63,316 IBM 1,100 113,531 Jabil Circuit 5,000 40,500 Johnson & Johnson 2,440 127,758 Juniper Networks 2,300(b) 49,795 KeyCorp 3,300 20,295 Laboratory Corp of America Holdings 1,510(b) 96,867 Lowe's Companies 5,000 107,500 Microsoft 3,390 68,681 Noble 1,900 51,927 Oracle 9,000 174,059 PepsiCo 2,290 113,950 Philip Morris Intl 1,965 71,133 Praxair 460 34,321 Republic Services 2,700 56,700 Thermo Fisher Scientific 2,590(b) 90,857 Tiffany & Co 1,800 52,092 Travelers Companies 3,030 124,655 Ultra Petroleum 2,300(b) 98,439 Union Pacific 700 34,398 Valero Energy 3,000 59,520 Walgreen 2,000 62,860 Western Union 2,700 45,225 --------------- Total 2,666,484 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $5,900,497) $5,637,127 ------------------------------------------------------------------------------------- MONEY MARKET FUND (0.2%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.28% 11,738(g) $11,738 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $11,738) $11,738 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (8.1%) SHARES VALUE(a) JPMorgan Prime Money Market Fund 457,913 $457,913 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $457,913) $457,913 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $6,370,148)(h) $6,106,778 =====================================================================================
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 12 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- SUMMARY OF INVESTMENTS IN SECURITIES BY INDUSTRY The following table represents the portfolio investments of the Fund by industry classifications as a percentage of total net assets at April 30, 2009:
PERCENTAGE OF INDUSTRY NET ASSETS VALUE ------------------------------------------------------------------- Automobiles 0.9% $51,938 Beverages 3.6 202,203 Biotechnology 1.8 100,633 Capital Markets 1.2 65,240 Chemicals 4.6 261,932 Commercial Banks 1.9 110,190 Commercial Services & Supplies 1.0 56,700 Communications Equipment 1.9 110,035 Computers & Peripherals 2.0 113,531 Diversified Financial Services 0.6 31,255 Diversified Telecommunication Services 3.1 174,017 Electrical Equipment 1.3 75,920 Electronic Equipment, Instruments & Components 2.2 124,854 Energy Equipment & Services 1.5 83,737 Food & Staples Retailing 4.3 244,636 Food Products 4.0 227,507 Health Care Providers & Services 2.8 160,183 Hotels, Restaurants & Leisure 1.1 61,007 Industrial Conglomerates 1.5 82,185 Insurance 6.5 367,658 Internet Software & Services 1.7 98,993 IT Services 2.8 158,367 Life Sciences Tools & Services 1.6 90,857 Machinery 0.9 52,248 Media 2.0 111,918 Metals & Mining 3.3 187,148 Office Electronics 0.5 29,919 Oil, Gas & Consumable Fuels 8.9 506,420 Pharmaceuticals 4.9 277,609 Real Estate Management & Development 2.5 142,486 Road & Rail 0.6 34,398 Semiconductors & Semiconductor Equipment 1.1 64,654 Software 8.4 474,349 Specialty Retail 3.5 196,638 Tobacco 2.0 111,958 Wireless Telecommunication Services 7.0 393,804 Other(1) 8.3 469,651 ------------------------------------------------------------------- Total $6,106,778 -------------------------------------------------------------------
(1) Cash & Cash Equivalents. See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- PORTFOLIO SWAP(1) OUTSTANDING AT APRIL 30, 2009
NEXT NET UNREALIZED COUNTERPARTY DESCRIPTION RESET DATE APPRECIATION ------------------------------------------------------------------------------ UBS The Fund receives(pays) the total May 8, 2009 $(11,846) return on a custom basket of long(short) equity positions and pays(receives) a floating rate based on the 1-day LIBOR which is denominated in various foreign currencies based on the local currencies of the securities underlying the custom basket. ------------------------------------------------------------------------------ Total $(11,846) ------------------------------------------------------------------------------
(1) The Fund has entered into a portfolio swap agreement. A portfolio swap allows the Fund to obtain exposure to a custom basket of securities and foreign markets (both long and short exposures) without owning or taking physical custody of such securities. Under the terms of the agreement, payments made by the Fund or the counterparty are based on the total return of the reference assets within the basket. That is, one party agrees to pay another party the return on the basket in return for a specified interest rate. The agreement allows the Investment Manager of the Fund to alter the composition of the custom basket by trading in and out of the notional security positions at its discretion. The notional amounts of the security positions held in the basket are not recorded in the financial statements. The portfolio swap is valued daily, and the change in value is recorded as unrealized appreciation (depreciation). The swap resets monthly at which time the Fund settles in cash with the counterparty. Payments received or made are recorded as realized gains (losses). See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 14 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies 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 may be determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2009, the value of these securities amounted to $49,700 or 0.9% of net assets. (e) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). The aggregate value of such securities at April 30, 2009, was $49,700 representing 0.9% of net assets. Information concerning such security holdings at April 30, 2009, is as follows:
ACQUISITION SECURITY DATES COST ---------------------------------------------------------------- NovaTek GDR* 04-23-09 $44,995
* Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. (f) At April 30, 2009, security was partially or fully on loan. See Note 5 to the financial statements. (g) Affiliated Money Market Fund -- See Note 6 to the financial statements. The rate shown is the seven-day current annualized yield at April 30, 2009. (h) At April 30, 2009, the cost of securities for federal income tax purposes was approximately $6,370,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $369,000 Unrealized depreciation (632,000) ---------------------------------------------------------- Net unrealized depreciation $(263,000) ----------------------------------------------------------
The industries identified above are based on the Global Industry Classification Standard (GICS), which 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. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to implement more uniform reporting relating to the fair valuation of securities for financial statement purposes. Mutual funds are required to implement the requirements of this standard for fiscal years beginning after Nov. 15, 2007. While uniformity of presentation is the objective of the standard, it is likely that there may be a range of practices utilized and it may be some period of time before industry practices become more uniform. For this reason care should be exercised in interpreting this information and/or using it for comparison with other mutual funds. Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.) - Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) Observable inputs are those based on market data obtained from sources independent of the Fund, and unobservable inputs reflect the Fund's own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the NYSE or require adjustment, as described in Note 1 to the financial statements -- Valuation of securities. The following table is a summary of the inputs used to value the Fund's investments as of April 30, 2009:
FAIR VALUE AT APRIL 30, 2009 ------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL ---------------------------------------------------------------------------------- Investments in securities $6,106,778 $-- $-- $6,106,778 Other financial instruments* -- (11,846) -- (11,846) ---------------------------------------------------------------------------------- Total $6,106,778 $(11,846) $-- $6,094,932 ----------------------------------------------------------------------------------
* Other financial instruments are derivative instruments, such as swap contracts, which are valued at the unrealized appreciation (depreciation) on the instrument. -------------------------------------------------------------------------------- 16 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY 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 filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 17 STATEMENT OF ASSETS AND LIABILITIES ------------------------------------------- APRIL 30, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $5,900,497) $ 5,637,127 Affiliated money market fund (identified cost $11,738) 11,738 Investments of cash collateral received for securities on loan (identified cost $457,913) 457,913 ------------------------------------------------------------------------------ Total investments in securities (identified cost $6,370,148) 6,106,778 Cash 22,714 Foreign currency holdings (identified cost $33,878) 34,430 Capital shares receivable 1,250 Dividends and accrued interest receivable 10,875 ------------------------------------------------------------------------------ Total assets 6,176,047 ------------------------------------------------------------------------------ LIABILITIES Capital shares payable 7,466 Payable upon return of securities loaned 457,913 Unrealized depreciation on swap contracts 11,846 Accrued investment management services fees 162 Accrued distribution fees 24 Accrued transfer agency fees 9 Accrued administrative services fees 12 Other accrued expenses 35,008 ------------------------------------------------------------------------------ Total liabilities 512,440 ------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $ 5,663,607 ------------------------------------------------------------------------------ REPRESENTED BY Capital stock -- $.01 par value $ 4,098 Additional paid-in capital 7,705,404 Undistributed net investment income 237,598 Accumulated net realized gain (loss) (2,008,851) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (274,642) ------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $ 5,663,607 ------------------------------------------------------------------------------ *Including securities on loan, at value $ 456,118 ------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 18 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $1,803,773 130,642 $13.81(1) Class B $ 302,268 22,025 $13.72 Class C $ 103,112 7,512 $13.73 Class I $3,410,773 246,500 $13.84 Class R2 $ 6,885 500 $13.77 Class R3 $ 6,899 500 $13.80 Class R4 $ 22,981 1,663 $13.82 Class R5 $ 6,916 500 $13.83 ---------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $14.65. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 5.75%. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 19 STATEMENT OF OPERATIONS ------------------------------------------------------- SIX MONTHS ENDED APRIL 30, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Dividends 74,485 Interest 1,501 Income distributions from affiliated money market fund 206 Fee income from securities lending 473 Less foreign taxes withheld (4,202) ------------------------------------------------------------------------------ Total income 72,463 ------------------------------------------------------------------------------ Expenses: Investment management services fees 29,195 Distribution fees Class A 2,444 Class B 1,363 Class C 488 Class R2 16 Class R3 8 Transfer agency fees Class A 1,394 Class B 207 Class C 72 Class R2 2 Class R3 2 Class R4 5 Class R5 2 Administrative services fees 2,224 Plan administration services fees Class R2 8 Class R3 8 Class R4 27 Compensation of board members 97 Custodian fees 10,522 Printing and postage 16,255 Registration fees 15,909 Professional fees 19,755 Other 3,569 ------------------------------------------------------------------------------ Total expenses 103,572 Expenses waived/reimbursed by the Investment Manager and its affiliates (64,324) ------------------------------------------------------------------------------ Total net expenses 39,248 ------------------------------------------------------------------------------ Investment income (loss) -- net 33,215 ------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 20 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $(1,078,458) Foreign currency transactions 3,854 Swap transactions (209,270) ------------------------------------------------------------------------------ Net realized gain (loss) on investments (1,283,874) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,131,024 ------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies (152,850) ------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ (119,635) ------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 21 STATEMENTS OF CHANGES IN NET ASSETS -------------------------------------------
SIX MONTHS ENDED FOR THE PERIOD APRIL 30, 2009 FROM AUG. 1, 2008* (UNAUDITED) TO OCT. 31, 2008 OPERATIONS Investment income (loss) -- net $ 33,215 $ 5,911 Net realized gain (loss) on investments (1,283,874) (971,237) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,131,024 (1,410,405) ------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (119,635) (2,375,731) ------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares 469,429 3,082,069 Class B shares 113,678 482,927 Class C shares 43,424 117,476 Class R4 shares 2,000 22,000 Payments for redemptions Class A shares (793,218) (157,519) Class B shares (48,312) (141,999) Class C shares (31,625) -- Class R4 shares (1,985) -- ------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (246,609) 3,404,954 ------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (366,244) 1,029,223 Net assets at beginning of period 6,029,851 5,000,628** ------------------------------------------------------------------------------------------------------- Net assets at end of period $ 5,663,607 $ 6,029,851 ------------------------------------------------------------------------------------------------------- Undistributed net investment income $ 237,598 $ 204,383 -------------------------------------------------------------------------------------------------------
* When shares became publicly available. ** Initial capital of $5,000,000 was contributed on July 24, 2008. The Fund had an increase in net assets resulting from operations of $628 during the period from July 24, 2008 to Aug. 1, 2008 (when shares became publicly available). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 22 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(j) 2008(b) Net asset value, beginning of period $13.97 $20.00 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .07 .00(d) Net gains (losses) (both realized and unrealized) (.23) (6.03) -------------------------------------------------------------------------------------------------------------- Total from investment operations (.16) (6.03) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $13.81 $13.97 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $2 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e) 3.80%(f) 5.55%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g) 1.55%(f) 1.55%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.03%(f) (.07%)(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 64% 36% -------------------------------------------------------------------------------------------------------------- Total return(h) (1.15%)(i) (30.15%)(i) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Rounds to zero. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 23 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(i) 2008(b) Net asset value, beginning of period $13.94 $20.00 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .02 (.02) Net gains (losses) (both realized and unrealized) (.24) (6.04) -------------------------------------------------------------------------------------------------------------- Total from investment operations (.22) (6.06) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $13.72 $13.94 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d) 4.75%(e) 6.33%(e) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f) 2.31%(e) 2.31%(e) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .33%(e) (.55%)(e) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 64% 36% -------------------------------------------------------------------------------------------------------------- Total return(g) (1.58%)(h) (30.30%)(h) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (c) Per share amounts have been calculated using the average shares outstanding method. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Total return does not reflect payment of a sales charge. (h) Not annualized. (i) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 24 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(i) 2008(b) Net asset value, beginning of period $13.94 $20.00 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .02 (.03) Net gains (losses) (both realized and unrealized) (.23) (6.03) -------------------------------------------------------------------------------------------------------------- Total from investment operations (.21) (6.06) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $13.73 $13.94 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d) 4.68%(e) 6.22%(e) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f) 2.30%(e) 2.30%(e) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .25%(e) (.79%)(e) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 64% 36% -------------------------------------------------------------------------------------------------------------- Total return(g) (1.51%)(h) (30.30%)(h) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (c) Per share amounts have been calculated using the average shares outstanding method. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Total return does not reflect payment of a sales charge. (h) Not annualized. (i) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 25 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(h) 2008(b) Net asset value, beginning of period $13.98 $20.00 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .09 .03 Net gains (losses) (both realized and unrealized) (.23) (6.05) -------------------------------------------------------------------------------------------------------------- Total from investment operations (.14) (6.02) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $13.84 $13.98 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $3 $3 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d) 3.55%(e) 4.94%(e) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f) 1.22%(e) 1.21%(e) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.40%(e) .63%(e) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 64% 36% -------------------------------------------------------------------------------------------------------------- Total return (1.00%)(g) (30.10%)(g) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (c) Per share amounts have been calculated using the average shares outstanding method. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Not annualized. (h) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 26 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS R2
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(i) 2008(b) Net asset value, beginning of period $13.96 $20.00 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .05 .00(d) Net gains (losses) (both realized and unrealized) (.24) (6.04) -------------------------------------------------------------------------------------------------------------- Total from investment operations (.19) (6.04) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $13.77 $13.96 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e) 4.35%(f) 5.74%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g) 1.89%(f) 1.81%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .73%(f) .03%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 64% 36% -------------------------------------------------------------------------------------------------------------- Total return (1.36%)(h) (30.20%)(h) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Rounds to zero. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Not annualized. (i) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 27 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS R3
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(h) 2008(b) Net asset value, beginning of period $13.97 $20.00 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .06 .01 Net gains (losses) (both realized and unrealized) (.23) (6.04) -------------------------------------------------------------------------------------------------------------- Total from investment operations (.17) (6.03) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $13.80 $13.97 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d) 4.11%(e) 5.49%(e) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f) 1.64%(e) 1.56%(e) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .98%(e) .28%(e) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 64% 36% -------------------------------------------------------------------------------------------------------------- Total return (1.22%)(g) (30.15%)(g) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (c) Per share amounts have been calculated using the average shares outstanding method. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Not annualized. (h) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 28 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(h) 2008(b) Net asset value, beginning of period $13.98 $20.00 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .08 .01 Net gains (losses) (both realized and unrealized) (.24) (6.03) -------------------------------------------------------------------------------------------------------------- Total from investment operations (.16) (6.02) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $13.82 $13.98 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d) 3.85%(e) 5.38%(e) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f) 1.39%(e) 1.36%(e) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.24%(e) .30%(e) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 64% 36% -------------------------------------------------------------------------------------------------------------- Total return (1.14%)(g) (30.10%)(g) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (c) Per share amounts have been calculated using the average shares outstanding method. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Not annualized. (h) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 29 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2009(h) 2008(b) Net asset value, beginning of period $13.98 $20.00 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .09 .02 Net gains (losses) (both realized and unrealized) (.24) (6.04) -------------------------------------------------------------------------------------------------------------- Total from investment operations (.15) (6.02) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $13.83 $13.98 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d) 3.60%(e) 4.99%(e) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f) 1.27%(e) 1.26%(e) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.35%(e) .58%(e) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 64% 36% -------------------------------------------------------------------------------------------------------------- Total return (1.07%)(g) (30.10%)(g) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (c) Per share amounts have been calculated using the average shares outstanding method. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Not annualized. (h) Six months ended April 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 30 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS TO APRIL 30, 2009) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Threadneedle Global Extended Alpha Fund (the Fund) is a series of RiverSource Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund invests primarily in equity securities, including at least 40% of its net assets in companies located in (non-U.S.) developed and emerging markets. The Fund holds both long and short positions. Both long and short positions may be obtained through buying or selling individual securities or creating similar long or short exposure through the use of derivative instruments. On July 24, 2008, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager), a subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), invested $5,000,000 in the Fund (500 shares for Class A, 500 shares for Class B, 500 shares for Class C, 246,500 shares for Class I, 500 shares for Class R2, 500 shares for Class R3, 500 shares for Class R4 and 500 shares for Class R5), which represented the initial capital for each class at $20 per share. Shares of the Fund were first offered to the public on Aug. 1, 2008. The Fund offers Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4 and Class R5 shares. - Class A shares are sold with a front-end sales charge. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - Class C shares may be subject to a CDSC. - Class I, Class R2, Class R3, Class R4 and Class R5 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. At April 30, 2009, the Investment Manager owned 100% of Class I, Class R2, Class R3 and Class R5 shares. At April 30, 2009, the Investment Manager owned approximately 61% of the total outstanding Fund shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) 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. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange (NYSE) and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. Swap transactions are valued through an authorized pricing service, broker, or an internal model. 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 -------------------------------------------------------------------------------- 32 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- rates; those maturing in 60 days or less are valued at amortized cost, which approximates fair value. ILLIQUID SECURITIES At April 30, 2009, investments in securities included issues that are illiquid which the Fund currently limits to 15% of net assets, at market value, at the time of purchase. The aggregate value of such securities at April 30, 2009 was $49,700 representing 0.88% of net assets. Certain illiquid securities may be valued by management at fair value according to procedures approved, in good faith, by the Board. According to Board guidelines, certain unregistered securities are determined to be liquid and are not included within the 15% limitation specified above. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. SECURITIES SOLD SHORT The Fund may enter into short sales of securities that it concurrently holds or for which it holds no corresponding position. Short selling is the practice of selling securities which have been borrowed from a third party in anticipation of a decline in the market price of that security. Securities which have been sold short represent a liability of the Fund to acquire specific securities at prevailing market prices at a future date in order to satisfy the obligation to deliver the securities sold. The Fund is required to return securities equivalent to those borrowed for the short sale at the lender's demand. A gain, limited to the price at which the Fund sold the security short, or a loss, unlimited in size, will be recorded upon the termination of a short sale. Short sales are collateralized with segregated securities or cash held at the custodian as noted in the Portfolio of Investments. The collateral required is determined daily based on the market value of the securities sold short. At April 30, 2009, the Fund had no outstanding securities sold short. The Fund is liable to pay the counterparty for any dividends accrued on a security it has borrowed and sold short and to pay interest for any net financing costs incurred during the time the short position is held by the Fund. Such dividends (recognized on ex-date) and interest are recorded as an expense and shown in the Statement of Operations. During the six months ended April 30, 2009, the Fund had no dividends and interest expense in the Statement of Operations. 