485BPOS 1 c54003be485bpos.txt FORM 485BPOS SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ] Pre-Effective Amendment No. ___ Post-Effective Amendment No. 60 (File No. 33-25824) and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 62 (File No. 811-5696) RIVERSOURCE GLOBAL SERIES, INC. 50606 Ameriprise Financial Center Minneapolis, Minnesota 55474 Scott R. Plummer 5228 Ameriprise Financial Center Minneapolis, MN 55474 (612) 671-1947 Approximate Date of Proposed Public Offering: It is proposed that this filing will become effective (check appropriate box.) [ ] immediately upon filing pursuant to paragraph (b) [X] on Dec. 30, 2009 pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1) [ ] on (date) pursuant to paragraph (a)(1) [ ] 75 days after filing pursuant to paragraph (a)(2) [ ] on (date) pursuant to paragraph (a)(2) of rule 485. If appropriate, check the following box: [ ] this post-effective amendment designates a new effective date for a previously filed post-effective amendment. Prospectus (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND PROSPECTUS DEC. 30, 2009 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND SEEKS TO PROVIDE SHAREHOLDERS WITH POSITIVE ABSOLUTE RETURN. Classes A, B, C, I, R4, R5 and W As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. You may qualify for sales charge discounts on purchases of Class A shares. Please notify your financial intermediary if you have other accounts holding shares of funds in the RiverSource Family of Funds to determine whether you qualify for a sales charge discount. See "Buying and Selling Shares" for more information. NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE TABLE OF CONTENTS THE FUND.......................................... 3P Objective......................................... 3p Principal Investment Strategies................... 3p Principal Risks................................... 4p Past Performance.................................. 8p Fees and Expenses................................. 12p Other Investment Strategies and Risks............. 14p Fund Management and Compensation.................. 16p FINANCIAL HIGHLIGHTS.............................. 18P BUYING AND SELLING SHARES......................... S.1 Description of Share Classes...................... S.2 Investment Options -- Classes of Shares......... S.2 Sales Charges................................... S.7 Opening an Account.............................. S.16 Exchanging or Selling Shares...................... S.20 Exchanges....................................... S.23 Selling Shares.................................. S.26 PRICING AND VALUING OF FUND SHARES................ S.27 DISTRIBUTIONS AND TAXES........................... S.28 GENERAL INFORMATION............................... S.32
RIVERSOURCE FAMILY OF FUNDS The RiverSource Family of Funds includes a comprehensive array of funds from RiverSource Investments. RiverSource Investments has also partnered with a number of professional investment managers, including its affiliate, Threadneedle Investments, to expand the array of funds offered in the RiverSource family. RiverSource funds, RiverSource Partners funds, Seligman funds and Threadneedle funds share the same Board of Directors/Trustees (the Board), and the same policies and procedures including those set forth in the service section of this prospectus. Please see the Statement of Additional Information (SAI) for a complete list of mutual funds included in the RiverSource Family of Funds. RiverSource Variable Portfolio Funds and Seligman (Variable) Portfolio Funds are sold exclusively as underlying investment options of variable insurance policies and annuity contracts offered by affiliated and unaffiliated insurance companies. -------------------------------------------------------------------------------- 2P RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS THE FUND OBJECTIVE RiverSource Absolute Return Currency and Income Fund (the Fund) seeks to provide shareholders with positive absolute return. Because any investment involves risk, there is no assurance this objective can be achieved. Only shareholders can change the Fund's objective. PRINCIPAL INVESTMENT STRATEGIES Under normal market conditions, the Fund will invest at least 80% of its net assets (including any borrowings for investment purposes) in short-duration debt obligations (or securities that invest in such debt obligations, including an affiliated money market fund) and forward foreign currency contracts. In pursuit of the Fund's objective, to provide absolute return, the investment manager (RiverSource Investments, LLC), seeks to generate positive total returns from the income produced by the short-term debt obligations, plus (minus) the gain (loss) resulting from fluctuations in the values of various foreign currencies relative to the U.S. dollar. The Fund's investment in short-duration debt obligations will consist primarily of (i) U.S. dollar denominated non-government, corporate and structured debt securities rated investment grade, or, if unrated, determined to be of comparable quality by the investment manager, and (ii) shares of an affiliated money market fund. A small portion of the Fund's portfolio may consist of U.S. government securities. In addition to producing income, these holdings will be designated by the Fund, as necessary, to cover obligations with respect to, or that may result from, the Fund's investments in forward currency contracts. The Fund targets a portfolio duration of one to five months but may extend the portfolio duration up to one year. The Fund does not actually take ownership of foreign currencies or sell actual foreign currencies. Rather, through forward currency contracts, the Fund gains economic exposure comparable to the exposure that it would have if it had bought or sold the currencies directly. A forward contract requires the purchase or delivery of a foreign currency at some future date. The price paid for the contract is the current price of the foreign currency in U.S. dollars plus or minus an adjustment based on the interest rate differential between the U.S. dollar and the foreign currency. It is expected that the gross notional value of the Fund's forward foreign currency contracts will be equivalent to at least 80% of the Fund's net assets. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS 3P The investment manager utilizes a quantitative, proprietary model that uses various fundamental and technical factors, including current and historical data, to rank the anticipated value of several developed countries' currencies relative to the U.S. dollar. The investment manager will enter into long forward currency contracts for a limited number of the currencies that rank higher in the model, and the Fund will experience profits (losses) to the extent the value of the currency appreciates (depreciates) relative to the U.S. dollar. Conversely, the investment manager will enter into short forward currency contracts for a limited number of the currencies that rank lower in the model, and the Fund will experience profits (losses) to the extent the value of the currency depreciates (appreciates) relative to the U.S. dollar. Except to close or reduce existing positions, the Fund will not enter into long and short forward currency contracts in the same currency at the same time. The investment manager runs the model regularly and generally seeks to maintain long and short forward currency contracts with approximately equal gross notional values. PRINCIPAL RISKS This Fund is designed for investors with above-average risk tolerance. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: MARKET RISK. The market value of securities and currencies may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities and currencies may fluctuate, sometimes rapidly and unpredictably. CREDIT RISK. Credit risk is the risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable or unwilling to honor a financial obligation, such as payments due on a bond or a note. If the Fund purchases unrated securities, or if the rating of a security is reduced after purchase, the Fund will depend on the investment manager's analysis of credit risk more heavily than usual. INTEREST RATE RISK. Interest rate risk is the risk of losses attributable to changes in interest rates. Interest rate risk is generally associated with bond prices: when interest rates rise, bond prices fall. In general, the longer the maturity or duration of a bond, the greater its sensitivity to changes in interest rates. -------------------------------------------------------------------------------- 4P RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS 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. As a result, the Fund's exposure to foreign currencies may reduce the returns of the Fund. Trading of foreign currencies also includes the risk of clearing and settling trades which, if prices are volatile, may be difficult. DERIVATIVES RISK. Derivatives are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, options, futures, indexes or currencies. Losses involving derivative instruments may be substantial, because a relatively small price movement in the underlying security(ies), instrument, currency or index may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund. Derivative instruments in which the Fund invests will typically increase the Fund's exposure to Principal Risks to which it is otherwise exposed, and may expose the Fund to additional risks, including leverage risk, hedging risk, correlation risk, and liquidity risk. Hedging risk is the risk that derivative instruments used to hedge against an opposite position may offset losses, but they may also offset gains. There is no guarantee that a hedging strategy will eliminate the risk which the hedging strategy is intended to offset, which may lead to losses within the Fund. Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses. Liquidity risk is the risk that the derivative instrument may be difficult or impossible to sell or terminate, which may cause the Fund to be in a position to do something the investment manager would not otherwise choose, including accepting a lower price for the derivative instrument, selling other investments or foregoing another, more appealing investment opportunity. Derivative instruments which are not traded on an exchange, including, but not limited to, forward contracts, swaps and over-the-counter options, may have increased liquidity risk. Leverage risk is the risk that losses from the derivative instrument may be greater than the amount invested in the derivative instrument. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. See the SAI for more information on derivative instruments and related risks. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS 5P QUANTITATIVE MODEL RISK. The quantitative methodology employed by the investment manager has been tested using historical market data, but has only recently begun to be used to manage open-end mutual funds. There can be no assurance that the methodology will enable the Fund to achieve its objective. ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. 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. 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 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. PREPAYMENT AND EXTENSION RISK. The risk that a bond or other security might be called, or otherwise converted, prepaid, or redeemed, before maturity. This risk is primarily associated with asset-backed securities, including mortgage backed securities. If a security is converted, prepaid, or redeemed, before maturity, particularly during a time of declining interest rates, the investment manager may not be able to reinvest in securities providing as high a level of income, resulting in a reduced yield to the Fund. Conversely, as interest rates rise, the likelihood of prepayment decreases. The investment manager may be unable to capitalize on securities with higher interest rates because the Fund's investments are locked in at a lower rate for a longer period of time. -------------------------------------------------------------------------------- 6P RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS TAX RISK. As a regulated investment company, a fund must derive at least 90% of its gross income for each taxable year from sources treated as "qualifying income" under the Internal Revenue Code of 1986, as amended. The Fund currently intends to take positions in forward currency contracts with notional value exceeding 80% of the Fund's total net assets. Although foreign currency gains currently constitute "qualifying income," the Treasury Department has the authority to issue regulations excluding from the definition of "qualifying income" a fund's foreign currency gains not "directly related" to its "principal business" of investing in stocks or securities (or options and futures with respect thereto). Such regulations might treat gains from some of the Fund's foreign currency-denominated positions as not "qualifying income" and there is a remote possibility that such regulations might be applied retroactively, in which case, the Fund might not qualify as a regulated investment company for one or more years. In the event the Treasury Department issues such regulations, the Fund's Board of Directors may authorize a significant change in investment strategy or Fund liquidation. RISKS OF INVESTING IN AFFILIATED MONEY MARKET FUND. In addition to the fees and expenses that the Fund directly bears, the Fund indirectly bears the fees and expenses of the affiliated money market fund in which it invests. To the extent these fees and expenses are expected to exceed 0.01% of the Fund's average daily net assets, they will be reflected in the Fund's Annual Operating Expenses set forth in the table under "Fees and Expenses." Additionally, by investing in an affiliated money market fund, the Fund will be exposed to the investment risks of the affiliated money market fund. To the extent the Fund invests a significant portion of its assets in the affiliated money market fund, the Fund will bear increased indirect expenses and be more susceptible to the investment risks of the affiliated money market fund, which include: ACTIVE MANAGEMENT RISK. The affiliated money market fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the fund's investment objective. Due to its active management, the affiliated money market fund could underperform other mutual funds with similar investment objectives. CONCENTRATION RISK. Investments that are concentrated in a particular issuer, geographic region, or sector will be more susceptible to changes in price. The more a fund diversifies, the more it spreads risk. For example, if the affiliated money market fund concentrates its investments in banks, the value of these investments may be adversely affected by economic or regulatory developments in the banking industry. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS 7P CREDIT RISK. Credit risk is the risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable or unwilling to honor a financial obligation, such as payments due on a bond or a note. If the affiliated money market fund purchases unrated securities, or if the rating of a security is reduced after purchase, the affiliated money market fund will depend on the investment manager's analysis of credit risk more heavily than usual. REINVESTMENT RISK. Reinvestment risk is the risk that the affiliated money market fund will not be able to reinvest income or principal at the same rate it currently is earning. PAST PERFORMANCE The following bar chart and table provide some illustration of the risks of investing in the Fund by showing, respectively: - how the Fund's performance has varied for each full calendar year shown on the bar chart; and - how the Fund's average annual total returns compare to recognized indexes shown on the table. Both the bar chart and the table assume that all distributions have been reinvested. The performance of different classes varies because of differences in sales charges and other fees and expenses. How the Fund has performed in the past (before and after taxes) does not indicate how the Fund will perform in the future. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of such fee waivers/expense caps, performance would have been lower. See "Fees and Expenses" for any current fee waivers/expense caps. Bar Chart. Class A share information is shown in the bar chart; the sales charge for Class A shares is not reflected in the bar chart. Table. The table shows total returns from hypothetical investments in Class A, Class B, Class C, Class I, Class R4, Class R5 and Class W shares of the Fund. These returns are compared to the indexes shown for the same periods. For purposes of the performance calculation in the table we assumed: - the maximum sales charge for Class A shares; - sales at the end of the period and deduction of the applicable contingent deferred sales charge (CDSC) for Class B and Class C shares; - no sales charge for Class I, Class R4, Class R5 and Class W shares; and - with the exception of Class A shares, no adjustments for taxes paid by an investor on the reinvested income and capital gains. -------------------------------------------------------------------------------- 8P RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS AFTER-TAX RETURNS After-tax returns are shown only for Class A shares. After-tax returns for the other classes will vary. After-tax returns are calculated using the highest historical individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax returns will depend on your tax situation and most likely will differ from the returns shown in the table. If you hold your shares in a tax-deferred account, such as a 401(k) plan or an IRA, the after-tax returns do not apply to you since you will not incur taxes until you begin to withdraw from your account. The return after taxes on distributions for a period may be the same as the return before taxes for the same period if there were no distributions or if the distributions were small. The return after taxes on distributions and sale of Fund shares for a period may be greater than the return before taxes for the same period if there was a tax loss realized on sale of Fund shares. The benefit of the tax loss (since it can be used to offset other gains) may result in a higher return. CLASS A SHARE PERFORMANCE (BASED ON CALENDAR YEARS) (BAR CHART) +6.02% +1.07% 2007 2008
During the periods shown in the bar chart, the highest return for a calendar quarter was +3.71% (quarter ended June 30, 2007) and the lowest return for a calendar quarter was -1.99% (quarter ended March 31, 2008). The 3.00% sales charge applicable to Class A shares of the Fund, which changed from 4.75% effective Oct. 18, 2007, is not reflected in the bar chart; if reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. The Fund's Class A year-to-date return at Sept. 30, 2009 was -0.20%. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS 9P AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2008)
CLASSES A, B, C, I & R4 CLASS R5 CLASS W SINCE SINCE SINCE INCEPTION INCEPTION INCEPTION 1 YEAR (6/15/06) (10/18/07) (12/1/06) RiverSource Absolute Return Currency and Income Fund: Class A* Return before taxes -1.96% +3.22% N/A N/A Return after taxes on distributions -2.49% +1.79% N/A N/A Return after taxes on distributions and sale of fund shares -1.20% +2.02% N/A N/A Class B Return before taxes -4.66% +2.69% N/A N/A Class C Return before taxes -0.61% +3.81% N/A N/A Class I Return before taxes +1.37% +4.87% N/A N/A Class R4 Return before taxes +1.45% +4.77% N/A N/A Class R5 Return before taxes +1.43% N/A +0.08% N/A Class W Return before taxes +1.01% N/A N/A +3.91% Citigroup 3-month U.S. Treasury Bill Index (reflects no deduction for fees, expenses or taxes) +1.80% +3.71% +2.32% +3.33%
* On Oct. 18, 2007, the maximum sales charge for Class A shares changed from 4.75% to 3.00%. The actual returns for periods prior to Oct. 18, 2007 would have been lower if a 4.75% maximum sales charge then in effect was included. 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. -------------------------------------------------------------------------------- 10P RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS Past performance for Class W for the period prior to the beginning of operations for that class may be calculated based on the performance of Class A. Past performance for Class R5 for the period prior to the beginning of operations for that class may be calculated based on the performance of Class R4. In each case, the blended class performance will be adjusted to reflect differences in sales charges, but not differences in annual Fund operating expenses (for example, 12b-1 fees). The use of blended performance generally results in a presentation of higher performance for classes with higher operating expenses than those of the class with which they are blended, and a presentation of lower performance for classes with lower operating expenses than those of the class with which they are blended. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS 11P FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund. Annual fund operating expenses are based on expenses incurred during the Fund's most recently completed fiscal year, and are expressed as a percentage (expense ratio) of the Fund's average net assets during the period. The expense ratios have been adjusted to reflect current fee schedules but have not been adjusted to reflect the Fund's assets as of a different period or point in time, as asset levels will fluctuate. As of the date of this prospectus, the Fund's net assets are lower than the Fund's average net assets during the most recently completed fiscal year. In general, a fund's annual operating expenses will increase as the fund's assets decrease. Accordingly, the Fund's annual operating expenses, if adjusted based on net assets as of the date of this prospectus, would be higher than are expressed in the fee and expense table below. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS I CLASS R4 CLASS R5 CLASS A CLASS B CLASS C CLASS W Maximum sales charge (load) imposed on purchases (as a percentage of offering price) 3.00%(a) None None None Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) None(b) 5% 1% None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS: CLASS A CLASS B CLASS C CLASS W Management fees 0.89% 0.89% 0.89% 0.89% Distribution and/or service (12b-1) fees 0.25% 1.00% 1.00% 0.25% Other expenses(c) 0.24% 0.25% 0.25% 0.32% Total annual fund operating expenses 1.38% 2.14% 2.14% 1.46% Acquired fund fees and expenses(d) 0.01% 0.01% 0.01% 0.01% Total fund and acquired fund fees and expenses(d) 1.39% 2.15% 2.15% 1.47%
CLASS I CLASS R4 CLASS R5 Management fees 0.89% 0.89% 0.89% Distribution and/or service (12b-1) fees 0.00% 0.00% 0.00% Other expenses(c) 0.12% 0.42% 0.17% Total annual fund operating expenses 1.01% 1.31% 1.06% Acquired fund fees and expenses(d) 0.01% 0.01% 0.01% Total fund and acquired fund fees and expenses(d) 1.02% 1.32% 1.07%
(a) This charge may be reduced depending on the total value of your investments in the RiverSource Family of Funds. See "Sales Charges." -------------------------------------------------------------------------------- 12P RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) CONT. (b) A 1% CDSC may be assessed on Class A shares purchased without an initial sales charge and sold within 18 months after purchase. See "Sales Charges." (c) Other expenses include an administrative services fee, a transfer agency fee (for all classes except Class I), a custody fee, other nonadvisory expenses and a plan administration services fee (for Class R4). (d) In addition to the Fund's total annual operating expenses that the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the acquired funds (affiliated and unaffiliated funds) in which the Fund invests. The Fund's "Acquired fund fees and expenses," based on its investment in the acquired funds, is as shown. EXAMPLES These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. These examples assume that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. These examples also assume that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $437 $727 $1,039 $1,923 Class B $718(b) $973(b) $1,355(b) $2,294(c) Class C $318(b) $673 $1,155 $2,487 Class I $104 $325 $ 564 $1,252 Class R4 $134 $419 $ 724 $1,595 Class R5 $109 $341 $ 591 $1,310 Class W $150 $465 $ 804 $1,762
(a) Includes a 3.00% sales charge. (b) Includes the applicable CDSC. (c) Based on conversion of Class B shares to Class A shares one month after the completion of the eighth year of ownership. You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $437 $727 $1,039 $1,923 Class B $218 $673 $1,155 $2,294(b) Class C $218 $673 $1,155 $2,487 Class I $104 $325 $ 564 $1,252 Class R4 $134 $419 $ 724 $1,595 Class R5 $109 $341 $ 591 $1,310 Class W $150 $465 $ 804 $1,762
(a) Includes a 3.00% sales charge. (b) Based on conversion of Class B shares to Class A shares one month after the completion of the eighth year of ownership. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS 13P OTHER INVESTMENT STRATEGIES AND RISKS Other Investment Strategies. In addition to the principal investment strategies previously described, the Fund may utilize investment strategies that are not principal investment strategies, including investment in affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds (ETFs), also referred to as "acquired funds") ownership of which results in the Fund bearing its proportionate share of the acquired funds' fees and expenses and proportionate exposure to the risks associated with the acquired funds' underlying investments. ETFs are generally designed to replicate the price and yield of a specified market index. An ETF's share price may not track its specified market index and may trade below its net asset value, resulting in a loss. ETFs generally use a "passive" investment strategy and will not attempt to take defensive positions in volatile or declining markets. An active secondary market in an ETF's shares may not develop or be maintained and may be halted or interrupted due to actions by its listing exchange, unusual market conditions or other reasons. There can be no assurance an ETF's shares will continue to be listed on an active exchange. For more information on strategies and holdings, and the risks of such strategies, including derivative instruments that the Fund may use, see the Fund's SAI and its annual and semiannual reports. Unusual Market Conditions. During unusual market conditions, the Fund may temporarily have less exposure to forward currency contracts and more exposure to money market securities than during normal market conditions. Although investing in these securities would serve primarily to attempt to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the portfolio managers may make frequent securities trades that could result in increased fees, expenses and taxes, and decreased performance. Instead of investing in money market securities directly, the Fund may invest in shares of an affiliated or unaffiliated money market fund. See "Cash Reserves" under the section "General Information" for more information. -------------------------------------------------------------------------------- 14P RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS Securities Transaction Commissions. Securities transactions involve the payment by the Fund of brokerage commissions to broker-dealers, on occasion as compensation for research or brokerage services (commonly referred to as "soft dollars"), as the portfolio managers buy and sell securities for the Fund in pursuit of its objective. A description of the policies governing the Fund's securities transactions and the dollar value of brokerage commissions paid by the Fund are set forth in the SAI. Funds that invest primarily in fixed income securities do not typically generate brokerage commissions that are used to pay for research or brokerage services. The brokerage commissions set forth in the SAI do not include implied commissions or mark-ups (implied commissions) paid by the Fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities (and certain other instruments, including derivatives). Brokerage commissions do not reflect other elements of transaction costs, including the extent to which the Fund's purchase and sale transactions may cause the market to move and change the market price for an investment. Although brokerage commissions and implied commissions are not reflected in the expense table under "Fees and Expenses," they are reflected in the total return of the Fund. Portfolio Turnover. Trading of securities may produce capital gains, which are taxable to shareholders when distributed. Active trading may also increase the amount of brokerage commissions paid or mark-ups to broker-dealers that the Fund pays when it buys and sells securities. Capital gains and increased brokerage commissions or mark-ups paid to broker-dealers may adversely affect a fund's performance. The Fund's historical portfolio turnover rate, which measures how frequently the Fund buys and sells investments, is shown in the "Financial Highlights." Directed Brokerage. The Fund's Board has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Fund as a factor in the selection of broker-dealers through which to execute securities transactions. Additional information regarding securities transactions can be found in the SAI. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS 15P FUND MANAGEMENT AND COMPENSATION INVESTMENT MANAGER RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource Family of Funds (including the RiverSource funds, Threadneedle funds and Seligman funds), and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for the RiverSource Family of Funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the SAI for more information. The RiverSource Family of Funds has received an order from the Securities and Exchange Commission that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for a fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or change the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. RiverSource Investments and its affiliates may have other relationships, including significant financial relationships, with current or potential subadvisers or their affiliates, which may create a conflict of interest. In making recommendations to the Board to appoint or to change a subadviser, or to change the terms of a subadvisory agreement, RiverSource Investments does not consider any other relationship it or its affiliates may have with a subadviser, and RiverSource Investments discloses the nature of any material relationships it has with a subadviser to the Board. The Fund pays RiverSource Investments a fee for managing its assets. Under the Investment Management Services Agreement (Agreement), the fee for the most recent fiscal year was 0.89% of the Fund's average daily net assets. Under the Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. A discussion regarding the basis for the Board approving the Agreement is available in the Fund's most recent annual or semiannual shareholder report. -------------------------------------------------------------------------------- 16P RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS Portfolio Manager(s). The portfolio manager responsible for the day-to-day management of the Fund is: Nicholas Pifer, CFA, Portfolio Manager - Managed the Fund since 2006. - Leader of the global fixed income sector team. - Joined RiverSource Investments in 2000. - Fixed Income Portfolio Manager, Investment Advisers, Inc., 1997 to 2000. - Began investment career in 1990. - MA, Johns Hopkins University School of Advanced International Studies. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS 17P FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. For periods ended 2007 and after, per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). Total returns do not reflect payment of sales charges, if any, and are not annualized for periods of less than one year. The information for the fiscal years ended on or after October 31, 2007 has been derived from the financial statements audited by Ernst & Young LLP, whose report, along with the Fund's financial statements and financial highlights, is included in the annual report which, if not included with this prospectus, is available upon request. The information for the periods ended on or before October 31, 2006 has been audited by other auditors.
YEAR ENDED OCT. 31, CLASS A ------------------------------------------ PER SHARE DATA 2009 2008 2007 2006(a) Net asset value, beginning of period $9.97 $10.58 $10.09 $9.98 --------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.08) .15 .41 .12 Net gains (losses) (both realized and unrealized) .09(b) (.22) .57 .11 --------------------------------------------------------------------------------------------- Total from investment operations .01 (.07) .98 .23 --------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.00)(c) (.18) (.39) (.12) Distributions from realized gains (.05) (.36) (.10) -- --------------------------------------------------------------------------------------------- Total distributions (.05) (.54) (.49) (.12) --------------------------------------------------------------------------------------------- Net asset value, end of period $9.93 $9.97 $10.58 $10.09 --------------------------------------------------------------------------------------------- TOTAL RETURN .15% (.57%) 9.96%(d) 2.37% --------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(e) Gross expenses prior to expense waiver/reimbursement 1.38% 1.39% 1.36% 1.59%(f) --------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(g) 1.38% 1.39% 1.36% 1.37%(f) --------------------------------------------------------------------------------------------- Net investment income (loss) (.83%) 1.50% 3.98% 3.89%(f) --------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $114 $176 $9 $10 --------------------------------------------------------------------------------------------- Portfolio turnover rate 16% 39% 36% 12% ---------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 18P RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS
YEAR ENDED OCT. 31, CLASS B ------------------------------------------- PER SHARE DATA 2009 2008 2007 2006(a) Net asset value, beginning of period $9.96 $10.58 $10.09 $9.97 ---------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.16) .04 .34 .09 Net gains (losses) (both realized and unrealized) .10(b) (.18) .59 .12 ---------------------------------------------------------------------------------------------- Total from investment operations (.06) (.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 $9.85 $9.96 $10.58 $10.09 ---------------------------------------------------------------------------------------------- TOTAL RETURN (.56%) (1.35%) 9.38%(d) 2.16% ---------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(e) Gross expenses prior to expense waiver/reimbursement 2.14% 2.16% 2.10% 2.38%(f) ---------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(g) 2.14% 2.16% 2.10% 2.16%(f) ---------------------------------------------------------------------------------------------- Net investment income (loss) (1.59%) .38% 3.26% 3.11%(f) ---------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $3 $-- $-- ---------------------------------------------------------------------------------------------- Portfolio turnover rate 16% 39% 36% 12% ----------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS 19P
YEAR ENDED OCT. 31, CLASS C ------------------------------------------- PER SHARE DATA 2009 2008 2007 2006(a) Net asset value, beginning of period $9.95 $10.57 $10.09 $9.97 ---------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.16) .06 .34 .09 Net gains (losses) (both realized and unrealized) .10(b) (.20) .58 .12 ---------------------------------------------------------------------------------------------- Total from investment operations (.06) (.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 $9.84 $9.95 $10.57 $10.09 ---------------------------------------------------------------------------------------------- TOTAL RETURN (.56%) (1.31%) 9.37%(d) 2.16% ---------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(e) Gross expenses prior to expense waiver/reimbursement 2.14% 2.15% 2.12% 2.38%(f) ---------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(g) 2.14% 2.15% 2.12% 2.16%(f) ---------------------------------------------------------------------------------------------- Net investment income (loss) (1.60%) .66% 3.42% 3.11%(f) ---------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $8 $9 $-- $-- ---------------------------------------------------------------------------------------------- Portfolio turnover rate 16% 39% 36% 12% ----------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 20P RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS
YEAR ENDED OCT. 31, CLASS I ------------------------------------------ PER SHARE DATA 2009 2008 2007 2006(a) Net asset value, beginning of period $9.98 $10.59 $10.10 $9.98 --------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.04) .21 .44 .13 Net gains (losses) (both realized and unrealized) .10(b) (.24) .59 .12 --------------------------------------------------------------------------------------------- Total from investment operations .06 (.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 $9.98 $9.98 $10.59 $10.10 --------------------------------------------------------------------------------------------- TOTAL RETURN .56% (.25%) 10.49%(d) 2.56% --------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(e) Gross expenses prior to expense waiver/reimbursement 1.01% 1.03% 1.07% 1.34%(f) --------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(g) 1.01% 1.03% 1.07% 1.12%(f) --------------------------------------------------------------------------------------------- Net investment income (loss) (.40%) 2.10% 4.30% 4.37%(f) --------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $29 $202 $122 $68 --------------------------------------------------------------------------------------------- Portfolio turnover rate 16% 39% 36% 12% ---------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS 21P
YEAR ENDED OCT. 31, CLASS R4 ------------------------------------------ PER SHARE DATA 2009 2008 2007 2006(a) Net asset value, beginning of period $9.97 $10.58 $10.09 $9.98 --------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.07) .22 .42 .13 Net gains (losses) (both realized and unrealized) .09(b) (.26) .59 .11 --------------------------------------------------------------------------------------------- Total from investment operations .02 (.04) 1.01 .24 --------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.00)(c) (.21) (.42) (.13) Distributions from realized gains (.05) (.36) (.10) -- --------------------------------------------------------------------------------------------- Total distributions (.05) (.57) (.52) (.13) --------------------------------------------------------------------------------------------- Net asset value, end of period $9.94 $9.97 $10.58 $10.09 --------------------------------------------------------------------------------------------- TOTAL RETURN .25% (.26%) 10.27%(d) 2.42% --------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(e) Gross expenses prior to expense waiver/reimbursement 1.31% 1.34% 1.36% 1.45%(f) --------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(g) 1.25% 1.09% 1.31% 1.23%(f) --------------------------------------------------------------------------------------------- Net investment income (loss) (.69%) 2.27% 4.13% 4.04%(f) --------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- --------------------------------------------------------------------------------------------- Portfolio turnover rate 16% 39% 36% 12% ---------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 22P RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS
YEAR ENDED OCT. 31, CLASS R5 ------------------------------ PER SHARE DATA 2009 2008 2007(h) Net asset value, beginning of period $9.98 $10.59 $10.58 --------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.05) .22 .02 Net gains (losses) (both realized and unrealized) .10(b) (.26) .03 --------------------------------------------------------------------------------- Total from investment operations .05 (.04) .05 --------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.00)(c) (.21) (.04) Distributions from realized gains (.05) (.36) -- --------------------------------------------------------------------------------- Total distributions (.05) (.57) (.04) --------------------------------------------------------------------------------- Net asset value, end of period $9.98 $9.98 $10.59 --------------------------------------------------------------------------------- TOTAL RETURN .56% (.30%) .44%(d) --------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(e) Total expenses 1.06% 1.07% 1.06%(f) --------------------------------------------------------------------------------- Net investment income (loss) (.54%) 2.23% 4.43%(f) --------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- --------------------------------------------------------------------------------- Portfolio turnover rate 16% 39% 36% ---------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS 23P
YEAR ENDED OCT. 31, CLASS W ------------------------------ PER SHARE DATA 2009 2008 2007(i) Net asset value, beginning of period $9.97 $10.58 $10.13 --------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.08) .11 .36 Net gains (losses) (both realized and unrealized) .08(b) (.19) .55 --------------------------------------------------------------------------------- Total from investment operations .00 (.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 $9.92 $9.97 $10.58 --------------------------------------------------------------------------------- TOTAL RETURN .04% (.66%) 9.21%(d) --------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(e) Total expenses 1.46% 1.50% 1.54%(f) --------------------------------------------------------------------------------- Net investment income (loss) (.86%) 1.09% 3.88%(f) --------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $87 $304 $-- --------------------------------------------------------------------------------- Portfolio turnover rate 16% 39% 36% ---------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For the period from June 15, 2006 (when shares became publicly available) to Oct. 31, 2006. (b) Calculation of the net gain per share (both realized and unrealized) does not correlate to the aggregate realized and unrealized losses presented in the Statement of Operations due to the timing of sales and repurchases of Fund shares in relation to fluctuations in the market value of the portfolio. (c) Rounds to zero. (d) 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, total return figures would have been lower by 0.05%. (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 reported expense ratios. (f) Annualized. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) For the period from Oct. 18, 2007 (when shares became publicly available) to Oct. 31, 2007. (i) For the period from Dec. 1, 2006 (when shares became publicly available) to Oct. 31, 2007. -------------------------------------------------------------------------------- 24P RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 PROSPECTUS RIVERSOURCE FAMILY OF FUNDS THE RIVERSOURCE FAMILY OF FUNDS (EACH INDIVIDUALLY A "FUND" AND, COLLECTIVELY, THE "FUNDS") INCLUDES "RIVERSOURCE" FUNDS, "RIVERSOURCE PARTNERS" FUNDS, "SELIGMAN" FUNDS AND "THREADNEEDLE" FUNDS. (THE RIVERSOURCE FUNDS, RIVERSOURCE PARTNERS FUNDS AND THREADNEEDLE FUNDS MAY BE COLLECTIVELY REFERRED TO AS THE "RIVERSOURCE FUNDS".) THE FUNDS SHARE THE SAME BOARD OF DIRECTORS/TRUSTEES (THE "BOARD") AND THE SAME POLICIES AND PROCEDURES INCLUDING THOSE SET FORTH IN THE SERVICE SECTION OF THIS PROSPECTUS. FOR EXAMPLE, FOR PURPOSES OF CALCULATING THE INITIAL SALES CHARGE ON THE PURCHASE OF CLASS A SHARES OF A FUND, AN INVESTOR OR FINANCIAL ADVISOR SHOULD CONSIDER THE COMBINED MARKET VALUE OF ALL FUNDS IN THE RIVERSOURCE FAMILY OF FUNDS OWNED BY THE INVESTOR AS DEFINED UNDER "INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA)." BUYING AND SELLING SHARES The funds are available directly and through broker-dealers, banks and other financial intermediaries or institutions (financial intermediaries), and through certain qualified and non-qualified plans, wrap fee products or other investment products sponsored by financial intermediaries. NOT ALL FINANCIAL INTERMEDIARIES OFFER THE FUNDS. FINANCIAL INTERMEDIARIES THAT OFFER THE FUNDS MAY CHARGE YOU ADDITIONAL FEES FOR THE SERVICES THEY PROVIDE AND THEY MAY HAVE DIFFERENT POLICIES NOT DESCRIBED IN THIS PROSPECTUS. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. Additionally, recordkeeping, transaction processing and payments of distributions relating to your account may be performed by the financial intermediaries through which your shares of the fund are held. Since the fund (and its service providers) may not have a record of your account transactions, you should always contact the financial intermediary through which you purchased or at which you maintain your shares of the fund to make changes to your account or to give instructions concerning your account, or to obtain information about your account. The fund and its service providers, including the distributor and the transfer agent, are not responsible for the failure of one of these financial intermediaries to carry out its obligations to its customers. -------------------------------------------------------------------------------- S.1 S-6400-9 DESCRIPTION OF SHARE CLASSES INVESTMENT OPTIONS -- CLASSES OF SHARES The funds offer different classes of shares. There are differences among the fees and expenses for each share class. See the "Fees and Expenses" table for more information. Not everyone is eligible to buy every share class. After determining which share classes you are eligible to buy, decide which share class best suits your needs. Your financial advisor can help you with this decision. The following table shows the key features of each share class. Not all funds offer all classes of shares. INVESTMENT OPTIONS SUMMARY
CONTINGENT DISTRIBUTION PLAN INITIAL DEFERRED SALES AND/OR ADMINISTRATION AVAILABILITY(a) SALES CHARGE CHARGE (CDSC) SERVICE FEE(b) SERVICES FEE -------------------------------------------------------------------------------------------------------------------------------- Class A Available to Yes. Payable at No.(c) Yes. No. all investors. time of purchase. 0.25%(g) Lower or no sales charge for larger investments. -------------------------------------------------------------------------------------------------------------------------------- Class B(d)(e)(f) Available to No. Entire Maximum 5% CDSC Yes. No. all investors. purchase price is during the first 1.00%(g) invested in shares year decreasing to of the fund. 0% after six years. -------------------------------------------------------------------------------------------------------------------------------- Class C(f) Available to No. Entire 1% CDSC may apply Yes. No. all investors. purchase price is if you sell shares 1.00%(g) invested in shares within one year of the fund. after purchase. -------------------------------------------------------------------------------------------------------------------------------- Class I Limited to No. No. No. No. qualifying institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R2 Limited to No. No. Yes. Yes. qualifying 0.50% 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R3 Limited to No. No. Yes. Yes. qualifying 0.25% 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R4 Limited to No. No. No. Yes. qualifying 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R5 Limited to No. No. No. No. qualifying institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class W Limited to No. No. Yes. No. qualifying 0.25%(g) discretionary managed accounts. --------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- S.2 INVESTMENT OPTIONS SUMMARY (CONTINUED)
CONTINGENT DISTRIBUTION PLAN INITIAL DEFERRED SALES AND/OR ADMINISTRATION AVAILABILITY(a) SALES CHARGE CHARGE (CDSC) SERVICE FEE(b) SERVICES FEE -------------------------------------------------------------------------------------------------------------------------------- Class Y Limited to No. No. No. Yes. qualifying 0.15% institutional investors. --------------------------------------------------------------------------------------------------------------------------------
(a) See "Buying and Selling Shares, Determining which class of shares to purchase" for more information on availability of share classes and eligible investors. See "Buying and Selling Shares, Opening an Account" for information on minimum investment and account balance requirements. (b) For each of Class A, Class B, Class C, Class R2, Class R3 and Class W shares, as applicable, each fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940, as amended, that allows it to pay distribution and shareholder servicing-related expenses for the sale of shares and the servicing of shareholders. This plan has been reviewed and approved by the Board. Because these fees are paid out of fund assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of distribution (sales) or servicing charges. (c) A 1% CDSC may be assessed on Class A shares sold within 18 months after purchase. See "Buying and Selling Shares, Sales Charges, Class A -- contingent deferred sales charge" for more information. For all funds except money market funds. (d) Class B shares automatically convert to Class A shares. See "Buying and Selling Shares, Sales Charges, Class B and Class C -- CDSC alternative" for more information on the timing of conversion of Class B shares to Class A shares. Timing of conversion will vary depending on the date of your original purchase of the Class B shares. (e) Class B shares of RiverSource Absolute Return Currency and Income Fund are only available for exchanges from Class B shares of another fund in the RiverSource Family of Funds. Class B shares of each of RiverSource Floating Rate Fund, RiverSource Inflation Protected Securities Fund, RiverSource Intermediate Tax-Exempt Fund, RiverSource Limited Duration Bond Fund and RiverSource Short Duration U.S. Government Fund are closed to new investors and new purchases. (Existing shareholders in these funds may continue to own Class B shares and make exchanges into and out of existing accounts where Class B shares of these funds are maintained.) (f) The money market funds may offer Class B and Class C shares, but only to facilitate exchanges with other funds offering Class B and Class C shares, respectively. (g) For RiverSource Cash Management Fund and RiverSource Tax-Exempt Money Market Fund, Class A is 0.10%. For RiverSource Cash Management Fund, Class B is 0.85%, Class C is 0.75% and Class W is 0.10%. DISTRIBUTION AND SERVICE FEES The distribution and shareholder servicing fees for Class A, Class B, Class C, Class R2, Class R3 and Class W shares, as applicable, are subject to the requirements of Rule 12b-1 under the Investment Company Act of 1940, as amended, and are used to reimburse the distributor for certain expenses it incurs in connection with distributing the fund's shares and directly or indirectly providing services to fund shareholders. These expenses include payment of distribution and/or shareholder servicing fees to financial intermediaries that sell shares of the fund or provide services to fund shareholders, up to 0.50% of the average daily net assets of Class R2 shares sold and held through them and up to 0.25%* of the average daily net assets of Class A, Class B, Class C, Class R3 and Class W shares sold and held through them. For Class A, Class B, Class R2, Class R3 and Class W shares, the distributor begins to pay these fees immediately after purchase. For Class C shares, the distributor pays these fees in advance for the first 12 months. Financial intermediaries also receive distribution fees up to 0.75% of the average daily net assets of Class C shares sold and held -------------------------------------------------------------------------------- S.3 through them, which the distributor begins to pay 12 months after purchase. For Class B shares, and, for the first 12 months following the sale of Class C shares, the fund's distributor retains the distribution fee of up to 0.75% in order to finance the payment of sales commissions to financial intermediaries, and to pay for other distribution related expenses. Financial intermediaries may compensate their financial advisors with the shareholder servicing and distribution fees paid to them by the distributor. IF YOU MAINTAIN SHARES OF THE FUND DIRECTLY WITH THE FUND, WITHOUT WORKING DIRECTLY WITH A FINANCIAL INTERMEDIARY OR FINANCIAL ADVISOR, DISTRIBUTION AND SERVICE FEES MAY BE RETAINED BY THE DISTRIBUTOR AS REIMBURSEMENT FOR INCURRING CERTAIN DISTRIBUTION AND SHAREHOLDER SERVICING RELATED EXPENSES. * For RiverSource Cash Management Fund, financial intermediaries receive fees up to 0.10% of the average daily net assets of Class A, Class B and Class W shares sold and held through them. PLAN ADMINISTRATION FEE Class R2, Class R3, Class R4 and Class Y shares pay an annual plan administration services fee for the provision of various administrative, recordkeeping, communication and educational services. The fee for Class R2, Class R3 and Class R4 shares is equal on an annual basis to 0.25% of average daily net assets attributable to the respective class. The fee for Class Y shares is equal on an annual basis to 0.15% of average daily net assets attributable to the class. DETERMINING WHICH CLASS OF SHARES TO PURCHASE Each of the fund's classes represent an interest in the same portfolio of investments. However, as set forth above, each class has its own sales charge schedule, and its ongoing distribution and shareholder service fees may differ from other classes. When deciding which class of shares to buy, you should consider, among other things: - The amount you plan to invest. - How long you intend to remain invested in the fund or another fund in the RiverSource Family of Funds. - Whether you may be eligible for reduced or no sales charges when you buy or sell shares. Your authorized financial intermediary or financial advisor will be able to help you decide which class of shares best meets your needs. -------------------------------------------------------------------------------- S.4 CLASS A, CLASS B AND CLASS C SHARES* Class B shares of RiverSource Absolute Return Currency and Income Fund are not currently available for new purchases. However, if you own Class B shares of another fund in the RiverSource Family of Funds, you may exchange into Class B shares of RiverSource Absolute Return Currency and Income Fund, if you meet the minimum investment and account balance requirements set forth in "Opening an Account," subject to the limitations set forth in this section. New purchases of Class B shares will not be permitted if your rights of accumulation are $50,000 or higher, and new purchases of Class C shares will not be permitted if your rights of accumulation are $1,000,000 or higher. See "Sales Charges, Initial Sales Charge -- Rights of Accumulation" for information on rights of accumulation. Class B shares have a higher annual distribution fee than Class A shares and a contingent deferred sales charge (CDSC) for six years. Class B shares convert to Class A shares. Class B shares purchased through reinvested dividends and distributions will convert to Class A shares in the same proportion as the other Class B shares. See "Class B and Class C -- CDSC alternative" for information on timing of Class B share conversion to Class A shares. Class C shares have a higher annual distribution fee than Class A shares and a CDSC for one year. Class C shares have no sales charge if you hold the shares for longer than one year. Unlike Class B shares, Class C shares do not convert to Class A shares. As a result, you will pay a distribution fee for as long as you hold Class C shares. If you choose a share class with a CDSC (Class B or Class C), you should consider the length of time you intend to hold your shares. To help you determine which investment is best for you, consult your financial intermediary or financial advisor. * For money market funds, new investments must be made in Class A shares of the fund. The money market funds offer Class B and Class C shares only to facilitate exchanges between classes of these shares in other funds. CLASS I SHARES. The following eligible investors may purchase Class I shares: - Any fund distributed by the distributor, if the fund seeks to achieve its investment objective by investing primarily in shares of funds in the RiverSource Family of Funds. Class I shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. CLASS R AND CLASS Y SHARES. The following eligible institutional investors may purchase Class R2, Class R3, Class R4, Class R5 and Class Y shares: -------------------------------------------------------------------------------- S.5 - Qualified employee benefit plans. - Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code. - Non-qualified deferred compensation plans whose participants are included in a qualified employee benefit plan described above. - State sponsored college savings plans established under Section 529 of the Internal Revenue Code. - Health Savings Accounts created pursuant to public law 108-173. Additionally, if approved by the distributor, the following eligible institutional investors may purchase Class R5 shares: - Institutional or corporate accounts above a threshold established by the distributor (currently $1 million per fund or $10 million in all funds in the RiverSource Family of Funds). - Bank trust departments. Class R and Class Y shares generally are not available to retail non-retirement accounts, traditional and Roth IRAs, Coverdell Educational Savings Accounts, SEPs, SARSEPs, SIMPLE IRAs and individual 403(b) plans. Class R shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. CLASS W SHARES. The following eligible investors may purchase Class W shares: - Investors purchasing through authorized investment programs managed by investment professionals, including discretionary managed account programs. Class W shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. Shares originally purchased in a discretionary managed account may continue to be held in Class W outside of a discretionary managed account, but no additional Class W purchases may be made and no exchanges to Class W shares of another fund may be made outside of a discretionary managed account. IN ADDITION, FOR CLASS I, CLASS R AND CLASS Y SHARES, THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY ACCEPT OR AUTHORIZE FINANCIAL INTERMEDIARIES TO ACCEPT INVESTMENTS FROM OTHER INSTITUTIONAL INVESTORS NOT LISTED ABOVE. IN ADDITION, FOR CLASS W SHARES, THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY ACCEPT OR AUTHORIZE FINANCIAL INTERMEDIARIES TO ACCEPT INVESTMENTS FROM OTHER INVESTORS NOT LISTED ABOVE. Please consult your financial advisor for assistance in selecting the appropriate class of shares. For more information, see the SAI. -------------------------------------------------------------------------------- S.6 SALES CHARGES FOR FUNDS OTHER THAN MONEY MARKET FUNDS CLASS A -- INITIAL SALES CHARGE ALTERNATIVE: Your purchase price for Class A shares is generally the net asset value (NAV) plus a front-end sales charge. The distributor receives the sales charge and re- allows a portion of the sales charge to the financial intermediary through which you purchased the shares. The distributor retains the balance of the sales charge. The distributor retains the full sales charge you pay when you purchase shares of the fund directly from the fund (not through an authorized financial intermediary). Sales charges vary depending on the amount of your purchase. INITIAL SALES CHARGE(A) FOR CLASS A SHARES For equity funds and funds-of-funds (equity)*
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 5.75% 6.10% 5.00% $50,000--$99,999 4.75 4.99 4.00 $100,000--$249,999 3.50 3.63 3.00 $250,000--$499,999 2.50 2.56 2.15 $500,000--$999,999 2.00 2.04 1.75 $1,000,000 or more 0.00 0.00 0.00(c),(d)
For fixed income funds except those listed below and funds-of-funds (fixed income)*
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 4.75% 4.99% 4.00% $50,000--$99,999 4.25 4.44 3.50 $100,000--$249,999 3.50 3.63 3.00 $250,000--$499,999 2.50 2.56 2.15 $500,000--$999,999 2.00 2.04 1.75 $1,000,000 or more 0.00 0.00 0.00(c),(d)
-------------------------------------------------------------------------------- S.7 For RiverSource Absolute Return Currency and Income Fund, RiverSource Floating Rate Fund, RiverSource Inflation Protected Securities Fund, RiverSource Intermediate Tax-Exempt Fund, RiverSource Limited Duration Bond Fund and RiverSource Short Duration U.S. Government Fund
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 3.00% 3.09% 2.50% $50,000--$99,999 3.00 3.09 2.50 $100,000--$249,999 2.50 2.56 2.15 $250,000--$499,999 2.00 2.04 1.75 $500,000--$999,999 1.50 1.52 1.25 $1,000,000 or more 0.00 0.00 0.00(c),(d)
* "Funds-of-funds (equity)" includes -- RiverSource Portfolio Builder Aggressive Fund, RiverSource Portfolio Builder Moderate Aggressive Fund, RiverSource Portfolio Builder Moderate Fund, RiverSource Portfolio Builder Total Equity Fund, RiverSource Retirement Plus 2010 Fund, RiverSource Retirement Plus 2015 Fund, RiverSource Retirement Plus 2020 Fund, RiverSource Retirement Plus 2025 Fund, RiverSource Retirement Plus 2030 Fund, RiverSource Retirement Plus 2035 Fund, RiverSource Retirement Plus 2040 Fund, RiverSource Retirement Plus 2045 Fund, Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025, Seligman TargETFund 2015 and Seligman TargETFund Core. "Funds-of-funds (fixed income)" includes -- RiverSource Income Builder Basic Income Fund, RiverSource Income Builder Enhanced Income Fund, RiverSource Income Builder Moderate Income Fund, RiverSource Portfolio Builder Conservative Fund and RiverSource Portfolio Builder Moderate Conservative Fund. (a) Because of rounding in the calculation of the offering price, the portion of the sales charge retained by the distributor may vary and the actual sales charge you pay may be more or less than the sales charge calculated using these percentages. (b) Purchase price includes the sales charge. (c) Although there is no sales charge for purchases with a total market value over $1,000,000, and therefore no re-allowance, the distributor may pay a financial intermediary the following out of its own resources: a sales commission of up to 1.00% for a sale of $1,000,000 to $3,999,999; a sales commission up to 0.50% for a sale of $4,000,000 to $49,999,999; and a sales commission up to 0.25% for a sale of $50,000,000 or more. (d) For certain eligible employee benefit plans defined under section 401(a), 401(k), 457 and 403(b) which meet eligibility rules for the waiver of applicable sales charges, the distributor may pay the following out of its own resources: a sales commission of 1.00% for a sale of $1 to $3,999,999 received in eligible employee benefit plans; a sales commission up to 0.50% for a sale of $4,000,000 to $49,999,999; and a sales commission up to 0.25% for a sale of $50,000,000 or more. See "Initial Sales Charge -- Waivers of the sales charge for Class A shares" for employee benefit plan eligibility rules. There is no initial sales charge on reinvested dividends or capital gain distributions. INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA). You may be able to reduce the sales charge on Class A shares, based on the combined market value of accounts in your ROA group. Your ROA group includes the current market values of the following investments which are eligible to be added together for purposes of determining the sales charge on your next purchase: - Your current investment in a fund; and -------------------------------------------------------------------------------- S.8 - Previous investments you and members of your household have made in Class A, Class B or Class C shares in the fund and other funds in the RiverSource Family of Funds, provided your investment was subject to a sales charge. Your household consists of you, your spouse or domestic partner and your unmarried children under age 21, all of whom share a mailing address. The following accounts are eligible to be included in your ROA group in order to determine the sales charge on your purchase: - Individual or joint accounts; - Roth and traditional IRAs, SEPs, SIMPLEs and TSCAs, provided they are invested in Class A, Class B or Class C shares that were subject to a sales charge; - UGMA/UTMA accounts for which you, your spouse, or your domestic partner is parent or guardian of the minor child; - Revocable trust accounts for which you or a member of your household, individually, is the beneficial owner/grantor; - Accounts held in the name of your, your spouse's, or your domestic partner's sole proprietorship or single owner limited liability company or S corporation; and - Qualified retirement plan assets, provided that you are the sole owner of the business sponsoring the plan, are the sole participant (other than a spouse) in the plan, and have no intention of adding participants to the plan. The following accounts are NOT eligible to be included in your ROA group in order to determine the sales charge on your purchase: - Accounts of pension and retirement plans with multiple participants, such as 401(k) plans (which are combined to reduce the sales charge for the entire pension or retirement plan and therefore are not used to reduce the sales charge for your individual accounts); - Investments in Class A shares where the sales charge is waived, for example, purchases through wrap accounts; - Investments in Class I, Class R2, Class R3, Class R4, Class R5, Class W or Class Y shares; - Investments in 529 plans, donor advised funds, variable annuities, variable life insurance products, wrap accounts or managed separate accounts; and - Charitable and irrevocable trust accounts. If you purchase fund shares through different financial intermediaries, and you want to include those assets toward a reduced sales charge, you must inform your financial intermediary in writing about the other accounts when placing your purchase order. Contact your financial intermediary to determine what information is required. -------------------------------------------------------------------------------- S.9 Unless you provide your financial intermediary in writing with information about all of the accounts that may count toward a sales charge reduction, there can be no assurance that you will receive all of the reductions for which you may be eligible. You should request that your financial intermediary provide this information to the fund when placing your purchase order. For more information on ROA, please see the SAI. INITIAL SALES CHARGE -- LETTER OF INTENT (LOI). Generally, if you intend to invest $50,000 or more (including any existing ROA) over a period of up to 13 months, you may be able to reduce the front-end sales charge(s) for investments in Class A shares by completing and filing an LOI. The required form of LOI may vary by financial intermediary. Existing ROA can be included in your LOI. Each purchase of fund shares normally subject to an initial sales charge made during the 13-month period will be made at the public offering price applicable to a single transaction of the total dollar amount indicated by the LOI. Five percent of the commitment amount will be placed in escrow. At the end of the 13-month period, the LOI will end and the shares will be released from escrow. If you do not invest the commitment amount by the end of the 13 months, the remaining amount of the unpaid sales charge will be redeemed from the escrowed shares and the remaining balance released from escrow. Existing ROA Example. Shareholder currently has $60,000 ROA in the funds. Shareholder completes an LOI to invest $100,000 in the funds (ROA eligible accounts). Shareholder only needs to invest an additional $40,000 in the funds' Class A shares (any non-money market fund in the RiverSource Family of Funds) in order to fulfill the LOI commitment and receive reduced front-end sales charge(s) over the next 13 months. Notification Obligation. You must request the reduced sales charge when you buy shares. If you do not complete and file an LOI, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge. You should request that your financial intermediary provide this information to the fund when placing your purchase order. For more detail on LOIs, please contact your financial intermediary or see the SAI. INITIAL SALES CHARGE -- WAIVERS OF THE SALES CHARGE FOR CLASS A SHARES. Sales charges do not apply to: - current or retired Board members, officers or employees of the funds or RiverSource Investments or its affiliates, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - current or retired Ameriprise Financial Services, Inc. financial advisors, employees of financial advisors, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. -------------------------------------------------------------------------------- S.10 - registered representatives and other employees of affiliated or unaffiliated financial intermediaries having a selling agreement with the distributor, including their spouses, domestic partners, children, parents and their spouse's or domestic partner's parents. - portfolio managers employed by subadvisers of the funds, including their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - partners and employees of outside legal counsel to the funds or the funds' directors or trustees who regularly provide advice and services to the funds, or to their directors or trustees. - direct rollovers from qualified employee benefit plans, provided that the rollover involves a transfer to Class A shares in the same fund. - purchases made: - with dividend or capital gain distributions from a fund or from the same class of another fund in the RiverSource Family of Funds; - through or under a wrap fee product or other investment product sponsored by a financial intermediary that charges an account management fee that has, or that clear trades through a financial intermediary that has, a selling agreement with the distributor; - through state sponsored college savings plans established under Section 529 of the Internal Revenue Code; or - through bank trust departments. - separate accounts established and maintained by an insurance company which are exempt from registration under Section 3(c)(11). - purchases made through "employee benefit plans" created under section 401(a), 401(k), 457 and 403(b) which: - have at least $1 million in plan assets at the time of investment; and - have a plan level or omnibus account that is maintained with the fund or its transfer agent; and - transact directly with the fund or its transfer agent through a third party administrator or third party recordkeeper. For more information regarding waivers of sales charge for Class A purchases, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of sales charges for additional classes of investors. Policies related to reducing or waiving the sales charge may be modified or withdrawn at any time. -------------------------------------------------------------------------------- S.11 Unless you provide your financial intermediary with information in writing about all of the factors that may count toward a waiver of the sales charge, there can be no assurance that you will receive all of the waivers for which you may be eligible. You should request that your financial intermediary provide this information to the fund when placing your purchase order. Because the current prospectus is available on the funds' website (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com free of charge, information regarding breakpoint discounts is not separately disclosed on the website. CDSCS AND THE COMBINATION OF TARGET DATE FUNDS WITH SELIGMAN TARGETFUND CORE. Each of Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025 and Seligman TargETFund 2015 (the Target Date Funds) will automatically be combined with Seligman TargETFund Core during their respective target year. The investment manager expects each of these combinations to be effected as an acquisition of the assets and liabilities of the applicable Target Date Fund in exchange for shares of Seligman TargETFund Core at net asset value, with the shares of Seligman TargETFund Core then distributed to shareholders of the applicable Target Date Fund. For the purpose of calculating CDSCs, holding periods in respect of shares of a Target Date Fund will be carried over to shares of Seligman TargETFund Core acquired as a result of the combination of a Target Date Fund with Seligman TargETFund Core. CLASS A -- CONTINGENT DEFERRED SALES CHARGE For Class A shares purchased without a sales charge where a commission was separately paid by the distributor to an authorized financial intermediary effecting the purchase, a 1% CDSC may be charged if you sell your shares within 18 months after purchase. A CDSC will be based on the original purchase cost or the current market value of the shares being sold, whichever is less. CDSC -- WAIVERS OF THE CDSC FOR CLASS A SHARES. The CDSC will be waived on sales of shares: - to which no sales commission or transaction fee was paid to an authorized financial intermediary at the time of purchase. - purchased through reinvestment of dividends and capital gain distributions. - in the event of the shareholder's death. - from a monthly, quarterly or annual systematic redemption plan of up to an annual amount of 12% of the account value on a per fund basis. - in an account that has been closed because it falls below the minimum account balance. - that result from required minimum distributions taken from retirement accounts upon the shareholders attainment of age 70 1/2. -------------------------------------------------------------------------------- S.12 - that result from returns of excess contributions or excess deferral amounts made to a retirement plan participant. - of RiverSource funds purchased prior to Dec. 1, 2008. - initially purchased by an employee benefit plan that is not connected with a plan level termination. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. CLASS B AND CLASS C -- CDSC ALTERNATIVE The money market funds (except RiverSource Tax-Exempt Money Market Fund) offer Class B and Class C shares, but only to facilitate exchanges with other funds offering Class B and Class C shares, respectively. For example, if you own Class B or Class C shares of another fund, but want to hold your money in a money market fund, you may exchange into Class B or Class C shares of a money market fund. Funds that offer Class B and Class C shares have limitations on the amount you may invest in those share classes. If you are considering purchasing Class B or Class C shares of a fund, please see the prospectus for that fund for any effective purchase limitations. Although you may not purchase Class B and Class C shares of the money market funds directly, if you exchange into Class B or Class C shares of a money market fund from another fund, you will be subject to the rules governing CDSC set forth in this section. To minimize the amount of CDSC you may pay when you sell your shares, the fund assumes that shares acquired through reinvested dividends and capital gain distributions (which are not subject to CDSC) are sold first. Shares that have been in your account long enough so that they are not subject to a CDSC are sold next. After these shares are exhausted, shares will be sold in the order they were purchased (earliest to latest). -------------------------------------------------------------------------------- S.13 FOR CLASS B, the CDSC is based on the sale amount and the number of years between purchase and sale. The following table shows how CDSC percentages on sales decline over time:
IF THE SALE IS MADE DURING THE: THE CDSC PERCENTAGE RATE IS:* First year 5% Second year 4% Third year 3%** Fourth year 3% Fifth year 2% Sixth year 1% Seventh or eighth year 0%
* Because of rounding in the calculation, the portion of the CDSC retained by the distributor may vary and the actual CDSC you pay may be more or less than the CDSC calculated using these percentages. ** For shares purchased in a RiverSource fund on or prior to June 12, 2009, the CDSC percentage for the third year is 4%. Although there is no front-end sales charge when you buy Class B shares, the distributor pays a sales commission of 4% to financial intermediaries that sell Class B shares. A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class B shares. You may not make additional purchases of Class B shares if your ROA exceeds $49,999.99. Class B shares purchased in a RiverSource fund prior to May 21, 2005 age on a calendar year basis. Class B shares purchases made in a RiverSource fund beginning May 21, 2005 age on a daily basis. For example, a purchase made on Nov. 12, 2004 completed its first year on Dec. 31, 2004 under calendar year aging. However, a purchase made on Nov. 12, 2005 completed its first year on Nov. 11, 2006 under daily aging. Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund on or prior to June 12, 2009 will convert to Class A shares in the month prior to the ninth year of ownership. Class B shares purchased in a RiverSource fund beginning May 21, 2005 and Class B shares purchased in a Seligman fund beginning June 13, 2009 will convert to Class A shares one month after the completion of the eighth year of ownership. -------------------------------------------------------------------------------- S.14 FOR CLASS C, a 1% CDSC may be charged if you sell your shares within one year after purchase. Although there is no front-end sales charge when you buy Class C shares, the distributor pays a total amount up to 1% (including sales commission and advance of service fees) to financial intermediaries that sell Class C shares. See "Buying and Selling Shares -- Distribution and Service Fees." A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class C shares. You may not make additional purchases of Class C shares if your ROA exceeds $999,999.99. For both Class B and Class C shares, the amount of any CDSC you pay will be based on the lower of the original purchase price of those shares or current net asset value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you do not have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. EXAMPLE Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3 1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase. CDSC -- WAIVERS OF THE CDSC FOR CLASS B SHARES. The CDSC will be waived on sales of shares: - in the event of the shareholder's death. - that result from required minimum distributions taken from retirement accounts upon the shareholders' attainment of age 70 1/2. - sold under an approved substantially equal periodic payment arrangement. - by certain other investors, including certain institutions as set forth in more detail in the SAI. For more information regarding waivers of the CDSC for Class B shares, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. -------------------------------------------------------------------------------- S.15 CDSC -- WAIVERS OF THE CDSC FOR CLASS C SHARES. The CDSC will be waived on sales of shares: - in the event of the shareholder's death. - to which no sales commission or transaction fee was paid to an authorized financial intermediary at the time of purchase. - that result from required minimum distributions taken from retirement accounts upon the shareholders' attainment of age 70 1/2. - initially purchased by an eligible employee benefit plan that are not connected with a plan level termination. - by certain other investors, including certain institutions as set forth in more detail in the SAI. For more information regarding waivers of the CDSC for Class C shares, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. CLASS I, CLASS R2, CLASS R3, CLASS R4, CLASS R5, CLASS W AND CLASS Y -- NO SALES CHARGE. For each of Class I, Class R2, Class R3, Class R4, Class R5 and Class W there is no initial sales charge or CDSC. OPENING AN ACCOUNT Financial institutions are required by law to obtain certain personal information from each person who opens an account in order to verify the identity of the person. As a result, when you open an account you will be asked to provide your name, permanent street address, date of birth, and Social Security or Employer Identification number. You may also be asked for other identifying documents or information. If you do not provide this information, the fund or the financial intermediary through which you are investing in the fund may not be able to open an account for you. If the fund or the financial intermediary through which you are investing in the fund is unable to verify your identity, your account may be closed, or other steps may be taken, as deemed appropriate. When you buy shares, your order will be priced at the next NAV calculated after your order is accepted by the fund or an authorized financial intermediary. Any applicable sales charge will be added to the purchase price for Class A shares. You may establish and maintain your account with an authorized financial intermediary or directly with the fund. The fund may appoint servicing agents to accept purchase orders and to accept exchange (and sale) orders on its behalf. Accounts established with the fund will be supported by the fund's transfer agent. -------------------------------------------------------------------------------- S.16 METHODS OF PURCHASING SHARES These methods of purchasing shares generally apply to Class A, Class B, and Class C shares. CLASS B SHARES OF RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND IS CURRENTLY CLOSED TO INVESTORS FOR NEW PURCHASES. CLASS B SHARES FOR RIVERSOURCE FLOATING RATE FUND, RIVERSOURCE INFLATION PROTECTED SECURITIES FUND, RIVERSOURCE INTERMEDIATE TAX-EXEMPT FUND, RIVERSOURCE LIMITED DURATION BOND FUND AND RIVERSOURCE SHORT DURATION U.S. GOVERNMENT FUND ARE CLOSED TO NEW INVESTORS AND NEW PURCHASES. EXISTING SHAREHOLDERS IN THESE FUNDS MAY CONTINUE TO OWN CLASS B SHARES AND MAKE EXCHANGES INTO AND OUT OF EXISTING ACCOUNTS WHERE CLASS B SHARES OF THESE FUNDS ARE MAINTAINED. ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INTERMEDIARY ALL REQUESTS The financial intermediary through which you buy shares may have different policies not described in this prospectus, including different minimum investment amounts and minimum account balances. -------------------------------------------------------------------------------- ACCOUNT ESTABLISHED WITH THE FUND BY MAIL You or the financial intermediary through which you buy shares may establish an account with the fund. To establish an account in this fashion, complete a fund account application with your financial advisor or investment professional, and mail the account application to the address below. Account applications may be obtained (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com or may be requested by calling (800) 221-2450. Make your check payable to the fund. The fund does not accept cash, credit card convenience checks, money orders, traveler's checks, starter checks, third or fourth party checks, or other cash equivalents. ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.17 METHODS OF PURCHASING SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) Mail your check and completed application to: REGULAR MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL P.O. BOX 8041 BOSTON, MA 02266-8041 EXPRESS MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL 30 DAN ROAD CANTON, MA 02021-2809 If you already have an account, include your name, account number, and the name of the fund and class of shares you wish to purchase along with your check. You can make scheduled investments in the fund by moving money from your checking account or savings account. See the Minimum Investment and Account Balance chart below for more information regarding scheduled investment plans. -------------------------------------------------------------------------------- BY WIRE OR ACH Fund shares purchased in an account established and maintained with the fund may be paid for by federal funds wire. Before sending a wire, call (800) 221-2450 to notify the fund's transfer agent of the wire and to receive further instructions. If you are establishing an account with a wire purchase, you are required to send a signed account application to the address above. Please include the wire control number or your new account number on the application. Your bank or financial intermediary may charge additional fees for wire transactions. -------------------------------------------------------------------------------- BY EXCHANGE Call (800) 221-2450 or send signed written instructions to the address above. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.18 METHODS OF PURCHASING SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) MINIMUM INVESTMENT AND ACCOUNT BALANCE
RIVERSOURCE RIVERSOURCE 120/20 DISCIPLINED CONTRARIAN SMALL CAP EQUITY FUND VALUE FUND THREADNEEDLE RIVERSOURCE FOR ALL FUNDS, GLOBAL EXTENDED FLOATING RATE CLASSES AND ALPHA FUND FUND ACCOUNTS EXCEPT RIVERSOURCE RIVERSOURCE THOSE LISTED TO ABSOLUTE RETURN INFLATION THE RIGHT TAX QUALIFIED CURRENCY AND PROTECTED (NONQUALIFIED) ACCOUNTS INCOME FUND SECURITIES FUND CLASS W --------------------------------------------------------------------------------------------------------------- INITIAL INVESTMENT $2,000 $1,000 $10,000 $5,000 $500 --------------------------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $100 $100 $100 None --------------------------------------------------------------------------------------------------------------- ACCOUNT BALANCE* $1,000 None $5,000 $2,500 $500
*If your fund account balance falls below the minimum account balance for any reason, including a market decline, you may be asked to increase it to the minimum account balance or establish a scheduled investment plan. If you do not do so within 30 days, your shares may be automatically redeemed and the proceeds mailed to you. ------------------------------------------------------------------------------- MINIMUM INVESTMENT AND ACCOUNT BALANCE -- SCHEDULED INVESTMENT PLANS
RIVERSOURCE RIVERSOURCE 120/20 DISCIPLINED CONTRARIAN SMALL CAP EQUITY FUND VALUE FUND THREADNEEDLE RIVERSOURCE FOR ALL FUNDS, GLOBAL EXTENDED FLOATING RATE CLASSES AND ALPHA FUND FUND ACCOUNTS EXCEPT RIVERSOURCE RIVERSOURCE THOSE LISTED TO ABSOLUTE RETURN INFLATION THE RIGHT TAX QUALIFIED CURRENCY AND PROTECTED (NONQUALIFIED) ACCOUNTS INCOME FUND SECURITIES FUND CLASS W --------------------------------------------------------------------------------------------------------------- INITIAL INVESTMENT $100(a) $100(b) $10,000 $5,000 $500 --------------------------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $50 $100 $100 None --------------------------------------------------------------------------------------------------------------- ACCOUNT BALANCE** None(b) None $5,000 $2,500 $500
**If your fund account balance is below the minimum initial investment described above, you must make payments at least monthly. (a)Money Market Funds -- $2,000 (b)Money Market Funds -- $1,000 ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.19 These minimums may be waived for accounts that are managed by an investment professional, for accounts held in approved discretionary or non-discretionary wrap programs, for accounts that are a part of an employer-sponsored retirement plan, or for other account types if approved by the distributor. The fund reserves the right to modify its minimum account requirements at any time, with or without prior notice. Please contact your financial intermediary for information regarding wire or electronic funds transfer. IMPORTANT: Payments sent by electronic fund transfers (ACH), a bank authorization or check that are not guaranteed may take up to 14 days to clear. If you request a sale within 14 days of purchase, this may cause your sale request to fail to process if the requested amount includes unguaranteed funds. EXCHANGING OR SELLING SHARES You may exchange or sell shares by having your financial intermediary process your transaction. If you maintain your account directly with your financial intermediary, you must contact that financial intermediary to exchange or sell shares of the fund. If your account was established with the fund, there are a variety of methods you may use to exchange or sell shares of the fund. WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INTERMEDIARY ALL REQUESTS You can exchange or sell shares by having your financial intermediary process your transaction. The financial intermediary through which you purchased shares may have different policies not described in this prospectus, including different transaction limits, exchange policies and sale procedures. -------------------------------------------------------------------------------- ACCOUNT ESTABLISHED WITH THE FUND BY MAIL Mail your exchange or sale request to: REGULAR MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL P.O. BOX 8041 BOSTON, MA 02266-8041 EXPRESS MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL 30 DAN ROAD CANTON, MA 02021-2809 ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.20 WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) Include in your letter: - your name - the name of the fund(s) - your account number - the class of shares to be exchanged or sold - your Social Security number or Employer Identification number - the dollar amount or number of shares you want to exchange or sell - specific instructions regarding delivery or exchange destination - signature(s) of registered account owner(s) - any special documents the transfer agent may require in order to process your order Corporate, trust or partnership accounts may need to send additional documents. Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners. A Medallion Signature Guarantee is required if: - Amount is over $50,000. - You want your check made payable to someone other than the registered account owner(s). - Your address of record has changed within the last 30 days. - You want the check mailed to an address other than the address of record. - You want the proceeds sent to a bank account not on file. - You are the beneficiary of the account and the account owner is deceased (additional documents may be required). A Medallion Signature Guarantee assures that a signature is genuine and not a forgery. The financial intermediary providing the Guarantee is financially liable for the transaction if the signature is a forgery. Eligible guarantors include commercial banks, trust companies, savings associations, and credit unions as defined by the Federal Deposit Insurance Act. Note: A guarantee from a notary public is not acceptable. ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.21 WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) NOTE: Any express mail delivery charges you pay will vary depending on domestic or international delivery instructions. -------------------------------------------------------------------------------- BY TELEPHONE Call (800) 221-2450. Unless you elect not to have telephone exchange and sale privileges, they will automatically be available to you. Reasonable procedures will be used to confirm authenticity of telephone exchange or sale requests. Telephone privileges may be modified or discontinued at any time. Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate, qualified retirement accounts and trust accounts which the current trustee is not listed. You may request that these privileges NOT apply by writing to the address above. Payment will be mailed to the address of record and made payable to the names listed on the account. Telephone sale requests are limited to $50,000 per day. -------------------------------------------------------------------------------- BY WIRE OR ACH You can wire money from your fund account to your bank account. Make sure we have your bank account information on file. If we do not have this information, you will need to send written instructions with your bank's name and a voided check or savings account deposit slip. Call (800) 221-2450 or send a letter of instruction, with a Medallion Signature Guarantee if required, to the address above. A service fee may be charged against your account for each wire sent. Minimum amount: by ACH: $100 by wire: $500 Your bank or financial intermediary may charge additional fees for wire transactions. -------------------------------------------------------------------------------- BY SCHEDULED You may elect to receive regular periodic payments through an PAYOUT PLAN automatic sale of shares. See the SAI for more information. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.22 CHECK REDEMPTION SERVICE Class A shares of the money market funds offer check writing privileges. If you have $2000 in a money market fund, you may request checks which may be drawn against your account. You can elect this service on your initial application, or, thereafter. Call (800) 221-2450 for the appropriate forms to establish this service. If you own Class A shares that were both in another fund at NAV because of the size of the purchase, and then exchanged into a money market fund, check redemptions may be subject to a CDSC. EXCHANGES Generally, you may exchange your fund shares for shares of the same class of any other publicly offered fund in the RiverSource Family of Funds without a sales charge. For complete information on the fund you are exchanging into, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after your transaction request is received in good order. You may be subject to a sales charge if you exchange from a money market fund into an equity or fixed income fund. IF YOU HOLD YOUR FUND SHARES IN AN ACCOUNT WITH AMERIPRISE FINANCIAL SERVICES, YOU MAY HAVE LIMITED EXCHANGEABILITY WITHIN THE RIVERSOURCE FAMILY OF FUNDS. MARKET TIMING SHORT-TERM TRADING AND OTHER SO-CALLED MARKET TIMING PRACTICES ARE FREQUENT TRADING PRACTICES BY CERTAIN SHAREHOLDERS INTENDED TO PROFIT AT THE EXPENSE OF OTHER SHAREHOLDERS BY SELLING SHARES OF A FUND SHORTLY AFTER PURCHASE. MARKET TIMING MAY ADVERSELY IMPACT A FUND'S PERFORMANCE BY PREVENTING THE INVESTMENT MANAGER FROM FULLY INVESTING THE ASSETS OF THE FUND, DILUTING THE VALUE OF SHARES HELD BY LONG-TERM SHAREHOLDERS, OR INCREASING THE FUND'S TRANSACTION COSTS. -------------------------------------------------------------------------------- S.23 FOR A FUND ORGANIZED AS A FUND-OF-FUNDS, ITS ASSETS CONSIST PRIMARILY OF SHARES OF THE UNDERLYING FUNDS IN WHICH IT INVESTS. THE UNDERLYING FUNDS MAY BE MORE SUSCEPTIBLE TO THE RISKS OF MARKET TIMING. FUNDS THAT INVEST DIRECTLY IN SECURITIES THAT TRADE INFREQUENTLY MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF INEFFICIENCIES IN THE SECURITIES MARKETS. FUNDS AND THE UNDERLYING FUNDS THAT INVEST IN SECURITIES THAT TRADE ON OVERSEAS SECURITIES MARKETS MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF CHANGES IN THE VALUES OF SECURITIES BETWEEN THE CLOSE OF OVERSEAS MARKETS AND THE CLOSE OF U.S. MARKETS, WHICH IS GENERALLY THE TIME AT WHICH A FUND'S NAV IS CALCULATED. TO THE EXTENT THAT A FUND OR UNDERLYING FUND HAS SIGNIFICANT HOLDINGS OF SMALL CAP STOCKS, FLOATING RATE LOANS, HIGH YIELD BONDS, TAX-EXEMPT SECURITIES OR FOREIGN SECURITIES, THE RISKS OF MARKET TIMING MAY BE GREATER FOR THE FUND THAN FOR OTHER FUNDS. SEE "PRINCIPAL INVESTMENT STRATEGIES" FOR A DISCUSSION OF THE TYPES OF SECURITIES IN WHICH YOUR FUND INVESTS. SEE "PRICING AND VALUING OF FUND SHARES" FOR A DISCUSSION OF THE FUNDS' POLICY ON FAIR VALUE PRICING, WHICH IS INTENDED, IN PART, TO REDUCE THE FREQUENCY AND EFFECT OF MARKET TIMING. THE FUNDS' BOARD HAS ADOPTED A POLICY THAT IS DESIGNED TO DETECT AND DETER MARKET TIMING THAT MAY BE HARMFUL TO THE FUNDS. EACH FUND SEEKS TO ENFORCE THIS POLICY THROUGH ITS SERVICE PROVIDERS AS FOLLOWS: - The fund tries to distinguish market timing from trading that it believes is not harmful, such as periodic rebalancing for purposes of asset allocation or dollar cost averaging or other purchase and exchange transactions not believed to be inconsistent with the best interest of fund shareholders or the Board's policy. The fund uses a variety of techniques to monitor for and detect abusive trading practices. These techniques may vary depending on the type of fund, the class of shares and where the shares are maintained. Under the fund's procedures, there is no set number of transactions in the fund that constitutes market timing. Even one purchase and subsequent sale by related accounts may be market timing. Generally, the fund seeks to restrict the exchange privilege of an investor who makes more than three exchanges into or out of the fund in any 90-day period. Accounts held by a retirement plan or a financial intermediary for the benefit of its participants or clients, which typically engage in daily transactions, are not subject to this limit, although the fund may seek the assistance of financial intermediaries in applying similar restrictions on their participants or clients. The fund's ability to monitor and discourage abusive trading practices in omnibus accounts is more limited. - The fund may rely on the monitoring policy of a financial intermediary, for example, a retirement plan administrator or similar financial intermediary authorized to distribute the funds, if it determines the policy and procedures of such financial intermediaries are sufficient to protect the fund and its shareholders. -------------------------------------------------------------------------------- S.24 - If an investor's trading activity is determined to be market timing or otherwise harmful to existing shareholders, the fund reserves the right to modify or discontinue the investor's exchange privilege or reject the investor's purchases or exchanges, including purchases or exchanges accepted by a financial intermediary. The fund may treat accounts it believes to be under common control as a single account for these purposes, although it may not be able to identify all such accounts. - Although the fund does not knowingly permit market timing, it cannot guarantee that it will be able to identify and restrict all short-term trading activity. The fund receives purchase and sale orders through financial intermediaries where market timing activity may not always be successfully detected. Other exchange policies: - Exchanges must be made into the same class of shares of the share class being exchanged out of. - Exchanges into RiverSource Tax-Exempt Money Market Fund may be made only from Class A shares. - If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. - Once the fund receives your exchange request, you cannot cancel it after the market closes. - Shares of the purchased fund may not be used on the same day for another exchange or sale. - New investments in Class A shares of a money market fund may be exchanged for either Class A, Class B or Class C shares of any other publicly offered fund in the RiverSource Family of Funds. - If you exchange shares from Class A shares of a money market fund to another fund in the RiverSource Family of Funds, any further exchanges must be between shares of the same class. For example, if you exchange from Class A shares of a money market fund into Class B shares of another fund in the RiverSource Family of Funds, you may not exchange from Class B shares of that fund back to Class A shares of a money market fund. Exchange rules for money market funds are illustrated in the following tables. - Shares of Class W originally purchased, but no longer held in a discretionary managed account, may not be exchanged for Class W shares of another fund. You may continue to hold these shares in the fund. Changing your investment to a different fund will be treated as a sale and purchase, and you will be subject to applicable taxes on the sale and sales charges on the purchase of the new fund. -------------------------------------------------------------------------------- S.25 - If your shares are subject to a CDSC, you will not be charged a CDSC upon the exchange of those shares. Any CDSC will be deducted when you sell the shares you received from the exchange. The CDSC imposed at that time will be based on the period that begins when you bought shares of the original fund and ends when you sell the shares of the fund you exchanged to.
TO OTHER FUNDS FROM A MONEY MARKET FUND ----------------------------- CLASS A CLASS B CLASS C -------------------------------------------------------------------- Class A Yes Yes Yes Class B No Yes No Class C No No Yes
TO A MONEY MARKET FUND FROM OTHER FUNDS ----------------------------- CLASS A CLASS B CLASS C -------------------------------------------------------------------- Class A Yes No No Class B No Yes No Class C No No Yes
If your initial investment was in a money market fund and you exchange into an equity or fixed income fund, you will pay an initial sales charge if you exchange into Class A and be subject to a CDSC if you exchange into Class B or Class C. If your initial investment was in Class A shares of an equity or fixed income fund and you exchange shares into a money market fund, you may exchange that amount to another fund, including dividends earned on that amount, without paying a sales charge. SELLING SHARES You may sell your shares at any time. The payment will be sent within seven days after your request is received in good order. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order, minus any applicable CDSC. REPURCHASES. You can change your mind after requesting a sale of shares and use all or part of the sale proceeds to purchase new shares of a fund in the RiverSource Family of Funds. If your original purchase was in Class A or Class B, you may use all or part of the sale proceeds to purchase new Class A shares in any fund account linked together for ROA purposes. Your repurchase will be in Class A shares at NAV, up to the amount of the sale proceeds. For a Class A repurchase on shares that were originally charged a CDSC, the amount of the CDSC will be reinvested at the NAV on the date the repurchase is processed. Repurchases of Class B shares will also be in Class A shares at NAV. Any CDSC paid upon redemption of your Class B shares will not be reimbursed. If your original purchase was in Class C, you will be allowed to reinvest in the -------------------------------------------------------------------------------- S.26 same Class C account and fund you originally purchased. In a Class C repurchase, the CDSC you paid will be reinvested and the shares will be deemed to have the original cost and purchase date for purposes of applying the CDSC (if any) to subsequent redemptions. Systematic withdrawals and purchases will be excluded from this policy. In order for you to take advantage of this repurchase waiver, you must notify your financial intermediary or the fund's transfer agent if your account is held at the fund within 90 days of the date your sale request was processed. Contact your financial intermediary for information on required documentation. The repurchase privilege may be modified or discontinued at any time and use of this option may have tax consequences. If you sold shares of a Seligman fund on or before February 3, 2009 and wish to repurchase shares, you have the option of taking advantage of the current repurchase policy (described above) within 90 days of the date your sale request was processed, or you may use all or part of your sale proceeds to purchase shares of the fund you sold or any other fund in the RiverSource Family of Funds without paying an initial sales charge or, if you paid a CDSC when you sold your shares, receiving a credit for the applicable CDSC, within 120 days of the date your sale request was processed. Contact your financial intermediary or, if you opened an account directly with the fund, the transfer agent, for more information on the required documentation to complete a repurchase transaction. The fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. PRICING AND VALUING OF FUND SHARES For classes of shares sold with an initial sales charge, the public offering or purchase price is the net asset value plus the sales charge. For funds or classes of shares sold without an initial sales charge, the public offering price is the NAV. Orders in good form are priced at the NAV next determined after you place your order. Good form or good order means that your instructions have been received in the form required by the fund. This may include, for example, providing the fund name and account number, the amount of the transaction and all required signatures. The NAV is the value of a single share of the fund. The NAV is determined by dividing the value of the fund's assets, minus any liabilities, by the number of shares outstanding. The NAV is calculated as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. For a fund organized as a fund-of-funds, the assets will consist primarily of shares of the underlying funds, which are valued at their NAVs. Securities are valued primarily on the basis of market quotations and floating rate loans are valued primarily on the basis of indicative bids. Both market quotations -------------------------------------------------------------------------------- S.27 and indicative bids are obtained from outside pricing services approved and monitored under procedures adopted by the Board. Certain short-term securities with maturities of 60 days or less are valued at amortized cost. When reliable market quotations or indicative bids are not readily available, investments are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of an investment held by a fund or underlying fund is materially affected by events that occur after the close of a securities market but prior to the time as of which the fund's or underlying fund's NAV is determined. Valuing investments at fair value involves reliance on judgment. The fair value of an investment is likely to differ from any available quoted or published price. To the extent that a fund or an underlying fund has significant holdings of small cap stocks, high yield bonds, floating rate loans, tax-exempt securities or foreign securities that may trade infrequently, fair valuation may be used more frequently than for other funds. The funds use an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of a fund's or an underlying fund's securities may be listed on foreign exchanges that trade on weekends or other days when the fund does not price its shares. In that event, the NAV of the fund's or underlying fund's shares may change on days when shareholders will not be able to purchase or sell the fund's or underlying fund's shares. For money markets funds -- The fund's investments are valued at amortized cost, which approximates market value, as explained in the SAI. Although the fund cannot guarantee it will always be able to maintain a constant net asset value of $1 per share, it will use its best efforts to do so. DISTRIBUTIONS AND TAXES As a shareholder you are entitled to your share of your fund's net income and net gains. Each fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS Your fund's net investment income is distributed to you as dividends. Dividends may be composed of qualified dividend income, which is eligible for preferential tax rates under current tax law, as well as other ordinary dividend income, which may include dividends which are non-qualified dividends, interest income and short-term capital gains. Because of the types of income earned by fixed income funds, it is unlikely the funds will distribute qualified dividend income. Generally, capital gains are realized when a security is sold for a higher price than was paid for it. Generally, capital losses are realized when a security is sold for a lower price than was paid for it. Typically, each realized capital gain or loss is long-term or short-term depending on the length of time the fund held the -------------------------------------------------------------------------------- S.28 security. Realized capital gains and losses offset each other. The fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains, if any, are included in net investment income and are taxable as ordinary income when distributed to the shareholder. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. If the fund's distributions exceed its current and accumulated earnings and profits, that portion of the fund's distributions will be treated as a return of capital to the shareholders to the extent of their basis in their shares. A return of capital will generally not be taxable; however, any amounts received in excess of basis are treated as capital gain. Forms 1099 sent to shareholders report any return of capital. Certain derivative instruments subject the fund to special tax rules, the effect of which may be to accelerate income to the fund, defer fund losses, cause adjustments in the holding periods of fund securities, convert capital gains into ordinary income and convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders. For Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025, Seligman TargETF 2015 and Seligman TargETFund Core (the Seligman TargETFunds) -- The Funds may purchase or sell (write) options. In general, option premiums which may be received by the Funds are not immediately included in the income of the Funds. Instead, such premiums are taken into account when the option contract expires, the option is exercised by the holder, or the Funds transfer or otherwise terminate the option. If an option written by a Fund is exercised and such Fund sells or delivers the underlying security, such Fund generally will recognize capital gain or loss equal to (a) the sum of the exercise price and the option premium received by the Fund minus (b) the Fund's basis in the security. Such gain or loss generally will be short-term or long- term depending upon the holding period of the underlying security. Gain or loss with respect to any termination of a Fund's obligation under an option other than through the exercise of the option and the related sale or delivery of the underlying security generally will be short-term gain or loss. Thus, for example, if an option written by a Fund expires unexercised, such Fund generally will recognize short-term gain equal to the premium received. -------------------------------------------------------------------------------- S.29 The Seligman TargETFunds generally will pay any dividends from its net investment income and distributes any net capital gains realized on investments at least annually (Seligman TargETFund Core generally will pay dividends from its net investment income on a quarterly basis). Because each Seligman TargETFund may sell underlying ETFs, US government securities and short-term debt instruments: (a) to accommodate redemptions of its shares; (b) in respect of the Target Date Funds, to implement the process of migration; and (c) to adjust the percentages of its assets invested in each underlying ETF, US government securities, short-term debt instruments, cash and cash equivalents in response to economic, market or other conditions or events, and changes in Seligman Time Horizon Matrix (the asset allocation methodology utilized by the Seligman TargETFunds), each Seligman TargETFund may generate net capital gains (including short-term capital gains that are generally taxed to shareholders at ordinary income tax rates) for investors that may be higher than the net capital gains ordinarily incurred by an investor through an investment in another asset allocation fund that has broader investment ranges or an asset allocation strategy designed by the investor. In addition, due to federal income tax laws, each Seligman TargETFund may not fully utilize capital losses (to offset capital gains) from the sale of underlying ETFs at a loss. In addition, underlying ETFs may distribute capital gains to the Seligman TargETFunds. REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the fund unless you request distributions in cash. The financial intermediary through which you purchased shares may have different policies. Distributions are reinvested at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. Generally, if you sell shares for less than their cost, the difference is a capital loss or if you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). -------------------------------------------------------------------------------- S.30 You may not create a tax loss or reduce a tax gain, based on paying a sales charge, by exchanging shares before the 91st day after the day of purchase. If you buy Class A shares and exchange into another fund before the 91st day after the day of purchase, you may not be able to include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. For more information, see the SAI. REITs often do not provide complete tax information until after the calendar year-end; generally mid to late January and continuing through early February. Consequently, if your fund has significant investments in REITs, you may not receive your Form 1099-DIV until February. Other RiverSource funds tax statements are generally mailed in January. FOR SELIGMAN TARGETFUNDS. Each of the Target Date Funds will automatically be combined with Seligman TargETFund Core during their respective target years. The investment manager expects each of these combinations to be effected as an acquisition of the assets and liabilities of the applicable Target Date Fund in exchange for shares of Seligman TargETFund Core at net asset value, with the shares of Seligman TargETFund Core then distributed to shareholders of the applicable Target Date Fund. Based on current tax rules, the investment manager expects the combination to be effected in a non-taxable transaction. Changes in such tax rules or other applicable law could negatively impact the combination of a Target Date Fund with Seligman TargETFund Core. FOR TAXABLE FUNDS. Distributions related to shares not held in IRAs or other retirement accounts are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. Shares held in an IRA or qualified retirement account are generally subject to different tax rules. Taking a distribution from your IRA or qualified retirement plan may subject you to federal taxes, withholding, penalties and reporting requirements. Please consult your tax advisor. Income received by a fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes. FOR TAX-EXEMPT FUNDS. Dividends distributed from interest earned on tax-exempt securities (exempt-interest dividends) are exempt from federal income taxes but may be subject to state and local taxes and potentially the alternative minimum tax. Dividends distributed from net capital gains, if any, and other income earned are not exempt from federal income taxes. Any taxable distributions are taxable in the year the fund declares them regardless of whether you take them in cash or reinvest them. -------------------------------------------------------------------------------- S.31 Interest on certain private activity bonds is a preference item for purposes of the individual and corporate alternative minimum tax. To the extent the fund earns such income, it will flow through to its shareholders and may affect those shareholders who are subject to the alternative minimum tax. See the SAI for more information. Because interest on municipal bonds and notes is tax-exempt for federal income tax purposes, any interest on money you borrow that is used directly or indirectly to purchase fund shares is not deductible on your federal income tax return. You should consult a tax advisor regarding its deductibility for state and local income tax purposes. FOR A FUND ORGANIZED AS A FUND-OF-FUNDS. Because most of the fund's investments are shares of underlying funds, the tax treatment of the fund's gains, losses, and distributions may differ from the tax treatment that would apply if either the fund invested directly in the types of securities held by the underlying funds or the fund shareholders invested directly in the underlying funds. As a result, fund shareholders may recognize higher amounts of capital gain distributions or ordinary income dividends than they otherwise would. IMPORTANT: This information is a brief and selective summary of some of the tax rules that apply to an investment in a fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. GENERAL INFORMATION AVAILABILITY AND TRANSFERABILITY OF FUND SHARES Please consult with your financial intermediary to determine the availability of the funds. The funds may only be purchased or sold directly or through financial intermediaries authorized by the distributor to offer the funds. NOT ALL FINANCIAL INSTITUTIONS ARE AUTHORIZED TO SELL THE RIVERSOURCE FAMILY OF FUNDS AND CERTAIN FINANCIAL INTERMEDIARIES THAT OFFER THE RIVERSOURCE FAMILY OF FUNDS MAY NOT OFFER ALL FUNDS ON ALL INVESTMENT PLATFORMS. If you set up an account at a financial intermediary that does not have, and is unable to obtain, a selling agreement with the distributor, you will not be able to transfer fund holdings to that account. In that event, you must either maintain your fund holdings with your current financial intermediary, find another financial intermediary with a selling agreement, or sell your shares, paying any applicable CDSC. Please be aware that transactions in taxable accounts are taxable events and may result in income tax liability. ADDITIONAL SERVICES AND COMPENSATION In addition to acting as the fund's investment manager, RiverSource Investments and its affiliates also receive compensation for providing other services to the funds. -------------------------------------------------------------------------------- S.32 Administration Services. Ameriprise Financial, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides or compensates others to provide administrative services to the funds. These services include administrative, accounting, treasury, and other services. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." Distribution and Shareholder Services. RiverSource Fund Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474, (the distributor), provides underwriting and distribution services to the funds. Under the Distribution Agreement and related distribution and shareholder servicing plans, the distributor receives distribution and shareholder servicing fees. The distributor may retain a portion of these fees to support its distribution and shareholder servicing activity. The distributor reallows the remainder of these fees (or the full fee) to the financial intermediaries that sell fund shares and provide services to shareholders. Fees paid by a fund for these services are set forth under "Distribution and/or service (12b-1) fees" in the expense table under "Fees and Expenses." More information on how these fees are used is set forth under "Investment Options -- Classes of Shares" and in the SAI. The distributor also administers any sales charges paid by an investor at the time of purchase or at the time of sale. See "Shareholder Fees (fees paid directly from your investment)" under "Fees and Expenses" for the scheduled sales charge of each share class. See "Buying and Selling Shares, Sales Charges" for variations in the scheduled sales charges, and for how these sales charges are used by the distributor. See "Other Investment Strategies and Risks" for the funds' policy regarding directed brokerage. Transfer Agency Services. RiverSource Service Corporation, 734 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the transfer agent or RiverSource Service Corporation), provides or compensates others to provide transfer agency services to the funds. The funds pay the transfer agent a fee that varies by class, as set forth in the SAI, and reimburses the transfer agent for its out-of-pocket expenses incurred while providing these transfer agency services to the funds. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." RiverSource Service Corporation pays a portion of these fees to financial intermediaries that provide sub-recordkeeping and other services to fund shareholders. The SAI provides additional information about the services provided and the fee schedules for the transfer agent agreements. -------------------------------------------------------------------------------- S.33 Plan Administration Services. Under a Plan Administration Services Agreement, the fund pays for plan administration services, including services such as implementation and conversion services, account set-up and maintenance, reconciliation and account recordkeeping, education services and administration to various plan types, including 529 plans, retirement plans and Health Savings Accounts. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." PAYMENTS TO FINANCIAL INTERMEDIARIES The distributor and its affiliates make or support additional cash payments out of their own resources (including profits earned from providing services to the fund) to financial intermediaries, in connection with agreements between the distributor and financial intermediaries pursuant to which these financial intermediaries sell fund shares and provide services to their clients who are shareholders of the fund. These payments and intercompany allocations (collectively, "payments") do not change the price paid by investors in the fund or fund shareholders for the purchase or ownership of fund shares of the fund, and these payments are not reflected in the fees and expenses of the fund, as they are not paid by the fund. In exchange for these payments, a financial intermediary may elevate the prominence or profile of the fund within the financial intermediary's organization, and may provide the distributor and its affiliates with preferred access to the financial intermediary's registered representatives or preferred access to the financial intermediary's customers. These arrangements are sometimes referred to as marketing and/or sales support payments, program and/or shareholder servicing payments, or revenue sharing payments. These arrangements create potential conflicts of interest between a financial intermediary's pecuniary interest and its duties to its customers, for example, if the financial intermediary receives higher payments from the sale of a certain fund than it receives from the sale of other funds, the financial intermediary or its representatives may be incented to recommend or sell shares of the fund where it receives or anticipates receiving the higher payment instead of other investment options that may be more appropriate for the customer. Employees of Ameriprise Financial and its affiliates, including employees of affiliated broker-dealers, may be separately incented to recommend or sell shares of the fund, as employee compensation and business unit operating goals at all levels are tied to the company's success. Certain employees, directly or indirectly, may receive higher compensation and other benefits as investment in the fund increases. In addition, management, sales leaders and other employees may spend more of their time and resources promoting Ameriprise Financial and its subsidiary companies, including RiverSource Investments and the distributor, and the products they offer, including the fund. -------------------------------------------------------------------------------- S.34 These payments are typically negotiated based on various factors including, but not limited to, the scope and quality of the services provided by the financial intermediary, its reputation in the industry, its ability to attract and retain assets, its access to target markets, its customer relationships, the profile the fund may obtain within the financial intermediary, and the access the distributor or other representatives of the fund may have within the financial intermediary for advertisement, training or education, including opportunities to present at or sponsor conferences for the registered representatives of the financial intermediary and its customers. These payments are usually calculated based on a percentage of fund assets owned through the financial intermediary and/or as a percentage of fund sales attributable to the financial intermediary. Certain financial intermediaries require flat fees instead of, or in addition to, these asset-based fees as compensation for including or maintaining a fund on their platforms, and, in certain situations, may require the reimbursement of ticket or operational charges -- fees that a financial intermediary charges its registered representatives for effecting transactions in the fund. The amount of payment varies by financial intermediary (e.g., initial platform set-up fees, ongoing maintenance or service fees, or asset or sales based fees). The amount of payments also varies by the type of sale. For instance, purchases of one fund may warrant a greater or lesser amount of payments than purchases of another fund. Additionally, sale and maintenance of shares on a stand alone basis may result in a greater or lesser amount of payments than the sale and maintenance of shares made through a plan, wrap or other fee-based program. Payments to affiliates may include payments as compensation to employees of RiverSource Investments who are licensed by the distributor in respect of certain sales and solicitation activity on behalf of the fund. These payments may be and often are significant. Additional information concerning the amount and calculation of these payments is available in the fund's SAI. Payments to affiliated broker-dealers are within the range of the payments the distributor pays to similarly-situated third party financial intermediaries and the payments such affiliated broker-dealers receive from third party fund sponsors related to the sale of their sponsored funds. However, because of the large amount of fund assets (from the RiverSource Family of Funds, in aggregate) currently held in customer accounts of the affiliated broker-dealers, the distributor and its affiliates, in the aggregate, pay significantly more in absolute dollars than other third-party fund sponsors pay to the affiliated broker-dealers for the sale and servicing of their sponsored funds. This level of payment creates potential conflicts of interest which the affiliated broker- dealers seek to mitigate by disclosure and implementation of internal controls, as well as the rules and regulations of applicable regulators. -------------------------------------------------------------------------------- S.35 From time to time, to the extent permitted by SEC and FINRA rules and by other applicable laws and regulations, the distributor and its affiliates may make other reimbursements or payments to financial intermediaries or their registered representatives, including non-cash compensation, in the form of gifts of nominal value, occasional meals, tickets, or other entertainment, support for due diligence trips, training and educational meetings or conference sponsorships, support for recognition programs, and other forms of non-cash compensation permissible under regulations to which these financial intermediaries and their representatives are subject. To the extent these are made as payments instead of reimbursement, they may provide profit to the financial intermediary to the extent the cost of such services was less than the actual expense of the service. The financial intermediary through which you are purchasing or own shares of the fund has been authorized directly or indirectly by the distributor to sell the fund and/or to provide services to you as a shareholder of the fund. Investors and current shareholders may wish to take such payment arrangements into account when considering and evaluating any recommendations they receive relating to fund shares. If you have questions regarding the specific details regarding the payments your financial intermediary may receive from the distributor or its affiliates related to your purchase or ownership of the fund, please contact your financial intermediary. The SAI contains additional detail regarding payments made by the distributor to financial intermediaries. The payments described in this section are in addition to fees paid by the fund to the distributor under 12b-1 plans, which fees may be used to compensate financial intermediaries for the distribution of fund shares and the servicing of fund shareholders, or paid by the fund to the transfer agent under the transfer agent agreement or plan administration agreement, which fees may be used to support networking or servicing fees to compensate financial intermediaries for supporting shareholder account maintenance, sub-accounting, plan recordkeeping or other services provided directly by the financial intermediary to shareholders or plans and plan participants, including retirement plans, 529 plans, Health Savings Account plans, or other plans, where participants beneficially own shares of the fund. Financial institutions may separately charge you additional fees. See "Buying and Selling Shares." ADDITIONAL MANAGEMENT INFORMATION AFFILIATED PRODUCTS. RiverSource Investments serves as investment manager to all funds in the RiverSource Family of Funds, including those that are structured to provide asset-allocation services to shareholders of those funds by investing in shares of other funds (funds of funds) in the RiverSource Family of Funds (collectively referred to as underlying funds) and to discretionary managed accounts (collectively referred to as affiliated products) that invest exclusively in underlying funds. These affiliated products, individually or collectively, may own -------------------------------------------------------------------------------- S.36 a significant percentage of the outstanding shares of the underlying funds, and RiverSource Investments seeks to balance potential conflicts between the affiliated products and the underlying funds in which they invest. The affiliated products investment in the underlying funds may also have the effect of creating economies of scale (including lower expense ratios) because the affiliated products may own substantial portions of the shares of underlying funds and, comparatively, a redemption of underlying fund shares by one or more affiliated products could cause the expense ratio of an underlying fund to increase as its fixed costs would be spread over a smaller asset base. Because of these large positions of the affiliated products, the underlying funds may experience relatively large purchases or redemptions. Although RiverSource Investments may seek to minimize the impact of these transactions, for example, by structuring them over a reasonable period of time or through other measures, underlying funds may experience increased expenses as they buy and sell securities to manage these transactions. When RiverSource Investments structures transactions over a reasonable period of time in order to manage the potential impact of the buy and sell decisions for the affiliated products, these affiliated products, including funds of funds, may pay more or less for shares of the underlying funds than if the transactions were executed in one transaction. In addition, substantial redemptions by the affiliated products within a short period of time could require the underlying fund to liquidate positions more rapidly than would otherwise be desirable, which may have the effect of reducing or eliminating potential gain or causing the underlying fund to realize a loss. Substantial redemptions may also adversely affect the ability of the investment manager to implement the underlying fund's investment strategy. RiverSource Investments also has an economic conflict of interest in determining the allocation of the affiliated products' assets among the underlying funds as it earns different fees from the underlying funds. RiverSource Investments monitors expense levels of the funds and is committed to offering funds that are competitively priced. RiverSource Investments reports to the Board on the steps it has taken to manage any potential conflicts. See the SAI for information on the percent of the fund owned by affiliated products. CASH RESERVES. A fund may invest its daily cash balance in a money market fund selected by RiverSource Investments, including but not limited to RiverSource Short-Term Cash Fund (Short-Term Cash Fund), a money market fund established for the exclusive use of funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. While Short-Term Cash Fund does not pay an advisory fee to RiverSource Investments, it does incur other expenses, and is expected to operate at a very low expense ratio. A fund will invest in Short-Term Cash Fund or any other money market fund selected by RiverSource Investments only to the extent it is consistent with the fund's investment objectives and policies. Short-Term Cash Fund is not insured or guaranteed by the FDIC or any other government agency. -------------------------------------------------------------------------------- S.37 FUND HOLDINGS DISCLOSURE. The Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by a fund. A description of these policies and procedures is included in the SAI. LEGAL PROCEEDINGS. 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 fund is 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 fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the fund. Information regarding certain pending and settled legal proceedings may be found in the fund's shareholder reports and in the SAI. Additionally, 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. -------------------------------------------------------------------------------- S.38 Funds in the RiverSource Family of Funds -- which include funds offered under the RiverSource, Threadneedle and Seligman brands -- can be purchased from authorized financial intermediaries. Additional information about the fund and its investments is available in the fund's SAI, and annual and semiannual reports to shareholders. In the fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the fund's performance during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, or to request other information about the fund, contact RiverSource Family of Funds or your financial intermediary. To make a shareholder inquiry, contact the financial intermediary through whom you purchased the fund. RiverSource Family of Funds 734 Ameriprise Financial Center Minneapolis, MN 55474 (800) 221-2450 RiverSource Family of Funds information available: (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com You may review and copy information about the fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202- 551-8090). Reports and other information about the fund are available on the EDGAR Database on the Commission's Internet site at www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, 100 F Street, N.E., Washington, D.C. 20549-1520. Investment Company Act File #811-5696 TICKER SYMBOL Class A: RARAX Class B: -- Class C: RARCX Class I: RVAIX Class R4: -- Class R5: RARRX Class W: RACWX
(RIVERSOURCE INVESTMENTS LOGO) S-6502-99 H (12/09) Prospectus (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE EMERGING MARKETS BOND FUND PROSPECTUS DEC. 30, 2009 RIVERSOURCE EMERGING MARKETS BOND FUND SEEKS TO PROVIDE SHAREHOLDERS WITH HIGH TOTAL RETURN THROUGH CURRENT INCOME AND, SECONDARILY, THROUGH CAPITAL APPRECIATION. Classes A, B, C, I, R4 and W As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. You may qualify for sales charge discounts on purchases of Class A shares. Please notify your financial intermediary if you have other accounts holding shares of funds in the RiverSource Family of Funds to determine whether you qualify for a sales charge discount. See "Buying and Selling Shares" for more information. NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE TABLE OF CONTENTS THE FUND.......................................... 3p Objective......................................... 3p Principal Investment Strategies................... 3p Principal Risks................................... 4p Past Performance.................................. 7p Fees and Expenses................................. 11p Other Investment Strategies and Risks............. 14p Fund Management and Compensation.................. 16p FINANCIAL HIGHLIGHTS.............................. 18P BUYING AND SELLING SHARES......................... S.1 Description of Share Classes...................... S.2 Investment Options -- Classes of Shares......... S.2 Sales Charges................................... S.7 Opening an Account.............................. S.16 Exchanging or Selling Shares...................... S.20 Exchanges....................................... S.23 Selling Shares.................................. S.26 PRICING AND VALUING OF FUND SHARES................ S.27 DISTRIBUTIONS AND TAXES........................... S.28 GENERAL INFORMATION............................... S.32
RIVERSOURCE FAMILY OF FUNDS The RiverSource Family of Funds includes a comprehensive array of funds from RiverSource Investments. RiverSource Investments has also partnered with a number of professional investment managers, including its affiliate, Threadneedle Investments, to expand the array of funds offered in the RiverSource family. RiverSource funds, RiverSource Partners funds, Seligman funds and Threadneedle funds share the same Board of Directors/Trustees (the Board), and the same policies and procedures including those set forth in the service section of this prospectus. Please see the Statement of Additional Information (SAI) for a complete list of mutual funds included in the RiverSource Family of Funds. RiverSource Variable Portfolio Funds and Seligman (Variable) Portfolio Funds are sold exclusively as underlying investment options of variable insurance policies and annuity contracts offered by affiliated and unaffiliated insurance companies. -------------------------------------------------------------------------------- 2P RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS THE FUND OBJECTIVE RiverSource Emerging Markets Bond Fund (the Fund) seeks to provide shareholders with high total return through current income and, secondarily, through capital appreciation. Because any investment involves risk, there is no assurance this objective can be achieved. Only shareholders can change the Fund's objective. PRINCIPAL INVESTMENT STRATEGIES The Fund is a non-diversified fund that invests primarily in fixed income securities of emerging markets issuers. Emerging markets include any country determined to have an emerging market economy. Emerging markets include any country that is not defined by the World Bank as a High Income OECD country. The OECD (Organization for Economic Co-operation and Development) is a group of 30 member countries sharing a commitment to democratic government and the market economy. Under normal market conditions, at least 80% of the Fund's net assets will be invested in fixed income securities of issuers that are located in emerging markets countries, or that earn 50% or more of their total revenues from goods or services produced in emerging markets countries or from sales made in emerging markets countries. Such securities may be denominated in either non- U.S. currencies or the U.S. dollar. While the Fund may invest 25% or more of its total assets in the securities of foreign governmental and corporate entities located in the same country, it will not invest 25% or more of its total assets in any single foreign government issuer. Emerging market fixed income securities are generally rated in the lower rating categories of recognized rating agencies or considered by the investment manager to be of comparable quality. These lower quality fixed income securities are often called "junk bonds." The Fund may invest up to 100% of its assets in these lower rated securities. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. In pursuit of the Fund's objective, the investment manager (RiverSource Investments, LLC) chooses investments by: - Analyzing the creditworthiness of emerging market countries. - Seeking to evaluate the best relative value opportunities among emerging market countries, by comparing sovereign debt spreads to fundamental creditworthiness and comparing the recent sovereign debt spread relationships among countries to historic relationships. - Seeking to identify emerging markets bonds that can take advantage of attractive local interest rates and provide exposure to undervalued currencies. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS 3P In evaluating whether to sell a security, the investment manager considers, among other factors, whether in its view: - The security is overvalued. - The security has new credit risks. - The security continues to meet the standards described above. The investment manager monitors the Fund's exposure to interest rate and foreign currency fluctuations. The investment manager may use derivatives such as futures, options, forward contracts and swaps, including credit default swaps, in an effort to produce incremental earnings, to hedge existing positions, to increase market exposure and investment flexibility, or to obtain or reduce credit exposure. The Fund may count the value of derivative securities with emerging markets exposure towards its 80% policy. PRINCIPAL RISKS This Fund is designed for long-term investors with above-average risk tolerance. The Fund has a higher potential for volatility and loss of principal. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. RISKS OF FOREIGN INVESTING. Foreign securities are securities of issuers based outside the United States. An issuer is deemed to be based outside the United States if it is organized under the laws of another country. Foreign securities are primarily denominated in foreign currencies. In addition to the risks normally associated with domestic securities of the same type, foreign securities are subject to the following foreign risks: Country risk includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that at times it may be difficult to sell foreign securities at desirable prices. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. -------------------------------------------------------------------------------- 4P RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. Emerging markets risk includes the dramatic pace of change (economic, social, and political) in these countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. CREDIT RISK. Credit risk is the risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable or unwilling to honor a financial obligation, such as payments due on a bond or a note. If the Fund purchases unrated securities, or if the rating of a security is reduced after purchase, the Fund will depend on the investment manager's analysis of credit risk more heavily than usual. Non-investment grade securities, commonly called "high-yield" or "junk" bonds, may react more to perceived changes in the ability of the issuing entity to pay interest and principal when due than to changes in interest rates. Non-investment grade securities have greater price fluctuations and are more likely to experience a default than investment grade bonds. In addition, investments in emerging markets debt obligations also are subject to increased credit risk because of the difficulties of requiring foreign entities, including issuers of sovereign debt obligations, to honor their contractual commitments, and because a number of emerging markets governments and other issuers are already in default. ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS 5P DERIVATIVES RISK. Derivatives are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, options, futures, indexes or currencies. Losses involving derivative instruments may be substantial, because a relatively small price movement in the underlying security(ies), instrument, currency or index may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund. Derivative instruments in which the Fund invests will typically increase the Fund's exposure to Principal Risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty credit risk, hedging risk, leverage risk and liquidity risk. Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses. Counterparty credit risk is the risk that a counterparty to the derivative instrument becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, and the Fund may obtain no recovery of its investment or may only obtain a limited recovery, and any recovery may be delayed. Hedging risk is the risk that derivative instruments used to hedge against an opposite position may offset losses, but they may also offset gains. There is no guarantee that a hedging strategy will eliminate the risk which the hedging strategy is intended to offset, which may lead to losses within the Fund. Leverage risk is the risk that losses from the derivative instrument may be greater than the amount invested in the derivative instrument. Liquidity Risk, as described as a Principal Risk below, may be increased for derivative instruments which are not traded on an exchange, including, but not limited to, forward contracts, swaps and over-the-counter options. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. See the SAI for more information on derivative instruments and related risks. 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. Because each investment has a greater effect on the Fund's performance, the Fund may be more exposed to the risks of loss and volatility then a fund that invests more broadly. -------------------------------------------------------------------------------- 6P RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS 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 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. INTEREST RATE RISK. Interest rate risk is the risk of losses attributable to changes in interest rates. Interest rate risk is generally associated with bond prices: when interest rates rise, bond prices fall. In general, the longer the maturity or duration of a bond, the greater its sensitivity to changes in interest rates. LIQUIDITY RISK. The risk associated from a lack of marketability of securities which may make it difficult or impossible to sell at desirable prices in order to minimize loss. The Fund may have to lower the selling price, sell other investments, or forego another, more appealing investment opportunity. SECTOR RISK. Investments that are concentrated in a particular issuer, geographic region or sector will be more susceptible to changes in price. The more a fund diversifies across sectors, the more it spreads risk and potentially reduces the risks of loss and volatility. PAST PERFORMANCE The following bar chart and table provide some illustration of the risks of investing in the Fund by showing, respectively: - how the Fund's performance has varied for each full calendar year shown on the bar chart; and - how the Fund's average annual total returns compare to recognized indexes shown on the table. Both the bar chart and the table assume that all distributions have been reinvested. The performance of different classes varies because of differences in sales charges and other fees and expenses. How the Fund has performed in the past (before and after taxes) does not indicate how the Fund will perform in the future. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of such fee waivers/expense caps, performance would have been lower. See "Fees and Expenses" for any current fee waivers/expense caps. Bar Chart. Class A share information is shown in the bar chart; the sales charge for Class A shares is not reflected in the bar chart. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS 7P Table. The table shows total returns from hypothetical investments in Class A, Class B, Class C, Class I, Class R4 and Class W shares of the Fund. These returns are compared to the indexes shown for the same periods. For purposes of the performance calculation in the table we assumed: - the maximum sales charge for Class A shares; - sales at the end of the period and deduction of the applicable contingent deferred sales charge (CDSC) for Class B and Class C shares; - no sales charge for Class I, Class R4 and Class W shares; and - with the exception of Class A shares, no adjustments for taxes paid by an investor on the reinvested income and capital gains. AFTER-TAX RETURNS After-tax returns are shown only for Class A shares. After-tax returns for the other classes will vary. After-tax returns are calculated using the highest historical individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax returns will depend on your tax situation and most likely will differ from the returns shown in the table. If you hold your shares in a tax-deferred account, such as a 401(k) plan or an IRA, the after-tax returns do not apply to you since you will not incur taxes until you begin to withdraw from your account. The return after taxes on distributions for a period may be the same as the return before taxes for the same period if there were no distributions or if the distributions were small. The return after taxes on distributions and sale of Fund shares for a period may be greater than the return before taxes for the same period if there was a tax loss realized on sale of Fund shares. The benefit of the tax loss (since it can be used to offset other gains) may result in a higher return. -------------------------------------------------------------------------------- 8P RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS CLASS A SHARE PERFORMANCE (BASED ON CALENDAR YEARS) (BAR CHART) +5.76% -19.57% 2007 2008
During the periods shown in the bar chart, the highest return for a calendar quarter was +2.64% (quarter ended March 31, 2007) and the lowest return for a calendar quarter was -12.38% (quarter ended Dec. 31, 2008). The 4.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart; if reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. The Fund's Class A year-to-date return at Sept. 30, 2009 was +38.57%. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS 9P (AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2008)
CLASSES A, B, C, I & R4 CLASS W SINCE INCEPTION SINCE INCEPTION 1 YEAR (2/16/06) (12/1/06) RiverSource Emerging Markets Bond Fund: Class A Return before taxes -23.39% -4.49% N/A Return after taxes on distributions -25.07% -6.46% N/A Return after taxes on distributions and sale of fund shares -15.02% -4.74% N/A Class B Return before taxes -23.92% -4.46% N/A Class C Return before taxes -20.91% -3.61% N/A Class I Return before taxes -19.19% -2.48% N/A Class R4 Return before taxes -19.15% -2.57% N/A Class W Return before taxes -19.59% N/A -6.82% J.P. Morgan Emerging Markets Bond Index-Global (reflects no deduction for fees, expenses or taxes) -10.91% +0.97% -2.28% Lipper Emerging Markets Debt Funds Index -20.11% -2.88% -7.09%
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. The Lipper Emerging Markets Debt Funds Index, published by Lipper Inc., includes the 10 largest funds that have similar investment objectives to the Fund, although some funds in the index may have somewhat different investment policies or objectives. Past performance for Class W for the period prior to the beginning of operations for that class may be calculated based on the performance of Class A. The blended class performance will be adjusted to reflect differences in sales charges, but not differences in annual Fund operating expenses (for example, 12b-1 fees). The use of blended performance generally results in a presentation of higher performance for classes with higher operating expenses than those of the class with which they are blended, and a presentation of lower performance for classes with lower operating expenses than those of the class with which they are blended. -------------------------------------------------------------------------------- 10P RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund. Annual fund operating expenses are based on expenses incurred during the Fund's most recently completed fiscal year, and are expressed as a percentage (expense ratio) of the Fund's average net assets during the period. The expense ratios have been adjusted to reflect current fee schedules but have not been adjusted to reflect the Fund's assets as of a different period or point in time, as asset levels will fluctuate. As of the date of this prospectus, the Fund's net assets are higher than the Fund's average net assets during the most recently completed fiscal year. In general, a fund's annual operating expenses will increase as the fund's assets decrease. Accordingly, the Fund's annual operating expenses, if adjusted based on net assets as of the date of this prospectus, would be lower than are expressed in the fee and expense table below. The commitment by the investment manager and its affiliates to waive fees and/or cap (reimburse) expenses limits the impact that any decrease in the Fund's assets will have on its total annual (net) operating expenses in the current fiscal year. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS I CLASS R4 CLASS A CLASS B CLASS C CLASS W Maximum sales charge (load) imposed on purchases (as a percentage of offering price) 4.75%(a) None None None Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) None(b) 5% 1% None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS: CLASS A CLASS B CLASS C CLASS W Management fees 0.72% 0.72% 0.72% 0.72% Distribution and/or service (12b-1) fees 0.25% 1.00% 1.00% 0.25% Other expenses(c) 0.40% 0.43% 0.41% 0.36% Total annual fund operating expenses 1.37% 2.15% 2.13% 1.33% Fee waiver/expense reimbursement 0.06% 0.07% 0.06% 0.00% Total annual (net) fund operating expenses(d) 1.31% 2.08% 2.07% 1.33%
-------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS 11P ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) CONT.
CLASS I CLASS R4 Management fees 0.72% 0.72% Distribution and/or service (12b-1) fees 0.00% 0.00% Other expenses(c) 0.16% 0.46% Total annual fund operating expenses 0.88% 1.18% Fee waiver/expense reimbursement 0.00% 0.00% Total annual (net) fund operating expenses(d) 0.88% 1.18%
(a) This charge may be reduced depending on the total value of your investments in the RiverSource Family of Funds. See "Sales Charges." (b) A 1% CDSC may be assessed on Class A shares purchased without an initial sales charge and sold within 18 months after purchase. See "Sales Charges." (c) Other expenses include an administrative services fee, a transfer agency fee (for all classes except Class I), a custody fee, other nonadvisory expenses and a plan administration services fee (for Class R4). Other expenses may also include fees and expenses of affiliated and unaffiliated funds (acquired funds) which the Fund indirectly bears when it invests in the acquired funds. The impact of these acquired funds fees and expenses for the most recent fiscal period was less than 0.01%. Because acquired funds will 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 by the Fund with respect to such investments will vary. (d) The investment manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Dec. 31, 2010, 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 1.31% for Class A, 2.08% for Class B, 2.07% for Class C, 0.92% for Class I, 1.22% for Class R4 and 1.37% for Class W. -------------------------------------------------------------------------------- 12P RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS EXAMPLES These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. These examples assume that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. These examples also assume that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $602 $883 $1,185 $2,043 Class B $711(b) $967(b) $1,349(b) $2,283(c) Class C $310(b) $661 $1,140 $2,462 Class I $ 90 $281 $ 488 $1,089 Class R4 $120 $375 $ 650 $1,437 Class W $135 $422 $ 730 $1,606
(a) Includes a 4.75% sales charge. (b) Includes the applicable CDSC. (c) Based on conversion of Class B shares to Class A shares one month after the completion of the eighth year of ownership. You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $602 $883 $1,185 $2,043 Class B $211 $667 $1,149 $2,283(b) Class C $210 $661 $1,140 $2,462 Class I $ 90 $281 $ 488 $1,089 Class R4 $120 $375 $ 650 $1,437 Class W $135 $422 $ 730 $1,606
(a) Includes a 4.75% sales charge. (b) Based on conversion of Class B shares to Class A shares one month after the completion of the eighth year of ownership. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS 13P OTHER INVESTMENT STRATEGIES AND RISKS Other Investment Strategies. In addition to the principal investment strategies previously described, the Fund may utilize investment strategies that are not principal investment strategies, including investment in affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds (ETFs), also referred to as "acquired funds") ownership of which results in the Fund bearing its proportionate share of the acquired funds' fees and expenses and proportionate exposure to the risks associated with the acquired funds' underlying investments. ETFs are generally designed to replicate the price and yield of a specified market index. An ETF's share price may not track its specified market index and may trade below its net asset value, resulting in a loss. ETFs generally use a "passive" investment strategy and will not attempt to take defensive positions in volatile or declining markets. An active secondary market in an ETF's shares may not develop or be maintained and may be halted or interrupted due to actions by its listing exchange, unusual market conditions or other reasons. There can be no assurance an ETF's shares will continue to be listed on an active exchange. For more information on strategies and holdings, and the risks of such strategies, including derivative instruments that the Fund may use, see the Fund's SAI and its annual and semiannual reports. Unusual Market Conditions. During unusual market conditions, the Fund may temporarily invest more of its assets in money market securities than during normal market conditions. Although investing in these securities would serve primarily to attempt to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the portfolio managers may make frequent securities trades that could result in increased fees, expenses and taxes, and decreased performance. Instead of investing in money market securities directly, the Fund may invest in shares of an affiliated or unaffiliated money market fund. See "Cash Reserves" under the section "General Information" for more information. -------------------------------------------------------------------------------- 14P RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS Securities Transaction Commissions. Securities transactions involve the payment by the Fund of brokerage commissions to broker-dealers, on occasion as compensation for research or brokerage services (commonly referred to as "soft dollars"), as the portfolio managers buy and sell securities for the Fund in pursuit of its objective. A description of the policies governing the Fund's securities transactions and the dollar value of brokerage commissions paid by the Fund are set forth in the SAI. Funds that invest primarily in fixed income securities do not typically generate brokerage commissions that are used to pay for research or brokerage services. The brokerage commissions set forth in the SAI do not include implied commissions or mark-ups (implied commissions) paid by the Fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities (and certain other instruments, including derivatives). Brokerage commissions do not reflect other elements of transaction costs, including the extent to which the Fund's purchase and sale transactions may cause the market to move and change the market price for an investment. Although brokerage commissions and implied commissions are not reflected in the expense table under "Fees and Expenses," they are reflected in the total return of the Fund. Portfolio Turnover. Trading of securities may produce capital gains, which are taxable to shareholders when distributed. Active trading may also increase the amount of brokerage commissions paid or mark-ups to broker-dealers that the Fund pays when it buys and sells securities. Capital gains and increased brokerage commissions or mark-ups paid to broker-dealers may adversely affect a fund's performance. The Fund's historical portfolio turnover rate, which measures how frequently the Fund buys and sells investments, is shown in the "Financial Highlights." Directed Brokerage. The Fund's Board has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Fund as a factor in the selection of broker-dealers through which to execute securities transactions. Additional information regarding securities transactions can be found in the SAI. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS 15P FUND MANAGEMENT AND COMPENSATION INVESTMENT MANAGER RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource Family of Funds (including the RiverSource funds, Threadneedle funds and Seligman funds), and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for the RiverSource Family of Funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the SAI for more information. The RiverSource Family of Funds has received an order from the Securities and Exchange Commission that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for a fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or change the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. RiverSource Investments and its affiliates may have other relationships, including significant financial relationships, with current or potential subadvisers or their affiliates, which may create a conflict of interest. In making recommendations to the Board to appoint or to change a subadviser, or to change the terms of a subadvisory agreement, RiverSource Investments does not consider any other relationship it or its affiliates may have with a subadviser, and RiverSource Investments discloses the nature of any material relationships it has with a subadviser to the Board. The Fund pays RiverSource Investments a fee for managing its assets. Under the Investment Management Services Agreement (Agreement), the fee for the most recent fiscal year was 0.72% of the Fund's average daily net assets. Under the Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. A discussion regarding the basis for the Board approving the Agreement is available in the Fund's most recent annual or semiannual shareholder report. -------------------------------------------------------------------------------- 16P RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS Portfolio Manager(s). The portfolio managers responsible for the day-to-day management of the Fund are: Nicholas Pifer, CFA, Portfolio Manager - Managed the Fund since 2006. - Leader of the global fixed income sector team. - Joined RiverSource Investments in 2000. - Fixed Income Portfolio Manager, Investment Advisers, Inc., 1997 to 2000. - Began investment career in 1990. - MA, Johns Hopkins University School of Advanced International Studies. Jim Carlen, CFA, Portfolio Manager - Managed the Fund since 2008. - Manager on the global fixed income sector team. - Joined RiverSource Investments in 1996 as an international economist. - Began investment career in 1996. - MS, Georgetown University. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS 17P FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. For periods ended 2007 and after, per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). Total returns do not reflect payment of sales charges, if any, and are not annualized for periods of less than one year. The information for the fiscal years ended on or after Oct. 31, 2007 has been derived from the financial statements audited by Ernst & Young LLP, whose report, along with the Fund's financial statements and financial highlights, is included in the annual report which, if not included with this prospectus, is available upon request. The information for the periods ended on or before Oct. 31, 2006 has been audited by other auditors.
YEAR ENDED OCT. 31, CLASS A -------------------------------------------- PER SHARE DATA 2009 2008 2007 2006(a) Net asset value, beginning of period $7.05 $10.57 $10.16 $9.98 ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .53 .61 .59 .33 Net gains (losses) (both realized and unrealized) 3.22 (3.43) .39 .18 ----------------------------------------------------------------------------------------------- Total from investment operations 3.75 (2.82) .98 .51 ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.45) (.61) (.55) (.33) Distributions from realized gains -- (.09) (.02) -- ----------------------------------------------------------------------------------------------- Total distributions (.45) (.70) (.57) (.33) ----------------------------------------------------------------------------------------------- Net asset value, end of period $10.35 $7.05 $10.57 $10.16 ----------------------------------------------------------------------------------------------- TOTAL RETURN 54.87% (28.44%) 9.94% 5.25% ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.37% 1.41% 1.33% 1.81%(c) ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 1.27% 1.40% 1.33% 1.39%(c) ----------------------------------------------------------------------------------------------- Net investment income (loss) 5.85% 6.31% 5.61% 5.20%(c) ----------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $33 $10 $5 $12 ----------------------------------------------------------------------------------------------- Portfolio turnover rate 62% 82% 41% 32% -----------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 18P RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS
YEAR ENDED OCT. 31, CLASS B -------------------------------------------- PER SHARE DATA 2009 2008 2007 2006(a) Net asset value, beginning of period $7.05 $10.55 $10.16 $9.97 ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .46 .55 .52 .28 Net gains (losses) (both realized and unrealized) 3.22 (3.42) .37 .19 ----------------------------------------------------------------------------------------------- Total from investment operations 3.68 (2.87) .89 .47 ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.39) (.54) (.48) (.28) Distributions from realized gains -- (.09) (.02) -- ----------------------------------------------------------------------------------------------- Total distributions (.39) (.63) (.50) (.28) ----------------------------------------------------------------------------------------------- Net asset value, end of period $10.34 $7.05 $10.55 $10.16 ----------------------------------------------------------------------------------------------- TOTAL RETURN 53.60% (28.85%) 8.94% 4.80% ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 2.15% 2.19% 2.13% 2.62%(c) ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 2.04% 2.17% 2.13% 2.20%(c) ----------------------------------------------------------------------------------------------- Net investment income (loss) 5.28% 5.61% 4.90% 4.51%(c) ----------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $1 $1 $1 ----------------------------------------------------------------------------------------------- Portfolio turnover rate 62% 82% 41% 32% -----------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS 19P
YEAR ENDED OCT. 31, CLASS C -------------------------------------------- PER SHARE DATA 2009 2008 2007 2006(a) Net asset value, beginning of period $7.04 $10.54 $10.15 $9.97 ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .45 .55 .53 .28 Net gains (losses) (both realized and unrealized) 3.22 (3.42) .36 .18 ----------------------------------------------------------------------------------------------- Total from investment operations 3.67 (2.87) .89 .46 ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.39) (.54) (.48) (.28) Distributions from realized gains -- (.09) (.02) -- ----------------------------------------------------------------------------------------------- Total distributions (.39) (.63) (.50) (.28) ----------------------------------------------------------------------------------------------- Net asset value, end of period $10.32 $7.04 $10.54 $10.15 ----------------------------------------------------------------------------------------------- TOTAL RETURN 53.57% (28.88%) 8.94% 4.75% ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 2.13% 2.18% 2.13% 2.61%(c) ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 2.03% 2.16% 2.13% 2.19%(c) ----------------------------------------------------------------------------------------------- Net investment income (loss) 5.06% 5.64% 5.00% 4.46%(c) ----------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $-- $-- $-- ----------------------------------------------------------------------------------------------- Portfolio turnover rate 62% 82% 41% 32% -----------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 20P RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS
YEAR ENDED OCT. 31,. CLASS I -------------------------------------------- PER SHARE DATA 2009 2008 2007 2006(a) Net asset value, beginning of period $7.05 $10.57 $10.16 $9.98 ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .57 .69 .65 .35 Net gains (losses) (both realized and unrealized) 3.22 (3.46) .38 .17 ----------------------------------------------------------------------------------------------- Total from investment operations 3.79 (2.77) 1.03 .52 ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.49) (.66) (.60) (.34) Distributions from realized gains -- (.09) (.02) -- ----------------------------------------------------------------------------------------------- Total distributions (.49) (.75) (.62) (.34) ----------------------------------------------------------------------------------------------- Net asset value, end of period $10.35 $7.05 $10.57 $10.16 ----------------------------------------------------------------------------------------------- TOTAL RETURN 55.52% (28.08%) 10.38% 5.44% ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement .88% .91% .93% 1.52%(c) ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) .85% .91% .93% 1.10%(c) ----------------------------------------------------------------------------------------------- Net investment income (loss) 6.59% 6.89% 6.14% 5.70%(c) ----------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $106 $65 $147 $47 ----------------------------------------------------------------------------------------------- Portfolio turnover rate 62% 82% 41% 32% -----------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS 21P
YEAR ENDED OCT. 31, CLASS R4 -------------------------------------------- PER SHARE DATA 2009 2008 2007 2006(a) Net asset value, beginning of period $7.05 $10.56 $10.16 $9.98 ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .54 .67 .60 .34 Net gains (losses) (both realized and unrealized) 3.23 (3.43) .39 .18 ----------------------------------------------------------------------------------------------- Total from investment operations 3.77 (2.76) .99 .52 ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.47) (.66) (.57) (.34) Distributions from realized gains -- (.09) (.02) -- ----------------------------------------------------------------------------------------------- Total distributions (.47) (.75) (.59) (.34) ----------------------------------------------------------------------------------------------- Net asset value, end of period $10.35 $7.05 $10.56 $10.16 ----------------------------------------------------------------------------------------------- TOTAL RETURN 55.14% (27.98%) 9.97% 5.36% ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.18% 1.22% 1.24% 1.67%(c) ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 1.11% .97% 1.24% 1.25%(c) ----------------------------------------------------------------------------------------------- Net investment income (loss) 6.31% 6.82% 5.75% 5.37%(c) ----------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- ----------------------------------------------------------------------------------------------- Portfolio turnover rate 62% 82% 41% 32% -----------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 22P RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS