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 -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- obligation depends upon the credit standing of the other party. Cash collateral may be collected by the Fund to secure certain over-the-counter (OTC options) options trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. 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. Options contracts, including OTC option contracts, with no readily available market value are valued using quotations obtained from independent brokers as of the close of the NYSE. The Fund will realize a gain or loss when the option transaction expires or is exercised. 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. At April 30, 2009, and for the six months then ended, the Fund had no outstanding option contracts. 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. Futures and options on futures are valued daily based upon the last sale price at the close of the market on the principal exchange on which they are traded. 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. At April 30, 2009, the Fund had no outstanding futures contracts. -------------------------------------------------------------------------------- 34 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At April 30, 2009, foreign currency holdings consisted of multiple denominations. The Fund may enter into forward foreign currency 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 counterparty will not complete its contract obligations. At April 30, 2009, the Fund had no outstanding forward foreign currency contracts. PORTFOLIO SWAP TRANSACTIONS The Fund has entered into a portfolio swap agreement. A portfolio swap allows the Fund to obtain exposure to a custom basket of securities and foreign markets (both long and short exposures) without owning or taking physical custody of such securities. Under the terms of the agreement, payments made by the Fund or the counterparty are based on the total return of the reference assets within the basket. That is, one party agrees to pay another party the return on the basket in return for a specified interest rate. The agreement allows the Investment Manager of the Fund to alter the composition of the custom basket by trading in and out of the notional security positions at its discretion. The notional amounts of the security positions held in the basket are not recorded in the financial statements. The portfolio swap is valued daily based on closing prices obtained from an authorized pricing source, and the change in value is recorded as unrealized appreciation (depreciation). The swap resets monthly at which time the Fund settles in cash with the counterparty. Payments received or made are recorded as realized gains (losses). See the Portfolio Swap Outstanding table following the Portfolio of Investments for additional information. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 35 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Portfolio swaps can involve greater risks than if a fund had invested in the reference securities directly since, in addition to general market risks (including foreign/emerging market risks and risks of securities sold short), portfolio swaps are also subject to counterparty credit risk and liquidity risk. Although the risks mentioned above are the largest risks associated with portfolio swaps, other risks may also apply. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to the shareholders. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of foreign currency transactions, recognition of unrealized appreciation (depreciation) for certain derivative investments and losses deferred due to wash sales. 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. RECENT ACCOUNTING PRONOUNCEMENTS The Fund has adopted FASB Staff Position No. 133-1 and FIN No. 45-4 (FSP FAS 133-1 and FIN 45-4), "Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45." The amendments to FSP FAS 133-1 and FIN 45-4 require enhanced disclosures about a fund's derivatives and guarantees. Funds are -------------------------------------------------------------------------------- 36 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows and (d) the current status of the payment/performance risk of the credit derivative. The amendments to FSP FAS 133-1 and FIN 45-4 also require additional disclosures about the current status of the payment/performance risk of a guarantee. At April 30, 2009, the Fund did not own nor was it party to any credit derivative contracts within the scope of these amendments. In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of April 30, 2009, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. On April 9, 2009, the FASB issued Staff Position No. 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly" (FSP 157-4). FSP 157-4 provides additional guidance for estimating fair value in accordance with Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157) when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also requires additional disaggregation of the current SFAS 157 required disclosures. FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Management is currently evaluating the impact that the adoption of FSP 157-4 will have on the amounts and disclosures within the Fund's financial statements. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 1.05% to 0.99% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment determined monthly by measuring the percentage difference over a rolling 36-month period between the annualized performance of one Class A share of the Fund and the annualized performance of the MSCI All Country World Index. In certain circumstances, the Board may approve a change in the index. The maximum adjustment is 0.50% per year. If the performance difference is less than 1.00%, the adjustment will be zero. The first adjustment will be made on Aug. 1, 2010 and cover the 24-month period beginning Aug. 1, 2008. The management fee for the six months ended April 30, 2009 was 1.05% of the Fund's average daily net assets. SUBADVISORY AGREEMENT The Investment Manager has a Subadvisory Agreement with Threadneedle International Limited (Threadneedle), an affiliate of the Investment Manager and an indirect wholly-owned subsidiary of Ameriprise Financial, to subadvise the assets of the Fund. The Investment Manager contracts with and compensates Threadneedle to manage the investment of the Fund's assets. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. The fee for the six months ended April 30, 2009 was 0.08% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended April 30, 2009, there were no expenses incurred for these particular items. -------------------------------------------------------------------------------- 38 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- COMPENSATION OF BOARD MEMBERS 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. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50 for Class B and $20.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R2, Class R3, Class R4 and Class R5 shares. The Transfer Agent charges an annual 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 in the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Fund's average daily net assets attributable to Class R2, Class R3 and Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. DISTRIBUTION FEES The Fund has agreements with RiverSource Distributors, Inc. and RiverSource Fund Distributors, Inc. (collectively, 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 of up to 0.25% of the Fund's average daily net assets attributable to Class A and Class R3 shares, a fee at an annual rate of up to 0.50% of the Fund's average daily net assets attributable to Class R2 shares and a fee at an annual rate of up to 1.00% of the Fund's average daily net assets attributable to Class B and Class C shares. For Class B and Class C shares, up to 0.75% of the fee is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed expense") was approximately $27,000 and $1,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of April 30, 2009, and may be recovered from -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGES Sales charges received by the Distributor for distributing Fund shares were $108 for Class A and $28 for Class C for the six months ended April 30, 2009. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended April 30, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*) were as follows: Class A............................................. 1.55% Class B............................................. 2.31 Class C............................................. 2.30 Class I............................................. 1.22 Class R2............................................ 1.89 Class R3............................................ 1.64 Class R4............................................ 1.39 Class R5............................................ 1.27
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class A............................................ $609 Class B............................................ 85 Class C............................................ 33
The waived/reimbursed fees and expenses for the plan administration services fees at the class level were as follows: Class R2............................................ $ 4 Class R3............................................ 4 Class R4............................................ 15
The management fees and other fund level expenses waived/reimbursed were $63,574. The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Oct. 31, 2009, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of -------------------------------------------------------------------------------- 40 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- acquired funds*), before giving effect to any performance incentive adjustment, will not exceed the following percentage of the class average daily net assets: Class A............................................. 1.55% Class B............................................. 2.31 Class C............................................. 2.30 Class I............................................. 1.22 Class R2............................................ 2.02 Class R3............................................ 1.77 Class R4............................................ 1.52 Class R5............................................ 1.27
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $3,641,560 and $3,490,827, respectively, for the six months ended April 30, 2009. Realized gains and losses are determined on an identified cost basis. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED APRIL 30, 2009 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) ----------------------------------------------------------------------------- Class A 35,325 -- (62,692) (27,367) Class B 8,538 -- (3,629) 4,909 Class C 3,166 -- (2,378) 788 Class R4 154 -- (154) -- -----------------------------------------------------------------------------
-------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
PERIOD FROM AUG. 1, 2008* TO OCT. 31, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) ----------------------------------------------------------------------------- Class A 166,961 -- (9,452) 157,509 Class B 26,996 -- (10,380) 16,616 Class C 6,224 -- -- 6,224 Class I 1,163 -- -- 1,163 -----------------------------------------------------------------------------