YEAR ENDED OCT. 31, CLASS W -------------------------------- PER SHARE DATA 2009 2008 2007(e) Net asset value, beginning of period $7.05 $10.55 $10.24 ----------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .53 .56 .57 Net gains (losses) (both realized and unrealized) 3.21 (3.36) .28 ----------------------------------------------------------------------------------- Total from investment operations 3.74 (2.80) .85 ----------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.45) (.61) (.52) Distributions from realized gains -- (.09) (.02) ----------------------------------------------------------------------------------- Total distributions (.45) (.70) (.54) ----------------------------------------------------------------------------------- Net asset value, end of period $10.34 $7.05 $10.55 ----------------------------------------------------------------------------------- TOTAL RETURN 54.69% (28.29%) 8.49% ----------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.33% 1.35% 1.33%(c) ----------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 1.30% 1.35% 1.33%(c) ----------------------------------------------------------------------------------- Net investment income (loss) 6.18% 6.08% 5.86%(c) ----------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $117 $104 $38 ----------------------------------------------------------------------------------- Portfolio turnover rate 62% 82% 41% -----------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For the period from Feb. 16, 2006 (when shares became publicly available) to Oct. 31, 2006. (b) 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 reported expense ratios. (c) Annualized. (d) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (e) For the period from Dec. 1, 2006 (when shares became publicly available) to Oct. 31, 2007. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 PROSPECTUS 23P RIVERSOURCE FAMILY OF FUNDS THE RIVERSOURCE FAMILY OF FUNDS (EACH INDIVIDUALLY A "FUND" AND, COLLECTIVELY, THE "FUNDS") INCLUDES "RIVERSOURCE" FUNDS, "RIVERSOURCE PARTNERS" FUNDS, "SELIGMAN" FUNDS AND "THREADNEEDLE" FUNDS. (THE RIVERSOURCE FUNDS, RIVERSOURCE PARTNERS FUNDS AND THREADNEEDLE FUNDS MAY BE COLLECTIVELY REFERRED TO AS THE "RIVERSOURCE FUNDS".) THE FUNDS SHARE THE SAME BOARD OF DIRECTORS/TRUSTEES (THE "BOARD") AND THE SAME POLICIES AND PROCEDURES INCLUDING THOSE SET FORTH IN THE SERVICE SECTION OF THIS PROSPECTUS. FOR EXAMPLE, FOR PURPOSES OF CALCULATING THE INITIAL SALES CHARGE ON THE PURCHASE OF CLASS A SHARES OF A FUND, AN INVESTOR OR FINANCIAL ADVISOR SHOULD CONSIDER THE COMBINED MARKET VALUE OF ALL FUNDS IN THE RIVERSOURCE FAMILY OF FUNDS OWNED BY THE INVESTOR AS DEFINED UNDER "INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA)." BUYING AND SELLING SHARES The funds are available directly and through broker-dealers, banks and other financial intermediaries or institutions (financial intermediaries), and through certain qualified and non-qualified plans, wrap fee products or other investment products sponsored by financial intermediaries. NOT ALL FINANCIAL INTERMEDIARIES OFFER THE FUNDS. FINANCIAL INTERMEDIARIES THAT OFFER THE FUNDS MAY CHARGE YOU ADDITIONAL FEES FOR THE SERVICES THEY PROVIDE AND THEY MAY HAVE DIFFERENT POLICIES NOT DESCRIBED IN THIS PROSPECTUS. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. Additionally, recordkeeping, transaction processing and payments of distributions relating to your account may be performed by the financial intermediaries through which your shares of the fund are held. Since the fund (and its service providers) may not have a record of your account transactions, you should always contact the financial intermediary through which you purchased or at which you maintain your shares of the fund to make changes to your account or to give instructions concerning your account, or to obtain information about your account. The fund and its service providers, including the distributor and the transfer agent, are not responsible for the failure of one of these financial intermediaries to carry out its obligations to its customers. -------------------------------------------------------------------------------- S.1 S-6400-9 DESCRIPTION OF SHARE CLASSES INVESTMENT OPTIONS -- CLASSES OF SHARES The funds offer different classes of shares. There are differences among the fees and expenses for each share class. See the "Fees and Expenses" table for more information. Not everyone is eligible to buy every share class. After determining which share classes you are eligible to buy, decide which share class best suits your needs. Your financial advisor can help you with this decision. The following table shows the key features of each share class. Not all funds offer all classes of shares. INVESTMENT OPTIONS SUMMARY
CONTINGENT DISTRIBUTION PLAN INITIAL DEFERRED SALES AND/OR ADMINISTRATION AVAILABILITY(a) SALES CHARGE CHARGE (CDSC) SERVICE FEE(b) SERVICES FEE -------------------------------------------------------------------------------------------------------------------------------- Class A Available to Yes. Payable at No.(c) Yes. No. all investors. time of purchase. 0.25%(g) Lower or no sales charge for larger investments. -------------------------------------------------------------------------------------------------------------------------------- Class B(d)(e)(f) Available to No. Entire Maximum 5% CDSC Yes. No. all investors. purchase price is during the first 1.00%(g) invested in shares year decreasing to of the fund. 0% after six years. -------------------------------------------------------------------------------------------------------------------------------- Class C(f) Available to No. Entire 1% CDSC may apply Yes. No. all investors. purchase price is if you sell shares 1.00%(g) invested in shares within one year of the fund. after purchase. -------------------------------------------------------------------------------------------------------------------------------- Class I Limited to No. No. No. No. qualifying institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R2 Limited to No. No. Yes. Yes. qualifying 0.50% 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R3 Limited to No. No. Yes. Yes. qualifying 0.25% 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R4 Limited to No. No. No. Yes. qualifying 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R5 Limited to No. No. No. No. qualifying institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class W Limited to No. No. Yes. No. qualifying 0.25%(g) discretionary managed accounts. --------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- S.2 INVESTMENT OPTIONS SUMMARY (CONTINUED)
CONTINGENT DISTRIBUTION PLAN INITIAL DEFERRED SALES AND/OR ADMINISTRATION AVAILABILITY(a) SALES CHARGE CHARGE (CDSC) SERVICE FEE(b) SERVICES FEE -------------------------------------------------------------------------------------------------------------------------------- Class Y Limited to No. No. No. Yes. qualifying 0.15% institutional investors. --------------------------------------------------------------------------------------------------------------------------------
(a) See "Buying and Selling Shares, Determining which class of shares to purchase" for more information on availability of share classes and eligible investors. See "Buying and Selling Shares, Opening an Account" for information on minimum investment and account balance requirements. (b) For each of Class A, Class B, Class C, Class R2, Class R3 and Class W shares, as applicable, each fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940, as amended, that allows it to pay distribution and shareholder servicing-related expenses for the sale of shares and the servicing of shareholders. This plan has been reviewed and approved by the Board. Because these fees are paid out of fund assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of distribution (sales) or servicing charges. (c) A 1% CDSC may be assessed on Class A shares sold within 18 months after purchase. See "Buying and Selling Shares, Sales Charges, Class A -- contingent deferred sales charge" for more information. For all funds except money market funds. (d) Class B shares automatically convert to Class A shares. See "Buying and Selling Shares, Sales Charges, Class B and Class C -- CDSC alternative" for more information on the timing of conversion of Class B shares to Class A shares. Timing of conversion will vary depending on the date of your original purchase of the Class B shares. (e) Class B shares of RiverSource Absolute Return Currency and Income Fund are only available for exchanges from Class B shares of another fund in the RiverSource Family of Funds. Class B shares of each of RiverSource Floating Rate Fund, RiverSource Inflation Protected Securities Fund, RiverSource Intermediate Tax-Exempt Fund, RiverSource Limited Duration Bond Fund and RiverSource Short Duration U.S. Government Fund are closed to new investors and new purchases. (Existing shareholders in these funds may continue to own Class B shares and make exchanges into and out of existing accounts where Class B shares of these funds are maintained.) (f) The money market funds may offer Class B and Class C shares, but only to facilitate exchanges with other funds offering Class B and Class C shares, respectively. (g) For RiverSource Cash Management Fund and RiverSource Tax-Exempt Money Market Fund, Class A is 0.10%. For RiverSource Cash Management Fund, Class B is 0.85%, Class C is 0.75% and Class W is 0.10%. DISTRIBUTION AND SERVICE FEES The distribution and shareholder servicing fees for Class A, Class B, Class C, Class R2, Class R3 and Class W shares, as applicable, are subject to the requirements of Rule 12b-1 under the Investment Company Act of 1940, as amended, and are used to reimburse the distributor for certain expenses it incurs in connection with distributing the fund's shares and directly or indirectly providing services to fund shareholders. These expenses include payment of distribution and/or shareholder servicing fees to financial intermediaries that sell shares of the fund or provide services to fund shareholders, up to 0.50% of the average daily net assets of Class R2 shares sold and held through them and up to 0.25%* of the average daily net assets of Class A, Class B, Class C, Class R3 and Class W shares sold and held through them. For Class A, Class B, Class R2, Class R3 and Class W shares, the distributor begins to pay these fees immediately after purchase. For Class C shares, the distributor pays these fees in advance for the first 12 months. Financial intermediaries also receive distribution fees up to 0.75% of the average daily net assets of Class C shares sold and held -------------------------------------------------------------------------------- S.3 through them, which the distributor begins to pay 12 months after purchase. For Class B shares, and, for the first 12 months following the sale of Class C shares, the fund's distributor retains the distribution fee of up to 0.75% in order to finance the payment of sales commissions to financial intermediaries, and to pay for other distribution related expenses. Financial intermediaries may compensate their financial advisors with the shareholder servicing and distribution fees paid to them by the distributor. IF YOU MAINTAIN SHARES OF THE FUND DIRECTLY WITH THE FUND, WITHOUT WORKING DIRECTLY WITH A FINANCIAL INTERMEDIARY OR FINANCIAL ADVISOR, DISTRIBUTION AND SERVICE FEES MAY BE RETAINED BY THE DISTRIBUTOR AS REIMBURSEMENT FOR INCURRING CERTAIN DISTRIBUTION AND SHAREHOLDER SERVICING RELATED EXPENSES. * For RiverSource Cash Management Fund, financial intermediaries receive fees up to 0.10% of the average daily net assets of Class A, Class B and Class W shares sold and held through them. PLAN ADMINISTRATION FEE Class R2, Class R3, Class R4 and Class Y shares pay an annual plan administration services fee for the provision of various administrative, recordkeeping, communication and educational services. The fee for Class R2, Class R3 and Class R4 shares is equal on an annual basis to 0.25% of average daily net assets attributable to the respective class. The fee for Class Y shares is equal on an annual basis to 0.15% of average daily net assets attributable to the class. DETERMINING WHICH CLASS OF SHARES TO PURCHASE Each of the fund's classes represent an interest in the same portfolio of investments. However, as set forth above, each class has its own sales charge schedule, and its ongoing distribution and shareholder service fees may differ from other classes. When deciding which class of shares to buy, you should consider, among other things: - The amount you plan to invest. - How long you intend to remain invested in the fund or another fund in the RiverSource Family of Funds. - Whether you may be eligible for reduced or no sales charges when you buy or sell shares. Your authorized financial intermediary or financial advisor will be able to help you decide which class of shares best meets your needs. -------------------------------------------------------------------------------- S.4 CLASS A, CLASS B AND CLASS C SHARES* Class B shares of RiverSource Absolute Return Currency and Income Fund are not currently available for new purchases. However, if you own Class B shares of another fund in the RiverSource Family of Funds, you may exchange into Class B shares of RiverSource Absolute Return Currency and Income Fund, if you meet the minimum investment and account balance requirements set forth in "Opening an Account," subject to the limitations set forth in this section. New purchases of Class B shares will not be permitted if your rights of accumulation are $50,000 or higher, and new purchases of Class C shares will not be permitted if your rights of accumulation are $1,000,000 or higher. See "Sales Charges, Initial Sales Charge -- Rights of Accumulation" for information on rights of accumulation. Class B shares have a higher annual distribution fee than Class A shares and a contingent deferred sales charge (CDSC) for six years. Class B shares convert to Class A shares. Class B shares purchased through reinvested dividends and distributions will convert to Class A shares in the same proportion as the other Class B shares. See "Class B and Class C -- CDSC alternative" for information on timing of Class B share conversion to Class A shares. Class C shares have a higher annual distribution fee than Class A shares and a CDSC for one year. Class C shares have no sales charge if you hold the shares for longer than one year. Unlike Class B shares, Class C shares do not convert to Class A shares. As a result, you will pay a distribution fee for as long as you hold Class C shares. If you choose a share class with a CDSC (Class B or Class C), you should consider the length of time you intend to hold your shares. To help you determine which investment is best for you, consult your financial intermediary or financial advisor. * For money market funds, new investments must be made in Class A shares of the fund. The money market funds offer Class B and Class C shares only to facilitate exchanges between classes of these shares in other funds. CLASS I SHARES. The following eligible investors may purchase Class I shares: - Any fund distributed by the distributor, if the fund seeks to achieve its investment objective by investing primarily in shares of funds in the RiverSource Family of Funds. Class I shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. CLASS R AND CLASS Y SHARES. The following eligible institutional investors may purchase Class R2, Class R3, Class R4, Class R5 and Class Y shares: -------------------------------------------------------------------------------- S.5 - Qualified employee benefit plans. - Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code. - Non-qualified deferred compensation plans whose participants are included in a qualified employee benefit plan described above. - State sponsored college savings plans established under Section 529 of the Internal Revenue Code. - Health Savings Accounts created pursuant to public law 108-173. Additionally, if approved by the distributor, the following eligible institutional investors may purchase Class R5 shares: - Institutional or corporate accounts above a threshold established by the distributor (currently $1 million per fund or $10 million in all funds in the RiverSource Family of Funds). - Bank trust departments. Class R and Class Y shares generally are not available to retail non-retirement accounts, traditional and Roth IRAs, Coverdell Educational Savings Accounts, SEPs, SARSEPs, SIMPLE IRAs and individual 403(b) plans. Class R shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. CLASS W SHARES. The following eligible investors may purchase Class W shares: - Investors purchasing through authorized investment programs managed by investment professionals, including discretionary managed account programs. Class W shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. Shares originally purchased in a discretionary managed account may continue to be held in Class W outside of a discretionary managed account, but no additional Class W purchases may be made and no exchanges to Class W shares of another fund may be made outside of a discretionary managed account. IN ADDITION, FOR CLASS I, CLASS R AND CLASS Y SHARES, THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY ACCEPT OR AUTHORIZE FINANCIAL INTERMEDIARIES TO ACCEPT INVESTMENTS FROM OTHER INSTITUTIONAL INVESTORS NOT LISTED ABOVE. IN ADDITION, FOR CLASS W SHARES, THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY ACCEPT OR AUTHORIZE FINANCIAL INTERMEDIARIES TO ACCEPT INVESTMENTS FROM OTHER INVESTORS NOT LISTED ABOVE. Please consult your financial advisor for assistance in selecting the appropriate class of shares. For more information, see the SAI. -------------------------------------------------------------------------------- S.6 SALES CHARGES FOR FUNDS OTHER THAN MONEY MARKET FUNDS CLASS A -- INITIAL SALES CHARGE ALTERNATIVE: Your purchase price for Class A shares is generally the net asset value (NAV) plus a front-end sales charge. The distributor receives the sales charge and re- allows a portion of the sales charge to the financial intermediary through which you purchased the shares. The distributor retains the balance of the sales charge. The distributor retains the full sales charge you pay when you purchase shares of the fund directly from the fund (not through an authorized financial intermediary). Sales charges vary depending on the amount of your purchase. INITIAL SALES CHARGE(A) FOR CLASS A SHARES For equity funds and funds-of-funds (equity)*
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 5.75% 6.10% 5.00% $50,000--$99,999 4.75 4.99 4.00 $100,000--$249,999 3.50 3.63 3.00 $250,000--$499,999 2.50 2.56 2.15 $500,000--$999,999 2.00 2.04 1.75 $1,000,000 or more 0.00 0.00 0.00(c),(d)
For fixed income funds except those listed below and funds-of-funds (fixed income)*
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 4.75% 4.99% 4.00% $50,000--$99,999 4.25 4.44 3.50 $100,000--$249,999 3.50 3.63 3.00 $250,000--$499,999 2.50 2.56 2.15 $500,000--$999,999 2.00 2.04 1.75 $1,000,000 or more 0.00 0.00 0.00(c),(d)
-------------------------------------------------------------------------------- S.7 For RiverSource Absolute Return Currency and Income Fund, RiverSource Floating Rate Fund, RiverSource Inflation Protected Securities Fund, RiverSource Intermediate Tax-Exempt Fund, RiverSource Limited Duration Bond Fund and RiverSource Short Duration U.S. Government Fund
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 3.00% 3.09% 2.50% $50,000--$99,999 3.00 3.09 2.50 $100,000--$249,999 2.50 2.56 2.15 $250,000--$499,999 2.00 2.04 1.75 $500,000--$999,999 1.50 1.52 1.25 $1,000,000 or more 0.00 0.00 0.00(c),(d)
* "Funds-of-funds (equity)" includes -- RiverSource Portfolio Builder Aggressive Fund, RiverSource Portfolio Builder Moderate Aggressive Fund, RiverSource Portfolio Builder Moderate Fund, RiverSource Portfolio Builder Total Equity Fund, RiverSource Retirement Plus 2010 Fund, RiverSource Retirement Plus 2015 Fund, RiverSource Retirement Plus 2020 Fund, RiverSource Retirement Plus 2025 Fund, RiverSource Retirement Plus 2030 Fund, RiverSource Retirement Plus 2035 Fund, RiverSource Retirement Plus 2040 Fund, RiverSource Retirement Plus 2045 Fund, Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025, Seligman TargETFund 2015 and Seligman TargETFund Core. "Funds-of-funds (fixed income)" includes -- RiverSource Income Builder Basic Income Fund, RiverSource Income Builder Enhanced Income Fund, RiverSource Income Builder Moderate Income Fund, RiverSource Portfolio Builder Conservative Fund and RiverSource Portfolio Builder Moderate Conservative Fund. (a) Because of rounding in the calculation of the offering price, the portion of the sales charge retained by the distributor may vary and the actual sales charge you pay may be more or less than the sales charge calculated using these percentages. (b) Purchase price includes the sales charge. (c) Although there is no sales charge for purchases with a total market value over $1,000,000, and therefore no re-allowance, the distributor may pay a financial intermediary the following out of its own resources: a sales commission of up to 1.00% for a sale of $1,000,000 to $3,999,999; a sales commission up to 0.50% for a sale of $4,000,000 to $49,999,999; and a sales commission up to 0.25% for a sale of $50,000,000 or more. (d) For certain eligible employee benefit plans defined under section 401(a), 401(k), 457 and 403(b) which meet eligibility rules for the waiver of applicable sales charges, the distributor may pay the following out of its own resources: a sales commission of 1.00% for a sale of $1 to $3,999,999 received in eligible employee benefit plans; a sales commission up to 0.50% for a sale of $4,000,000 to $49,999,999; and a sales commission up to 0.25% for a sale of $50,000,000 or more. See "Initial Sales Charge -- Waivers of the sales charge for Class A shares" for employee benefit plan eligibility rules. There is no initial sales charge on reinvested dividends or capital gain distributions. INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA). You may be able to reduce the sales charge on Class A shares, based on the combined market value of accounts in your ROA group. Your ROA group includes the current market values of the following investments which are eligible to be added together for purposes of determining the sales charge on your next purchase: - Your current investment in a fund; and -------------------------------------------------------------------------------- S.8 - Previous investments you and members of your household have made in Class A, Class B or Class C shares in the fund and other funds in the RiverSource Family of Funds, provided your investment was subject to a sales charge. Your household consists of you, your spouse or domestic partner and your unmarried children under age 21, all of whom share a mailing address. The following accounts are eligible to be included in your ROA group in order to determine the sales charge on your purchase: - Individual or joint accounts; - Roth and traditional IRAs, SEPs, SIMPLEs and TSCAs, provided they are invested in Class A, Class B or Class C shares that were subject to a sales charge; - UGMA/UTMA accounts for which you, your spouse, or your domestic partner is parent or guardian of the minor child; - Revocable trust accounts for which you or a member of your household, individually, is the beneficial owner/grantor; - Accounts held in the name of your, your spouse's, or your domestic partner's sole proprietorship or single owner limited liability company or S corporation; and - Qualified retirement plan assets, provided that you are the sole owner of the business sponsoring the plan, are the sole participant (other than a spouse) in the plan, and have no intention of adding participants to the plan. The following accounts are NOT eligible to be included in your ROA group in order to determine the sales charge on your purchase: - Accounts of pension and retirement plans with multiple participants, such as 401(k) plans (which are combined to reduce the sales charge for the entire pension or retirement plan and therefore are not used to reduce the sales charge for your individual accounts); - Investments in Class A shares where the sales charge is waived, for example, purchases through wrap accounts; - Investments in Class I, Class R2, Class R3, Class R4, Class R5, Class W or Class Y shares; - Investments in 529 plans, donor advised funds, variable annuities, variable life insurance products, wrap accounts or managed separate accounts; and - Charitable and irrevocable trust accounts. If you purchase fund shares through different financial intermediaries, and you want to include those assets toward a reduced sales charge, you must inform your financial intermediary in writing about the other accounts when placing your purchase order. Contact your financial intermediary to determine what information is required. -------------------------------------------------------------------------------- S.9 Unless you provide your financial intermediary in writing with information about all of the accounts that may count toward a sales charge reduction, there can be no assurance that you will receive all of the reductions for which you may be eligible. You should request that your financial intermediary provide this information to the fund when placing your purchase order. For more information on ROA, please see the SAI. INITIAL SALES CHARGE -- LETTER OF INTENT (LOI). Generally, if you intend to invest $50,000 or more (including any existing ROA) over a period of up to 13 months, you may be able to reduce the front-end sales charge(s) for investments in Class A shares by completing and filing an LOI. The required form of LOI may vary by financial intermediary. Existing ROA can be included in your LOI. Each purchase of fund shares normally subject to an initial sales charge made during the 13-month period will be made at the public offering price applicable to a single transaction of the total dollar amount indicated by the LOI. Five percent of the commitment amount will be placed in escrow. At the end of the 13-month period, the LOI will end and the shares will be released from escrow. If you do not invest the commitment amount by the end of the 13 months, the remaining amount of the unpaid sales charge will be redeemed from the escrowed shares and the remaining balance released from escrow. Existing ROA Example. Shareholder currently has $60,000 ROA in the funds. Shareholder completes an LOI to invest $100,000 in the funds (ROA eligible accounts). Shareholder only needs to invest an additional $40,000 in the funds' Class A shares (any non-money market fund in the RiverSource Family of Funds) in order to fulfill the LOI commitment and receive reduced front-end sales charge(s) over the next 13 months. Notification Obligation. You must request the reduced sales charge when you buy shares. If you do not complete and file an LOI, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge. You should request that your financial intermediary provide this information to the fund when placing your purchase order. For more detail on LOIs, please contact your financial intermediary or see the SAI. INITIAL SALES CHARGE -- WAIVERS OF THE SALES CHARGE FOR CLASS A SHARES. Sales charges do not apply to: - current or retired Board members, officers or employees of the funds or RiverSource Investments or its affiliates, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - current or retired Ameriprise Financial Services, Inc. financial advisors, employees of financial advisors, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. -------------------------------------------------------------------------------- S.10 - registered representatives and other employees of affiliated or unaffiliated financial intermediaries having a selling agreement with the distributor, including their spouses, domestic partners, children, parents and their spouse's or domestic partner's parents. - portfolio managers employed by subadvisers of the funds, including their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - partners and employees of outside legal counsel to the funds or the funds' directors or trustees who regularly provide advice and services to the funds, or to their directors or trustees. - direct rollovers from qualified employee benefit plans, provided that the rollover involves a transfer to Class A shares in the same fund. - purchases made: - with dividend or capital gain distributions from a fund or from the same class of another fund in the RiverSource Family of Funds; - through or under a wrap fee product or other investment product sponsored by a financial intermediary that charges an account management fee that has, or that clear trades through a financial intermediary that has, a selling agreement with the distributor; - through state sponsored college savings plans established under Section 529 of the Internal Revenue Code; or - through bank trust departments. - separate accounts established and maintained by an insurance company which are exempt from registration under Section 3(c)(11). - purchases made through "employee benefit plans" created under section 401(a), 401(k), 457 and 403(b) which: - have at least $1 million in plan assets at the time of investment; and - have a plan level or omnibus account that is maintained with the fund or its transfer agent; and - transact directly with the fund or its transfer agent through a third party administrator or third party recordkeeper. For more information regarding waivers of sales charge for Class A purchases, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of sales charges for additional classes of investors. Policies related to reducing or waiving the sales charge may be modified or withdrawn at any time. -------------------------------------------------------------------------------- S.11 Unless you provide your financial intermediary with information in writing about all of the factors that may count toward a waiver of the sales charge, there can be no assurance that you will receive all of the waivers for which you may be eligible. You should request that your financial intermediary provide this information to the fund when placing your purchase order. Because the current prospectus is available on the funds' website (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com free of charge, information regarding breakpoint discounts is not separately disclosed on the website. CDSCS AND THE COMBINATION OF TARGET DATE FUNDS WITH SELIGMAN TARGETFUND CORE. Each of Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025 and Seligman TargETFund 2015 (the Target Date Funds) will automatically be combined with Seligman TargETFund Core during their respective target year. The investment manager expects each of these combinations to be effected as an acquisition of the assets and liabilities of the applicable Target Date Fund in exchange for shares of Seligman TargETFund Core at net asset value, with the shares of Seligman TargETFund Core then distributed to shareholders of the applicable Target Date Fund. For the purpose of calculating CDSCs, holding periods in respect of shares of a Target Date Fund will be carried over to shares of Seligman TargETFund Core acquired as a result of the combination of a Target Date Fund with Seligman TargETFund Core. CLASS A -- CONTINGENT DEFERRED SALES CHARGE For Class A shares purchased without a sales charge where a commission was separately paid by the distributor to an authorized financial intermediary effecting the purchase, a 1% CDSC may be charged if you sell your shares within 18 months after purchase. A CDSC will be based on the original purchase cost or the current market value of the shares being sold, whichever is less. CDSC -- WAIVERS OF THE CDSC FOR CLASS A SHARES. The CDSC will be waived on sales of shares: - to which no sales commission or transaction fee was paid to an authorized financial intermediary at the time of purchase. - purchased through reinvestment of dividends and capital gain distributions. - in the event of the shareholder's death. - from a monthly, quarterly or annual systematic redemption plan of up to an annual amount of 12% of the account value on a per fund basis. - in an account that has been closed because it falls below the minimum account balance. - that result from required minimum distributions taken from retirement accounts upon the shareholders attainment of age 70 1/2. -------------------------------------------------------------------------------- S.12 - that result from returns of excess contributions or excess deferral amounts made to a retirement plan participant. - of RiverSource funds purchased prior to Dec. 1, 2008. - initially purchased by an employee benefit plan that is not connected with a plan level termination. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. CLASS B AND CLASS C -- CDSC ALTERNATIVE The money market funds (except RiverSource Tax-Exempt Money Market Fund) offer Class B and Class C shares, but only to facilitate exchanges with other funds offering Class B and Class C shares, respectively. For example, if you own Class B or Class C shares of another fund, but want to hold your money in a money market fund, you may exchange into Class B or Class C shares of a money market fund. Funds that offer Class B and Class C shares have limitations on the amount you may invest in those share classes. If you are considering purchasing Class B or Class C shares of a fund, please see the prospectus for that fund for any effective purchase limitations. Although you may not purchase Class B and Class C shares of the money market funds directly, if you exchange into Class B or Class C shares of a money market fund from another fund, you will be subject to the rules governing CDSC set forth in this section. To minimize the amount of CDSC you may pay when you sell your shares, the fund assumes that shares acquired through reinvested dividends and capital gain distributions (which are not subject to CDSC) are sold first. Shares that have been in your account long enough so that they are not subject to a CDSC are sold next. After these shares are exhausted, shares will be sold in the order they were purchased (earliest to latest). -------------------------------------------------------------------------------- S.13 FOR CLASS B, the CDSC is based on the sale amount and the number of years between purchase and sale. The following table shows how CDSC percentages on sales decline over time:
IF THE SALE IS MADE DURING THE: THE CDSC PERCENTAGE RATE IS:* First year 5% Second year 4% Third year 3%** Fourth year 3% Fifth year 2% Sixth year 1% Seventh or eighth year 0%
* Because of rounding in the calculation, the portion of the CDSC retained by the distributor may vary and the actual CDSC you pay may be more or less than the CDSC calculated using these percentages. ** For shares purchased in a RiverSource fund on or prior to June 12, 2009, the CDSC percentage for the third year is 4%. Although there is no front-end sales charge when you buy Class B shares, the distributor pays a sales commission of 4% to financial intermediaries that sell Class B shares. A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class B shares. You may not make additional purchases of Class B shares if your ROA exceeds $49,999.99. Class B shares purchased in a RiverSource fund prior to May 21, 2005 age on a calendar year basis. Class B shares purchases made in a RiverSource fund beginning May 21, 2005 age on a daily basis. For example, a purchase made on Nov. 12, 2004 completed its first year on Dec. 31, 2004 under calendar year aging. However, a purchase made on Nov. 12, 2005 completed its first year on Nov. 11, 2006 under daily aging. Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund on or prior to June 12, 2009 will convert to Class A shares in the month prior to the ninth year of ownership. Class B shares purchased in a RiverSource fund beginning May 21, 2005 and Class B shares purchased in a Seligman fund beginning June 13, 2009 will convert to Class A shares one month after the completion of the eighth year of ownership. -------------------------------------------------------------------------------- S.14 FOR CLASS C, a 1% CDSC may be charged if you sell your shares within one year after purchase. Although there is no front-end sales charge when you buy Class C shares, the distributor pays a total amount up to 1% (including sales commission and advance of service fees) to financial intermediaries that sell Class C shares. See "Buying and Selling Shares -- Distribution and Service Fees." A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class C shares. You may not make additional purchases of Class C shares if your ROA exceeds $999,999.99. For both Class B and Class C shares, the amount of any CDSC you pay will be based on the lower of the original purchase price of those shares or current net asset value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you do not have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. EXAMPLE Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3 1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase. CDSC -- WAIVERS OF THE CDSC FOR CLASS B SHARES. The CDSC will be waived on sales of shares: - in the event of the shareholder's death. - that result from required minimum distributions taken from retirement accounts upon the shareholders' attainment of age 70 1/2. - sold under an approved substantially equal periodic payment arrangement. - by certain other investors, including certain institutions as set forth in more detail in the SAI. For more information regarding waivers of the CDSC for Class B shares, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. -------------------------------------------------------------------------------- S.15 CDSC -- WAIVERS OF THE CDSC FOR CLASS C SHARES. The CDSC will be waived on sales of shares: - in the event of the shareholder's death. - to which no sales commission or transaction fee was paid to an authorized financial intermediary at the time of purchase. - that result from required minimum distributions taken from retirement accounts upon the shareholders' attainment of age 70 1/2. - initially purchased by an eligible employee benefit plan that are not connected with a plan level termination. - by certain other investors, including certain institutions as set forth in more detail in the SAI. For more information regarding waivers of the CDSC for Class C shares, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. CLASS I, CLASS R2, CLASS R3, CLASS R4, CLASS R5, CLASS W AND CLASS Y -- NO SALES CHARGE. For each of Class I, Class R2, Class R3, Class R4, Class R5 and Class W there is no initial sales charge or CDSC. OPENING AN ACCOUNT Financial institutions are required by law to obtain certain personal information from each person who opens an account in order to verify the identity of the person. As a result, when you open an account you will be asked to provide your name, permanent street address, date of birth, and Social Security or Employer Identification number. You may also be asked for other identifying documents or information. If you do not provide this information, the fund or the financial intermediary through which you are investing in the fund may not be able to open an account for you. If the fund or the financial intermediary through which you are investing in the fund is unable to verify your identity, your account may be closed, or other steps may be taken, as deemed appropriate. When you buy shares, your order will be priced at the next NAV calculated after your order is accepted by the fund or an authorized financial intermediary. Any applicable sales charge will be added to the purchase price for Class A shares. You may establish and maintain your account with an authorized financial intermediary or directly with the fund. The fund may appoint servicing agents to accept purchase orders and to accept exchange (and sale) orders on its behalf. Accounts established with the fund will be supported by the fund's transfer agent. -------------------------------------------------------------------------------- S.16 METHODS OF PURCHASING SHARES These methods of purchasing shares generally apply to Class A, Class B, and Class C shares. CLASS B SHARES OF RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND IS CURRENTLY CLOSED TO INVESTORS FOR NEW PURCHASES. CLASS B SHARES FOR RIVERSOURCE FLOATING RATE FUND, RIVERSOURCE INFLATION PROTECTED SECURITIES FUND, RIVERSOURCE INTERMEDIATE TAX-EXEMPT FUND, RIVERSOURCE LIMITED DURATION BOND FUND AND RIVERSOURCE SHORT DURATION U.S. GOVERNMENT FUND ARE CLOSED TO NEW INVESTORS AND NEW PURCHASES. EXISTING SHAREHOLDERS IN THESE FUNDS MAY CONTINUE TO OWN CLASS B SHARES AND MAKE EXCHANGES INTO AND OUT OF EXISTING ACCOUNTS WHERE CLASS B SHARES OF THESE FUNDS ARE MAINTAINED. ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INTERMEDIARY ALL REQUESTS The financial intermediary through which you buy shares may have different policies not described in this prospectus, including different minimum investment amounts and minimum account balances. -------------------------------------------------------------------------------- ACCOUNT ESTABLISHED WITH THE FUND BY MAIL You or the financial intermediary through which you buy shares may establish an account with the fund. To establish an account in this fashion, complete a fund account application with your financial advisor or investment professional, and mail the account application to the address below. Account applications may be obtained (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com or may be requested by calling (800) 221-2450. Make your check payable to the fund. The fund does not accept cash, credit card convenience checks, money orders, traveler's checks, starter checks, third or fourth party checks, or other cash equivalents. ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.17 METHODS OF PURCHASING SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) Mail your check and completed application to: REGULAR MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL P.O. BOX 8041 BOSTON, MA 02266-8041 EXPRESS MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL 30 DAN ROAD CANTON, MA 02021-2809 If you already have an account, include your name, account number, and the name of the fund and class of shares you wish to purchase along with your check. You can make scheduled investments in the fund by moving money from your checking account or savings account. See the Minimum Investment and Account Balance chart below for more information regarding scheduled investment plans. -------------------------------------------------------------------------------- BY WIRE OR ACH Fund shares purchased in an account established and maintained with the fund may be paid for by federal funds wire. Before sending a wire, call (800) 221-2450 to notify the fund's transfer agent of the wire and to receive further instructions. If you are establishing an account with a wire purchase, you are required to send a signed account application to the address above. Please include the wire control number or your new account number on the application. Your bank or financial intermediary may charge additional fees for wire transactions. -------------------------------------------------------------------------------- BY EXCHANGE Call (800) 221-2450 or send signed written instructions to the address above. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.18 METHODS OF PURCHASING SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) MINIMUM INVESTMENT AND ACCOUNT BALANCE
RIVERSOURCE RIVERSOURCE 120/20 DISCIPLINED CONTRARIAN SMALL CAP EQUITY FUND VALUE FUND THREADNEEDLE RIVERSOURCE FOR ALL FUNDS, GLOBAL EXTENDED FLOATING RATE CLASSES AND ALPHA FUND FUND ACCOUNTS EXCEPT RIVERSOURCE RIVERSOURCE THOSE LISTED TO ABSOLUTE RETURN INFLATION THE RIGHT TAX QUALIFIED CURRENCY AND PROTECTED (NONQUALIFIED) ACCOUNTS INCOME FUND SECURITIES FUND CLASS W --------------------------------------------------------------------------------------------------------------- INITIAL INVESTMENT $2,000 $1,000 $10,000 $5,000 $500 --------------------------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $100 $100 $100 None --------------------------------------------------------------------------------------------------------------- ACCOUNT BALANCE* $1,000 None $5,000 $2,500 $500
*If your fund account balance falls below the minimum account balance for any reason, including a market decline, you may be asked to increase it to the minimum account balance or establish a scheduled investment plan. If you do not do so within 30 days, your shares may be automatically redeemed and the proceeds mailed to you. ------------------------------------------------------------------------------- MINIMUM INVESTMENT AND ACCOUNT BALANCE -- SCHEDULED INVESTMENT PLANS
RIVERSOURCE RIVERSOURCE 120/20 DISCIPLINED CONTRARIAN SMALL CAP EQUITY FUND VALUE FUND THREADNEEDLE RIVERSOURCE FOR ALL FUNDS, GLOBAL EXTENDED FLOATING RATE CLASSES AND ALPHA FUND FUND ACCOUNTS EXCEPT RIVERSOURCE RIVERSOURCE THOSE LISTED TO ABSOLUTE RETURN INFLATION THE RIGHT TAX QUALIFIED CURRENCY AND PROTECTED (NONQUALIFIED) ACCOUNTS INCOME FUND SECURITIES FUND CLASS W --------------------------------------------------------------------------------------------------------------- INITIAL INVESTMENT $100(a) $100(b) $10,000 $5,000 $500 --------------------------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $50 $100 $100 None --------------------------------------------------------------------------------------------------------------- ACCOUNT BALANCE** None(b) None $5,000 $2,500 $500
**If your fund account balance is below the minimum initial investment described above, you must make payments at least monthly. (a)Money Market Funds -- $2,000 (b)Money Market Funds -- $1,000 ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.19 These minimums may be waived for accounts that are managed by an investment professional, for accounts held in approved discretionary or non-discretionary wrap programs, for accounts that are a part of an employer-sponsored retirement plan, or for other account types if approved by the distributor. The fund reserves the right to modify its minimum account requirements at any time, with or without prior notice. Please contact your financial intermediary for information regarding wire or electronic funds transfer. IMPORTANT: Payments sent by electronic fund transfers (ACH), a bank authorization or check that are not guaranteed may take up to 14 days to clear. If you request a sale within 14 days of purchase, this may cause your sale request to fail to process if the requested amount includes unguaranteed funds. EXCHANGING OR SELLING SHARES You may exchange or sell shares by having your financial intermediary process your transaction. If you maintain your account directly with your financial intermediary, you must contact that financial intermediary to exchange or sell shares of the fund. If your account was established with the fund, there are a variety of methods you may use to exchange or sell shares of the fund. WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INTERMEDIARY ALL REQUESTS You can exchange or sell shares by having your financial intermediary process your transaction. The financial intermediary through which you purchased shares may have different policies not described in this prospectus, including different transaction limits, exchange policies and sale procedures. -------------------------------------------------------------------------------- ACCOUNT ESTABLISHED WITH THE FUND BY MAIL Mail your exchange or sale request to: REGULAR MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL P.O. BOX 8041 BOSTON, MA 02266-8041 EXPRESS MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL 30 DAN ROAD CANTON, MA 02021-2809 ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.20 WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) Include in your letter: - your name - the name of the fund(s) - your account number - the class of shares to be exchanged or sold - your Social Security number or Employer Identification number - the dollar amount or number of shares you want to exchange or sell - specific instructions regarding delivery or exchange destination - signature(s) of registered account owner(s) - any special documents the transfer agent may require in order to process your order Corporate, trust or partnership accounts may need to send additional documents. Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners. A Medallion Signature Guarantee is required if: - Amount is over $50,000. - You want your check made payable to someone other than the registered account owner(s). - Your address of record has changed within the last 30 days. - You want the check mailed to an address other than the address of record. - You want the proceeds sent to a bank account not on file. - You are the beneficiary of the account and the account owner is deceased (additional documents may be required). A Medallion Signature Guarantee assures that a signature is genuine and not a forgery. The financial intermediary providing the Guarantee is financially liable for the transaction if the signature is a forgery. Eligible guarantors include commercial banks, trust companies, savings associations, and credit unions as defined by the Federal Deposit Insurance Act. Note: A guarantee from a notary public is not acceptable. ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.21 WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) NOTE: Any express mail delivery charges you pay will vary depending on domestic or international delivery instructions. -------------------------------------------------------------------------------- BY TELEPHONE Call (800) 221-2450. Unless you elect not to have telephone exchange and sale privileges, they will automatically be available to you. Reasonable procedures will be used to confirm authenticity of telephone exchange or sale requests. Telephone privileges may be modified or discontinued at any time. Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate, qualified retirement accounts and trust accounts which the current trustee is not listed. You may request that these privileges NOT apply by writing to the address above. Payment will be mailed to the address of record and made payable to the names listed on the account. Telephone sale requests are limited to $50,000 per day. -------------------------------------------------------------------------------- BY WIRE OR ACH You can wire money from your fund account to your bank account. Make sure we have your bank account information on file. If we do not have this information, you will need to send written instructions with your bank's name and a voided check or savings account deposit slip. Call (800) 221-2450 or send a letter of instruction, with a Medallion Signature Guarantee if required, to the address above. A service fee may be charged against your account for each wire sent. Minimum amount: by ACH: $100 by wire: $500 Your bank or financial intermediary may charge additional fees for wire transactions. -------------------------------------------------------------------------------- BY SCHEDULED You may elect to receive regular periodic payments through an PAYOUT PLAN automatic sale of shares. See the SAI for more information. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.22 CHECK REDEMPTION SERVICE Class A shares of the money market funds offer check writing privileges. If you have $2000 in a money market fund, you may request checks which may be drawn against your account. You can elect this service on your initial application, or, thereafter. Call (800) 221-2450 for the appropriate forms to establish this service. If you own Class A shares that were both in another fund at NAV because of the size of the purchase, and then exchanged into a money market fund, check redemptions may be subject to a CDSC. EXCHANGES Generally, you may exchange your fund shares for shares of the same class of any other publicly offered fund in the RiverSource Family of Funds without a sales charge. For complete information on the fund you are exchanging into, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after your transaction request is received in good order. You may be subject to a sales charge if you exchange from a money market fund into an equity or fixed income fund. IF YOU HOLD YOUR FUND SHARES IN AN ACCOUNT WITH AMERIPRISE FINANCIAL SERVICES, YOU MAY HAVE LIMITED EXCHANGEABILITY WITHIN THE RIVERSOURCE FAMILY OF FUNDS. MARKET TIMING SHORT-TERM TRADING AND OTHER SO-CALLED MARKET TIMING PRACTICES ARE FREQUENT TRADING PRACTICES BY CERTAIN SHAREHOLDERS INTENDED TO PROFIT AT THE EXPENSE OF OTHER SHAREHOLDERS BY SELLING SHARES OF A FUND SHORTLY AFTER PURCHASE. MARKET TIMING MAY ADVERSELY IMPACT A FUND'S PERFORMANCE BY PREVENTING THE INVESTMENT MANAGER FROM FULLY INVESTING THE ASSETS OF THE FUND, DILUTING THE VALUE OF SHARES HELD BY LONG-TERM SHAREHOLDERS, OR INCREASING THE FUND'S TRANSACTION COSTS. -------------------------------------------------------------------------------- S.23 FOR A FUND ORGANIZED AS A FUND-OF-FUNDS, ITS ASSETS CONSIST PRIMARILY OF SHARES OF THE UNDERLYING FUNDS IN WHICH IT INVESTS. THE UNDERLYING FUNDS MAY BE MORE SUSCEPTIBLE TO THE RISKS OF MARKET TIMING. FUNDS THAT INVEST DIRECTLY IN SECURITIES THAT TRADE INFREQUENTLY MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF INEFFICIENCIES IN THE SECURITIES MARKETS. FUNDS AND THE UNDERLYING FUNDS THAT INVEST IN SECURITIES THAT TRADE ON OVERSEAS SECURITIES MARKETS MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF CHANGES IN THE VALUES OF SECURITIES BETWEEN THE CLOSE OF OVERSEAS MARKETS AND THE CLOSE OF U.S. MARKETS, WHICH IS GENERALLY THE TIME AT WHICH A FUND'S NAV IS CALCULATED. TO THE EXTENT THAT A FUND OR UNDERLYING FUND HAS SIGNIFICANT HOLDINGS OF SMALL CAP STOCKS, FLOATING RATE LOANS, HIGH YIELD BONDS, TAX-EXEMPT SECURITIES OR FOREIGN SECURITIES, THE RISKS OF MARKET TIMING MAY BE GREATER FOR THE FUND THAN FOR OTHER FUNDS. SEE "PRINCIPAL INVESTMENT STRATEGIES" FOR A DISCUSSION OF THE TYPES OF SECURITIES IN WHICH YOUR FUND INVESTS. SEE "PRICING AND VALUING OF FUND SHARES" FOR A DISCUSSION OF THE FUNDS' POLICY ON FAIR VALUE PRICING, WHICH IS INTENDED, IN PART, TO REDUCE THE FREQUENCY AND EFFECT OF MARKET TIMING. THE FUNDS' BOARD HAS ADOPTED A POLICY THAT IS DESIGNED TO DETECT AND DETER MARKET TIMING THAT MAY BE HARMFUL TO THE FUNDS. EACH FUND SEEKS TO ENFORCE THIS POLICY THROUGH ITS SERVICE PROVIDERS AS FOLLOWS: - The fund tries to distinguish market timing from trading that it believes is not harmful, such as periodic rebalancing for purposes of asset allocation or dollar cost averaging or other purchase and exchange transactions not believed to be inconsistent with the best interest of fund shareholders or the Board's policy. The fund uses a variety of techniques to monitor for and detect abusive trading practices. These techniques may vary depending on the type of fund, the class of shares and where the shares are maintained. Under the fund's procedures, there is no set number of transactions in the fund that constitutes market timing. Even one purchase and subsequent sale by related accounts may be market timing. Generally, the fund seeks to restrict the exchange privilege of an investor who makes more than three exchanges into or out of the fund in any 90-day period. Accounts held by a retirement plan or a financial intermediary for the benefit of its participants or clients, which typically engage in daily transactions, are not subject to this limit, although the fund may seek the assistance of financial intermediaries in applying similar restrictions on their participants or clients. The fund's ability to monitor and discourage abusive trading practices in omnibus accounts is more limited. - The fund may rely on the monitoring policy of a financial intermediary, for example, a retirement plan administrator or similar financial intermediary authorized to distribute the funds, if it determines the policy and procedures of such financial intermediaries are sufficient to protect the fund and its shareholders. -------------------------------------------------------------------------------- S.24 - If an investor's trading activity is determined to be market timing or otherwise harmful to existing shareholders, the fund reserves the right to modify or discontinue the investor's exchange privilege or reject the investor's purchases or exchanges, including purchases or exchanges accepted by a financial intermediary. The fund may treat accounts it believes to be under common control as a single account for these purposes, although it may not be able to identify all such accounts. - Although the fund does not knowingly permit market timing, it cannot guarantee that it will be able to identify and restrict all short-term trading activity. The fund receives purchase and sale orders through financial intermediaries where market timing activity may not always be successfully detected. Other exchange policies: - Exchanges must be made into the same class of shares of the share class being exchanged out of. - Exchanges into RiverSource Tax-Exempt Money Market Fund may be made only from Class A shares. - If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. - Once the fund receives your exchange request, you cannot cancel it after the market closes. - Shares of the purchased fund may not be used on the same day for another exchange or sale. - New investments in Class A shares of a money market fund may be exchanged for either Class A, Class B or Class C shares of any other publicly offered fund in the RiverSource Family of Funds. - If you exchange shares from Class A shares of a money market fund to another fund in the RiverSource Family of Funds, any further exchanges must be between shares of the same class. For example, if you exchange from Class A shares of a money market fund into Class B shares of another fund in the RiverSource Family of Funds, you may not exchange from Class B shares of that fund back to Class A shares of a money market fund. Exchange rules for money market funds are illustrated in the following tables. - Shares of Class W originally purchased, but no longer held in a discretionary managed account, may not be exchanged for Class W shares of another fund. You may continue to hold these shares in the fund. Changing your investment to a different fund will be treated as a sale and purchase, and you will be subject to applicable taxes on the sale and sales charges on the purchase of the new fund. -------------------------------------------------------------------------------- S.25 - If your shares are subject to a CDSC, you will not be charged a CDSC upon the exchange of those shares. Any CDSC will be deducted when you sell the shares you received from the exchange. The CDSC imposed at that time will be based on the period that begins when you bought shares of the original fund and ends when you sell the shares of the fund you exchanged to.
TO OTHER FUNDS FROM A MONEY MARKET FUND ----------------------------- CLASS A CLASS B CLASS C -------------------------------------------------------------------- Class A Yes Yes Yes Class B No Yes No Class C No No Yes
TO A MONEY MARKET FUND FROM OTHER FUNDS ----------------------------- CLASS A CLASS B CLASS C -------------------------------------------------------------------- Class A Yes No No Class B No Yes No Class C No No Yes
If your initial investment was in a money market fund and you exchange into an equity or fixed income fund, you will pay an initial sales charge if you exchange into Class A and be subject to a CDSC if you exchange into Class B or Class C. If your initial investment was in Class A shares of an equity or fixed income fund and you exchange shares into a money market fund, you may exchange that amount to another fund, including dividends earned on that amount, without paying a sales charge. SELLING SHARES You may sell your shares at any time. The payment will be sent within seven days after your request is received in good order. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order, minus any applicable CDSC. REPURCHASES. You can change your mind after requesting a sale of shares and use all or part of the sale proceeds to purchase new shares of a fund in the RiverSource Family of Funds. If your original purchase was in Class A or Class B, you may use all or part of the sale proceeds to purchase new Class A shares in any fund account linked together for ROA purposes. Your repurchase will be in Class A shares at NAV, up to the amount of the sale proceeds. For a Class A repurchase on shares that were originally charged a CDSC, the amount of the CDSC will be reinvested at the NAV on the date the repurchase is processed. Repurchases of Class B shares will also be in Class A shares at NAV. Any CDSC paid upon redemption of your Class B shares will not be reimbursed. If your original purchase was in Class C, you will be allowed to reinvest in the -------------------------------------------------------------------------------- S.26 same Class C account and fund you originally purchased. In a Class C repurchase, the CDSC you paid will be reinvested and the shares will be deemed to have the original cost and purchase date for purposes of applying the CDSC (if any) to subsequent redemptions. Systematic withdrawals and purchases will be excluded from this policy. In order for you to take advantage of this repurchase waiver, you must notify your financial intermediary or the fund's transfer agent if your account is held at the fund within 90 days of the date your sale request was processed. Contact your financial intermediary for information on required documentation. The repurchase privilege may be modified or discontinued at any time and use of this option may have tax consequences. If you sold shares of a Seligman fund on or before February 3, 2009 and wish to repurchase shares, you have the option of taking advantage of the current repurchase policy (described above) within 90 days of the date your sale request was processed, or you may use all or part of your sale proceeds to purchase shares of the fund you sold or any other fund in the RiverSource Family of Funds without paying an initial sales charge or, if you paid a CDSC when you sold your shares, receiving a credit for the applicable CDSC, within 120 days of the date your sale request was processed. Contact your financial intermediary or, if you opened an account directly with the fund, the transfer agent, for more information on the required documentation to complete a repurchase transaction. The fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. PRICING AND VALUING OF FUND SHARES For classes of shares sold with an initial sales charge, the public offering or purchase price is the net asset value plus the sales charge. For funds or classes of shares sold without an initial sales charge, the public offering price is the NAV. Orders in good form are priced at the NAV next determined after you place your order. Good form or good order means that your instructions have been received in the form required by the fund. This may include, for example, providing the fund name and account number, the amount of the transaction and all required signatures. The NAV is the value of a single share of the fund. The NAV is determined by dividing the value of the fund's assets, minus any liabilities, by the number of shares outstanding. The NAV is calculated as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. For a fund organized as a fund-of-funds, the assets will consist primarily of shares of the underlying funds, which are valued at their NAVs. Securities are valued primarily on the basis of market quotations and floating rate loans are valued primarily on the basis of indicative bids. Both market quotations -------------------------------------------------------------------------------- S.27 and indicative bids are obtained from outside pricing services approved and monitored under procedures adopted by the Board. Certain short-term securities with maturities of 60 days or less are valued at amortized cost. When reliable market quotations or indicative bids are not readily available, investments are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of an investment held by a fund or underlying fund is materially affected by events that occur after the close of a securities market but prior to the time as of which the fund's or underlying fund's NAV is determined. Valuing investments at fair value involves reliance on judgment. The fair value of an investment is likely to differ from any available quoted or published price. To the extent that a fund or an underlying fund has significant holdings of small cap stocks, high yield bonds, floating rate loans, tax-exempt securities or foreign securities that may trade infrequently, fair valuation may be used more frequently than for other funds. The funds use an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of a fund's or an underlying fund's securities may be listed on foreign exchanges that trade on weekends or other days when the fund does not price its shares. In that event, the NAV of the fund's or underlying fund's shares may change on days when shareholders will not be able to purchase or sell the fund's or underlying fund's shares. For money markets funds -- The fund's investments are valued at amortized cost, which approximates market value, as explained in the SAI. Although the fund cannot guarantee it will always be able to maintain a constant net asset value of $1 per share, it will use its best efforts to do so. DISTRIBUTIONS AND TAXES As a shareholder you are entitled to your share of your fund's net income and net gains. Each fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS Your fund's net investment income is distributed to you as dividends. Dividends may be composed of qualified dividend income, which is eligible for preferential tax rates under current tax law, as well as other ordinary dividend income, which may include dividends which are non-qualified dividends, interest income and short-term capital gains. Because of the types of income earned by fixed income funds, it is unlikely the funds will distribute qualified dividend income. Generally, capital gains are realized when a security is sold for a higher price than was paid for it. Generally, capital losses are realized when a security is sold for a lower price than was paid for it. Typically, each realized capital gain or loss is long-term or short-term depending on the length of time the fund held the -------------------------------------------------------------------------------- S.28 security. Realized capital gains and losses offset each other. The fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains, if any, are included in net investment income and are taxable as ordinary income when distributed to the shareholder. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. If the fund's distributions exceed its current and accumulated earnings and profits, that portion of the fund's distributions will be treated as a return of capital to the shareholders to the extent of their basis in their shares. A return of capital will generally not be taxable; however, any amounts received in excess of basis are treated as capital gain. Forms 1099 sent to shareholders report any return of capital. Certain derivative instruments subject the fund to special tax rules, the effect of which may be to accelerate income to the fund, defer fund losses, cause adjustments in the holding periods of fund securities, convert capital gains into ordinary income and convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders. For Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025, Seligman TargETF 2015 and Seligman TargETFund Core (the Seligman TargETFunds) -- The Funds may purchase or sell (write) options. In general, option premiums which may be received by the Funds are not immediately included in the income of the Funds. Instead, such premiums are taken into account when the option contract expires, the option is exercised by the holder, or the Funds transfer or otherwise terminate the option. If an option written by a Fund is exercised and such Fund sells or delivers the underlying security, such Fund generally will recognize capital gain or loss equal to (a) the sum of the exercise price and the option premium received by the Fund minus (b) the Fund's basis in the security. Such gain or loss generally will be short-term or long- term depending upon the holding period of the underlying security. Gain or loss with respect to any termination of a Fund's obligation under an option other than through the exercise of the option and the related sale or delivery of the underlying security generally will be short-term gain or loss. Thus, for example, if an option written by a Fund expires unexercised, such Fund generally will recognize short-term gain equal to the premium received. -------------------------------------------------------------------------------- S.29 The Seligman TargETFunds generally will pay any dividends from its net investment income and distributes any net capital gains realized on investments at least annually (Seligman TargETFund Core generally will pay dividends from its net investment income on a quarterly basis). Because each Seligman TargETFund may sell underlying ETFs, US government securities and short-term debt instruments: (a) to accommodate redemptions of its shares; (b) in respect of the Target Date Funds, to implement the process of migration; and (c) to adjust the percentages of its assets invested in each underlying ETF, US government securities, short-term debt instruments, cash and cash equivalents in response to economic, market or other conditions or events, and changes in Seligman Time Horizon Matrix (the asset allocation methodology utilized by the Seligman TargETFunds), each Seligman TargETFund may generate net capital gains (including short-term capital gains that are generally taxed to shareholders at ordinary income tax rates) for investors that may be higher than the net capital gains ordinarily incurred by an investor through an investment in another asset allocation fund that has broader investment ranges or an asset allocation strategy designed by the investor. In addition, due to federal income tax laws, each Seligman TargETFund may not fully utilize capital losses (to offset capital gains) from the sale of underlying ETFs at a loss. In addition, underlying ETFs may distribute capital gains to the Seligman TargETFunds. REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the fund unless you request distributions in cash. The financial intermediary through which you purchased shares may have different policies. Distributions are reinvested at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. Generally, if you sell shares for less than their cost, the difference is a capital loss or if you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). -------------------------------------------------------------------------------- S.30 You may not create a tax loss or reduce a tax gain, based on paying a sales charge, by exchanging shares before the 91st day after the day of purchase. If you buy Class A shares and exchange into another fund before the 91st day after the day of purchase, you may not be able to include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. For more information, see the SAI. REITs often do not provide complete tax information until after the calendar year-end; generally mid to late January and continuing through early February. Consequently, if your fund has significant investments in REITs, you may not receive your Form 1099-DIV until February. Other RiverSource funds tax statements are generally mailed in January. FOR SELIGMAN TARGETFUNDS. Each of the Target Date Funds will automatically be combined with Seligman TargETFund Core during their respective target years. The investment manager expects each of these combinations to be effected as an acquisition of the assets and liabilities of the applicable Target Date Fund in exchange for shares of Seligman TargETFund Core at net asset value, with the shares of Seligman TargETFund Core then distributed to shareholders of the applicable Target Date Fund. Based on current tax rules, the investment manager expects the combination to be effected in a non-taxable transaction. Changes in such tax rules or other applicable law could negatively impact the combination of a Target Date Fund with Seligman TargETFund Core. FOR TAXABLE FUNDS. Distributions related to shares not held in IRAs or other retirement accounts are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. Shares held in an IRA or qualified retirement account are generally subject to different tax rules. Taking a distribution from your IRA or qualified retirement plan may subject you to federal taxes, withholding, penalties and reporting requirements. Please consult your tax advisor. Income received by a fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes. FOR TAX-EXEMPT FUNDS. Dividends distributed from interest earned on tax-exempt securities (exempt-interest dividends) are exempt from federal income taxes but may be subject to state and local taxes and potentially the alternative minimum tax. Dividends distributed from net capital gains, if any, and other income earned are not exempt from federal income taxes. Any taxable distributions are taxable in the year the fund declares them regardless of whether you take them in cash or reinvest them. -------------------------------------------------------------------------------- S.31 Interest on certain private activity bonds is a preference item for purposes of the individual and corporate alternative minimum tax. To the extent the fund earns such income, it will flow through to its shareholders and may affect those shareholders who are subject to the alternative minimum tax. See the SAI for more information. Because interest on municipal bonds and notes is tax-exempt for federal income tax purposes, any interest on money you borrow that is used directly or indirectly to purchase fund shares is not deductible on your federal income tax return. You should consult a tax advisor regarding its deductibility for state and local income tax purposes. FOR A FUND ORGANIZED AS A FUND-OF-FUNDS. Because most of the fund's investments are shares of underlying funds, the tax treatment of the fund's gains, losses, and distributions may differ from the tax treatment that would apply if either the fund invested directly in the types of securities held by the underlying funds or the fund shareholders invested directly in the underlying funds. As a result, fund shareholders may recognize higher amounts of capital gain distributions or ordinary income dividends than they otherwise would. IMPORTANT: This information is a brief and selective summary of some of the tax rules that apply to an investment in a fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. GENERAL INFORMATION AVAILABILITY AND TRANSFERABILITY OF FUND SHARES Please consult with your financial intermediary to determine the availability of the funds. The funds may only be purchased or sold directly or through financial intermediaries authorized by the distributor to offer the funds. NOT ALL FINANCIAL INSTITUTIONS ARE AUTHORIZED TO SELL THE RIVERSOURCE FAMILY OF FUNDS AND CERTAIN FINANCIAL INTERMEDIARIES THAT OFFER THE RIVERSOURCE FAMILY OF FUNDS MAY NOT OFFER ALL FUNDS ON ALL INVESTMENT PLATFORMS. If you set up an account at a financial intermediary that does not have, and is unable to obtain, a selling agreement with the distributor, you will not be able to transfer fund holdings to that account. In that event, you must either maintain your fund holdings with your current financial intermediary, find another financial intermediary with a selling agreement, or sell your shares, paying any applicable CDSC. Please be aware that transactions in taxable accounts are taxable events and may result in income tax liability. ADDITIONAL SERVICES AND COMPENSATION In addition to acting as the fund's investment manager, RiverSource Investments and its affiliates also receive compensation for providing other services to the funds. -------------------------------------------------------------------------------- S.32 Administration Services. Ameriprise Financial, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides or compensates others to provide administrative services to the funds. These services include administrative, accounting, treasury, and other services. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." Distribution and Shareholder Services. RiverSource Fund Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474, (the distributor), provides underwriting and distribution services to the funds. Under the Distribution Agreement and related distribution and shareholder servicing plans, the distributor receives distribution and shareholder servicing fees. The distributor may retain a portion of these fees to support its distribution and shareholder servicing activity. The distributor reallows the remainder of these fees (or the full fee) to the financial intermediaries that sell fund shares and provide services to shareholders. Fees paid by a fund for these services are set forth under "Distribution and/or service (12b-1) fees" in the expense table under "Fees and Expenses." More information on how these fees are used is set forth under "Investment Options -- Classes of Shares" and in the SAI. The distributor also administers any sales charges paid by an investor at the time of purchase or at the time of sale. See "Shareholder Fees (fees paid directly from your investment)" under "Fees and Expenses" for the scheduled sales charge of each share class. See "Buying and Selling Shares, Sales Charges" for variations in the scheduled sales charges, and for how these sales charges are used by the distributor. See "Other Investment Strategies and Risks" for the funds' policy regarding directed brokerage. Transfer Agency Services. RiverSource Service Corporation, 734 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the transfer agent or RiverSource Service Corporation), provides or compensates others to provide transfer agency services to the funds. The funds pay the transfer agent a fee that varies by class, as set forth in the SAI, and reimburses the transfer agent for its out-of-pocket expenses incurred while providing these transfer agency services to the funds. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." RiverSource Service Corporation pays a portion of these fees to financial intermediaries that provide sub-recordkeeping and other services to fund shareholders. The SAI provides additional information about the services provided and the fee schedules for the transfer agent agreements. -------------------------------------------------------------------------------- S.33 Plan Administration Services. Under a Plan Administration Services Agreement, the fund pays for plan administration services, including services such as implementation and conversion services, account set-up and maintenance, reconciliation and account recordkeeping, education services and administration to various plan types, including 529 plans, retirement plans and Health Savings Accounts. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." PAYMENTS TO FINANCIAL INTERMEDIARIES The distributor and its affiliates make or support additional cash payments out of their own resources (including profits earned from providing services to the fund) to financial intermediaries, in connection with agreements between the distributor and financial intermediaries pursuant to which these financial intermediaries sell fund shares and provide services to their clients who are shareholders of the fund. These payments and intercompany allocations (collectively, "payments") do not change the price paid by investors in the fund or fund shareholders for the purchase or ownership of fund shares of the fund, and these payments are not reflected in the fees and expenses of the fund, as they are not paid by the fund. In exchange for these payments, a financial intermediary may elevate the prominence or profile of the fund within the financial intermediary's organization, and may provide the distributor and its affiliates with preferred access to the financial intermediary's registered representatives or preferred access to the financial intermediary's customers. These arrangements are sometimes referred to as marketing and/or sales support payments, program and/or shareholder servicing payments, or revenue sharing payments. These arrangements create potential conflicts of interest between a financial intermediary's pecuniary interest and its duties to its customers, for example, if the financial intermediary receives higher payments from the sale of a certain fund than it receives from the sale of other funds, the financial intermediary or its representatives may be incented to recommend or sell shares of the fund where it receives or anticipates receiving the higher payment instead of other investment options that may be more appropriate for the customer. Employees of Ameriprise Financial and its affiliates, including employees of affiliated broker-dealers, may be separately incented to recommend or sell shares of the fund, as employee compensation and business unit operating goals at all levels are tied to the company's success. Certain employees, directly or indirectly, may receive higher compensation and other benefits as investment in the fund increases. In addition, management, sales leaders and other employees may spend more of their time and resources promoting Ameriprise Financial and its subsidiary companies, including RiverSource Investments and the distributor, and the products they offer, including the fund. -------------------------------------------------------------------------------- S.34 These payments are typically negotiated based on various factors including, but not limited to, the scope and quality of the services provided by the financial intermediary, its reputation in the industry, its ability to attract and retain assets, its access to target markets, its customer relationships, the profile the fund may obtain within the financial intermediary, and the access the distributor or other representatives of the fund may have within the financial intermediary for advertisement, training or education, including opportunities to present at or sponsor conferences for the registered representatives of the financial intermediary and its customers. These payments are usually calculated based on a percentage of fund assets owned through the financial intermediary and/or as a percentage of fund sales attributable to the financial intermediary. Certain financial intermediaries require flat fees instead of, or in addition to, these asset-based fees as compensation for including or maintaining a fund on their platforms, and, in certain situations, may require the reimbursement of ticket or operational charges -- fees that a financial intermediary charges its registered representatives for effecting transactions in the fund. The amount of payment varies by financial intermediary (e.g., initial platform set-up fees, ongoing maintenance or service fees, or asset or sales based fees). The amount of payments also varies by the type of sale. For instance, purchases of one fund may warrant a greater or lesser amount of payments than purchases of another fund. Additionally, sale and maintenance of shares on a stand alone basis may result in a greater or lesser amount of payments than the sale and maintenance of shares made through a plan, wrap or other fee-based program. Payments to affiliates may include payments as compensation to employees of RiverSource Investments who are licensed by the distributor in respect of certain sales and solicitation activity on behalf of the fund. These payments may be and often are significant. Additional information concerning the amount and calculation of these payments is available in the fund's SAI. Payments to affiliated broker-dealers are within the range of the payments the distributor pays to similarly-situated third party financial intermediaries and the payments such affiliated broker-dealers receive from third party fund sponsors related to the sale of their sponsored funds. However, because of the large amount of fund assets (from the RiverSource Family of Funds, in aggregate) currently held in customer accounts of the affiliated broker-dealers, the distributor and its affiliates, in the aggregate, pay significantly more in absolute dollars than other third-party fund sponsors pay to the affiliated broker-dealers for the sale and servicing of their sponsored funds. This level of payment creates potential conflicts of interest which the affiliated broker- dealers seek to mitigate by disclosure and implementation of internal controls, as well as the rules and regulations of applicable regulators. -------------------------------------------------------------------------------- S.35 From time to time, to the extent permitted by SEC and FINRA rules and by other applicable laws and regulations, the distributor and its affiliates may make other reimbursements or payments to financial intermediaries or their registered representatives, including non-cash compensation, in the form of gifts of nominal value, occasional meals, tickets, or other entertainment, support for due diligence trips, training and educational meetings or conference sponsorships, support for recognition programs, and other forms of non-cash compensation permissible under regulations to which these financial intermediaries and their representatives are subject. To the extent these are made as payments instead of reimbursement, they may provide profit to the financial intermediary to the extent the cost of such services was less than the actual expense of the service. The financial intermediary through which you are purchasing or own shares of the fund has been authorized directly or indirectly by the distributor to sell the fund and/or to provide services to you as a shareholder of the fund. Investors and current shareholders may wish to take such payment arrangements into account when considering and evaluating any recommendations they receive relating to fund shares. If you have questions regarding the specific details regarding the payments your financial intermediary may receive from the distributor or its affiliates related to your purchase or ownership of the fund, please contact your financial intermediary. The SAI contains additional detail regarding payments made by the distributor to financial intermediaries. The payments described in this section are in addition to fees paid by the fund to the distributor under 12b-1 plans, which fees may be used to compensate financial intermediaries for the distribution of fund shares and the servicing of fund shareholders, or paid by the fund to the transfer agent under the transfer agent agreement or plan administration agreement, which fees may be used to support networking or servicing fees to compensate financial intermediaries for supporting shareholder account maintenance, sub-accounting, plan recordkeeping or other services provided directly by the financial intermediary to shareholders or plans and plan participants, including retirement plans, 529 plans, Health Savings Account plans, or other plans, where participants beneficially own shares of the fund. Financial institutions may separately charge you additional fees. See "Buying and Selling Shares." ADDITIONAL MANAGEMENT INFORMATION AFFILIATED PRODUCTS. RiverSource Investments serves as investment manager to all funds in the RiverSource Family of Funds, including those that are structured to provide asset-allocation services to shareholders of those funds by investing in shares of other funds (funds of funds) in the RiverSource Family of Funds (collectively referred to as underlying funds) and to discretionary managed accounts (collectively referred to as affiliated products) that invest exclusively in underlying funds. These affiliated products, individually or collectively, may own -------------------------------------------------------------------------------- S.36 a significant percentage of the outstanding shares of the underlying funds, and RiverSource Investments seeks to balance potential conflicts between the affiliated products and the underlying funds in which they invest. The affiliated products investment in the underlying funds may also have the effect of creating economies of scale (including lower expense ratios) because the affiliated products may own substantial portions of the shares of underlying funds and, comparatively, a redemption of underlying fund shares by one or more affiliated products could cause the expense ratio of an underlying fund to increase as its fixed costs would be spread over a smaller asset base. Because of these large positions of the affiliated products, the underlying funds may experience relatively large purchases or redemptions. Although RiverSource Investments may seek to minimize the impact of these transactions, for example, by structuring them over a reasonable period of time or through other measures, underlying funds may experience increased expenses as they buy and sell securities to manage these transactions. When RiverSource Investments structures transactions over a reasonable period of time in order to manage the potential impact of the buy and sell decisions for the affiliated products, these affiliated products, including funds of funds, may pay more or less for shares of the underlying funds than if the transactions were executed in one transaction. In addition, substantial redemptions by the affiliated products within a short period of time could require the underlying fund to liquidate positions more rapidly than would otherwise be desirable, which may have the effect of reducing or eliminating potential gain or causing the underlying fund to realize a loss. Substantial redemptions may also adversely affect the ability of the investment manager to implement the underlying fund's investment strategy. RiverSource Investments also has an economic conflict of interest in determining the allocation of the affiliated products' assets among the underlying funds as it earns different fees from the underlying funds. RiverSource Investments monitors expense levels of the funds and is committed to offering funds that are competitively priced. RiverSource Investments reports to the Board on the steps it has taken to manage any potential conflicts. See the SAI for information on the percent of the fund owned by affiliated products. CASH RESERVES. A fund may invest its daily cash balance in a money market fund selected by RiverSource Investments, including but not limited to RiverSource Short-Term Cash Fund (Short-Term Cash Fund), a money market fund established for the exclusive use of funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. While Short-Term Cash Fund does not pay an advisory fee to RiverSource Investments, it does incur other expenses, and is expected to operate at a very low expense ratio. A fund will invest in Short-Term Cash Fund or any other money market fund selected by RiverSource Investments only to the extent it is consistent with the fund's investment objectives and policies. Short-Term Cash Fund is not insured or guaranteed by the FDIC or any other government agency. -------------------------------------------------------------------------------- S.37 FUND HOLDINGS DISCLOSURE. The Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by a fund. A description of these policies and procedures is included in the SAI. LEGAL PROCEEDINGS. 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 fund is 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 fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the fund. Information regarding certain pending and settled legal proceedings may be found in the fund's shareholder reports and in the SAI. Additionally, 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. -------------------------------------------------------------------------------- S.38 Funds in the RiverSource Family of Funds -- which include funds offered under the RiverSource, Threadneedle and Seligman brands -- can be purchased from authorized financial intermediaries. Additional information about the fund and its investments is available in the fund's SAI, and annual and semiannual reports to shareholders. In the fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the fund's performance during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, or to request other information about the fund, contact RiverSource Family of Funds or your financial intermediary. To make a shareholder inquiry, contact the financial intermediary through whom you purchased the fund. RiverSource Family of Funds 734 Ameriprise Financial Center Minneapolis, MN 55474 (800) 221-2450 RiverSource Family of Funds information available: (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com You may review and copy information about the fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202- 551-8090). Reports and other information about the fund are available on the EDGAR Database on the Commission's Internet site at www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, 100 F Street, N.E., Washington, D.C. 20549-1520. Investment Company Act File #811-5696 TICKER SYMBOL Class A: REBAX Class B: -- Class C: REBCX Class I: RSMIX Class R4: -- Class W: REMWX
(RIVERSOURCE INVESTMENTS LOGO) S-6398-99 F (12/09) Prospectus (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE GLOBAL BOND FUND PROSPECTUS DEC. 30, 2009 RIVERSOURCE GLOBAL BOND FUND SEEKS TO PROVIDE SHAREHOLDERS WITH HIGH TOTAL RETURN THROUGH INCOME AND GROWTH OF CAPITAL. Classes A, B, C, I, R4 and W As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. You may qualify for sales charge discounts on purchases of Class A shares. Please notify your financial intermediary if you have other accounts holding shares of funds in the RiverSource Family of Funds to determine whether you qualify for a sales charge discount. See "Buying and Selling Shares" for more information. NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE TABLE OF CONTENTS THE FUND.......................................... 3P Objective......................................... 3p Principal Investment Strategies................... 3p Principal Risks................................... 4p Past Performance.................................. 7p Fees and Expenses................................. 10p Other Investment Strategies and Risks............. 13p Fund Management and Compensation.................. 15p FINANCIAL HIGHLIGHTS.............................. 17P BUYING AND SELLING SHARES......................... S.1 Description of Share Classes...................... S.2 Investment Options -- Classes of Shares......... S.2 Sales Charges................................... S.7 Opening an Account.............................. S.16 Exchanging or Selling Shares...................... S.20 Exchanges....................................... S.23 Selling Shares.................................. S.26 PRICING AND VALUING OF FUND SHARES................ S.27 DISTRIBUTIONS AND TAXES........................... S.28 GENERAL INFORMATION............................... S.32
RIVERSOURCE FAMILY OF FUNDS The RiverSource Family of Funds includes a comprehensive array of funds from RiverSource Investments. RiverSource Investments has also partnered with a number of professional investment managers, including its affiliate, Threadneedle Investments, to expand the array of funds offered in the RiverSource family. RiverSource funds, RiverSource Partners funds, Seligman funds and Threadneedle funds share the same Board of Directors/Trustees (the Board), and the same policies and procedures including those set forth in the service section of this prospectus. Please see the Statement of Additional Information (SAI) for a complete list of mutual funds included in the RiverSource Family of Funds. RiverSource Variable Portfolio Funds and Seligman (Variable) Portfolio Funds are sold exclusively as underlying investment options of variable insurance policies and annuity contracts offered by affiliated and unaffiliated insurance companies. -------------------------------------------------------------------------------- 2P RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS THE FUND OBJECTIVE RiverSource Global Bond Fund (the Fund) seeks to provide shareholders with high total return through income and growth of capital. Because any investment involves risk, there is no assurance this objective can be achieved. Only shareholders can change the Fund's objective. PRINCIPAL INVESTMENT STRATEGIES The Fund is a non-diversified mutual fund that invests primarily in debt obligations of U.S. and foreign issuers. Under normal market conditions, at least 80% of the Fund's net assets will be invested in investment-grade corporate or government debt obligations, including money market instruments, of issuers located in at least three different countries. Although the Fund emphasizes high and medium-quality debt securities, it may assume some credit risk in seeking to achieve higher dividends and /or capital appreciation by buying below investment-grade bonds (junk bonds). The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. In pursuit of the Fund's objective, the investment manager (RiverSource Investments, LLC) chooses investments by: - Considering opportunities and risks by credit rating and currency. - Identifying investment-grade U.S. and foreign bonds. - Identifying below investment-grade U.S. and foreign bonds. - Identifying bonds that can take advantage of currency movements and interest rate differences among nations. In evaluating whether to sell a security, the investment manager considers, among other factors, whether: - The security is overvalued. - The security continues to meet the standards described above. The investment manager monitors the Fund's exposure to interest rate and foreign currency fluctuations. The investment manager may use derivatives such as futures, options, forward contracts and swaps, including credit default swaps, in an effort to produce incremental earnings, to hedge existing positions, interest rate fluctuations or currency fluctuations, to increase market exposure and investment flexibility, or to obtain or reduce credit exposure. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS 3P PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. CREDIT RISK. Credit risk is the risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable or unwilling to honor a financial obligation, such as payments due on a bond or a note. If the Fund purchases unrated securities, or if the rating of a security is reduced after purchase, the Fund will depend on the investment manager's analysis of credit risk more heavily than usual. Non-investment grade securities, commonly called "high-yield" or "junk" bonds, may react more to perceived changes in the ability of the issuing entity to pay interest and principal when due than to changes in interest rates. Non-investment grade securities have greater price fluctuations and are more likely to experience a default than investment grade bonds. DERIVATIVES RISK. Derivatives are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, options, futures, indexes or currencies. Losses involving derivative instruments may be substantial, because a relatively small price movement in the underlying security(ies), instrument, currency or index may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund. Derivative instruments in which the Fund invests will typically increase the Fund's exposure to Principal Risks to which it is otherwise exposed, and may expose the Fund to additional risks, including counterparty credit risk, leverage risk, hedging risk, correlation risk and liquidity risk. Counterparty credit risk is the risk that a counterparty to the derivative instrument becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, and the Fund may obtain no recovery of its investment or may only obtain a limited recovery, and any recovery may be delayed. Hedging risk is the risk that derivative instruments used to hedge against an opposite position may offset losses, but they may also offset gains. There is no guarantee that a hedging strategy will eliminate the risk which the hedging strategy is intended to offset, which may lead to losses within the Fund. Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses. -------------------------------------------------------------------------------- 4P RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS Leverage risk is the risk that losses from the derivative instrument may be greater than the amount invested in the derivative instrument. Liquidity Risk, as described as a Principal Risk below, may be increased for derivative instruments which are not traded on an exchange, including, but not limited to, forward contracts, swaps and over-the-counter options. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. See the SAI for more information on derivative instruments and related risks. 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. Because each investment has a greater effect on the Fund's performance, the Fund may be more exposed to the risks of loss and volatility than a fund that invests more broadly. RISKS OF FOREIGN INVESTING. Foreign securities are securities of issuers based outside the United States. An issuer is deemed to be based outside the United States if it is organized under the laws of another country. Foreign securities are primarily denominated in foreign currencies. In addition to the risks normally associated with domestic securities of the same type, foreign securities are subject to the following foreign risks: Country risk includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add to or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS 5P Emerging markets risk includes the dramatic pace of change (economic, social and political) in these countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. 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 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. INTEREST RATE RISK. Interest rate risk is the risk of losses attributable to changes in interest rates. Interest rate risk is generally associated with bond prices: when interest rates rise, bond prices fall. In general, the longer the maturity or duration of a bond, the greater its sensitivity to changes in interest rates. LIQUIDITY RISK. Liquidity risk is the risk associated from a lack of marketability of securities which may make it difficult or impossible to sell at desirable prices in order to minimize loss. The Fund may have to lower the selling price, sell other investments, or forego another, more appealing investment opportunity. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. PREPAYMENT AND EXTENSION RISK. Prepayment and extension risk is the risk that a bond or other security might be called or otherwise converted, prepaid, or redeemed before maturity. This risk is primarily associated with asset-backed securities, including mortgage-backed securities. If a security is converted, prepaid, or redeemed before maturity, particularly during a time of declining interest rates, the investment manager may not be able to reinvest in securities providing as high a level of income, resulting in a reduced yield to the Fund. Conversely, as interest rates rise, the likelihood of prepayment decreases. The investment manager may be unable to capitalize on securities with higher interest rates because the Fund's investments are locked in at a lower rate for a longer period of time. SECTOR RISK. Investments that are concentrated in a particular issuer, geographic region or sector will be more susceptible to changes in price. The more a fund diversifies across sectors, the more it spreads risk and potentially reduces the risks of loss and volatility. -------------------------------------------------------------------------------- 6P RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS PAST PERFORMANCE The following bar chart and table provide some illustration of the risks of investing in the Fund by showing, respectively: - how the Fund's performance has varied for each full calendar year shown on the bar chart; and - how the Fund's average annual total returns compare to recognized indexes shown on the table. Both the bar chart and the table assume that all distributions have been reinvested. The performance of different classes varies because of differences in sales charges and other fees and expenses. How the Fund has performed in the past (before and after taxes) does not indicate how the Fund will perform in the future. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of such fee waivers/expense caps, performance would have been lower. See "Fees and Expenses" for any current fee waivers/expense caps. Bar Chart. Class A share information is shown in the bar chart; the sales charge for Class A shares is not reflected in the bar chart. Table. The table shows total returns from hypothetical investments in Class A, Class B, Class C, Class I, Class R4 and Class W shares of the Fund. These returns are compared to the indexes shown for the same periods. For purposes of the performance calculation in the table we assumed: - the maximum sales charge for Class A shares; - sales at the end of the period and deduction of the applicable contingent deferred sales charge (CDSC) for Class B and Class C shares; - no sales charge for Class I, Class R4 and Class W shares; and - with the exception of Class A shares, no adjustments for taxes paid by an investor on the reinvested income and capital gains. AFTER-TAX RETURNS After-tax returns are shown only for Class A shares. After-tax returns for the other classes will vary. After-tax returns are calculated using the highest historical individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax returns will depend on your tax situation and most likely will differ from the returns shown in the table. If you hold your shares in a tax-deferred account, such as a 401(k) plan or an IRA, the after-tax returns do not apply to you since you will not incur taxes until you begin to withdraw from your account. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS 7P The return after taxes on distributions for a period may be the same as the return before taxes for the same period if there were no distributions or if the distributions were small. The return after taxes on distributions and sale of Fund shares for a period may be greater than the return before taxes for the same period if there was a tax loss realized on sale of Fund shares. The benefit of the tax loss (since it can be used to offset other gains) may result in a higher return. CLASS A SHARE PERFORMANCE (BASED ON CALENDAR YEARS) (BAR CHART) -4.11% +2.40% +1.51% +14.02% +13.27% +9.98% -5.32% +6.87% +7.48% -1.08% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
During the periods shown in the bar chart, the highest return for a calendar quarter was +7.23% (quarter ended Dec. 31, 2004) and the lowest return for a calendar quarter was -4.55% (quarter ended Sept. 30, 2008). The 4.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart; if reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. The Fund's Class A year-to-date return at Sept. 30, 2009 was +12.78%. The Fund formerly was a "feeder" fund in a master/feeder arrangement where the Fund invested all of its assets in a corresponding "master" fund with an identical investment objective and investment strategies. As of Nov. 8, 2005, the Fund became a stand-alone fund that invests directly in a portfolio of securities. The information shown in the table and in the financial highlights for the Fund includes the activity of the Fund when it was a feeder in a master/feeder arrangement. -------------------------------------------------------------------------------- 8P RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2008)
CLASS C CLASS I CLASS W SINCE SINCE SINCE INCEPTION INCEPTION INCEPTION 1 YEAR 5 YEARS 10 YEARS (6/26/00) (3/4/04) (12/1/06) RiverSource Global Bond Fund: Class A Return before taxes -5.78% +2.42% +3.79% N/A N/A N/A Return after taxes on distributions -8.13% +0.67% +2.22% N/A N/A N/A Return after taxes on distributions and sale of fund shares -3.73% +1.05% +2.29% N/A N/A N/A Class B Return before taxes -6.41% +2.28% +3.51% N/A N/A N/A Class C Return before taxes -2.81% +2.62% N/A +5.00% N/A N/A Class I Return before taxes -0.66% N/A N/A N/A +4.05% N/A Class R4 Return before taxes -0.66% +3.67% +4.54% N/A N/A N/A Class W Return before taxes -0.98% N/A N/A N/A N/A +2.47% Barclays Capital Global Aggregate Index (reflects no deduction for fees, expenses or taxes) +4.79% +5.01% +5.22% +6.89% +5.27% +5.87% Lipper Global Income Funds Index -7.54% +2.48% +4.03% +5.12% +2.54% -0.93%
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. 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. Past performance for Class W for the period prior to the beginning of operations may be calculated based on the performance of Class A. The blended class performance will be adjusted to reflect differences in sales charges, but not differences in annual Fund operating expenses (for example, 12b-1 fees). The use of blended performance generally results in a presentation of higher performance for classes with higher operating expenses than those of the class with which they are blended, and a presentation of lower performance for classes with lower operating expenses than those of the class with which they are blended. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS 9P FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund. Annual fund operating expenses are based on expenses incurred during the Fund's most recently completed fiscal year, and are expressed as a percentage (expense ratio) of the Fund's average net assets during the period. The expense ratios have been adjusted to reflect current fee schedules but have not been adjusted to reflect the Fund's assets as of a different period or point in time, as asset levels will fluctuate. As of the date of this prospectus, the Fund's net assets are higher than the Fund's average net assets during the most recently completed fiscal year. In general, a fund's annual operating expenses will increase as the fund's assets decrease. Accordingly, the Fund's annual operating expenses, if adjusted based on net assets as of the date of this prospectus, would be lower than are expressed in the fee and expense table below. The commitment by the investment manager and its affiliates to waive fees and/or cap (reimburse) expenses limits the impact that any decrease in the Fund's assets will have on its total annual (net) operating expenses in the current fiscal year. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS I CLASS R4 CLASS A CLASS B CLASS C CLASS W Maximum sales charge (load) imposed on purchases (as a percentage of offering price) 4.75%(a) None None None Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) None(b) 5% 1% None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS: CLASS A CLASS B CLASS C CLASS W Management fees 0.71% 0.71% 0.71% 0.71% Distribution and/or service (12b-1) fees 0.25% 1.00% 1.00% 0.25% Other expenses(c) 0.40% 0.42% 0.41% 0.34% Total annual fund operating expenses 1.36% 2.13% 2.12% 1.30% Fee waiver/expense reimbursement 0.11% 0.11% 0.11% 0.04% Total annual (net) fund operating expenses(d) 1.25% 2.02% 2.01% 1.26%
-------------------------------------------------------------------------------- 10P RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) CONT.
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS: CLASS I CLASS R4 Management fees 0.71% 0.71% Distribution and/or service (12b-1) fees 0.00% 0.00% Other expenses(c) 0.15% 0.45% Total annual fund operating expenses 0.86% 1.16% Fee waiver/expense reimbursement 0.04% 0.04% Total annual (net) fund operating expenses(d) 0.82% 1.12%
(a) This charge may be reduced depending on the total value of your investments in the RiverSource Family of Funds. See "Sales Charges." (b) A 1% CDSC may be assessed on Class A shares purchased without an initial sales charge and sold within 18 months after purchase. See "Sales Charges." (c) Other expenses include an administrative services fee, a transfer agency fee (for all classes except Class I), a custody fee, other nonadvisory expenses and a plan administration services fee (for Class R4). Other expenses may also include fees and expenses of affiliated and unaffiliated funds (acquired funds) which the Fund indirectly bears when it invests in the acquired funds. The impact of these acquired funds fees and expenses for the most recent fiscal period was less than 0.01%. Because acquired funds will 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 by the Fund with respect to such investments will vary. (d) The investment manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Dec. 31, 2010, 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, 2.02% for Class B, 2.01% for Class C, 0.82% for Class I, 1.12% for Class R4 and 1.27% for Class W. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS 11P EXAMPLES These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. These examples assume that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. These examples also assume that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $596 $875 $1,175 $2,028 Class B $704(b) $956(b) $1,334(b) $2,260(c) Class C $304(b) $654 $1,130 $2,448 Class I $ 84 $271 $ 474 $1,061 Class R4 $114 $365 $ 635 $1,410 Class W $128 $408 $ 710 $1,569
(a) Includes a 4.75% sales charge. (b) Includes the applicable CDSC. (c) Based on conversion of Class B shares to Class A shares one month after the completion of the eighth year of ownership. You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $596 $875 $1,175 $2,028 Class B $204 $656 $1,134 $2,260(b) Class C $204 $654 $1,130 $2,448 Class I $ 84 $271 $ 474 $1,061 Class R4 $114 $365 $ 635 $1,410 Class W $128 $408 $ 710 $1,569
(a) Includes a 4.75% sales charge. (b) Based on conversion of Class B shares to Class A shares one month after the completion of the eighth year of ownership. -------------------------------------------------------------------------------- 12P RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS OTHER INVESTMENT STRATEGIES AND RISKS Other Investment Strategies. In addition to the principal investment strategies previously described, the Fund may utilize investment strategies that are not principal investment strategies, including investment in affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds (ETFs), also referred to as "acquired funds") ownership of which results in the Fund bearing its proportionate share of the acquired funds' fees and expenses and proportionate exposure to the risks associated with the acquired funds' underlying investments. ETFs are generally designed to replicate the price and yield of a specified market index. An ETF's share price may not track its specified market index and may trade below its net asset value, resulting in a loss. ETFs generally use a "passive" investment strategy and will not attempt to take defensive positions in volatile or declining markets. An active secondary market in an ETF's shares may not develop or be maintained and may be halted or interrupted due to actions by its listing exchange, unusual market conditions or other reasons. There can be no assurance an ETF's shares will continue to be listed on an active exchange. For more information on strategies and holdings, and the risks of such strategies, including derivative instruments that the Fund may use, see the Fund's SAI and its annual and semiannual reports. Unusual Market Conditions. During unusual market conditions, the Fund may temporarily invest more of its assets in money market securities than during normal market conditions. Although investing in these securities would serve primarily to attempt to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the portfolio managers may make frequent securities trades that could result in increased fees, expenses and taxes, and decreased performance. Instead of investing in money market securities directly, the Fund may invest in shares of an affiliated or unaffiliated money market fund. See "Cash Reserves" under the section "General Information" for more information. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS 13P Securities Transaction Commissions. Securities transactions involve the payment by the Fund of brokerage commissions to broker-dealers, on occasion as compensation for research or brokerage services (commonly referred to as "soft dollars"), as the portfolio managers buy and sell securities for the Fund in pursuit of its objective. A description of the policies governing the Fund's securities transactions and the dollar value of brokerage commissions paid by the Fund are set forth in the SAI. Funds that invest primarily in fixed income securities do not typically generate brokerage commissions that are used to pay for research or brokerage services. The brokerage commissions set forth in the SAI do not include implied commissions or mark-ups (implied commissions) paid by the Fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities (and certain other instruments, including derivatives). Brokerage commissions do not reflect other elements of transaction costs, including the extent to which the Fund's purchase and sale transactions may cause the market to move and change the market price for an investment. Although brokerage commissions and implied commissions are not reflected in the expense table under "Fees and Expenses," they are reflected in the total return of the Fund. Portfolio Turnover. Trading of securities may produce capital gains, which are taxable to shareholders when distributed. Active trading may also increase the amount of brokerage commissions paid or mark-ups to broker-dealers that the Fund pays when it buys and sells securities. Capital gains and increased brokerage commissions or mark-ups paid to broker-dealers may adversely affect a fund's performance. The Fund's historical portfolio turnover rate, which measures how frequently the Fund buys and sells investments, is shown in the "Financial Highlights." Directed Brokerage. The Fund's Board has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Fund as a factor in the selection of broker-dealers through which to execute securities transactions. Additional information regarding securities transactions can be found in the SAI. -------------------------------------------------------------------------------- 14P RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS FUND MANAGEMENT AND COMPENSATION INVESTMENT MANAGER RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource Family of Funds (including the RiverSource funds, Threadneedle funds and Seligman funds), and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for the RiverSource Family of Funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the SAI for more information. The RiverSource Family of Funds has received an order from the Securities and Exchange Commission that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for a fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or change the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. If the Fund was to seek to rely on the order, holders of a majority of the Fund's outstanding voting securities would need to approve operating the Fund in this manner. There is no assurance shareholder approval, if sought, would be received, and no changes would be made without shareholder approval until that time. For more information, see the SAI. RiverSource Investments and its affiliates may have other relationships, including significant financial relationships, with current or potential subadvisers or their affiliates, which may create a conflict of interest. In making recommendations to the Board to appoint or to change a subadviser, or to change the terms of a subadvisory agreement, RiverSource Investments does not consider any other relationship it or its affiliates may have with a subadviser, and RiverSource Investments discloses the nature of any material relationships it has with a subadviser to the Board. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS 15P The Fund pays RiverSource Investments a fee for managing its assets. Under the Investment Management Services Agreement (Agreement), the fee for the most recent fiscal year was 0.71% of the Fund's average daily net assets. Under the Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. A discussion regarding the basis for the Board approving the Agreement is available in the Fund's most recent annual or semiannual shareholder report. Portfolio Manager(s). The portfolio manager responsible for the day-to-day management of the Fund is: Nicholas Pifer, CFA, Portfolio Manager - Managed the Fund since 2000. - Sector leader of the global fixed income sector team. - Joined RiverSource Investments in 2000. - Fixed Income Portfolio Manager, Investment Advisers, Inc., 1997 to 2000. - Began investment career in 1990. - MA, Johns Hopkins University School of Advanced International Studies. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. -------------------------------------------------------------------------------- 16P RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. For periods ended 2007 and after, per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). Total returns do not reflect payment of sales charges, if any, and are not annualized for periods of less than one year. The information for the fiscal years ended on or after October 31, 2007 has been derived from the financial statements audited by Ernst & Young LLP, whose report, along with the Fund's financial statements and financial highlights, is included in the annual report which, if not included with this prospectus, is available upon request. The information for the periods ended on or before October 31, 2006 has been audited by other auditors.