* When shares became publicly available. 5. LENDING OF PORTFOLIO SECURITIES Effective Dec. 1, 2008, the Fund has entered into a Master Securities Lending Agreement ("the Agreement") with JPMorgan Chase Bank, National Association ("JPMorgan"). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments, and any uninvested cash collateral balance, are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At April 30, 2009, securities valued at $456,118 were on loan, secured by cash collateral of $457,913 invested in short- term securities or in cash equivalents. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Income of $473 earned from securities lending from Dec. 1, 2008 through April 30, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such -------------------------------------------------------------------------------- 42 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Fund or the borrower at any time, and are, therefore, not considered to be illiquid investments. Prior to Dec. 1, 2008, the Investment Manager served as securities lending agent for the Fund under the Securities Lending Agency Agreement. For the period from Nov. 1, 2008 through Nov. 30, 2008, the Fund had no securities on loan. 6. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term Cash Fund aggregated $1,385,668 and $1,373,930, respectively, for the six months ended April 30, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short- Term Cash Fund at April 30, 2009, can be found in the Portfolio of Investments. 7. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $475 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $175 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $650 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum, in addition to an upfront fee equal to its pro rata share of 0.02% of the amount of the credit facility. The Fund had no borrowings during the six months ended April 30, 2009. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 43 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 8. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund had a capital loss carry-over of $577,229 at Oct. 31, 2008, that if not offset by capital gains will expire in 2016. 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. RISKS RELATING TO CERTAIN INVESTMENTS FOREIGN/EMERGING MARKETS RISK Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging markets may accentuate these risks. SHORT SELLING RISK The Fund may make short sales, which involves selling a security the Fund does not own in anticipation that the security's price will decline. The Fund's potential losses could exceed those of other mutual funds which hold only long security positions if the value of the securities held long decreases and the value of the securities sold short increases. The Fund's use of short sales in effect "leverages" the Fund, as the Fund intends to use the cash proceeds from the short sales to invest in additional long securities. Leveraging potentially exposes the Fund to greater risks due to unanticipated market movements, which may magnify losses and increase volatility of returns. There is no assurance that a leveraging strategy will be successful. 10. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in -------------------------------------------------------------------------------- 44 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co., Inc. (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (which is now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman is and has been misleading. The NYAG included other -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 45 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman will pay $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- 46 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 SEMIANNUAL REPORT 47 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource Investments employs Threadneedle as a subadviser. Threadneedle(R) mutual funds are distributed by RiverSource Distributors, Inc., and RiverSource Fund Distributors, Inc., Members FINRA, and managed by RiverSource Investments, LLC. RiverSource and Threadneedle are part of Ameriprise Financial, Inc. (THREADNEEDLE LOGO) (C)2009 RiverSource Investments, LLC. S-6528 A (6/09)
Item 2. Code of Ethics. Not applicable for semi-annual reports. Item 3. Audit Committee Financial Expert. Not applicable for semi-annual reports. Item 4. Principal Accountant Fees and Services. Not applicable for semi-annual reports. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. The complete schedule of investments is included in Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of matters to a vote of security holders. Not applicable. Item 11. Controls and Procedures. (a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's Principal Financial Officer and Principal Executive Officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal controls over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) Not applicable for semi-annual reports. (a)(2) Separate certification for the Registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX.99.CERT. (a)(3) Not applicable. (b) A certification by the Registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached as EX.99.906 CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) RiverSource Global Series, Inc. By /s/ Patrick T. Bannigan ---------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date July 2, 2009 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/ Patrick T. Bannigan ---------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date July 2, 2009 By /s/ Jeffrey P. Fox ---------------------------------- Jeffrey P. Fox Treasurer and Principal Financial Officer Date July 2, 2009