YEAR ENDED OCT. 31, CLASS A ---------------------------------------------------- PER SHARE DATA 2009 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) .17 .22 .20 .19 .16 Net gains (losses) (both realized and unrealized) 1.15 (.73) .35 .14 (.23) ------------------------------------------------------------------------------------------------------- Total from investment operations 1.32 (.51) .55 .33 (.07) ------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.38) (.22) (.26) (.32) (.36) ------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.10 $6.16 $6.89 $6.60 $6.59 ------------------------------------------------------------------------------------------------------- TOTAL RETURN 22.12% (7.66%) 8.63% 5.17% (1.18%) ------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 1.36% 1.32% 1.37% 1.39% 1.37% ------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(b) 1.25% 1.25% 1.25% 1.25% 1.35% ------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.72% 3.26% 3.08% 2.77% 2.42% ------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $253 $249 $259 $276 $353 ------------------------------------------------------------------------------------------------------- Portfolio turnover rate 69% 75% 77% 68% 73% -------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS 17P
YEAR ENDED OCT. 31, CLASS B ---------------------------------------------------- PER SHARE DATA 2009 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) .13 .17 .15 .13 .10 Net gains (losses) (both realized and unrealized) 1.15 (.73) .35 .16 (.23) ------------------------------------------------------------------------------------------------------- Total from investment operations 1.28 (.56) .50 .29 (.13) ------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.37) (.17) (.21) (.21) (.30) ------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.14 $6.23 $6.96 $6.67 $6.59 ------------------------------------------------------------------------------------------------------- TOTAL RETURN 21.14% (8.28%) 7.68% 4.45% (1.98%) ------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 2.13% 2.09% 2.13% 2.16% 2.13% ------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(b) 2.01% 2.01% 2.01% 2.02% 2.12% ------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.00% 2.49% 2.30% 1.98% 1.65% ------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $30 $42 $47 $63 $111 ------------------------------------------------------------------------------------------------------- Portfolio turnover rate 69% 75% 77% 68% 73% -------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 18P RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS
YEAR ENDED OCT. 31, CLASS C ---------------------------------------------------- PER SHARE DATA 2009 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) .13 .17 .15 .14 .11 Net gains (losses) (both realized and unrealized) 1.14 (.73) .35 .13 (.22) ------------------------------------------------------------------------------------------------------- Total from investment operations 1.27 (.56) .50 .27 (.11) ------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.37) (.17) (.21) (.22) (.31) ------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.08 $6.18 $6.91 $6.62 $6.57 ------------------------------------------------------------------------------------------------------- TOTAL RETURN 21.15% (8.27%) 7.75% 4.25% (1.83%) ------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 2.12% 2.08% 2.13% 2.16% 2.14% ------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(b) 2.01% 2.01% 2.01% 2.02% 2.12% ------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.94% 2.51% 2.32% 2.00% 1.65% ------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $6 $4 $3 $3 $4 ------------------------------------------------------------------------------------------------------- Portfolio turnover rate 69% 75% 77% 68% 73% -------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS 19P
YEAR ENDED OCT. 31, CLASS I --------------------------------------------------- PER SHARE DATA 2009 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) .20 .25 .23 .21 .19 Net gains (losses) (both realized and unrealized) 1.15 (.73) .34 .14 (.22) ------------------------------------------------------------------------------------------------------ Total from investment operations 1.35 (.48) .57 .35 (.03) ------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.38) (.25) (.29) (.37) (.39) ------------------------------------------------------------------------------------------------------ Net asset value, end of period $7.11 $6.14 $6.87 $6.59 $6.61 ------------------------------------------------------------------------------------------------------ TOTAL RETURN 22.83% (7.30%) 8.91% 5.52% (.56%) ------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement .86% .85% .87% .88% .91% ------------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement(b) .82% .82% .87% .88% .91% ------------------------------------------------------------------------------------------------------ Net investment income (loss) 3.16% 3.68% 3.47% 3.18% 2.87% ------------------------------------------------------------------------------------------------------ SUPPLEMENTAL DATA Net assets, end of period (in millions) $170 $206 $157 $145 $89 ------------------------------------------------------------------------------------------------------ Portfolio turnover rate 69% 75% 77% 68% 73% ------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 20P RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS
YEAR ENDED OCT. 31, CLASS R4 ---------------------------------------------------- PER SHARE DATA 2009 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) .18 .25 .22 .20 .16 Net gains (losses) (both realized and unrealized) 1.15 (.72) .35 .13 (.22) ------------------------------------------------------------------------------------------------------- Total from investment operations 1.33 (.47) .57 .33 (.06) ------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.38) (.26) (.28) (.34) (.37) ------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.11 $6.16 $6.89 $6.60 $6.61 ------------------------------------------------------------------------------------------------------- TOTAL RETURN 22.42% (7.19%) 8.84% 5.29% (1.00%) ------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 1.16% 1.14% 1.17% 1.20% 1.20% ------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(b) 1.06% .87% 1.08% 1.08% 1.18% ------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.86% 3.64% 3.27% 2.95% 2.60% ------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- $-- ------------------------------------------------------------------------------------------------------- Portfolio turnover rate 69% 75% 77% 68% 73% -------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS 21P
YEAR ENDED OCT. 31, CLASS W ------------------------------- PER SHARE DATA 2009 2008 2007(c) Net asset value, beginning of period $6.15 $6.88 $6.79 ---------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .17 .22 .20 Net gains (losses) (both realized and unrealized) 1.14 (.73) .17 ---------------------------------------------------------------------------------- Total from investment operations 1.31 (.51) .37 ---------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.37) (.22) (.28) ---------------------------------------------------------------------------------- Net asset value, end of period $7.09 $6.15 $6.88 ---------------------------------------------------------------------------------- TOTAL RETURN 22.04% (7.62%) 5.71% ---------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 1.30% 1.30% 1.35%(d) ---------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(b) 1.27% 1.27% 1.26%(d) ---------------------------------------------------------------------------------- Net investment income (loss) 2.70% 3.27% 3.34%(d) ---------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $60 $135 $54 ---------------------------------------------------------------------------------- Portfolio turnover rate 69% 75% 77% ----------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) 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 reported expense ratios. (b) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (c) For the period from Dec. 1, 2006 (inception date) to Oct. 31, 2007. (d) Annualized. -------------------------------------------------------------------------------- 22P RIVERSOURCE GLOBAL BOND FUND -- 2009 PROSPECTUS RIVERSOURCE FAMILY OF FUNDS THE RIVERSOURCE FAMILY OF FUNDS (EACH INDIVIDUALLY A "FUND" AND, COLLECTIVELY, THE "FUNDS") INCLUDES "RIVERSOURCE" FUNDS, "RIVERSOURCE PARTNERS" FUNDS, "SELIGMAN" FUNDS AND "THREADNEEDLE" FUNDS. (THE RIVERSOURCE FUNDS, RIVERSOURCE PARTNERS FUNDS AND THREADNEEDLE FUNDS MAY BE COLLECTIVELY REFERRED TO AS THE "RIVERSOURCE FUNDS".) THE FUNDS SHARE THE SAME BOARD OF DIRECTORS/TRUSTEES (THE "BOARD") AND THE SAME POLICIES AND PROCEDURES INCLUDING THOSE SET FORTH IN THE SERVICE SECTION OF THIS PROSPECTUS. FOR EXAMPLE, FOR PURPOSES OF CALCULATING THE INITIAL SALES CHARGE ON THE PURCHASE OF CLASS A SHARES OF A FUND, AN INVESTOR OR FINANCIAL ADVISOR SHOULD CONSIDER THE COMBINED MARKET VALUE OF ALL FUNDS IN THE RIVERSOURCE FAMILY OF FUNDS OWNED BY THE INVESTOR AS DEFINED UNDER "INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA)." BUYING AND SELLING SHARES The funds are available directly and through broker-dealers, banks and other financial intermediaries or institutions (financial intermediaries), and through certain qualified and non-qualified plans, wrap fee products or other investment products sponsored by financial intermediaries. NOT ALL FINANCIAL INTERMEDIARIES OFFER THE FUNDS. FINANCIAL INTERMEDIARIES THAT OFFER THE FUNDS MAY CHARGE YOU ADDITIONAL FEES FOR THE SERVICES THEY PROVIDE AND THEY MAY HAVE DIFFERENT POLICIES NOT DESCRIBED IN THIS PROSPECTUS. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. Additionally, recordkeeping, transaction processing and payments of distributions relating to your account may be performed by the financial intermediaries through which your shares of the fund are held. Since the fund (and its service providers) may not have a record of your account transactions, you should always contact the financial intermediary through which you purchased or at which you maintain your shares of the fund to make changes to your account or to give instructions concerning your account, or to obtain information about your account. The fund and its service providers, including the distributor and the transfer agent, are not responsible for the failure of one of these financial intermediaries to carry out its obligations to its customers. -------------------------------------------------------------------------------- S.1 S-6400-9 DESCRIPTION OF SHARE CLASSES INVESTMENT OPTIONS -- CLASSES OF SHARES The funds offer different classes of shares. There are differences among the fees and expenses for each share class. See the "Fees and Expenses" table for more information. Not everyone is eligible to buy every share class. After determining which share classes you are eligible to buy, decide which share class best suits your needs. Your financial advisor can help you with this decision. The following table shows the key features of each share class. Not all funds offer all classes of shares. INVESTMENT OPTIONS SUMMARY
CONTINGENT DISTRIBUTION PLAN INITIAL DEFERRED SALES AND/OR ADMINISTRATION AVAILABILITY(a) SALES CHARGE CHARGE (CDSC) SERVICE FEE(b) SERVICES FEE -------------------------------------------------------------------------------------------------------------------------------- Class A Available to Yes. Payable at No.(c) Yes. No. all investors. time of purchase. 0.25%(g) Lower or no sales charge for larger investments. -------------------------------------------------------------------------------------------------------------------------------- Class B(d)(e)(f) Available to No. Entire Maximum 5% CDSC Yes. No. all investors. purchase price is during the first 1.00%(g) invested in shares year decreasing to of the fund. 0% after six years. -------------------------------------------------------------------------------------------------------------------------------- Class C(f) Available to No. Entire 1% CDSC may apply Yes. No. all investors. purchase price is if you sell shares 1.00%(g) invested in shares within one year of the fund. after purchase. -------------------------------------------------------------------------------------------------------------------------------- Class I Limited to No. No. No. No. qualifying institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R2 Limited to No. No. Yes. Yes. qualifying 0.50% 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R3 Limited to No. No. Yes. Yes. qualifying 0.25% 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R4 Limited to No. No. No. Yes. qualifying 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R5 Limited to No. No. No. No. qualifying institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class W Limited to No. No. Yes. No. qualifying 0.25%(g) discretionary managed accounts. --------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- S.2 INVESTMENT OPTIONS SUMMARY (CONTINUED)
CONTINGENT DISTRIBUTION PLAN INITIAL DEFERRED SALES AND/OR ADMINISTRATION AVAILABILITY(a) SALES CHARGE CHARGE (CDSC) SERVICE FEE(b) SERVICES FEE -------------------------------------------------------------------------------------------------------------------------------- Class Y Limited to No. No. No. Yes. qualifying 0.15% institutional investors. --------------------------------------------------------------------------------------------------------------------------------
(a) See "Buying and Selling Shares, Determining which class of shares to purchase" for more information on availability of share classes and eligible investors. See "Buying and Selling Shares, Opening an Account" for information on minimum investment and account balance requirements. (b) For each of Class A, Class B, Class C, Class R2, Class R3 and Class W shares, as applicable, each fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940, as amended, that allows it to pay distribution and shareholder servicing-related expenses for the sale of shares and the servicing of shareholders. This plan has been reviewed and approved by the Board. Because these fees are paid out of fund assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of distribution (sales) or servicing charges. (c) A 1% CDSC may be assessed on Class A shares sold within 18 months after purchase. See "Buying and Selling Shares, Sales Charges, Class A -- contingent deferred sales charge" for more information. For all funds except money market funds. (d) Class B shares automatically convert to Class A shares. See "Buying and Selling Shares, Sales Charges, Class B and Class C -- CDSC alternative" for more information on the timing of conversion of Class B shares to Class A shares. Timing of conversion will vary depending on the date of your original purchase of the Class B shares. (e) Class B shares of RiverSource Absolute Return Currency and Income Fund are only available for exchanges from Class B shares of another fund in the RiverSource Family of Funds. Class B shares of each of RiverSource Floating Rate Fund, RiverSource Inflation Protected Securities Fund, RiverSource Intermediate Tax-Exempt Fund, RiverSource Limited Duration Bond Fund and RiverSource Short Duration U.S. Government Fund are closed to new investors and new purchases. (Existing shareholders in these funds may continue to own Class B shares and make exchanges into and out of existing accounts where Class B shares of these funds are maintained.) (f) The money market funds may offer Class B and Class C shares, but only to facilitate exchanges with other funds offering Class B and Class C shares, respectively. (g) For RiverSource Cash Management Fund and RiverSource Tax-Exempt Money Market Fund, Class A is 0.10%. For RiverSource Cash Management Fund, Class B is 0.85%, Class C is 0.75% and Class W is 0.10%. DISTRIBUTION AND SERVICE FEES The distribution and shareholder servicing fees for Class A, Class B, Class C, Class R2, Class R3 and Class W shares, as applicable, are subject to the requirements of Rule 12b-1 under the Investment Company Act of 1940, as amended, and are used to reimburse the distributor for certain expenses it incurs in connection with distributing the fund's shares and directly or indirectly providing services to fund shareholders. These expenses include payment of distribution and/or shareholder servicing fees to financial intermediaries that sell shares of the fund or provide services to fund shareholders, up to 0.50% of the average daily net assets of Class R2 shares sold and held through them and up to 0.25%* of the average daily net assets of Class A, Class B, Class C, Class R3 and Class W shares sold and held through them. For Class A, Class B, Class R2, Class R3 and Class W shares, the distributor begins to pay these fees immediately after purchase. For Class C shares, the distributor pays these fees in advance for the first 12 months. Financial intermediaries also receive distribution fees up to 0.75% of the average daily net assets of Class C shares sold and held -------------------------------------------------------------------------------- S.3 through them, which the distributor begins to pay 12 months after purchase. For Class B shares, and, for the first 12 months following the sale of Class C shares, the fund's distributor retains the distribution fee of up to 0.75% in order to finance the payment of sales commissions to financial intermediaries, and to pay for other distribution related expenses. Financial intermediaries may compensate their financial advisors with the shareholder servicing and distribution fees paid to them by the distributor. IF YOU MAINTAIN SHARES OF THE FUND DIRECTLY WITH THE FUND, WITHOUT WORKING DIRECTLY WITH A FINANCIAL INTERMEDIARY OR FINANCIAL ADVISOR, DISTRIBUTION AND SERVICE FEES MAY BE RETAINED BY THE DISTRIBUTOR AS REIMBURSEMENT FOR INCURRING CERTAIN DISTRIBUTION AND SHAREHOLDER SERVICING RELATED EXPENSES. * For RiverSource Cash Management Fund, financial intermediaries receive fees up to 0.10% of the average daily net assets of Class A, Class B and Class W shares sold and held through them. PLAN ADMINISTRATION FEE Class R2, Class R3, Class R4 and Class Y shares pay an annual plan administration services fee for the provision of various administrative, recordkeeping, communication and educational services. The fee for Class R2, Class R3 and Class R4 shares is equal on an annual basis to 0.25% of average daily net assets attributable to the respective class. The fee for Class Y shares is equal on an annual basis to 0.15% of average daily net assets attributable to the class. DETERMINING WHICH CLASS OF SHARES TO PURCHASE Each of the fund's classes represent an interest in the same portfolio of investments. However, as set forth above, each class has its own sales charge schedule, and its ongoing distribution and shareholder service fees may differ from other classes. When deciding which class of shares to buy, you should consider, among other things: - The amount you plan to invest. - How long you intend to remain invested in the fund or another fund in the RiverSource Family of Funds. - Whether you may be eligible for reduced or no sales charges when you buy or sell shares. Your authorized financial intermediary or financial advisor will be able to help you decide which class of shares best meets your needs. -------------------------------------------------------------------------------- S.4 CLASS A, CLASS B AND CLASS C SHARES* Class B shares of RiverSource Absolute Return Currency and Income Fund are not currently available for new purchases. However, if you own Class B shares of another fund in the RiverSource Family of Funds, you may exchange into Class B shares of RiverSource Absolute Return Currency and Income Fund, if you meet the minimum investment and account balance requirements set forth in "Opening an Account," subject to the limitations set forth in this section. New purchases of Class B shares will not be permitted if your rights of accumulation are $50,000 or higher, and new purchases of Class C shares will not be permitted if your rights of accumulation are $1,000,000 or higher. See "Sales Charges, Initial Sales Charge -- Rights of Accumulation" for information on rights of accumulation. Class B shares have a higher annual distribution fee than Class A shares and a contingent deferred sales charge (CDSC) for six years. Class B shares convert to Class A shares. Class B shares purchased through reinvested dividends and distributions will convert to Class A shares in the same proportion as the other Class B shares. See "Class B and Class C -- CDSC alternative" for information on timing of Class B share conversion to Class A shares. Class C shares have a higher annual distribution fee than Class A shares and a CDSC for one year. Class C shares have no sales charge if you hold the shares for longer than one year. Unlike Class B shares, Class C shares do not convert to Class A shares. As a result, you will pay a distribution fee for as long as you hold Class C shares. If you choose a share class with a CDSC (Class B or Class C), you should consider the length of time you intend to hold your shares. To help you determine which investment is best for you, consult your financial intermediary or financial advisor. * For money market funds, new investments must be made in Class A shares of the fund. The money market funds offer Class B and Class C shares only to facilitate exchanges between classes of these shares in other funds. CLASS I SHARES. The following eligible investors may purchase Class I shares: - Any fund distributed by the distributor, if the fund seeks to achieve its investment objective by investing primarily in shares of funds in the RiverSource Family of Funds. Class I shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. CLASS R AND CLASS Y SHARES. The following eligible institutional investors may purchase Class R2, Class R3, Class R4, Class R5 and Class Y shares: -------------------------------------------------------------------------------- S.5 - Qualified employee benefit plans. - Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code. - Non-qualified deferred compensation plans whose participants are included in a qualified employee benefit plan described above. - State sponsored college savings plans established under Section 529 of the Internal Revenue Code. - Health Savings Accounts created pursuant to public law 108-173. Additionally, if approved by the distributor, the following eligible institutional investors may purchase Class R5 shares: - Institutional or corporate accounts above a threshold established by the distributor (currently $1 million per fund or $10 million in all funds in the RiverSource Family of Funds). - Bank trust departments. Class R and Class Y shares generally are not available to retail non-retirement accounts, traditional and Roth IRAs, Coverdell Educational Savings Accounts, SEPs, SARSEPs, SIMPLE IRAs and individual 403(b) plans. Class R shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. CLASS W SHARES. The following eligible investors may purchase Class W shares: - Investors purchasing through authorized investment programs managed by investment professionals, including discretionary managed account programs. Class W shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. Shares originally purchased in a discretionary managed account may continue to be held in Class W outside of a discretionary managed account, but no additional Class W purchases may be made and no exchanges to Class W shares of another fund may be made outside of a discretionary managed account. IN ADDITION, FOR CLASS I, CLASS R AND CLASS Y SHARES, THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY ACCEPT OR AUTHORIZE FINANCIAL INTERMEDIARIES TO ACCEPT INVESTMENTS FROM OTHER INSTITUTIONAL INVESTORS NOT LISTED ABOVE. IN ADDITION, FOR CLASS W SHARES, THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY ACCEPT OR AUTHORIZE FINANCIAL INTERMEDIARIES TO ACCEPT INVESTMENTS FROM OTHER INVESTORS NOT LISTED ABOVE. Please consult your financial advisor for assistance in selecting the appropriate class of shares. For more information, see the SAI. -------------------------------------------------------------------------------- S.6 SALES CHARGES FOR FUNDS OTHER THAN MONEY MARKET FUNDS CLASS A -- INITIAL SALES CHARGE ALTERNATIVE: Your purchase price for Class A shares is generally the net asset value (NAV) plus a front-end sales charge. The distributor receives the sales charge and re- allows a portion of the sales charge to the financial intermediary through which you purchased the shares. The distributor retains the balance of the sales charge. The distributor retains the full sales charge you pay when you purchase shares of the fund directly from the fund (not through an authorized financial intermediary). Sales charges vary depending on the amount of your purchase. INITIAL SALES CHARGE(A) FOR CLASS A SHARES For equity funds and funds-of-funds (equity)*
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 5.75% 6.10% 5.00% $50,000--$99,999 4.75 4.99 4.00 $100,000--$249,999 3.50 3.63 3.00 $250,000--$499,999 2.50 2.56 2.15 $500,000--$999,999 2.00 2.04 1.75 $1,000,000 or more 0.00 0.00 0.00(c),(d)
For fixed income funds except those listed below and funds-of-funds (fixed income)*
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 4.75% 4.99% 4.00% $50,000--$99,999 4.25 4.44 3.50 $100,000--$249,999 3.50 3.63 3.00 $250,000--$499,999 2.50 2.56 2.15 $500,000--$999,999 2.00 2.04 1.75 $1,000,000 or more 0.00 0.00 0.00(c),(d)
-------------------------------------------------------------------------------- S.7 For RiverSource Absolute Return Currency and Income Fund, RiverSource Floating Rate Fund, RiverSource Inflation Protected Securities Fund, RiverSource Intermediate Tax-Exempt Fund, RiverSource Limited Duration Bond Fund and RiverSource Short Duration U.S. Government Fund
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 3.00% 3.09% 2.50% $50,000--$99,999 3.00 3.09 2.50 $100,000--$249,999 2.50 2.56 2.15 $250,000--$499,999 2.00 2.04 1.75 $500,000--$999,999 1.50 1.52 1.25 $1,000,000 or more 0.00 0.00 0.00(c),(d)
* "Funds-of-funds (equity)" includes -- RiverSource Portfolio Builder Aggressive Fund, RiverSource Portfolio Builder Moderate Aggressive Fund, RiverSource Portfolio Builder Moderate Fund, RiverSource Portfolio Builder Total Equity Fund, RiverSource Retirement Plus 2010 Fund, RiverSource Retirement Plus 2015 Fund, RiverSource Retirement Plus 2020 Fund, RiverSource Retirement Plus 2025 Fund, RiverSource Retirement Plus 2030 Fund, RiverSource Retirement Plus 2035 Fund, RiverSource Retirement Plus 2040 Fund, RiverSource Retirement Plus 2045 Fund, Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025, Seligman TargETFund 2015 and Seligman TargETFund Core. "Funds-of-funds (fixed income)" includes -- RiverSource Income Builder Basic Income Fund, RiverSource Income Builder Enhanced Income Fund, RiverSource Income Builder Moderate Income Fund, RiverSource Portfolio Builder Conservative Fund and RiverSource Portfolio Builder Moderate Conservative Fund. (a) Because of rounding in the calculation of the offering price, the portion of the sales charge retained by the distributor may vary and the actual sales charge you pay may be more or less than the sales charge calculated using these percentages. (b) Purchase price includes the sales charge. (c) Although there is no sales charge for purchases with a total market value over $1,000,000, and therefore no re-allowance, the distributor may pay a financial intermediary the following out of its own resources: a sales commission of up to 1.00% for a sale of $1,000,000 to $3,999,999; a sales commission up to 0.50% for a sale of $4,000,000 to $49,999,999; and a sales commission up to 0.25% for a sale of $50,000,000 or more. (d) For certain eligible employee benefit plans defined under section 401(a), 401(k), 457 and 403(b) which meet eligibility rules for the waiver of applicable sales charges, the distributor may pay the following out of its own resources: a sales commission of 1.00% for a sale of $1 to $3,999,999 received in eligible employee benefit plans; a sales commission up to 0.50% for a sale of $4,000,000 to $49,999,999; and a sales commission up to 0.25% for a sale of $50,000,000 or more. See "Initial Sales Charge -- Waivers of the sales charge for Class A shares" for employee benefit plan eligibility rules. There is no initial sales charge on reinvested dividends or capital gain distributions. INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA). You may be able to reduce the sales charge on Class A shares, based on the combined market value of accounts in your ROA group. Your ROA group includes the current market values of the following investments which are eligible to be added together for purposes of determining the sales charge on your next purchase: - Your current investment in a fund; and -------------------------------------------------------------------------------- S.8 - Previous investments you and members of your household have made in Class A, Class B or Class C shares in the fund and other funds in the RiverSource Family of Funds, provided your investment was subject to a sales charge. Your household consists of you, your spouse or domestic partner and your unmarried children under age 21, all of whom share a mailing address. The following accounts are eligible to be included in your ROA group in order to determine the sales charge on your purchase: - Individual or joint accounts; - Roth and traditional IRAs, SEPs, SIMPLEs and TSCAs, provided they are invested in Class A, Class B or Class C shares that were subject to a sales charge; - UGMA/UTMA accounts for which you, your spouse, or your domestic partner is parent or guardian of the minor child; - Revocable trust accounts for which you or a member of your household, individually, is the beneficial owner/grantor; - Accounts held in the name of your, your spouse's, or your domestic partner's sole proprietorship or single owner limited liability company or S corporation; and - Qualified retirement plan assets, provided that you are the sole owner of the business sponsoring the plan, are the sole participant (other than a spouse) in the plan, and have no intention of adding participants to the plan. The following accounts are NOT eligible to be included in your ROA group in order to determine the sales charge on your purchase: - Accounts of pension and retirement plans with multiple participants, such as 401(k) plans (which are combined to reduce the sales charge for the entire pension or retirement plan and therefore are not used to reduce the sales charge for your individual accounts); - Investments in Class A shares where the sales charge is waived, for example, purchases through wrap accounts; - Investments in Class I, Class R2, Class R3, Class R4, Class R5, Class W or Class Y shares; - Investments in 529 plans, donor advised funds, variable annuities, variable life insurance products, wrap accounts or managed separate accounts; and - Charitable and irrevocable trust accounts. If you purchase fund shares through different financial intermediaries, and you want to include those assets toward a reduced sales charge, you must inform your financial intermediary in writing about the other accounts when placing your purchase order. Contact your financial intermediary to determine what information is required. -------------------------------------------------------------------------------- S.9 Unless you provide your financial intermediary in writing with information about all of the accounts that may count toward a sales charge reduction, there can be no assurance that you will receive all of the reductions for which you may be eligible. You should request that your financial intermediary provide this information to the fund when placing your purchase order. For more information on ROA, please see the SAI. INITIAL SALES CHARGE -- LETTER OF INTENT (LOI). Generally, if you intend to invest $50,000 or more (including any existing ROA) over a period of up to 13 months, you may be able to reduce the front-end sales charge(s) for investments in Class A shares by completing and filing an LOI. The required form of LOI may vary by financial intermediary. Existing ROA can be included in your LOI. Each purchase of fund shares normally subject to an initial sales charge made during the 13-month period will be made at the public offering price applicable to a single transaction of the total dollar amount indicated by the LOI. Five percent of the commitment amount will be placed in escrow. At the end of the 13-month period, the LOI will end and the shares will be released from escrow. If you do not invest the commitment amount by the end of the 13 months, the remaining amount of the unpaid sales charge will be redeemed from the escrowed shares and the remaining balance released from escrow. Existing ROA Example. Shareholder currently has $60,000 ROA in the funds. Shareholder completes an LOI to invest $100,000 in the funds (ROA eligible accounts). Shareholder only needs to invest an additional $40,000 in the funds' Class A shares (any non-money market fund in the RiverSource Family of Funds) in order to fulfill the LOI commitment and receive reduced front-end sales charge(s) over the next 13 months. Notification Obligation. You must request the reduced sales charge when you buy shares. If you do not complete and file an LOI, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge. You should request that your financial intermediary provide this information to the fund when placing your purchase order. For more detail on LOIs, please contact your financial intermediary or see the SAI. INITIAL SALES CHARGE -- WAIVERS OF THE SALES CHARGE FOR CLASS A SHARES. Sales charges do not apply to: - current or retired Board members, officers or employees of the funds or RiverSource Investments or its affiliates, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - current or retired Ameriprise Financial Services, Inc. financial advisors, employees of financial advisors, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. -------------------------------------------------------------------------------- S.10 - registered representatives and other employees of affiliated or unaffiliated financial intermediaries having a selling agreement with the distributor, including their spouses, domestic partners, children, parents and their spouse's or domestic partner's parents. - portfolio managers employed by subadvisers of the funds, including their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - partners and employees of outside legal counsel to the funds or the funds' directors or trustees who regularly provide advice and services to the funds, or to their directors or trustees. - direct rollovers from qualified employee benefit plans, provided that the rollover involves a transfer to Class A shares in the same fund. - purchases made: - with dividend or capital gain distributions from a fund or from the same class of another fund in the RiverSource Family of Funds; - through or under a wrap fee product or other investment product sponsored by a financial intermediary that charges an account management fee that has, or that clear trades through a financial intermediary that has, a selling agreement with the distributor; - through state sponsored college savings plans established under Section 529 of the Internal Revenue Code; or - through bank trust departments. - separate accounts established and maintained by an insurance company which are exempt from registration under Section 3(c)(11). - purchases made through "employee benefit plans" created under section 401(a), 401(k), 457 and 403(b) which: - have at least $1 million in plan assets at the time of investment; and - have a plan level or omnibus account that is maintained with the fund or its transfer agent; and - transact directly with the fund or its transfer agent through a third party administrator or third party recordkeeper. For more information regarding waivers of sales charge for Class A purchases, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of sales charges for additional classes of investors. Policies related to reducing or waiving the sales charge may be modified or withdrawn at any time. -------------------------------------------------------------------------------- S.11 Unless you provide your financial intermediary with information in writing about all of the factors that may count toward a waiver of the sales charge, there can be no assurance that you will receive all of the waivers for which you may be eligible. You should request that your financial intermediary provide this information to the fund when placing your purchase order. Because the current prospectus is available on the funds' website (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com free of charge, information regarding breakpoint discounts is not separately disclosed on the website. CDSCS AND THE COMBINATION OF TARGET DATE FUNDS WITH SELIGMAN TARGETFUND CORE. Each of Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025 and Seligman TargETFund 2015 (the Target Date Funds) will automatically be combined with Seligman TargETFund Core during their respective target year. The investment manager expects each of these combinations to be effected as an acquisition of the assets and liabilities of the applicable Target Date Fund in exchange for shares of Seligman TargETFund Core at net asset value, with the shares of Seligman TargETFund Core then distributed to shareholders of the applicable Target Date Fund. For the purpose of calculating CDSCs, holding periods in respect of shares of a Target Date Fund will be carried over to shares of Seligman TargETFund Core acquired as a result of the combination of a Target Date Fund with Seligman TargETFund Core. CLASS A -- CONTINGENT DEFERRED SALES CHARGE For Class A shares purchased without a sales charge where a commission was separately paid by the distributor to an authorized financial intermediary effecting the purchase, a 1% CDSC may be charged if you sell your shares within 18 months after purchase. A CDSC will be based on the original purchase cost or the current market value of the shares being sold, whichever is less. CDSC -- WAIVERS OF THE CDSC FOR CLASS A SHARES. The CDSC will be waived on sales of shares: - to which no sales commission or transaction fee was paid to an authorized financial intermediary at the time of purchase. - purchased through reinvestment of dividends and capital gain distributions. - in the event of the shareholder's death. - from a monthly, quarterly or annual systematic redemption plan of up to an annual amount of 12% of the account value on a per fund basis. - in an account that has been closed because it falls below the minimum account balance. - that result from required minimum distributions taken from retirement accounts upon the shareholders attainment of age 70 1/2. -------------------------------------------------------------------------------- S.12 - that result from returns of excess contributions or excess deferral amounts made to a retirement plan participant. - of RiverSource funds purchased prior to Dec. 1, 2008. - initially purchased by an employee benefit plan that is not connected with a plan level termination. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. CLASS B AND CLASS C -- CDSC ALTERNATIVE The money market funds (except RiverSource Tax-Exempt Money Market Fund) offer Class B and Class C shares, but only to facilitate exchanges with other funds offering Class B and Class C shares, respectively. For example, if you own Class B or Class C shares of another fund, but want to hold your money in a money market fund, you may exchange into Class B or Class C shares of a money market fund. Funds that offer Class B and Class C shares have limitations on the amount you may invest in those share classes. If you are considering purchasing Class B or Class C shares of a fund, please see the prospectus for that fund for any effective purchase limitations. Although you may not purchase Class B and Class C shares of the money market funds directly, if you exchange into Class B or Class C shares of a money market fund from another fund, you will be subject to the rules governing CDSC set forth in this section. To minimize the amount of CDSC you may pay when you sell your shares, the fund assumes that shares acquired through reinvested dividends and capital gain distributions (which are not subject to CDSC) are sold first. Shares that have been in your account long enough so that they are not subject to a CDSC are sold next. After these shares are exhausted, shares will be sold in the order they were purchased (earliest to latest). -------------------------------------------------------------------------------- S.13 FOR CLASS B, the CDSC is based on the sale amount and the number of years between purchase and sale. The following table shows how CDSC percentages on sales decline over time:
IF THE SALE IS MADE DURING THE: THE CDSC PERCENTAGE RATE IS:* First year 5% Second year 4% Third year 3%** Fourth year 3% Fifth year 2% Sixth year 1% Seventh or eighth year 0%
* Because of rounding in the calculation, the portion of the CDSC retained by the distributor may vary and the actual CDSC you pay may be more or less than the CDSC calculated using these percentages. ** For shares purchased in a RiverSource fund on or prior to June 12, 2009, the CDSC percentage for the third year is 4%. Although there is no front-end sales charge when you buy Class B shares, the distributor pays a sales commission of 4% to financial intermediaries that sell Class B shares. A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class B shares. You may not make additional purchases of Class B shares if your ROA exceeds $49,999.99. Class B shares purchased in a RiverSource fund prior to May 21, 2005 age on a calendar year basis. Class B shares purchases made in a RiverSource fund beginning May 21, 2005 age on a daily basis. For example, a purchase made on Nov. 12, 2004 completed its first year on Dec. 31, 2004 under calendar year aging. However, a purchase made on Nov. 12, 2005 completed its first year on Nov. 11, 2006 under daily aging. Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund on or prior to June 12, 2009 will convert to Class A shares in the month prior to the ninth year of ownership. Class B shares purchased in a RiverSource fund beginning May 21, 2005 and Class B shares purchased in a Seligman fund beginning June 13, 2009 will convert to Class A shares one month after the completion of the eighth year of ownership. -------------------------------------------------------------------------------- S.14 FOR CLASS C, a 1% CDSC may be charged if you sell your shares within one year after purchase. Although there is no front-end sales charge when you buy Class C shares, the distributor pays a total amount up to 1% (including sales commission and advance of service fees) to financial intermediaries that sell Class C shares. See "Buying and Selling Shares -- Distribution and Service Fees." A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class C shares. You may not make additional purchases of Class C shares if your ROA exceeds $999,999.99. For both Class B and Class C shares, the amount of any CDSC you pay will be based on the lower of the original purchase price of those shares or current net asset value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you do not have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. EXAMPLE Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3 1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase. CDSC -- WAIVERS OF THE CDSC FOR CLASS B SHARES. The CDSC will be waived on sales of shares: - in the event of the shareholder's death. - that result from required minimum distributions taken from retirement accounts upon the shareholders' attainment of age 70 1/2. - sold under an approved substantially equal periodic payment arrangement. - by certain other investors, including certain institutions as set forth in more detail in the SAI. For more information regarding waivers of the CDSC for Class B shares, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. -------------------------------------------------------------------------------- S.15 CDSC -- WAIVERS OF THE CDSC FOR CLASS C SHARES. The CDSC will be waived on sales of shares: - in the event of the shareholder's death. - to which no sales commission or transaction fee was paid to an authorized financial intermediary at the time of purchase. - that result from required minimum distributions taken from retirement accounts upon the shareholders' attainment of age 70 1/2. - initially purchased by an eligible employee benefit plan that are not connected with a plan level termination. - by certain other investors, including certain institutions as set forth in more detail in the SAI. For more information regarding waivers of the CDSC for Class C shares, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. CLASS I, CLASS R2, CLASS R3, CLASS R4, CLASS R5, CLASS W AND CLASS Y -- NO SALES CHARGE. For each of Class I, Class R2, Class R3, Class R4, Class R5 and Class W there is no initial sales charge or CDSC. OPENING AN ACCOUNT Financial institutions are required by law to obtain certain personal information from each person who opens an account in order to verify the identity of the person. As a result, when you open an account you will be asked to provide your name, permanent street address, date of birth, and Social Security or Employer Identification number. You may also be asked for other identifying documents or information. If you do not provide this information, the fund or the financial intermediary through which you are investing in the fund may not be able to open an account for you. If the fund or the financial intermediary through which you are investing in the fund is unable to verify your identity, your account may be closed, or other steps may be taken, as deemed appropriate. When you buy shares, your order will be priced at the next NAV calculated after your order is accepted by the fund or an authorized financial intermediary. Any applicable sales charge will be added to the purchase price for Class A shares. You may establish and maintain your account with an authorized financial intermediary or directly with the fund. The fund may appoint servicing agents to accept purchase orders and to accept exchange (and sale) orders on its behalf. Accounts established with the fund will be supported by the fund's transfer agent. -------------------------------------------------------------------------------- S.16 METHODS OF PURCHASING SHARES These methods of purchasing shares generally apply to Class A, Class B, and Class C shares. CLASS B SHARES OF RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND IS CURRENTLY CLOSED TO INVESTORS FOR NEW PURCHASES. CLASS B SHARES FOR RIVERSOURCE FLOATING RATE FUND, RIVERSOURCE INFLATION PROTECTED SECURITIES FUND, RIVERSOURCE INTERMEDIATE TAX-EXEMPT FUND, RIVERSOURCE LIMITED DURATION BOND FUND AND RIVERSOURCE SHORT DURATION U.S. GOVERNMENT FUND ARE CLOSED TO NEW INVESTORS AND NEW PURCHASES. EXISTING SHAREHOLDERS IN THESE FUNDS MAY CONTINUE TO OWN CLASS B SHARES AND MAKE EXCHANGES INTO AND OUT OF EXISTING ACCOUNTS WHERE CLASS B SHARES OF THESE FUNDS ARE MAINTAINED. ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INTERMEDIARY ALL REQUESTS The financial intermediary through which you buy shares may have different policies not described in this prospectus, including different minimum investment amounts and minimum account balances. -------------------------------------------------------------------------------- ACCOUNT ESTABLISHED WITH THE FUND BY MAIL You or the financial intermediary through which you buy shares may establish an account with the fund. To establish an account in this fashion, complete a fund account application with your financial advisor or investment professional, and mail the account application to the address below. Account applications may be obtained (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com or may be requested by calling (800) 221-2450. Make your check payable to the fund. The fund does not accept cash, credit card convenience checks, money orders, traveler's checks, starter checks, third or fourth party checks, or other cash equivalents. ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.17 METHODS OF PURCHASING SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) Mail your check and completed application to: REGULAR MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL P.O. BOX 8041 BOSTON, MA 02266-8041 EXPRESS MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL 30 DAN ROAD CANTON, MA 02021-2809 If you already have an account, include your name, account number, and the name of the fund and class of shares you wish to purchase along with your check. You can make scheduled investments in the fund by moving money from your checking account or savings account. See the Minimum Investment and Account Balance chart below for more information regarding scheduled investment plans. -------------------------------------------------------------------------------- BY WIRE OR ACH Fund shares purchased in an account established and maintained with the fund may be paid for by federal funds wire. Before sending a wire, call (800) 221-2450 to notify the fund's transfer agent of the wire and to receive further instructions. If you are establishing an account with a wire purchase, you are required to send a signed account application to the address above. Please include the wire control number or your new account number on the application. Your bank or financial intermediary may charge additional fees for wire transactions. -------------------------------------------------------------------------------- BY EXCHANGE Call (800) 221-2450 or send signed written instructions to the address above. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.18 METHODS OF PURCHASING SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) MINIMUM INVESTMENT AND ACCOUNT BALANCE
RIVERSOURCE RIVERSOURCE 120/20 DISCIPLINED CONTRARIAN SMALL CAP EQUITY FUND VALUE FUND THREADNEEDLE RIVERSOURCE FOR ALL FUNDS, GLOBAL EXTENDED FLOATING RATE CLASSES AND ALPHA FUND FUND ACCOUNTS EXCEPT RIVERSOURCE RIVERSOURCE THOSE LISTED TO ABSOLUTE RETURN INFLATION THE RIGHT TAX QUALIFIED CURRENCY AND PROTECTED (NONQUALIFIED) ACCOUNTS INCOME FUND SECURITIES FUND CLASS W --------------------------------------------------------------------------------------------------------------- INITIAL INVESTMENT $2,000 $1,000 $10,000 $5,000 $500 --------------------------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $100 $100 $100 None --------------------------------------------------------------------------------------------------------------- ACCOUNT BALANCE* $1,000 None $5,000 $2,500 $500
*If your fund account balance falls below the minimum account balance for any reason, including a market decline, you may be asked to increase it to the minimum account balance or establish a scheduled investment plan. If you do not do so within 30 days, your shares may be automatically redeemed and the proceeds mailed to you. ------------------------------------------------------------------------------- MINIMUM INVESTMENT AND ACCOUNT BALANCE -- SCHEDULED INVESTMENT PLANS
RIVERSOURCE RIVERSOURCE 120/20 DISCIPLINED CONTRARIAN SMALL CAP EQUITY FUND VALUE FUND THREADNEEDLE RIVERSOURCE FOR ALL FUNDS, GLOBAL EXTENDED FLOATING RATE CLASSES AND ALPHA FUND FUND ACCOUNTS EXCEPT RIVERSOURCE RIVERSOURCE THOSE LISTED TO ABSOLUTE RETURN INFLATION THE RIGHT TAX QUALIFIED CURRENCY AND PROTECTED (NONQUALIFIED) ACCOUNTS INCOME FUND SECURITIES FUND CLASS W --------------------------------------------------------------------------------------------------------------- INITIAL INVESTMENT $100(a) $100(b) $10,000 $5,000 $500 --------------------------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $50 $100 $100 None --------------------------------------------------------------------------------------------------------------- ACCOUNT BALANCE** None(b) None $5,000 $2,500 $500
**If your fund account balance is below the minimum initial investment described above, you must make payments at least monthly. (a)Money Market Funds -- $2,000 (b)Money Market Funds -- $1,000 ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.19 These minimums may be waived for accounts that are managed by an investment professional, for accounts held in approved discretionary or non-discretionary wrap programs, for accounts that are a part of an employer-sponsored retirement plan, or for other account types if approved by the distributor. The fund reserves the right to modify its minimum account requirements at any time, with or without prior notice. Please contact your financial intermediary for information regarding wire or electronic funds transfer. IMPORTANT: Payments sent by electronic fund transfers (ACH), a bank authorization or check that are not guaranteed may take up to 14 days to clear. If you request a sale within 14 days of purchase, this may cause your sale request to fail to process if the requested amount includes unguaranteed funds. EXCHANGING OR SELLING SHARES You may exchange or sell shares by having your financial intermediary process your transaction. If you maintain your account directly with your financial intermediary, you must contact that financial intermediary to exchange or sell shares of the fund. If your account was established with the fund, there are a variety of methods you may use to exchange or sell shares of the fund. WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INTERMEDIARY ALL REQUESTS You can exchange or sell shares by having your financial intermediary process your transaction. The financial intermediary through which you purchased shares may have different policies not described in this prospectus, including different transaction limits, exchange policies and sale procedures. -------------------------------------------------------------------------------- ACCOUNT ESTABLISHED WITH THE FUND BY MAIL Mail your exchange or sale request to: REGULAR MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL P.O. BOX 8041 BOSTON, MA 02266-8041 EXPRESS MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL 30 DAN ROAD CANTON, MA 02021-2809 ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.20 WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) Include in your letter: - your name - the name of the fund(s) - your account number - the class of shares to be exchanged or sold - your Social Security number or Employer Identification number - the dollar amount or number of shares you want to exchange or sell - specific instructions regarding delivery or exchange destination - signature(s) of registered account owner(s) - any special documents the transfer agent may require in order to process your order Corporate, trust or partnership accounts may need to send additional documents. Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners. A Medallion Signature Guarantee is required if: - Amount is over $50,000. - You want your check made payable to someone other than the registered account owner(s). - Your address of record has changed within the last 30 days. - You want the check mailed to an address other than the address of record. - You want the proceeds sent to a bank account not on file. - You are the beneficiary of the account and the account owner is deceased (additional documents may be required). A Medallion Signature Guarantee assures that a signature is genuine and not a forgery. The financial intermediary providing the Guarantee is financially liable for the transaction if the signature is a forgery. Eligible guarantors include commercial banks, trust companies, savings associations, and credit unions as defined by the Federal Deposit Insurance Act. Note: A guarantee from a notary public is not acceptable. ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.21 WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) NOTE: Any express mail delivery charges you pay will vary depending on domestic or international delivery instructions. -------------------------------------------------------------------------------- BY TELEPHONE Call (800) 221-2450. Unless you elect not to have telephone exchange and sale privileges, they will automatically be available to you. Reasonable procedures will be used to confirm authenticity of telephone exchange or sale requests. Telephone privileges may be modified or discontinued at any time. Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate, qualified retirement accounts and trust accounts which the current trustee is not listed. You may request that these privileges NOT apply by writing to the address above. Payment will be mailed to the address of record and made payable to the names listed on the account. Telephone sale requests are limited to $50,000 per day. -------------------------------------------------------------------------------- BY WIRE OR ACH You can wire money from your fund account to your bank account. Make sure we have your bank account information on file. If we do not have this information, you will need to send written instructions with your bank's name and a voided check or savings account deposit slip. Call (800) 221-2450 or send a letter of instruction, with a Medallion Signature Guarantee if required, to the address above. A service fee may be charged against your account for each wire sent. Minimum amount: by ACH: $100 by wire: $500 Your bank or financial intermediary may charge additional fees for wire transactions. -------------------------------------------------------------------------------- BY SCHEDULED You may elect to receive regular periodic payments through an PAYOUT PLAN automatic sale of shares. See the SAI for more information. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.22 CHECK REDEMPTION SERVICE Class A shares of the money market funds offer check writing privileges. If you have $2000 in a money market fund, you may request checks which may be drawn against your account. You can elect this service on your initial application, or, thereafter. Call (800) 221-2450 for the appropriate forms to establish this service. If you own Class A shares that were both in another fund at NAV because of the size of the purchase, and then exchanged into a money market fund, check redemptions may be subject to a CDSC. EXCHANGES Generally, you may exchange your fund shares for shares of the same class of any other publicly offered fund in the RiverSource Family of Funds without a sales charge. For complete information on the fund you are exchanging into, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after your transaction request is received in good order. You may be subject to a sales charge if you exchange from a money market fund into an equity or fixed income fund. IF YOU HOLD YOUR FUND SHARES IN AN ACCOUNT WITH AMERIPRISE FINANCIAL SERVICES, YOU MAY HAVE LIMITED EXCHANGEABILITY WITHIN THE RIVERSOURCE FAMILY OF FUNDS. MARKET TIMING SHORT-TERM TRADING AND OTHER SO-CALLED MARKET TIMING PRACTICES ARE FREQUENT TRADING PRACTICES BY CERTAIN SHAREHOLDERS INTENDED TO PROFIT AT THE EXPENSE OF OTHER SHAREHOLDERS BY SELLING SHARES OF A FUND SHORTLY AFTER PURCHASE. MARKET TIMING MAY ADVERSELY IMPACT A FUND'S PERFORMANCE BY PREVENTING THE INVESTMENT MANAGER FROM FULLY INVESTING THE ASSETS OF THE FUND, DILUTING THE VALUE OF SHARES HELD BY LONG-TERM SHAREHOLDERS, OR INCREASING THE FUND'S TRANSACTION COSTS. -------------------------------------------------------------------------------- S.23 FOR A FUND ORGANIZED AS A FUND-OF-FUNDS, ITS ASSETS CONSIST PRIMARILY OF SHARES OF THE UNDERLYING FUNDS IN WHICH IT INVESTS. THE UNDERLYING FUNDS MAY BE MORE SUSCEPTIBLE TO THE RISKS OF MARKET TIMING. FUNDS THAT INVEST DIRECTLY IN SECURITIES THAT TRADE INFREQUENTLY MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF INEFFICIENCIES IN THE SECURITIES MARKETS. FUNDS AND THE UNDERLYING FUNDS THAT INVEST IN SECURITIES THAT TRADE ON OVERSEAS SECURITIES MARKETS MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF CHANGES IN THE VALUES OF SECURITIES BETWEEN THE CLOSE OF OVERSEAS MARKETS AND THE CLOSE OF U.S. MARKETS, WHICH IS GENERALLY THE TIME AT WHICH A FUND'S NAV IS CALCULATED. TO THE EXTENT THAT A FUND OR UNDERLYING FUND HAS SIGNIFICANT HOLDINGS OF SMALL CAP STOCKS, FLOATING RATE LOANS, HIGH YIELD BONDS, TAX-EXEMPT SECURITIES OR FOREIGN SECURITIES, THE RISKS OF MARKET TIMING MAY BE GREATER FOR THE FUND THAN FOR OTHER FUNDS. SEE "PRINCIPAL INVESTMENT STRATEGIES" FOR A DISCUSSION OF THE TYPES OF SECURITIES IN WHICH YOUR FUND INVESTS. SEE "PRICING AND VALUING OF FUND SHARES" FOR A DISCUSSION OF THE FUNDS' POLICY ON FAIR VALUE PRICING, WHICH IS INTENDED, IN PART, TO REDUCE THE FREQUENCY AND EFFECT OF MARKET TIMING. THE FUNDS' BOARD HAS ADOPTED A POLICY THAT IS DESIGNED TO DETECT AND DETER MARKET TIMING THAT MAY BE HARMFUL TO THE FUNDS. EACH FUND SEEKS TO ENFORCE THIS POLICY THROUGH ITS SERVICE PROVIDERS AS FOLLOWS: - The fund tries to distinguish market timing from trading that it believes is not harmful, such as periodic rebalancing for purposes of asset allocation or dollar cost averaging or other purchase and exchange transactions not believed to be inconsistent with the best interest of fund shareholders or the Board's policy. The fund uses a variety of techniques to monitor for and detect abusive trading practices. These techniques may vary depending on the type of fund, the class of shares and where the shares are maintained. Under the fund's procedures, there is no set number of transactions in the fund that constitutes market timing. Even one purchase and subsequent sale by related accounts may be market timing. Generally, the fund seeks to restrict the exchange privilege of an investor who makes more than three exchanges into or out of the fund in any 90-day period. Accounts held by a retirement plan or a financial intermediary for the benefit of its participants or clients, which typically engage in daily transactions, are not subject to this limit, although the fund may seek the assistance of financial intermediaries in applying similar restrictions on their participants or clients. The fund's ability to monitor and discourage abusive trading practices in omnibus accounts is more limited. - The fund may rely on the monitoring policy of a financial intermediary, for example, a retirement plan administrator or similar financial intermediary authorized to distribute the funds, if it determines the policy and procedures of such financial intermediaries are sufficient to protect the fund and its shareholders. -------------------------------------------------------------------------------- S.24 - If an investor's trading activity is determined to be market timing or otherwise harmful to existing shareholders, the fund reserves the right to modify or discontinue the investor's exchange privilege or reject the investor's purchases or exchanges, including purchases or exchanges accepted by a financial intermediary. The fund may treat accounts it believes to be under common control as a single account for these purposes, although it may not be able to identify all such accounts. - Although the fund does not knowingly permit market timing, it cannot guarantee that it will be able to identify and restrict all short-term trading activity. The fund receives purchase and sale orders through financial intermediaries where market timing activity may not always be successfully detected. Other exchange policies: - Exchanges must be made into the same class of shares of the share class being exchanged out of. - Exchanges into RiverSource Tax-Exempt Money Market Fund may be made only from Class A shares. - If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. - Once the fund receives your exchange request, you cannot cancel it after the market closes. - Shares of the purchased fund may not be used on the same day for another exchange or sale. - New investments in Class A shares of a money market fund may be exchanged for either Class A, Class B or Class C shares of any other publicly offered fund in the RiverSource Family of Funds. - If you exchange shares from Class A shares of a money market fund to another fund in the RiverSource Family of Funds, any further exchanges must be between shares of the same class. For example, if you exchange from Class A shares of a money market fund into Class B shares of another fund in the RiverSource Family of Funds, you may not exchange from Class B shares of that fund back to Class A shares of a money market fund. Exchange rules for money market funds are illustrated in the following tables. - Shares of Class W originally purchased, but no longer held in a discretionary managed account, may not be exchanged for Class W shares of another fund. You may continue to hold these shares in the fund. Changing your investment to a different fund will be treated as a sale and purchase, and you will be subject to applicable taxes on the sale and sales charges on the purchase of the new fund. -------------------------------------------------------------------------------- S.25 - If your shares are subject to a CDSC, you will not be charged a CDSC upon the exchange of those shares. Any CDSC will be deducted when you sell the shares you received from the exchange. The CDSC imposed at that time will be based on the period that begins when you bought shares of the original fund and ends when you sell the shares of the fund you exchanged to.
TO OTHER FUNDS FROM A MONEY MARKET FUND ----------------------------- CLASS A CLASS B CLASS C -------------------------------------------------------------------- Class A Yes Yes Yes Class B No Yes No Class C No No Yes
TO A MONEY MARKET FUND FROM OTHER FUNDS ----------------------------- CLASS A CLASS B CLASS C -------------------------------------------------------------------- Class A Yes No No Class B No Yes No Class C No No Yes
If your initial investment was in a money market fund and you exchange into an equity or fixed income fund, you will pay an initial sales charge if you exchange into Class A and be subject to a CDSC if you exchange into Class B or Class C. If your initial investment was in Class A shares of an equity or fixed income fund and you exchange shares into a money market fund, you may exchange that amount to another fund, including dividends earned on that amount, without paying a sales charge. SELLING SHARES You may sell your shares at any time. The payment will be sent within seven days after your request is received in good order. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order, minus any applicable CDSC. REPURCHASES. You can change your mind after requesting a sale of shares and use all or part of the sale proceeds to purchase new shares of a fund in the RiverSource Family of Funds. If your original purchase was in Class A or Class B, you may use all or part of the sale proceeds to purchase new Class A shares in any fund account linked together for ROA purposes. Your repurchase will be in Class A shares at NAV, up to the amount of the sale proceeds. For a Class A repurchase on shares that were originally charged a CDSC, the amount of the CDSC will be reinvested at the NAV on the date the repurchase is processed. Repurchases of Class B shares will also be in Class A shares at NAV. Any CDSC paid upon redemption of your Class B shares will not be reimbursed. If your original purchase was in Class C, you will be allowed to reinvest in the -------------------------------------------------------------------------------- S.26 same Class C account and fund you originally purchased. In a Class C repurchase, the CDSC you paid will be reinvested and the shares will be deemed to have the original cost and purchase date for purposes of applying the CDSC (if any) to subsequent redemptions. Systematic withdrawals and purchases will be excluded from this policy. In order for you to take advantage of this repurchase waiver, you must notify your financial intermediary or the fund's transfer agent if your account is held at the fund within 90 days of the date your sale request was processed. Contact your financial intermediary for information on required documentation. The repurchase privilege may be modified or discontinued at any time and use of this option may have tax consequences. If you sold shares of a Seligman fund on or before February 3, 2009 and wish to repurchase shares, you have the option of taking advantage of the current repurchase policy (described above) within 90 days of the date your sale request was processed, or you may use all or part of your sale proceeds to purchase shares of the fund you sold or any other fund in the RiverSource Family of Funds without paying an initial sales charge or, if you paid a CDSC when you sold your shares, receiving a credit for the applicable CDSC, within 120 days of the date your sale request was processed. Contact your financial intermediary or, if you opened an account directly with the fund, the transfer agent, for more information on the required documentation to complete a repurchase transaction. The fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. PRICING AND VALUING OF FUND SHARES For classes of shares sold with an initial sales charge, the public offering or purchase price is the net asset value plus the sales charge. For funds or classes of shares sold without an initial sales charge, the public offering price is the NAV. Orders in good form are priced at the NAV next determined after you place your order. Good form or good order means that your instructions have been received in the form required by the fund. This may include, for example, providing the fund name and account number, the amount of the transaction and all required signatures. The NAV is the value of a single share of the fund. The NAV is determined by dividing the value of the fund's assets, minus any liabilities, by the number of shares outstanding. The NAV is calculated as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. For a fund organized as a fund-of-funds, the assets will consist primarily of shares of the underlying funds, which are valued at their NAVs. Securities are valued primarily on the basis of market quotations and floating rate loans are valued primarily on the basis of indicative bids. Both market quotations -------------------------------------------------------------------------------- S.27 and indicative bids are obtained from outside pricing services approved and monitored under procedures adopted by the Board. Certain short-term securities with maturities of 60 days or less are valued at amortized cost. When reliable market quotations or indicative bids are not readily available, investments are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of an investment held by a fund or underlying fund is materially affected by events that occur after the close of a securities market but prior to the time as of which the fund's or underlying fund's NAV is determined. Valuing investments at fair value involves reliance on judgment. The fair value of an investment is likely to differ from any available quoted or published price. To the extent that a fund or an underlying fund has significant holdings of small cap stocks, high yield bonds, floating rate loans, tax-exempt securities or foreign securities that may trade infrequently, fair valuation may be used more frequently than for other funds. The funds use an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of a fund's or an underlying fund's securities may be listed on foreign exchanges that trade on weekends or other days when the fund does not price its shares. In that event, the NAV of the fund's or underlying fund's shares may change on days when shareholders will not be able to purchase or sell the fund's or underlying fund's shares. For money markets funds -- The fund's investments are valued at amortized cost, which approximates market value, as explained in the SAI. Although the fund cannot guarantee it will always be able to maintain a constant net asset value of $1 per share, it will use its best efforts to do so. DISTRIBUTIONS AND TAXES As a shareholder you are entitled to your share of your fund's net income and net gains. Each fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS Your fund's net investment income is distributed to you as dividends. Dividends may be composed of qualified dividend income, which is eligible for preferential tax rates under current tax law, as well as other ordinary dividend income, which may include dividends which are non-qualified dividends, interest income and short-term capital gains. Because of the types of income earned by fixed income funds, it is unlikely the funds will distribute qualified dividend income. Generally, capital gains are realized when a security is sold for a higher price than was paid for it. Generally, capital losses are realized when a security is sold for a lower price than was paid for it. Typically, each realized capital gain or loss is long-term or short-term depending on the length of time the fund held the -------------------------------------------------------------------------------- S.28 security. Realized capital gains and losses offset each other. The fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains, if any, are included in net investment income and are taxable as ordinary income when distributed to the shareholder. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. If the fund's distributions exceed its current and accumulated earnings and profits, that portion of the fund's distributions will be treated as a return of capital to the shareholders to the extent of their basis in their shares. A return of capital will generally not be taxable; however, any amounts received in excess of basis are treated as capital gain. Forms 1099 sent to shareholders report any return of capital. Certain derivative instruments subject the fund to special tax rules, the effect of which may be to accelerate income to the fund, defer fund losses, cause adjustments in the holding periods of fund securities, convert capital gains into ordinary income and convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders. For Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025, Seligman TargETF 2015 and Seligman TargETFund Core (the Seligman TargETFunds) -- The Funds may purchase or sell (write) options. In general, option premiums which may be received by the Funds are not immediately included in the income of the Funds. Instead, such premiums are taken into account when the option contract expires, the option is exercised by the holder, or the Funds transfer or otherwise terminate the option. If an option written by a Fund is exercised and such Fund sells or delivers the underlying security, such Fund generally will recognize capital gain or loss equal to (a) the sum of the exercise price and the option premium received by the Fund minus (b) the Fund's basis in the security. Such gain or loss generally will be short-term or long- term depending upon the holding period of the underlying security. Gain or loss with respect to any termination of a Fund's obligation under an option other than through the exercise of the option and the related sale or delivery of the underlying security generally will be short-term gain or loss. Thus, for example, if an option written by a Fund expires unexercised, such Fund generally will recognize short-term gain equal to the premium received. -------------------------------------------------------------------------------- S.29 The Seligman TargETFunds generally will pay any dividends from its net investment income and distributes any net capital gains realized on investments at least annually (Seligman TargETFund Core generally will pay dividends from its net investment income on a quarterly basis). Because each Seligman TargETFund may sell underlying ETFs, US government securities and short-term debt instruments: (a) to accommodate redemptions of its shares; (b) in respect of the Target Date Funds, to implement the process of migration; and (c) to adjust the percentages of its assets invested in each underlying ETF, US government securities, short-term debt instruments, cash and cash equivalents in response to economic, market or other conditions or events, and changes in Seligman Time Horizon Matrix (the asset allocation methodology utilized by the Seligman TargETFunds), each Seligman TargETFund may generate net capital gains (including short-term capital gains that are generally taxed to shareholders at ordinary income tax rates) for investors that may be higher than the net capital gains ordinarily incurred by an investor through an investment in another asset allocation fund that has broader investment ranges or an asset allocation strategy designed by the investor. In addition, due to federal income tax laws, each Seligman TargETFund may not fully utilize capital losses (to offset capital gains) from the sale of underlying ETFs at a loss. In addition, underlying ETFs may distribute capital gains to the Seligman TargETFunds. REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the fund unless you request distributions in cash. The financial intermediary through which you purchased shares may have different policies. Distributions are reinvested at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. Generally, if you sell shares for less than their cost, the difference is a capital loss or if you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). -------------------------------------------------------------------------------- S.30 You may not create a tax loss or reduce a tax gain, based on paying a sales charge, by exchanging shares before the 91st day after the day of purchase. If you buy Class A shares and exchange into another fund before the 91st day after the day of purchase, you may not be able to include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. For more information, see the SAI. REITs often do not provide complete tax information until after the calendar year-end; generally mid to late January and continuing through early February. Consequently, if your fund has significant investments in REITs, you may not receive your Form 1099-DIV until February. Other RiverSource funds tax statements are generally mailed in January. FOR SELIGMAN TARGETFUNDS. Each of the Target Date Funds will automatically be combined with Seligman TargETFund Core during their respective target years. The investment manager expects each of these combinations to be effected as an acquisition of the assets and liabilities of the applicable Target Date Fund in exchange for shares of Seligman TargETFund Core at net asset value, with the shares of Seligman TargETFund Core then distributed to shareholders of the applicable Target Date Fund. Based on current tax rules, the investment manager expects the combination to be effected in a non-taxable transaction. Changes in such tax rules or other applicable law could negatively impact the combination of a Target Date Fund with Seligman TargETFund Core. FOR TAXABLE FUNDS. Distributions related to shares not held in IRAs or other retirement accounts are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. Shares held in an IRA or qualified retirement account are generally subject to different tax rules. Taking a distribution from your IRA or qualified retirement plan may subject you to federal taxes, withholding, penalties and reporting requirements. Please consult your tax advisor. Income received by a fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes. FOR TAX-EXEMPT FUNDS. Dividends distributed from interest earned on tax-exempt securities (exempt-interest dividends) are exempt from federal income taxes but may be subject to state and local taxes and potentially the alternative minimum tax. Dividends distributed from net capital gains, if any, and other income earned are not exempt from federal income taxes. Any taxable distributions are taxable in the year the fund declares them regardless of whether you take them in cash or reinvest them. -------------------------------------------------------------------------------- S.31 Interest on certain private activity bonds is a preference item for purposes of the individual and corporate alternative minimum tax. To the extent the fund earns such income, it will flow through to its shareholders and may affect those shareholders who are subject to the alternative minimum tax. See the SAI for more information. Because interest on municipal bonds and notes is tax-exempt for federal income tax purposes, any interest on money you borrow that is used directly or indirectly to purchase fund shares is not deductible on your federal income tax return. You should consult a tax advisor regarding its deductibility for state and local income tax purposes. FOR A FUND ORGANIZED AS A FUND-OF-FUNDS. Because most of the fund's investments are shares of underlying funds, the tax treatment of the fund's gains, losses, and distributions may differ from the tax treatment that would apply if either the fund invested directly in the types of securities held by the underlying funds or the fund shareholders invested directly in the underlying funds. As a result, fund shareholders may recognize higher amounts of capital gain distributions or ordinary income dividends than they otherwise would. IMPORTANT: This information is a brief and selective summary of some of the tax rules that apply to an investment in a fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. GENERAL INFORMATION AVAILABILITY AND TRANSFERABILITY OF FUND SHARES Please consult with your financial intermediary to determine the availability of the funds. The funds may only be purchased or sold directly or through financial intermediaries authorized by the distributor to offer the funds. NOT ALL FINANCIAL INSTITUTIONS ARE AUTHORIZED TO SELL THE RIVERSOURCE FAMILY OF FUNDS AND CERTAIN FINANCIAL INTERMEDIARIES THAT OFFER THE RIVERSOURCE FAMILY OF FUNDS MAY NOT OFFER ALL FUNDS ON ALL INVESTMENT PLATFORMS. If you set up an account at a financial intermediary that does not have, and is unable to obtain, a selling agreement with the distributor, you will not be able to transfer fund holdings to that account. In that event, you must either maintain your fund holdings with your current financial intermediary, find another financial intermediary with a selling agreement, or sell your shares, paying any applicable CDSC. Please be aware that transactions in taxable accounts are taxable events and may result in income tax liability. ADDITIONAL SERVICES AND COMPENSATION In addition to acting as the fund's investment manager, RiverSource Investments and its affiliates also receive compensation for providing other services to the funds. -------------------------------------------------------------------------------- S.32 Administration Services. Ameriprise Financial, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides or compensates others to provide administrative services to the funds. These services include administrative, accounting, treasury, and other services. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." Distribution and Shareholder Services. RiverSource Fund Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474, (the distributor), provides underwriting and distribution services to the funds. Under the Distribution Agreement and related distribution and shareholder servicing plans, the distributor receives distribution and shareholder servicing fees. The distributor may retain a portion of these fees to support its distribution and shareholder servicing activity. The distributor reallows the remainder of these fees (or the full fee) to the financial intermediaries that sell fund shares and provide services to shareholders. Fees paid by a fund for these services are set forth under "Distribution and/or service (12b-1) fees" in the expense table under "Fees and Expenses." More information on how these fees are used is set forth under "Investment Options -- Classes of Shares" and in the SAI. The distributor also administers any sales charges paid by an investor at the time of purchase or at the time of sale. See "Shareholder Fees (fees paid directly from your investment)" under "Fees and Expenses" for the scheduled sales charge of each share class. See "Buying and Selling Shares, Sales Charges" for variations in the scheduled sales charges, and for how these sales charges are used by the distributor. See "Other Investment Strategies and Risks" for the funds' policy regarding directed brokerage. Transfer Agency Services. RiverSource Service Corporation, 734 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the transfer agent or RiverSource Service Corporation), provides or compensates others to provide transfer agency services to the funds. The funds pay the transfer agent a fee that varies by class, as set forth in the SAI, and reimburses the transfer agent for its out-of-pocket expenses incurred while providing these transfer agency services to the funds. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." RiverSource Service Corporation pays a portion of these fees to financial intermediaries that provide sub-recordkeeping and other services to fund shareholders. The SAI provides additional information about the services provided and the fee schedules for the transfer agent agreements. -------------------------------------------------------------------------------- S.33 Plan Administration Services. Under a Plan Administration Services Agreement, the fund pays for plan administration services, including services such as implementation and conversion services, account set-up and maintenance, reconciliation and account recordkeeping, education services and administration to various plan types, including 529 plans, retirement plans and Health Savings Accounts. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." PAYMENTS TO FINANCIAL INTERMEDIARIES The distributor and its affiliates make or support additional cash payments out of their own resources (including profits earned from providing services to the fund) to financial intermediaries, in connection with agreements between the distributor and financial intermediaries pursuant to which these financial intermediaries sell fund shares and provide services to their clients who are shareholders of the fund. These payments and intercompany allocations (collectively, "payments") do not change the price paid by investors in the fund or fund shareholders for the purchase or ownership of fund shares of the fund, and these payments are not reflected in the fees and expenses of the fund, as they are not paid by the fund. In exchange for these payments, a financial intermediary may elevate the prominence or profile of the fund within the financial intermediary's organization, and may provide the distributor and its affiliates with preferred access to the financial intermediary's registered representatives or preferred access to the financial intermediary's customers. These arrangements are sometimes referred to as marketing and/or sales support payments, program and/or shareholder servicing payments, or revenue sharing payments. These arrangements create potential conflicts of interest between a financial intermediary's pecuniary interest and its duties to its customers, for example, if the financial intermediary receives higher payments from the sale of a certain fund than it receives from the sale of other funds, the financial intermediary or its representatives may be incented to recommend or sell shares of the fund where it receives or anticipates receiving the higher payment instead of other investment options that may be more appropriate for the customer. Employees of Ameriprise Financial and its affiliates, including employees of affiliated broker-dealers, may be separately incented to recommend or sell shares of the fund, as employee compensation and business unit operating goals at all levels are tied to the company's success. Certain employees, directly or indirectly, may receive higher compensation and other benefits as investment in the fund increases. In addition, management, sales leaders and other employees may spend more of their time and resources promoting Ameriprise Financial and its subsidiary companies, including RiverSource Investments and the distributor, and the products they offer, including the fund. -------------------------------------------------------------------------------- S.34 These payments are typically negotiated based on various factors including, but not limited to, the scope and quality of the services provided by the financial intermediary, its reputation in the industry, its ability to attract and retain assets, its access to target markets, its customer relationships, the profile the fund may obtain within the financial intermediary, and the access the distributor or other representatives of the fund may have within the financial intermediary for advertisement, training or education, including opportunities to present at or sponsor conferences for the registered representatives of the financial intermediary and its customers. These payments are usually calculated based on a percentage of fund assets owned through the financial intermediary and/or as a percentage of fund sales attributable to the financial intermediary. Certain financial intermediaries require flat fees instead of, or in addition to, these asset-based fees as compensation for including or maintaining a fund on their platforms, and, in certain situations, may require the reimbursement of ticket or operational charges -- fees that a financial intermediary charges its registered representatives for effecting transactions in the fund. The amount of payment varies by financial intermediary (e.g., initial platform set-up fees, ongoing maintenance or service fees, or asset or sales based fees). The amount of payments also varies by the type of sale. For instance, purchases of one fund may warrant a greater or lesser amount of payments than purchases of another fund. Additionally, sale and maintenance of shares on a stand alone basis may result in a greater or lesser amount of payments than the sale and maintenance of shares made through a plan, wrap or other fee-based program. Payments to affiliates may include payments as compensation to employees of RiverSource Investments who are licensed by the distributor in respect of certain sales and solicitation activity on behalf of the fund. These payments may be and often are significant. Additional information concerning the amount and calculation of these payments is available in the fund's SAI. Payments to affiliated broker-dealers are within the range of the payments the distributor pays to similarly-situated third party financial intermediaries and the payments such affiliated broker-dealers receive from third party fund sponsors related to the sale of their sponsored funds. However, because of the large amount of fund assets (from the RiverSource Family of Funds, in aggregate) currently held in customer accounts of the affiliated broker-dealers, the distributor and its affiliates, in the aggregate, pay significantly more in absolute dollars than other third-party fund sponsors pay to the affiliated broker-dealers for the sale and servicing of their sponsored funds. This level of payment creates potential conflicts of interest which the affiliated broker- dealers seek to mitigate by disclosure and implementation of internal controls, as well as the rules and regulations of applicable regulators. -------------------------------------------------------------------------------- S.35 From time to time, to the extent permitted by SEC and FINRA rules and by other applicable laws and regulations, the distributor and its affiliates may make other reimbursements or payments to financial intermediaries or their registered representatives, including non-cash compensation, in the form of gifts of nominal value, occasional meals, tickets, or other entertainment, support for due diligence trips, training and educational meetings or conference sponsorships, support for recognition programs, and other forms of non-cash compensation permissible under regulations to which these financial intermediaries and their representatives are subject. To the extent these are made as payments instead of reimbursement, they may provide profit to the financial intermediary to the extent the cost of such services was less than the actual expense of the service. The financial intermediary through which you are purchasing or own shares of the fund has been authorized directly or indirectly by the distributor to sell the fund and/or to provide services to you as a shareholder of the fund. Investors and current shareholders may wish to take such payment arrangements into account when considering and evaluating any recommendations they receive relating to fund shares. If you have questions regarding the specific details regarding the payments your financial intermediary may receive from the distributor or its affiliates related to your purchase or ownership of the fund, please contact your financial intermediary. The SAI contains additional detail regarding payments made by the distributor to financial intermediaries. The payments described in this section are in addition to fees paid by the fund to the distributor under 12b-1 plans, which fees may be used to compensate financial intermediaries for the distribution of fund shares and the servicing of fund shareholders, or paid by the fund to the transfer agent under the transfer agent agreement or plan administration agreement, which fees may be used to support networking or servicing fees to compensate financial intermediaries for supporting shareholder account maintenance, sub-accounting, plan recordkeeping or other services provided directly by the financial intermediary to shareholders or plans and plan participants, including retirement plans, 529 plans, Health Savings Account plans, or other plans, where participants beneficially own shares of the fund. Financial institutions may separately charge you additional fees. See "Buying and Selling Shares." ADDITIONAL MANAGEMENT INFORMATION AFFILIATED PRODUCTS. RiverSource Investments serves as investment manager to all funds in the RiverSource Family of Funds, including those that are structured to provide asset-allocation services to shareholders of those funds by investing in shares of other funds (funds of funds) in the RiverSource Family of Funds (collectively referred to as underlying funds) and to discretionary managed accounts (collectively referred to as affiliated products) that invest exclusively in underlying funds. These affiliated products, individually or collectively, may own -------------------------------------------------------------------------------- S.36 a significant percentage of the outstanding shares of the underlying funds, and RiverSource Investments seeks to balance potential conflicts between the affiliated products and the underlying funds in which they invest. The affiliated products investment in the underlying funds may also have the effect of creating economies of scale (including lower expense ratios) because the affiliated products may own substantial portions of the shares of underlying funds and, comparatively, a redemption of underlying fund shares by one or more affiliated products could cause the expense ratio of an underlying fund to increase as its fixed costs would be spread over a smaller asset base. Because of these large positions of the affiliated products, the underlying funds may experience relatively large purchases or redemptions. Although RiverSource Investments may seek to minimize the impact of these transactions, for example, by structuring them over a reasonable period of time or through other measures, underlying funds may experience increased expenses as they buy and sell securities to manage these transactions. When RiverSource Investments structures transactions over a reasonable period of time in order to manage the potential impact of the buy and sell decisions for the affiliated products, these affiliated products, including funds of funds, may pay more or less for shares of the underlying funds than if the transactions were executed in one transaction. In addition, substantial redemptions by the affiliated products within a short period of time could require the underlying fund to liquidate positions more rapidly than would otherwise be desirable, which may have the effect of reducing or eliminating potential gain or causing the underlying fund to realize a loss. Substantial redemptions may also adversely affect the ability of the investment manager to implement the underlying fund's investment strategy. RiverSource Investments also has an economic conflict of interest in determining the allocation of the affiliated products' assets among the underlying funds as it earns different fees from the underlying funds. RiverSource Investments monitors expense levels of the funds and is committed to offering funds that are competitively priced. RiverSource Investments reports to the Board on the steps it has taken to manage any potential conflicts. See the SAI for information on the percent of the fund owned by affiliated products. CASH RESERVES. A fund may invest its daily cash balance in a money market fund selected by RiverSource Investments, including but not limited to RiverSource Short-Term Cash Fund (Short-Term Cash Fund), a money market fund established for the exclusive use of funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. While Short-Term Cash Fund does not pay an advisory fee to RiverSource Investments, it does incur other expenses, and is expected to operate at a very low expense ratio. A fund will invest in Short-Term Cash Fund or any other money market fund selected by RiverSource Investments only to the extent it is consistent with the fund's investment objectives and policies. Short-Term Cash Fund is not insured or guaranteed by the FDIC or any other government agency. -------------------------------------------------------------------------------- S.37 FUND HOLDINGS DISCLOSURE. The Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by a fund. A description of these policies and procedures is included in the SAI. LEGAL PROCEEDINGS. 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 fund is 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 fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the fund. Information regarding certain pending and settled legal proceedings may be found in the fund's shareholder reports and in the SAI. Additionally, 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. -------------------------------------------------------------------------------- S.38 Funds in the RiverSource Family of Funds -- which include funds offered under the RiverSource, Threadneedle and Seligman brands -- can be purchased from authorized financial intermediaries. Additional information about the fund and its investments is available in the fund's SAI, and annual and semiannual reports to shareholders. In the fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the fund's performance during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, or to request other information about the fund, contact RiverSource Family of Funds or your financial intermediary. To make a shareholder inquiry, contact the financial intermediary through whom you purchased the fund. RiverSource Family of Funds 734 Ameriprise Financial Center Minneapolis, MN 55474 (800) 221-2450 RiverSource Family of Funds information available: (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com You may review and copy information about the fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202- 551-8090). Reports and other information about the fund are available on the EDGAR Database on the Commission's Internet site at www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, 100 F Street, N.E., Washington, D.C. 20549-1520. Investment Company Act File #811-5696 TICKER SYMBOL Class A: IGBFX Class B: IGLOX Class C: AGBCX Class I: AGBIX Class R4: RGBRX Class W: RGBWX
(RIVERSOURCE INVESTMENTS LOGO) S-6309-99 AF (12/09) Prospectus (THREADNEEDLE LOGO) THREADNEEDLE EMERGING MARKETS FUND PROSPECTUS DEC. 30, 2009 THREADNEEDLE EMERGING MARKETS FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. Classes A, B, C, I, R2, R4 and R5 As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. You may qualify for sales charge discounts on purchases of Class A shares. Please notify your financial intermediary if you have other accounts holding shares of funds in the RiverSource Family of Funds to determine whether you qualify for a sales charge discount. See "Buying and Selling Shares" for more information. NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE TABLE OF CONTENTS THE FUND.......................................... 3P Objective......................................... 3p Principal Investment Strategies................... 3p Principal Risks................................... 4p Past Performance.................................. 6p Fees and Expenses................................. 9p Other Investment Strategies and Risks............. 12p Fund Management and Compensation.................. 13p FINANCIAL HIGHLIGHTS.............................. 16P BUYING AND SELLING SHARES......................... S.1 Description of Share Classes...................... S.2 Investment Options -- Classes of Shares......... S.2 Sales Charges................................... S.7 Opening an Account.............................. S.16 Exchanging or Selling Shares...................... S.20 Exchanges....................................... S.23 Selling Shares.................................. S.26 PRICING AND VALUING OF FUND SHARES................ S.27 DISTRIBUTIONS AND TAXES........................... S.28 GENERAL INFORMATION............................... S.32
RIVERSOURCE FAMILY OF FUNDS The RiverSource Family of Funds includes a comprehensive array of funds from RiverSource Investments. RiverSource Investments has also partnered with a number of professional investment managers, including its affiliate, Threadneedle Investments, to expand the array of funds offered in the RiverSource family. RiverSource funds, RiverSource Partners funds, Seligman funds and Threadneedle funds share the same Board of Directors/Trustees (the Board), and the same policies and procedures including those set forth in the service section of this prospectus. Please see the Statement of Additional Information (SAI) for a complete list of mutual funds included in the RiverSource Family of Funds. RiverSource Variable Portfolio Funds and Seligman (Variable) Portfolio Funds are sold exclusively as underlying investment options of variable insurance policies and annuity contracts offered by affiliated and unaffiliated insurance companies. -------------------------------------------------------------------------------- 2P THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS THE FUND OBJECTIVE Threadneedle Emerging Markets Fund (the Fund) seeks to provide shareholders with long-term capital growth. Because any investment involves risk, there is no assurance this objective can be achieved. Only shareholders can change the Fund's objective. PRINCIPAL INVESTMENT STRATEGIES The Fund's assets are primarily invested in equity securities of emerging markets companies. Emerging markets are countries characterized as developing or emerging by either the World Bank or the United Nations. Under normal market conditions, at least 80% of the Fund's net assets will be invested in securities of companies that are located in emerging markets countries, or that earn 50% or more of their total revenues from goods or services produced in emerging market countries or from sales made in emerging markets countries. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. RiverSource Investments, LLC (RiverSource Investments) serves as the investment manager to the Fund and is responsible for oversight of the subadviser, Threadneedle International Limited (Threadneedle), an indirect wholly-owned subsidiary of Ameriprise Financial, Inc., the parent company of RiverSource Investments. Threadneedle chooses investments by: - Deploying an integrated approach to equity research that incorporates regional analyses, a global sector strategy, and stock specific perspectives. - Conducting detailed research on companies in a consistent strategic and macroeconomic framework. - Looking for catalysts of change and identifying the factors driving markets, which will vary over economic and market cycles. - Implementing rigorous risk control processes that seek to ensure that the risk and return characteristics of the Fund's portfolio are consistent with established portfolio management parameters. The Fund's portfolio management team constructs the portfolio by selecting what it considers to be the best stocks in each industry sector, based on return on invested capital analysis, growth and valuation. The Fund's sector exposure generally reflects the global macroeconomic environment, the outlook for each sector and the relative valuation of the stocks among the sectors. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS 3P This analysis allows the portfolio management team to identify those stocks which it believes are most likely to produce high returns on capital in the future and which it expects should consequently deliver the best returns for investors. A number of factors may prompt the portfolio management team to sell securities. A sale may result from a change in the composition of the Fund's benchmark or a change in sector strategy. A sale may also be prompted by factors specific to a stock, such as valuation or company fundamentals. The Fund will normally have exposure to foreign currencies. The portfolio management team closely monitors the Fund's exposure to foreign currency. From time to time the team may use forward currency transactions or other derivative instruments to hedge against currency fluctuations. PRINCIPAL RISKS This Fund is designed for long-term investors with above-average risk tolerance. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. RISKS OF FOREIGN INVESTING. Foreign securities are securities of issuers based outside the United States. An issuer is deemed to be based outside the United States if it is organized under the laws of another country. Foreign securities are primarily denominated in foreign currencies. In addition to the risks normally associated with domestic securities of the same type, foreign securities are subject to the following foreign risks: Country risk includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add to or subtract from the value of the investment. -------------------------------------------------------------------------------- 4P THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. Emerging markets risk includes the dramatic pace of change (economic, social and political) in these countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. 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 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. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its stocks and bonds may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. SECTOR RISK. Investments that are concentrated in a particular issuer, geographic region or sector will be more susceptible to changes in price. The more a fund diversifies across sectors, the more it spreads risk and potentially reduces the risks of loss and volatility. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS 5P SMALL AND MID-SIZED COMPANY RISK. Investments in small and medium companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, experience and competitive strengths of larger companies. Additionally, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less and may be more volatile than is typical of larger companies. PAST PERFORMANCE The following bar chart and table provide some illustration of the risks of investing in the Fund by showing, respectively: - how the Fund's performance has varied for each full calendar year shown on the bar chart; and - how the Fund's average annual total returns compare to recognized indexes shown on the table. Both the bar chart and the table assume that all distributions have been reinvested. The performance of different classes varies because of differences in sales charges and other fees and expenses. How the Fund has performed in the past (before and after taxes) does not indicate how the Fund will perform in the future. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of such fee waivers/expense caps, performance would have been lower. See "Fees and Expenses" for any current fee waivers/expense caps. Bar Chart. Class A share information is shown in the bar chart; the sales charge for Class A shares is not reflected in the bar chart. Table. The table shows total returns from hypothetical investments in Class A, Class B, Class C, Class I, Class R2, Class R4 and Class R5 shares of the Fund. These returns are compared to the indexes shown for the same periods. For purposes of the performance calculation in the table we assumed: - the maximum sales charge for Class A shares; - sales at the end of the period and deduction of the applicable contingent deferred sales charge (CDSC) for Class B and Class C shares; - no sales charge for Class I, Class R2, Class R4 and Class R5 shares; and - with the exception of Class A shares, no adjustments for taxes paid by an investor on the reinvested income and capital gains. -------------------------------------------------------------------------------- 6P THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS AFTER-TAX RETURNS After-tax returns are shown only for Class A shares. After-tax returns for the other classes will vary. After-tax returns are calculated using the highest historical individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax returns will depend on your tax situation and most likely will differ from the returns shown in the table. If you hold your shares in a tax-deferred account, such as a 401(k) plan or an IRA, the after-tax returns do not apply to you since you will not incur taxes until you begin to withdraw from your account. The return after taxes on distributions for a period may be the same as the return before taxes for the same period if there were no distributions or if the distributions were small. The return after taxes on distributions and sale of Fund shares for a period may be greater than the return before taxes for the same period if there was a tax loss realized on sale of Fund shares. The benefit of the tax loss (since it can be used to offset other gains) may result in a higher return. CLASS A SHARE PERFORMANCE (based on calendar years) (BAR CHART) +79.03% -33.03% -3.85% -3.06% +40.60% +24.44% +34.10% +34.25% +37.23% -54.91% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
During the periods shown in the bar chart, the highest return for a calendar quarter was +37.49% (quarter ended Dec. 31, 1999) and the lowest return for a calendar quarter was -29.68% (quarter ended Sept. 30, 2008). The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart; if reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. The Fund's Class A year-to-date return at Sept. 30, 2009 was +61.19%. The Fund formerly was a "feeder" fund in a master/feeder arrangement where the Fund invested all of its assets in a corresponding "master" fund with an identical investment objective and investment strategies. As of Nov. 8, 2005, the Fund became a stand-alone fund that invests directly in a portfolio of securities. The information shown in the table and in the financial highlights for the Fund includes the activity of the Fund when it was a feeder in a master/feeder arrangement. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS 7P AVERAGE ANNUAL TOTAL RETURNS (for periods ended Dec. 31, 2008)
CLASS C CLASS I SINCE SINCE INCEPTION INCEPTION 1 YEAR 5 YEARS 10 YEARS (6/26/2000) (3/4/2004) Threadneedle Emerging Markets Fund: Class A Return before taxes -57.50% +5.49% +7.46% N/A N/A Return after taxes on distributions -57.50% +3.10% +6.21% N/A N/A Return after taxes on distributions and sale of fund shares -37.38% +4.62% +6.52% N/A N/A Class B Return before taxes -57.48% +5.66% +7.26% N/A N/A Class C Return before taxes -55.68% +5.95% N/A +3.16% N/A Class I Return before taxes -54.73% N/A N/A N/A +4.79% Class R4 Return before taxes -54.62% +7.04% +8.38% N/A N/A MSCI Emerging Markets Index (reflects no deduction for fees, expenses or taxes) -53.18% +8.02% +9.31% +5.78% +6.17% Lipper Emerging Markets Funds Index -54.76% +6.30% +8.64% +5.08% +4.64%
The Morgan Stanley Capital International (MSCI) Emerging Markets Index, an unmanaged market capitalization-weighted index, is designed to measure equity market performance in the global emerging markets. The index reflects reinvestment of all distributions and changes in market prices. 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. See "Fund Management and Compensation" for more information. Class R2 and Class R5 are new and therefore, performance information for these classes is not shown. Past performance for Class R2 for the period prior to the beginning of operations for that class may be calculated based on the performance of Class B. Past performance for Class R5 for the period prior to the beginning of operations for that class may be calculated based on the performance of Class R4. The blended class performance will be adjusted to reflect differences in sales charges, but not differences in annual Fund operating expenses (for example, 12b-1 fees). The use of blended performance generally results in a presentation of higher performance for classes with higher operating expenses than those of the class with which they are blended, and a presentation of lower performance for classes with lower operating expenses than those of the class with which they are blended. -------------------------------------------------------------------------------- 8P THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund. Annual fund operating expenses are based on expenses incurred during the Fund's most recently completed fiscal year, and are expressed as a percentage (expense ratio) of the Fund's average net assets during the period. The expense ratios have not been adjusted to reflect the Fund's assets as of a different period or point in time, as asset levels will fluctuate. As of the date of this prospectus, the Fund's net assets are higher than the Fund's average net assets during the most recently completed fiscal year. In general, a fund's annual operating expenses will increase as the fund's assets decrease. Accordingly, the Fund's annual operating expenses, if adjusted based on net assets as of the date of this prospectus, would be lower than are expressed in the fee and expense table below. SHAREHOLDER FEES (fees paid directly from your investment)
CLASS I CLASS R2 CLASS R4 CLASS A CLASS B CLASS C CLASS R5 Maximum sales charge (load) imposed on purchases (as a percentage of offering price) 5.75%(a) None None None Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) None(b) 5% 1% None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS: CLASS A CLASS B CLASS C Management fees(c) 1.08% 1.08% 1.08% Distribution and/or service (12b-1) fees 0.25% 1.00% 1.00% Other expenses(d) 0.57% 0.60% 0.52% Total annual fund operating expenses 1.90% 2.68% 2.60%
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS: CLASS I CLASS R2 CLASS R4 CLASS R5 Management fees(c) 1.08% 1.08% 1.08% 1.08% Distribution and/or service (12b- 1) fees 0.00% 0.50% 0.00% 0.00% Other expenses(d) 0.18% 0.48% 0.54% 0.23% Total annual fund operating expenses 1.26% 2.06% 1.62% 1.31%
(a) This charge may be reduced depending on the total value of your investments in the RiverSource Family of Funds. See "Sales Charges." (b) A 1% CDSC may be assessed on Class A shares purchased without an initial sales charge and sold within 18 months after purchase. See "Sales Charges." -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS 9P ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) cont. (c) Includes the impact of a performance incentive adjustment fee that decreased the management fee by 0.01% for the most recent fiscal year. The index against which the Fund's performance is measured for purposes of determining the performance incentive adjustment is the Lipper Emerging Markets Funds Index. See "Fund Management and Compensation" for more information. (d) Other expenses include an administrative services fee, a transfer agency fee (for all classes except Class I), a custody fee, other nonadvisory expenses and a plan administration services fee (for Class R2 and Class R4). Other expenses may also include fees and expenses of affiliated and unaffiliated funds (acquired funds) which the Fund indirectly bears when it invests in the acquired funds. The impact of these acquired funds fees and expenses for the most recent fiscal period was less than 0.01%. Because acquired funds will 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 by the Fund with respect to such investments will vary. -------------------------------------------------------------------------------- 10P THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS EXAMPLES These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. These examples assume that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. These examples also assume that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $757 $1,138 $1,543 $2,674 Class B $771(b) $1,133(b) $1,621(b) $2,828(c) Class C $363(b) $ 809 $1,381 $2,938 Class I $128 $ 400 $ 693 $1,528 Class R2 $209 $ 646 $1,109 $2,394 Class R4 $165 $ 511 $ 882 $1,927 Class R5 $133 $ 415 $ 719 $1,584
(a) Includes a 5.75% sales charge. (b) Includes the applicable CDSC. (c) Based on conversion of Class B shares to Class A shares one month after the completion of the eighth year of ownership. You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $757 $1,138 $1,543 $2,674 Class B $271 $ 833 $1,421 $2,828(b) Class C $263 $ 809 $1,381 $2,938 Class I $128 $ 400 $ 693 $1,528 Class R2 $209 $ 646 $1,109 $2,394 Class R4 $165 $ 511 $ 882 $1,927 Class R5 $133 $ 415 $ 719 $1,584
(a) Includes a 5.75% sales charge. (b) Based on conversion of Class B shares to Class A shares one month after the completion of the eighth year of ownership. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS 11P OTHER INVESTMENT STRATEGIES AND RISKS Other Investment Strategies. In addition to the principal investment strategies previously described, the Fund may utilize investment strategies that are not principal investment strategies, including investment in affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds (ETFs), also referred to as "acquired funds") ownership of which results in the Fund bearing its proportionate share of the acquired funds' fees and expenses and proportionate exposure to the risks associated with the acquired funds' underlying investments. ETFs are generally designed to replicate the price and yield of a specified market index. An ETF's share price may not track its specified market index and may trade below its net asset value, resulting in a loss. ETFs generally use a "passive" investment strategy and will not attempt to take defensive positions in volatile or declining markets. An active secondary market in an ETF's shares may not develop or be maintained and may be halted or interrupted due to actions by its listing exchange, unusual market conditions or other reasons. There can be no assurance an ETF's shares will continue to be listed on an active exchange. For more information on strategies and holdings, and the risks of such strategies, including derivative instruments that the Fund may use, see the Fund's SAI and its annual and semiannual reports. Unusual Market Conditions. During unusual market conditions, the Fund may temporarily invest more of its assets in money market securities than during normal market conditions. Although investing in these securities would serve primarily to attempt to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the portfolio managers may make frequent securities trades that could result in increased fees, expenses and taxes, and decreased performance. Instead of investing in money market securities directly, the Fund may invest in shares of an affiliated or unaffiliated money market fund. See "Cash Reserves" under the section "General Information" for more information. Securities Transaction Commissions. Securities transactions involve the payment by the Fund of brokerage commissions to broker-dealers, on occasion as compensation for research or brokerage services (commonly referred to as "soft dollars"), as the portfolio managers buy and sell securities for the Fund in pursuit of its objective. A description of the policies governing the Fund's securities transactions and the dollar value of brokerage commissions paid by the Fund are set forth in the SAI. The brokerage commissions set forth in the SAI do not include implied commissions or mark-ups (implied commissions) paid by the Fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities (and certain other instruments, including derivatives). Brokerage commissions do not reflect other elements of transaction costs, including the extent to which the Fund's purchase and sale transactions may cause the market to move and change the market price for an investment. -------------------------------------------------------------------------------- 12P THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS Although brokerage commissions and implied commissions are not reflected in the expense table under "Fees and Expenses," they are reflected in the total return of the Fund. Portfolio Turnover. Trading of securities may produce capital gains, which are taxable to shareholders when distributed. Active trading may also increase the amount of brokerage commissions paid or mark-ups to broker-dealers that the Fund pays when it buys and sells securities. Capital gains and increased brokerage commissions or mark-ups paid to broker-dealers may adversely affect a fund's performance. The Fund's historical portfolio turnover rate, which measures how frequently the Fund buys and sells investments, is shown in the "Financial Highlights." Directed Brokerage. The Fund's Board has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Fund as a factor in the selection of broker-dealers through which to execute securities transactions. Additional information regarding securities transactions can be found in the SAI. FUND MANAGEMENT AND COMPENSATION INVESTMENT MANAGER RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource Family of Funds (including the RiverSource funds, Threadneedle funds and Seligman funds), and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for the RiverSource Family of Funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the SAI for more information. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS 13P The RiverSource Family of Funds has received an order from the Securities and Exchange Commission that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for a fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or change the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. RiverSource Investments and its affiliates may have other relationships, including significant financial relationships, with current or potential subadvisers or their affiliates, which may create a conflict of interest. In making recommendations to the Board to appoint or to change a subadviser, or to change the terms of a subadvisory agreement, RiverSource Investments does not consider any other relationship it or its affiliates may have with a subadviser, and RiverSource Investments discloses the nature of any material relationships it has with a subadviser to the Board. The Fund pays RiverSource Investments a fee for managing its assets. Under the Investment Management Services Agreement (Agreement), the fee for the most recent fiscal year was 1.08% of the Fund's average daily net assets, including an adjustment under the terms of a performance incentive arrangement. The adjustment is computed by comparing the Fund's performance to the performance of an index of comparable funds published by Lipper Inc. The index against which the Fund's performance is currently measured for purposes of the performance incentive adjustment is the Lipper Emerging Markets Funds Index. In certain circumstances, the Fund's Board may approve a change in the index. The maximum adjustment (increase or decrease) is 0.12% of the Fund's average net assets on an annual basis. Under the Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. A discussion regarding the basis for the Board approving the Agreement is available in the Fund's most recent annual or semiannual shareholder report. RiverSource Investments contracts with and compensates Threadneedle International Limited (Subadviser or Threadneedle) to manage the investment of the Fund's assets. RiverSource Investments monitors the compliance of Threadneedle with the investment objectives and related policies of the Fund, reviews the performance of Threadneedle, and reports periodically to the Board. Threadneedle manages the Fund's assets based upon its experience managing funds with investment goals and strategies substantially similar to those of the Fund. THREADNEEDLE Threadneedle, located at 60 St. Mary Axe, London EC3A 8JQ, England, is an affiliate of RiverSource Investments, and an indirect wholly-owned subsidiary of Ameriprise Financial, Inc. The portfolio managers who lead the team responsible for the day-to-day management of the Fund are: -------------------------------------------------------------------------------- 14P THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS Julian A.S. Thompson, Portfolio Manager - Managed the Fund since 2000. - Joined Threadneedle in 2003. - Began investment career in 1993 as an Investment Manager for Stewart Ivory, a Scottish investment company, 1993 to 1999. Portfolio Manager, American Express Asset Management International, 1999 to 2003. - BA and Ph.D., Magdalene College, Cambridge University. Jules Mort, Deputy Portfolio Manager - Deputy managed the Fund since 2003. - Joined Threadneedle in 2001 as a fund manager. - Began investment career in 1997 as an Analyst and Portfolio Manager, Baillie Gifford & Co., 1997 to 2001. - BA (Hons), Oxford University 1996. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS 15P FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. For periods ended 2007 and after, per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). Total returns do not reflect payment of sales charges, if any, and are not annualized for periods of less than one year. The information for the fiscal years ended on or after Oct. 31, 2007 has been derived from the financial statements audited by Ernst & Young LLP, whose report, along with the Fund's financial statements and financial highlights, is included in the annual report which, if not included with this prospectus, is available upon request. The information for the periods ended on or before Oct. 31, 2006 has been audited by other auditors.
YEAR ENDED OCT. 31, CLASS A ------------------------------------------------------- PER SHARE DATA 2009 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) .02 .08 .04 .01 .04 Net gains (losses) (both realized and unrealized) 2.75 (7.24) 6.27 3.10 1.95 ---------------------------------------------------------------------------------------------------------- Total from investment operations 2.77 (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) ---------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlement .01 -- -- -- -- ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.74 $4.96 $14.99 $11.32 $8.23 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 56.05%(a) (57.79%) 68.21% 37.85% 31.83% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses 1.90% 1.87% 1.83% 1.81% 1.79% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) .38% .78% .31% .19% .54% ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $416 $250 $661 $425 $295 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 149% 133% 125% 145% 124% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 16P THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS
YEAR ENDED OCT. 31, CLASS B ------------------------------------------------------- PER SHARE DATA 2009 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) (.02) .00(c) (.05) (.05) (.01) Net gains (losses) (both realized and unrealized) 2.45 (6.53) 5.79 2.91 1.83 ---------------------------------------------------------------------------------------------------------- Total from investment operations 2.43 (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) -- -- Proceeds from regulatory settlement .01 -- -- -- -- ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.87 $4.43 $13.73 $10.63 $7.77 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 55.08%(a) (58.08%) 66.95% 36.81% 30.59% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses 2.68% 2.62% 2.58% 2.57% 2.55% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) (.36%) .02% (.48%) (.55%) (.24%) ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $38 $28 $94 $77 $74 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 149% 133% 125% 145% 124% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS 17P
YEAR ENDED OCT. 31, CLASS C ------------------------------------------------------- PER SHARE DATA 2009 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) (.04) .00(c) (.05) (.06) -- Net gains (losses) (both realized and unrealized) 2.48 (6.54) 5.81 2.93 1.82 ---------------------------------------------------------------------------------------------------------- Total from investment operations 2.44 (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) -- -- ---------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlement .01 -- -- -- -- ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.89 $4.44 $13.78 $10.66 $7.79 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 55.18%(a) (58.15%) 67.03% 36.84% 30.54% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses 2.60% 2.63% 2.59% 2.58% 2.56% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) (.65%) .03% (.48%) (.57%) (.19%) ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $33 $3 $8 $5 $3 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 149% 133% 125% 145% 124% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 18P THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS
YEAR ENDED OCT. 31, CLASS I ------------------------------------------------------- PER SHARE DATA 2009 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) .06 .11 .09 .03 .06 Net gains (losses) (both realized and unrealized) 2.85 (7.45) 6.43 3.16 1.98 ---------------------------------------------------------------------------------------------------------- Total from investment operations 2.91 (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) ---------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlement .01 -- -- -- -- ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.04 $5.12 $15.38 $11.50 $8.35 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 57.03%(a) (57.63%) 69.07% 38.36% 32.32% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses 1.26% 1.42% 1.39% 1.35% 1.30% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) .77% .97% .75% .63% .97% ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $69 $-- $56 $41 $19 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 149% 133% 125% 145% 124% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS 19P
CLASS R2 YEAR ENDED OCT. 31, PER SHARE DATA 2009(d) Net asset value, beginning of period $7.42 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01) Net gains (losses) (both realized and unrealized) .33 ---------------------------------------------------------------------- Total from investment operations .32 ---------------------------------------------------------------------- Net asset value, end of period $7.74 ---------------------------------------------------------------------- TOTAL RETURN 4.31% ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses 2.06%(e) ---------------------------------------------------------------------- Net investment income (loss) (.36%)(e) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $12 ---------------------------------------------------------------------- Portfolio turnover rate 149% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 20P THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS
YEAR ENDED OCT. 31, CLASS R4 ------------------------------------------------------- PER SHARE DATA 2009 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) .04 .11 .05 .03 .05 Net gains (losses) (both realized and unrealized) 2.86 (7.45) 6.41 3.14 1.97 ---------------------------------------------------------------------------------------------------------- Total from investment operations 2.90 (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) ---------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlement .01 -- -- -- -- ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.05 $5.14 $15.32 $11.50 $8.33 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 56.62%(a) (57.58%) 68.51% 38.06% 31.87% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.62% 1.73% 1.65% 1.63% 1.59% ---------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f) 1.56% 1.47% 1.65% 1.63% 1.59% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) .72% 1.12% .45% .41% .81% ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $1 $2 $6 $2 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 149% 133% 125% 145% 124% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS 21P
YEAR ENDED OCT. 31, CLASS R5 ------------------- PER SHARE DATA 2009 2008(g) Net asset value, beginning of period $5.13 $9.32 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .05 .03 Net gains (losses) (both realized and unrealized) 2.87 (4.22) ---------------------------------------------------------------------- Total from investment operations 2.92 (4.19) ---------------------------------------------------------------------- Proceeds from regulatory settlement .01 -- ---------------------------------------------------------------------- Net asset value, end of period $8.06 $5.13 ---------------------------------------------------------------------- TOTAL RETURN 57.12%(a) (44.96%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses 1.31% 1.47%(e) ---------------------------------------------------------------------- Net investment income (loss) .68% 1.57%(e) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $-- ---------------------------------------------------------------------- Portfolio turnover rate 149% 133% ----------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) During the year ended Oct. 31, 2009 the fund received proceeds from regulatory settlements. Had the fund not received these proceeds, the total returns would have been lower by 0.12%. (b) Expense ratios include the impact of a performance incentive adjustment, if any. 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 expense ratios. (c) Rounds to zero. (d) For the period from Aug. 3, 2009 (inception date) to Oct. 31, 2009. (e) Annualized. (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) For the period from Aug. 1, 2008 (inception date) to Oct. 31, 2008. -------------------------------------------------------------------------------- 22P THREADNEEDLE EMERGING MARKETS FUND -- 2009 PROSPECTUS RIVERSOURCE FAMILY OF FUNDS THE RIVERSOURCE FAMILY OF FUNDS (EACH INDIVIDUALLY A "FUND" AND, COLLECTIVELY, THE "FUNDS") INCLUDES "RIVERSOURCE" FUNDS, "RIVERSOURCE PARTNERS" FUNDS, "SELIGMAN" FUNDS AND "THREADNEEDLE" FUNDS. (THE RIVERSOURCE FUNDS, RIVERSOURCE PARTNERS FUNDS AND THREADNEEDLE FUNDS MAY BE COLLECTIVELY REFERRED TO AS THE "RIVERSOURCE FUNDS".) THE FUNDS SHARE THE SAME BOARD OF DIRECTORS/TRUSTEES (THE "BOARD") AND THE SAME POLICIES AND PROCEDURES INCLUDING THOSE SET FORTH IN THE SERVICE SECTION OF THIS PROSPECTUS. FOR EXAMPLE, FOR PURPOSES OF CALCULATING THE INITIAL SALES CHARGE ON THE PURCHASE OF CLASS A SHARES OF A FUND, AN INVESTOR OR FINANCIAL ADVISOR SHOULD CONSIDER THE COMBINED MARKET VALUE OF ALL FUNDS IN THE RIVERSOURCE FAMILY OF FUNDS OWNED BY THE INVESTOR AS DEFINED UNDER "INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA)." BUYING AND SELLING SHARES The funds are available directly and through broker-dealers, banks and other financial intermediaries or institutions (financial intermediaries), and through certain qualified and non-qualified plans, wrap fee products or other investment products sponsored by financial intermediaries. NOT ALL FINANCIAL INTERMEDIARIES OFFER THE FUNDS. FINANCIAL INTERMEDIARIES THAT OFFER THE FUNDS MAY CHARGE YOU ADDITIONAL FEES FOR THE SERVICES THEY PROVIDE AND THEY MAY HAVE DIFFERENT POLICIES NOT DESCRIBED IN THIS PROSPECTUS. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. Additionally, recordkeeping, transaction processing and payments of distributions relating to your account may be performed by the financial intermediaries through which your shares of the fund are held. Since the fund (and its service providers) may not have a record of your account transactions, you should always contact the financial intermediary through which you purchased or at which you maintain your shares of the fund to make changes to your account or to give instructions concerning your account, or to obtain information about your account. The fund and its service providers, including the distributor and the transfer agent, are not responsible for the failure of one of these financial intermediaries to carry out its obligations to its customers. -------------------------------------------------------------------------------- S.1 S-6400-9 DESCRIPTION OF SHARE CLASSES INVESTMENT OPTIONS -- CLASSES OF SHARES The funds offer different classes of shares. There are differences among the fees and expenses for each share class. See the "Fees and Expenses" table for more information. Not everyone is eligible to buy every share class. After determining which share classes you are eligible to buy, decide which share class best suits your needs. Your financial advisor can help you with this decision. The following table shows the key features of each share class. Not all funds offer all classes of shares. INVESTMENT OPTIONS SUMMARY
CONTINGENT DISTRIBUTION PLAN INITIAL DEFERRED SALES AND/OR ADMINISTRATION AVAILABILITY(a) SALES CHARGE CHARGE (CDSC) SERVICE FEE(b) SERVICES FEE -------------------------------------------------------------------------------------------------------------------------------- Class A Available to Yes. Payable at No.(c) Yes. No. all investors. time of purchase. 0.25%(g) Lower or no sales charge for larger investments. -------------------------------------------------------------------------------------------------------------------------------- Class B(d)(e)(f) Available to No. Entire Maximum 5% CDSC Yes. No. all investors. purchase price is during the first 1.00%(g) invested in shares year decreasing to of the fund. 0% after six years. -------------------------------------------------------------------------------------------------------------------------------- Class C(f) Available to No. Entire 1% CDSC may apply Yes. No. all investors. purchase price is if you sell shares 1.00%(g) invested in shares within one year of the fund. after purchase. -------------------------------------------------------------------------------------------------------------------------------- Class I Limited to No. No. No. No. qualifying institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R2 Limited to No. No. Yes. Yes. qualifying 0.50% 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R3 Limited to No. No. Yes. Yes. qualifying 0.25% 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R4 Limited to No. No. No. Yes. qualifying 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R5 Limited to No. No. No. No. qualifying institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class W Limited to No. No. Yes. No. qualifying 0.25%(g) discretionary managed accounts. --------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- S.2 INVESTMENT OPTIONS SUMMARY (CONTINUED)
CONTINGENT DISTRIBUTION PLAN INITIAL DEFERRED SALES AND/OR ADMINISTRATION AVAILABILITY(a) SALES CHARGE CHARGE (CDSC) SERVICE FEE(b) SERVICES FEE -------------------------------------------------------------------------------------------------------------------------------- Class Y Limited to No. No. No. Yes. qualifying 0.15% institutional investors. --------------------------------------------------------------------------------------------------------------------------------
(a) See "Buying and Selling Shares, Determining which class of shares to purchase" for more information on availability of share classes and eligible investors. See "Buying and Selling Shares, Opening an Account" for information on minimum investment and account balance requirements. (b) For each of Class A, Class B, Class C, Class R2, Class R3 and Class W shares, as applicable, each fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940, as amended, that allows it to pay distribution and shareholder servicing-related expenses for the sale of shares and the servicing of shareholders. This plan has been reviewed and approved by the Board. Because these fees are paid out of fund assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of distribution (sales) or servicing charges. (c) A 1% CDSC may be assessed on Class A shares sold within 18 months after purchase. See "Buying and Selling Shares, Sales Charges, Class A -- contingent deferred sales charge" for more information. For all funds except money market funds. (d) Class B shares automatically convert to Class A shares. See "Buying and Selling Shares, Sales Charges, Class B and Class C -- CDSC alternative" for more information on the timing of conversion of Class B shares to Class A shares. Timing of conversion will vary depending on the date of your original purchase of the Class B shares. (e) Class B shares of RiverSource Absolute Return Currency and Income Fund are only available for exchanges from Class B shares of another fund in the RiverSource Family of Funds. Class B shares of each of RiverSource Floating Rate Fund, RiverSource Inflation Protected Securities Fund, RiverSource Intermediate Tax-Exempt Fund, RiverSource Limited Duration Bond Fund and RiverSource Short Duration U.S. Government Fund are closed to new investors and new purchases. (Existing shareholders in these funds may continue to own Class B shares and make exchanges into and out of existing accounts where Class B shares of these funds are maintained.) (f) The money market funds may offer Class B and Class C shares, but only to facilitate exchanges with other funds offering Class B and Class C shares, respectively. (g) For RiverSource Cash Management Fund and RiverSource Tax-Exempt Money Market Fund, Class A is 0.10%. For RiverSource Cash Management Fund, Class B is 0.85%, Class C is 0.75% and Class W is 0.10%. DISTRIBUTION AND SERVICE FEES The distribution and shareholder servicing fees for Class A, Class B, Class C, Class R2, Class R3 and Class W shares, as applicable, are subject to the requirements of Rule 12b-1 under the Investment Company Act of 1940, as amended, and are used to reimburse the distributor for certain expenses it incurs in connection with distributing the fund's shares and directly or indirectly providing services to fund shareholders. These expenses include payment of distribution and/or shareholder servicing fees to financial intermediaries that sell shares of the fund or provide services to fund shareholders, up to 0.50% of the average daily net assets of Class R2 shares sold and held through them and up to 0.25%* of the average daily net assets of Class A, Class B, Class C, Class R3 and Class W shares sold and held through them. For Class A, Class B, Class R2, Class R3 and Class W shares, the distributor begins to pay these fees immediately after purchase. For Class C shares, the distributor pays these fees in advance for the first 12 months. Financial intermediaries also receive distribution fees up to 0.75% of the average daily net assets of Class C shares sold and held -------------------------------------------------------------------------------- S.3 through them, which the distributor begins to pay 12 months after purchase. For Class B shares, and, for the first 12 months following the sale of Class C shares, the fund's distributor retains the distribution fee of up to 0.75% in order to finance the payment of sales commissions to financial intermediaries, and to pay for other distribution related expenses. Financial intermediaries may compensate their financial advisors with the shareholder servicing and distribution fees paid to them by the distributor. IF YOU MAINTAIN SHARES OF THE FUND DIRECTLY WITH THE FUND, WITHOUT WORKING DIRECTLY WITH A FINANCIAL INTERMEDIARY OR FINANCIAL ADVISOR, DISTRIBUTION AND SERVICE FEES MAY BE RETAINED BY THE DISTRIBUTOR AS REIMBURSEMENT FOR INCURRING CERTAIN DISTRIBUTION AND SHAREHOLDER SERVICING RELATED EXPENSES. * For RiverSource Cash Management Fund, financial intermediaries receive fees up to 0.10% of the average daily net assets of Class A, Class B and Class W shares sold and held through them. PLAN ADMINISTRATION FEE Class R2, Class R3, Class R4 and Class Y shares pay an annual plan administration services fee for the provision of various administrative, recordkeeping, communication and educational services. The fee for Class R2, Class R3 and Class R4 shares is equal on an annual basis to 0.25% of average daily net assets attributable to the respective class. The fee for Class Y shares is equal on an annual basis to 0.15% of average daily net assets attributable to the class. DETERMINING WHICH CLASS OF SHARES TO PURCHASE Each of the fund's classes represent an interest in the same portfolio of investments. However, as set forth above, each class has its own sales charge schedule, and its ongoing distribution and shareholder service fees may differ from other classes. When deciding which class of shares to buy, you should consider, among other things: - The amount you plan to invest. - How long you intend to remain invested in the fund or another fund in the RiverSource Family of Funds. - Whether you may be eligible for reduced or no sales charges when you buy or sell shares. Your authorized financial intermediary or financial advisor will be able to help you decide which class of shares best meets your needs. -------------------------------------------------------------------------------- S.4 CLASS A, CLASS B AND CLASS C SHARES* Class B shares of RiverSource Absolute Return Currency and Income Fund are not currently available for new purchases. However, if you own Class B shares of another fund in the RiverSource Family of Funds, you may exchange into Class B shares of RiverSource Absolute Return Currency and Income Fund, if you meet the minimum investment and account balance requirements set forth in "Opening an Account," subject to the limitations set forth in this section. New purchases of Class B shares will not be permitted if your rights of accumulation are $50,000 or higher, and new purchases of Class C shares will not be permitted if your rights of accumulation are $1,000,000 or higher. See "Sales Charges, Initial Sales Charge -- Rights of Accumulation" for information on rights of accumulation. Class B shares have a higher annual distribution fee than Class A shares and a contingent deferred sales charge (CDSC) for six years. Class B shares convert to Class A shares. Class B shares purchased through reinvested dividends and distributions will convert to Class A shares in the same proportion as the other Class B shares. See "Class B and Class C -- CDSC alternative" for information on timing of Class B share conversion to Class A shares. Class C shares have a higher annual distribution fee than Class A shares and a CDSC for one year. Class C shares have no sales charge if you hold the shares for longer than one year. Unlike Class B shares, Class C shares do not convert to Class A shares. As a result, you will pay a distribution fee for as long as you hold Class C shares. If you choose a share class with a CDSC (Class B or Class C), you should consider the length of time you intend to hold your shares. To help you determine which investment is best for you, consult your financial intermediary or financial advisor. * For money market funds, new investments must be made in Class A shares of the fund. The money market funds offer Class B and Class C shares only to facilitate exchanges between classes of these shares in other funds. CLASS I SHARES. The following eligible investors may purchase Class I shares: - Any fund distributed by the distributor, if the fund seeks to achieve its investment objective by investing primarily in shares of funds in the RiverSource Family of Funds. Class I shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. CLASS R AND CLASS Y SHARES. The following eligible institutional investors may purchase Class R2, Class R3, Class R4, Class R5 and Class Y shares: -------------------------------------------------------------------------------- S.5 - Qualified employee benefit plans. - Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code. - Non-qualified deferred compensation plans whose participants are included in a qualified employee benefit plan described above. - State sponsored college savings plans established under Section 529 of the Internal Revenue Code. - Health Savings Accounts created pursuant to public law 108-173. Additionally, if approved by the distributor, the following eligible institutional investors may purchase Class R5 shares: - Institutional or corporate accounts above a threshold established by the distributor (currently $1 million per fund or $10 million in all funds in the RiverSource Family of Funds). - Bank trust departments. Class R and Class Y shares generally are not available to retail non-retirement accounts, traditional and Roth IRAs, Coverdell Educational Savings Accounts, SEPs, SARSEPs, SIMPLE IRAs and individual 403(b) plans. Class R shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. CLASS W SHARES. The following eligible investors may purchase Class W shares: - Investors purchasing through authorized investment programs managed by investment professionals, including discretionary managed account programs. Class W shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. Shares originally purchased in a discretionary managed account may continue to be held in Class W outside of a discretionary managed account, but no additional Class W purchases may be made and no exchanges to Class W shares of another fund may be made outside of a discretionary managed account. IN ADDITION, FOR CLASS I, CLASS R AND CLASS Y SHARES, THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY ACCEPT OR AUTHORIZE FINANCIAL INTERMEDIARIES TO ACCEPT INVESTMENTS FROM OTHER INSTITUTIONAL INVESTORS NOT LISTED ABOVE. IN ADDITION, FOR CLASS W SHARES, THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY ACCEPT OR AUTHORIZE FINANCIAL INTERMEDIARIES TO ACCEPT INVESTMENTS FROM OTHER INVESTORS NOT LISTED ABOVE. Please consult your financial advisor for assistance in selecting the appropriate class of shares. For more information, see the SAI. -------------------------------------------------------------------------------- S.6 SALES CHARGES FOR FUNDS OTHER THAN MONEY MARKET FUNDS CLASS A -- INITIAL SALES CHARGE ALTERNATIVE: Your purchase price for Class A shares is generally the net asset value (NAV) plus a front-end sales charge. The distributor receives the sales charge and re- allows a portion of the sales charge to the financial intermediary through which you purchased the shares. The distributor retains the balance of the sales charge. The distributor retains the full sales charge you pay when you purchase shares of the fund directly from the fund (not through an authorized financial intermediary). Sales charges vary depending on the amount of your purchase. INITIAL SALES CHARGE(A) FOR CLASS A SHARES For equity funds and funds-of-funds (equity)*
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 5.75% 6.10% 5.00% $50,000--$99,999 4.75 4.99 4.00 $100,000--$249,999 3.50 3.63 3.00 $250,000--$499,999 2.50 2.56 2.15 $500,000--$999,999 2.00 2.04 1.75 $1,000,000 or more 0.00 0.00 0.00(c),(d)
For fixed income funds except those listed below and funds-of-funds (fixed income)*
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 4.75% 4.99% 4.00% $50,000--$99,999 4.25 4.44 3.50 $100,000--$249,999 3.50 3.63 3.00 $250,000--$499,999 2.50 2.56 2.15 $500,000--$999,999 2.00 2.04 1.75 $1,000,000 or more 0.00 0.00 0.00(c),(d)
-------------------------------------------------------------------------------- S.7 For RiverSource Absolute Return Currency and Income Fund, RiverSource Floating Rate Fund, RiverSource Inflation Protected Securities Fund, RiverSource Intermediate Tax-Exempt Fund, RiverSource Limited Duration Bond Fund and RiverSource Short Duration U.S. Government Fund
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 3.00% 3.09% 2.50% $50,000--$99,999 3.00 3.09 2.50 $100,000--$249,999 2.50 2.56 2.15 $250,000--$499,999 2.00 2.04 1.75 $500,000--$999,999 1.50 1.52 1.25 $1,000,000 or more 0.00 0.00 0.00(c),(d)
* "Funds-of-funds (equity)" includes -- RiverSource Portfolio Builder Aggressive Fund, RiverSource Portfolio Builder Moderate Aggressive Fund, RiverSource Portfolio Builder Moderate Fund, RiverSource Portfolio Builder Total Equity Fund, RiverSource Retirement Plus 2010 Fund, RiverSource Retirement Plus 2015 Fund, RiverSource Retirement Plus 2020 Fund, RiverSource Retirement Plus 2025 Fund, RiverSource Retirement Plus 2030 Fund, RiverSource Retirement Plus 2035 Fund, RiverSource Retirement Plus 2040 Fund, RiverSource Retirement Plus 2045 Fund, Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025, Seligman TargETFund 2015 and Seligman TargETFund Core. "Funds-of-funds (fixed income)" includes -- RiverSource Income Builder Basic Income Fund, RiverSource Income Builder Enhanced Income Fund, RiverSource Income Builder Moderate Income Fund, RiverSource Portfolio Builder Conservative Fund and RiverSource Portfolio Builder Moderate Conservative Fund. (a) Because of rounding in the calculation of the offering price, the portion of the sales charge retained by the distributor may vary and the actual sales charge you pay may be more or less than the sales charge calculated using these percentages. (b) Purchase price includes the sales charge. (c) Although there is no sales charge for purchases with a total market value over $1,000,000, and therefore no re-allowance, the distributor may pay a financial intermediary the following out of its own resources: a sales commission of up to 1.00% for a sale of $1,000,000 to $3,999,999; a sales commission up to 0.50% for a sale of $4,000,000 to $49,999,999; and a sales commission up to 0.25% for a sale of $50,000,000 or more. (d) For certain eligible employee benefit plans defined under section 401(a), 401(k), 457 and 403(b) which meet eligibility rules for the waiver of applicable sales charges, the distributor may pay the following out of its own resources: a sales commission of 1.00% for a sale of $1 to $3,999,999 received in eligible employee benefit plans; a sales commission up to 0.50% for a sale of $4,000,000 to $49,999,999; and a sales commission up to 0.25% for a sale of $50,000,000 or more. See "Initial Sales Charge -- Waivers of the sales charge for Class A shares" for employee benefit plan eligibility rules. There is no initial sales charge on reinvested dividends or capital gain distributions. INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA). You may be able to reduce the sales charge on Class A shares, based on the combined market value of accounts in your ROA group. Your ROA group includes the current market values of the following investments which are eligible to be added together for purposes of determining the sales charge on your next purchase: - Your current investment in a fund; and -------------------------------------------------------------------------------- S.8 - Previous investments you and members of your household have made in Class A, Class B or Class C shares in the fund and other funds in the RiverSource Family of Funds, provided your investment was subject to a sales charge. Your household consists of you, your spouse or domestic partner and your unmarried children under age 21, all of whom share a mailing address. The following accounts are eligible to be included in your ROA group in order to determine the sales charge on your purchase: - Individual or joint accounts; - Roth and traditional IRAs, SEPs, SIMPLEs and TSCAs, provided they are invested in Class A, Class B or Class C shares that were subject to a sales charge; - UGMA/UTMA accounts for which you, your spouse, or your domestic partner is parent or guardian of the minor child; - Revocable trust accounts for which you or a member of your household, individually, is the beneficial owner/grantor; - Accounts held in the name of your, your spouse's, or your domestic partner's sole proprietorship or single owner limited liability company or S corporation; and - Qualified retirement plan assets, provided that you are the sole owner of the business sponsoring the plan, are the sole participant (other than a spouse) in the plan, and have no intention of adding participants to the plan. The following accounts are NOT eligible to be included in your ROA group in order to determine the sales charge on your purchase: - Accounts of pension and retirement plans with multiple participants, such as 401(k) plans (which are combined to reduce the sales charge for the entire pension or retirement plan and therefore are not used to reduce the sales charge for your individual accounts); - Investments in Class A shares where the sales charge is waived, for example, purchases through wrap accounts; - Investments in Class I, Class R2, Class R3, Class R4, Class R5, Class W or Class Y shares; - Investments in 529 plans, donor advised funds, variable annuities, variable life insurance products, wrap accounts or managed separate accounts; and - Charitable and irrevocable trust accounts. If you purchase fund shares through different financial intermediaries, and you want to include those assets toward a reduced sales charge, you must inform your financial intermediary in writing about the other accounts when placing your purchase order. Contact your financial intermediary to determine what information is required. -------------------------------------------------------------------------------- S.9 Unless you provide your financial intermediary in writing with information about all of the accounts that may count toward a sales charge reduction, there can be no assurance that you will receive all of the reductions for which you may be eligible. You should request that your financial intermediary provide this information to the fund when placing your purchase order. For more information on ROA, please see the SAI. INITIAL SALES CHARGE -- LETTER OF INTENT (LOI). Generally, if you intend to invest $50,000 or more (including any existing ROA) over a period of up to 13 months, you may be able to reduce the front-end sales charge(s) for investments in Class A shares by completing and filing an LOI. The required form of LOI may vary by financial intermediary. Existing ROA can be included in your LOI. Each purchase of fund shares normally subject to an initial sales charge made during the 13-month period will be made at the public offering price applicable to a single transaction of the total dollar amount indicated by the LOI. Five percent of the commitment amount will be placed in escrow. At the end of the 13-month period, the LOI will end and the shares will be released from escrow. If you do not invest the commitment amount by the end of the 13 months, the remaining amount of the unpaid sales charge will be redeemed from the escrowed shares and the remaining balance released from escrow. Existing ROA Example. Shareholder currently has $60,000 ROA in the funds. Shareholder completes an LOI to invest $100,000 in the funds (ROA eligible accounts). Shareholder only needs to invest an additional $40,000 in the funds' Class A shares (any non-money market fund in the RiverSource Family of Funds) in order to fulfill the LOI commitment and receive reduced front-end sales charge(s) over the next 13 months. Notification Obligation. You must request the reduced sales charge when you buy shares. If you do not complete and file an LOI, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge. You should request that your financial intermediary provide this information to the fund when placing your purchase order. For more detail on LOIs, please contact your financial intermediary or see the SAI. INITIAL SALES CHARGE -- WAIVERS OF THE SALES CHARGE FOR CLASS A SHARES. Sales charges do not apply to: - current or retired Board members, officers or employees of the funds or RiverSource Investments or its affiliates, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - current or retired Ameriprise Financial Services, Inc. financial advisors, employees of financial advisors, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. -------------------------------------------------------------------------------- S.10 - registered representatives and other employees of affiliated or unaffiliated financial intermediaries having a selling agreement with the distributor, including their spouses, domestic partners, children, parents and their spouse's or domestic partner's parents. - portfolio managers employed by subadvisers of the funds, including their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - partners and employees of outside legal counsel to the funds or the funds' directors or trustees who regularly provide advice and services to the funds, or to their directors or trustees. - direct rollovers from qualified employee benefit plans, provided that the rollover involves a transfer to Class A shares in the same fund. - purchases made: - with dividend or capital gain distributions from a fund or from the same class of another fund in the RiverSource Family of Funds; - through or under a wrap fee product or other investment product sponsored by a financial intermediary that charges an account management fee that has, or that clear trades through a financial intermediary that has, a selling agreement with the distributor; - through state sponsored college savings plans established under Section 529 of the Internal Revenue Code; or - through bank trust departments. - separate accounts established and maintained by an insurance company which are exempt from registration under Section 3(c)(11). - purchases made through "employee benefit plans" created under section 401(a), 401(k), 457 and 403(b) which: - have at least $1 million in plan assets at the time of investment; and - have a plan level or omnibus account that is maintained with the fund or its transfer agent; and - transact directly with the fund or its transfer agent through a third party administrator or third party recordkeeper. For more information regarding waivers of sales charge for Class A purchases, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of sales charges for additional classes of investors. Policies related to reducing or waiving the sales charge may be modified or withdrawn at any time. -------------------------------------------------------------------------------- S.11 Unless you provide your financial intermediary with information in writing about all of the factors that may count toward a waiver of the sales charge, there can be no assurance that you will receive all of the waivers for which you may be eligible. You should request that your financial intermediary provide this information to the fund when placing your purchase order. Because the current prospectus is available on the funds' website (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com free of charge, information regarding breakpoint discounts is not separately disclosed on the website. CDSCS AND THE COMBINATION OF TARGET DATE FUNDS WITH SELIGMAN TARGETFUND CORE. Each of Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025 and Seligman TargETFund 2015 (the Target Date Funds) will automatically be combined with Seligman TargETFund Core during their respective target year. The investment manager expects each of these combinations to be effected as an acquisition of the assets and liabilities of the applicable Target Date Fund in exchange for shares of Seligman TargETFund Core at net asset value, with the shares of Seligman TargETFund Core then distributed to shareholders of the applicable Target Date Fund. For the purpose of calculating CDSCs, holding periods in respect of shares of a Target Date Fund will be carried over to shares of Seligman TargETFund Core acquired as a result of the combination of a Target Date Fund with Seligman TargETFund Core. CLASS A -- CONTINGENT DEFERRED SALES CHARGE For Class A shares purchased without a sales charge where a commission was separately paid by the distributor to an authorized financial intermediary effecting the purchase, a 1% CDSC may be charged if you sell your shares within 18 months after purchase. A CDSC will be based on the original purchase cost or the current market value of the shares being sold, whichever is less. CDSC -- WAIVERS OF THE CDSC FOR CLASS A SHARES. The CDSC will be waived on sales of shares: - to which no sales commission or transaction fee was paid to an authorized financial intermediary at the time of purchase. - purchased through reinvestment of dividends and capital gain distributions. - in the event of the shareholder's death. - from a monthly, quarterly or annual systematic redemption plan of up to an annual amount of 12% of the account value on a per fund basis. - in an account that has been closed because it falls below the minimum account balance. - that result from required minimum distributions taken from retirement accounts upon the shareholders attainment of age 70 1/2. -------------------------------------------------------------------------------- S.12 - that result from returns of excess contributions or excess deferral amounts made to a retirement plan participant. - of RiverSource funds purchased prior to Dec. 1, 2008. - initially purchased by an employee benefit plan that is not connected with a plan level termination. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. CLASS B AND CLASS C -- CDSC ALTERNATIVE The money market funds (except RiverSource Tax-Exempt Money Market Fund) offer Class B and Class C shares, but only to facilitate exchanges with other funds offering Class B and Class C shares, respectively. For example, if you own Class B or Class C shares of another fund, but want to hold your money in a money market fund, you may exchange into Class B or Class C shares of a money market fund. Funds that offer Class B and Class C shares have limitations on the amount you may invest in those share classes. If you are considering purchasing Class B or Class C shares of a fund, please see the prospectus for that fund for any effective purchase limitations. Although you may not purchase Class B and Class C shares of the money market funds directly, if you exchange into Class B or Class C shares of a money market fund from another fund, you will be subject to the rules governing CDSC set forth in this section. To minimize the amount of CDSC you may pay when you sell your shares, the fund assumes that shares acquired through reinvested dividends and capital gain distributions (which are not subject to CDSC) are sold first. Shares that have been in your account long enough so that they are not subject to a CDSC are sold next. After these shares are exhausted, shares will be sold in the order they were purchased (earliest to latest). -------------------------------------------------------------------------------- S.13 FOR CLASS B, the CDSC is based on the sale amount and the number of years between purchase and sale. The following table shows how CDSC percentages on sales decline over time:
IF THE SALE IS MADE DURING THE: THE CDSC PERCENTAGE RATE IS:* First year 5% Second year 4% Third year 3%** Fourth year 3% Fifth year 2% Sixth year 1% Seventh or eighth year 0%
* Because of rounding in the calculation, the portion of the CDSC retained by the distributor may vary and the actual CDSC you pay may be more or less than the CDSC calculated using these percentages. ** For shares purchased in a RiverSource fund on or prior to June 12, 2009, the CDSC percentage for the third year is 4%. Although there is no front-end sales charge when you buy Class B shares, the distributor pays a sales commission of 4% to financial intermediaries that sell Class B shares. A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class B shares. You may not make additional purchases of Class B shares if your ROA exceeds $49,999.99. Class B shares purchased in a RiverSource fund prior to May 21, 2005 age on a calendar year basis. Class B shares purchases made in a RiverSource fund beginning May 21, 2005 age on a daily basis. For example, a purchase made on Nov. 12, 2004 completed its first year on Dec. 31, 2004 under calendar year aging. However, a purchase made on Nov. 12, 2005 completed its first year on Nov. 11, 2006 under daily aging. Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund on or prior to June 12, 2009 will convert to Class A shares in the month prior to the ninth year of ownership. Class B shares purchased in a RiverSource fund beginning May 21, 2005 and Class B shares purchased in a Seligman fund beginning June 13, 2009 will convert to Class A shares one month after the completion of the eighth year of ownership. -------------------------------------------------------------------------------- S.14 FOR CLASS C, a 1% CDSC may be charged if you sell your shares within one year after purchase. Although there is no front-end sales charge when you buy Class C shares, the distributor pays a total amount up to 1% (including sales commission and advance of service fees) to financial intermediaries that sell Class C shares. See "Buying and Selling Shares -- Distribution and Service Fees." A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class C shares. You may not make additional purchases of Class C shares if your ROA exceeds $999,999.99. For both Class B and Class C shares, the amount of any CDSC you pay will be based on the lower of the original purchase price of those shares or current net asset value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you do not have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. EXAMPLE Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3 1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase. CDSC -- WAIVERS OF THE CDSC FOR CLASS B SHARES. The CDSC will be waived on sales of shares: - in the event of the shareholder's death. - that result from required minimum distributions taken from retirement accounts upon the shareholders' attainment of age 70 1/2. - sold under an approved substantially equal periodic payment arrangement. - by certain other investors, including certain institutions as set forth in more detail in the SAI. For more information regarding waivers of the CDSC for Class B shares, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. -------------------------------------------------------------------------------- S.15 CDSC -- WAIVERS OF THE CDSC FOR CLASS C SHARES. The CDSC will be waived on sales of shares: - in the event of the shareholder's death. - to which no sales commission or transaction fee was paid to an authorized financial intermediary at the time of purchase. - that result from required minimum distributions taken from retirement accounts upon the shareholders' attainment of age 70 1/2. - initially purchased by an eligible employee benefit plan that are not connected with a plan level termination. - by certain other investors, including certain institutions as set forth in more detail in the SAI. For more information regarding waivers of the CDSC for Class C shares, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. CLASS I, CLASS R2, CLASS R3, CLASS R4, CLASS R5, CLASS W AND CLASS Y -- NO SALES CHARGE. For each of Class I, Class R2, Class R3, Class R4, Class R5 and Class W there is no initial sales charge or CDSC. OPENING AN ACCOUNT Financial institutions are required by law to obtain certain personal information from each person who opens an account in order to verify the identity of the person. As a result, when you open an account you will be asked to provide your name, permanent street address, date of birth, and Social Security or Employer Identification number. You may also be asked for other identifying documents or information. If you do not provide this information, the fund or the financial intermediary through which you are investing in the fund may not be able to open an account for you. If the fund or the financial intermediary through which you are investing in the fund is unable to verify your identity, your account may be closed, or other steps may be taken, as deemed appropriate. When you buy shares, your order will be priced at the next NAV calculated after your order is accepted by the fund or an authorized financial intermediary. Any applicable sales charge will be added to the purchase price for Class A shares. You may establish and maintain your account with an authorized financial intermediary or directly with the fund. The fund may appoint servicing agents to accept purchase orders and to accept exchange (and sale) orders on its behalf. Accounts established with the fund will be supported by the fund's transfer agent. -------------------------------------------------------------------------------- S.16 METHODS OF PURCHASING SHARES These methods of purchasing shares generally apply to Class A, Class B, and Class C shares. CLASS B SHARES OF RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND IS CURRENTLY CLOSED TO INVESTORS FOR NEW PURCHASES. CLASS B SHARES FOR RIVERSOURCE FLOATING RATE FUND, RIVERSOURCE INFLATION PROTECTED SECURITIES FUND, RIVERSOURCE INTERMEDIATE TAX-EXEMPT FUND, RIVERSOURCE LIMITED DURATION BOND FUND AND RIVERSOURCE SHORT DURATION U.S. GOVERNMENT FUND ARE CLOSED TO NEW INVESTORS AND NEW PURCHASES. EXISTING SHAREHOLDERS IN THESE FUNDS MAY CONTINUE TO OWN CLASS B SHARES AND MAKE EXCHANGES INTO AND OUT OF EXISTING ACCOUNTS WHERE CLASS B SHARES OF THESE FUNDS ARE MAINTAINED. ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INTERMEDIARY ALL REQUESTS The financial intermediary through which you buy shares may have different policies not described in this prospectus, including different minimum investment amounts and minimum account balances. -------------------------------------------------------------------------------- ACCOUNT ESTABLISHED WITH THE FUND BY MAIL You or the financial intermediary through which you buy shares may establish an account with the fund. To establish an account in this fashion, complete a fund account application with your financial advisor or investment professional, and mail the account application to the address below. Account applications may be obtained (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com or may be requested by calling (800) 221-2450. Make your check payable to the fund. The fund does not accept cash, credit card convenience checks, money orders, traveler's checks, starter checks, third or fourth party checks, or other cash equivalents. ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.17 METHODS OF PURCHASING SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) Mail your check and completed application to: REGULAR MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL P.O. BOX 8041 BOSTON, MA 02266-8041 EXPRESS MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL 30 DAN ROAD CANTON, MA 02021-2809 If you already have an account, include your name, account number, and the name of the fund and class of shares you wish to purchase along with your check. You can make scheduled investments in the fund by moving money from your checking account or savings account. See the Minimum Investment and Account Balance chart below for more information regarding scheduled investment plans. -------------------------------------------------------------------------------- BY WIRE OR ACH Fund shares purchased in an account established and maintained with the fund may be paid for by federal funds wire. Before sending a wire, call (800) 221-2450 to notify the fund's transfer agent of the wire and to receive further instructions. If you are establishing an account with a wire purchase, you are required to send a signed account application to the address above. Please include the wire control number or your new account number on the application. Your bank or financial intermediary may charge additional fees for wire transactions. -------------------------------------------------------------------------------- BY EXCHANGE Call (800) 221-2450 or send signed written instructions to the address above. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.18 METHODS OF PURCHASING SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) MINIMUM INVESTMENT AND ACCOUNT BALANCE
RIVERSOURCE RIVERSOURCE 120/20 DISCIPLINED CONTRARIAN SMALL CAP EQUITY FUND VALUE FUND THREADNEEDLE RIVERSOURCE FOR ALL FUNDS, GLOBAL EXTENDED FLOATING RATE CLASSES AND ALPHA FUND FUND ACCOUNTS EXCEPT RIVERSOURCE RIVERSOURCE THOSE LISTED TO ABSOLUTE RETURN INFLATION THE RIGHT TAX QUALIFIED CURRENCY AND PROTECTED (NONQUALIFIED) ACCOUNTS INCOME FUND SECURITIES FUND CLASS W --------------------------------------------------------------------------------------------------------------- INITIAL INVESTMENT $2,000 $1,000 $10,000 $5,000 $500 --------------------------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $100 $100 $100 None --------------------------------------------------------------------------------------------------------------- ACCOUNT BALANCE* $1,000 None $5,000 $2,500 $500
*If your fund account balance falls below the minimum account balance for any reason, including a market decline, you may be asked to increase it to the minimum account balance or establish a scheduled investment plan. If you do not do so within 30 days, your shares may be automatically redeemed and the proceeds mailed to you. ------------------------------------------------------------------------------- MINIMUM INVESTMENT AND ACCOUNT BALANCE -- SCHEDULED INVESTMENT PLANS
RIVERSOURCE RIVERSOURCE 120/20 DISCIPLINED CONTRARIAN SMALL CAP EQUITY FUND VALUE FUND THREADNEEDLE RIVERSOURCE FOR ALL FUNDS, GLOBAL EXTENDED FLOATING RATE CLASSES AND ALPHA FUND FUND ACCOUNTS EXCEPT RIVERSOURCE RIVERSOURCE THOSE LISTED TO ABSOLUTE RETURN INFLATION THE RIGHT TAX QUALIFIED CURRENCY AND PROTECTED (NONQUALIFIED) ACCOUNTS INCOME FUND SECURITIES FUND CLASS W --------------------------------------------------------------------------------------------------------------- INITIAL INVESTMENT $100(a) $100(b) $10,000 $5,000 $500 --------------------------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $50 $100 $100 None --------------------------------------------------------------------------------------------------------------- ACCOUNT BALANCE** None(b) None $5,000 $2,500 $500
**If your fund account balance is below the minimum initial investment described above, you must make payments at least monthly. (a)Money Market Funds -- $2,000 (b)Money Market Funds -- $1,000 ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.19 These minimums may be waived for accounts that are managed by an investment professional, for accounts held in approved discretionary or non-discretionary wrap programs, for accounts that are a part of an employer-sponsored retirement plan, or for other account types if approved by the distributor. The fund reserves the right to modify its minimum account requirements at any time, with or without prior notice. Please contact your financial intermediary for information regarding wire or electronic funds transfer. IMPORTANT: Payments sent by electronic fund transfers (ACH), a bank authorization or check that are not guaranteed may take up to 14 days to clear. If you request a sale within 14 days of purchase, this may cause your sale request to fail to process if the requested amount includes unguaranteed funds. EXCHANGING OR SELLING SHARES You may exchange or sell shares by having your financial intermediary process your transaction. If you maintain your account directly with your financial intermediary, you must contact that financial intermediary to exchange or sell shares of the fund. If your account was established with the fund, there are a variety of methods you may use to exchange or sell shares of the fund. WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INTERMEDIARY ALL REQUESTS You can exchange or sell shares by having your financial intermediary process your transaction. The financial intermediary through which you purchased shares may have different policies not described in this prospectus, including different transaction limits, exchange policies and sale procedures. -------------------------------------------------------------------------------- ACCOUNT ESTABLISHED WITH THE FUND BY MAIL Mail your exchange or sale request to: REGULAR MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL P.O. BOX 8041 BOSTON, MA 02266-8041 EXPRESS MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL 30 DAN ROAD CANTON, MA 02021-2809 ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.20 WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) Include in your letter: - your name - the name of the fund(s) - your account number - the class of shares to be exchanged or sold - your Social Security number or Employer Identification number - the dollar amount or number of shares you want to exchange or sell - specific instructions regarding delivery or exchange destination - signature(s) of registered account owner(s) - any special documents the transfer agent may require in order to process your order Corporate, trust or partnership accounts may need to send additional documents. Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners. A Medallion Signature Guarantee is required if: - Amount is over $50,000. - You want your check made payable to someone other than the registered account owner(s). - Your address of record has changed within the last 30 days. - You want the check mailed to an address other than the address of record. - You want the proceeds sent to a bank account not on file. - You are the beneficiary of the account and the account owner is deceased (additional documents may be required). A Medallion Signature Guarantee assures that a signature is genuine and not a forgery. The financial intermediary providing the Guarantee is financially liable for the transaction if the signature is a forgery. Eligible guarantors include commercial banks, trust companies, savings associations, and credit unions as defined by the Federal Deposit Insurance Act. Note: A guarantee from a notary public is not acceptable. ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.21 WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) NOTE: Any express mail delivery charges you pay will vary depending on domestic or international delivery instructions. -------------------------------------------------------------------------------- BY TELEPHONE Call (800) 221-2450. Unless you elect not to have telephone exchange and sale privileges, they will automatically be available to you. Reasonable procedures will be used to confirm authenticity of telephone exchange or sale requests. Telephone privileges may be modified or discontinued at any time. Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate, qualified retirement accounts and trust accounts which the current trustee is not listed. You may request that these privileges NOT apply by writing to the address above. Payment will be mailed to the address of record and made payable to the names listed on the account. Telephone sale requests are limited to $50,000 per day. -------------------------------------------------------------------------------- BY WIRE OR ACH You can wire money from your fund account to your bank account. Make sure we have your bank account information on file. If we do not have this information, you will need to send written instructions with your bank's name and a voided check or savings account deposit slip. Call (800) 221-2450 or send a letter of instruction, with a Medallion Signature Guarantee if required, to the address above. A service fee may be charged against your account for each wire sent. Minimum amount: by ACH: $100 by wire: $500 Your bank or financial intermediary may charge additional fees for wire transactions. -------------------------------------------------------------------------------- BY SCHEDULED You may elect to receive regular periodic payments through an PAYOUT PLAN automatic sale of shares. See the SAI for more information. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.22 CHECK REDEMPTION SERVICE Class A shares of the money market funds offer check writing privileges. If you have $2000 in a money market fund, you may request checks which may be drawn against your account. You can elect this service on your initial application, or, thereafter. Call (800) 221-2450 for the appropriate forms to establish this service. If you own Class A shares that were both in another fund at NAV because of the size of the purchase, and then exchanged into a money market fund, check redemptions may be subject to a CDSC. EXCHANGES Generally, you may exchange your fund shares for shares of the same class of any other publicly offered fund in the RiverSource Family of Funds without a sales charge. For complete information on the fund you are exchanging into, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after your transaction request is received in good order. You may be subject to a sales charge if you exchange from a money market fund into an equity or fixed income fund. IF YOU HOLD YOUR FUND SHARES IN AN ACCOUNT WITH AMERIPRISE FINANCIAL SERVICES, YOU MAY HAVE LIMITED EXCHANGEABILITY WITHIN THE RIVERSOURCE FAMILY OF FUNDS. MARKET TIMING SHORT-TERM TRADING AND OTHER SO-CALLED MARKET TIMING PRACTICES ARE FREQUENT TRADING PRACTICES BY CERTAIN SHAREHOLDERS INTENDED TO PROFIT AT THE EXPENSE OF OTHER SHAREHOLDERS BY SELLING SHARES OF A FUND SHORTLY AFTER PURCHASE. MARKET TIMING MAY ADVERSELY IMPACT A FUND'S PERFORMANCE BY PREVENTING THE INVESTMENT MANAGER FROM FULLY INVESTING THE ASSETS OF THE FUND, DILUTING THE VALUE OF SHARES HELD BY LONG-TERM SHAREHOLDERS, OR INCREASING THE FUND'S TRANSACTION COSTS. -------------------------------------------------------------------------------- S.23 FOR A FUND ORGANIZED AS A FUND-OF-FUNDS, ITS ASSETS CONSIST PRIMARILY OF SHARES OF THE UNDERLYING FUNDS IN WHICH IT INVESTS. THE UNDERLYING FUNDS MAY BE MORE SUSCEPTIBLE TO THE RISKS OF MARKET TIMING. FUNDS THAT INVEST DIRECTLY IN SECURITIES THAT TRADE INFREQUENTLY MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF INEFFICIENCIES IN THE SECURITIES MARKETS. FUNDS AND THE UNDERLYING FUNDS THAT INVEST IN SECURITIES THAT TRADE ON OVERSEAS SECURITIES MARKETS MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF CHANGES IN THE VALUES OF SECURITIES BETWEEN THE CLOSE OF OVERSEAS MARKETS AND THE CLOSE OF U.S. MARKETS, WHICH IS GENERALLY THE TIME AT WHICH A FUND'S NAV IS CALCULATED. TO THE EXTENT THAT A FUND OR UNDERLYING FUND HAS SIGNIFICANT HOLDINGS OF SMALL CAP STOCKS, FLOATING RATE LOANS, HIGH YIELD BONDS, TAX-EXEMPT SECURITIES OR FOREIGN SECURITIES, THE RISKS OF MARKET TIMING MAY BE GREATER FOR THE FUND THAN FOR OTHER FUNDS. SEE "PRINCIPAL INVESTMENT STRATEGIES" FOR A DISCUSSION OF THE TYPES OF SECURITIES IN WHICH YOUR FUND INVESTS. SEE "PRICING AND VALUING OF FUND SHARES" FOR A DISCUSSION OF THE FUNDS' POLICY ON FAIR VALUE PRICING, WHICH IS INTENDED, IN PART, TO REDUCE THE FREQUENCY AND EFFECT OF MARKET TIMING. THE FUNDS' BOARD HAS ADOPTED A POLICY THAT IS DESIGNED TO DETECT AND DETER MARKET TIMING THAT MAY BE HARMFUL TO THE FUNDS. EACH FUND SEEKS TO ENFORCE THIS POLICY THROUGH ITS SERVICE PROVIDERS AS FOLLOWS: - The fund tries to distinguish market timing from trading that it believes is not harmful, such as periodic rebalancing for purposes of asset allocation or dollar cost averaging or other purchase and exchange transactions not believed to be inconsistent with the best interest of fund shareholders or the Board's policy. The fund uses a variety of techniques to monitor for and detect abusive trading practices. These techniques may vary depending on the type of fund, the class of shares and where the shares are maintained. Under the fund's procedures, there is no set number of transactions in the fund that constitutes market timing. Even one purchase and subsequent sale by related accounts may be market timing. Generally, the fund seeks to restrict the exchange privilege of an investor who makes more than three exchanges into or out of the fund in any 90-day period. Accounts held by a retirement plan or a financial intermediary for the benefit of its participants or clients, which typically engage in daily transactions, are not subject to this limit, although the fund may seek the assistance of financial intermediaries in applying similar restrictions on their participants or clients. The fund's ability to monitor and discourage abusive trading practices in omnibus accounts is more limited. - The fund may rely on the monitoring policy of a financial intermediary, for example, a retirement plan administrator or similar financial intermediary authorized to distribute the funds, if it determines the policy and procedures of such financial intermediaries are sufficient to protect the fund and its shareholders. -------------------------------------------------------------------------------- S.24 - If an investor's trading activity is determined to be market timing or otherwise harmful to existing shareholders, the fund reserves the right to modify or discontinue the investor's exchange privilege or reject the investor's purchases or exchanges, including purchases or exchanges accepted by a financial intermediary. The fund may treat accounts it believes to be under common control as a single account for these purposes, although it may not be able to identify all such accounts. - Although the fund does not knowingly permit market timing, it cannot guarantee that it will be able to identify and restrict all short-term trading activity. The fund receives purchase and sale orders through financial intermediaries where market timing activity may not always be successfully detected. Other exchange policies: - Exchanges must be made into the same class of shares of the share class being exchanged out of. - Exchanges into RiverSource Tax-Exempt Money Market Fund may be made only from Class A shares. - If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. - Once the fund receives your exchange request, you cannot cancel it after the market closes. - Shares of the purchased fund may not be used on the same day for another exchange or sale. - New investments in Class A shares of a money market fund may be exchanged for either Class A, Class B or Class C shares of any other publicly offered fund in the RiverSource Family of Funds. - If you exchange shares from Class A shares of a money market fund to another fund in the RiverSource Family of Funds, any further exchanges must be between shares of the same class. For example, if you exchange from Class A shares of a money market fund into Class B shares of another fund in the RiverSource Family of Funds, you may not exchange from Class B shares of that fund back to Class A shares of a money market fund. Exchange rules for money market funds are illustrated in the following tables. - Shares of Class W originally purchased, but no longer held in a discretionary managed account, may not be exchanged for Class W shares of another fund. You may continue to hold these shares in the fund. Changing your investment to a different fund will be treated as a sale and purchase, and you will be subject to applicable taxes on the sale and sales charges on the purchase of the new fund. -------------------------------------------------------------------------------- S.25 - If your shares are subject to a CDSC, you will not be charged a CDSC upon the exchange of those shares. Any CDSC will be deducted when you sell the shares you received from the exchange. The CDSC imposed at that time will be based on the period that begins when you bought shares of the original fund and ends when you sell the shares of the fund you exchanged to.
TO OTHER FUNDS FROM A MONEY MARKET FUND ----------------------------- CLASS A CLASS B CLASS C -------------------------------------------------------------------- Class A Yes Yes Yes Class B No Yes No Class C No No Yes
TO A MONEY MARKET FUND FROM OTHER FUNDS ----------------------------- CLASS A CLASS B CLASS C -------------------------------------------------------------------- Class A Yes No No Class B No Yes No Class C No No Yes
If your initial investment was in a money market fund and you exchange into an equity or fixed income fund, you will pay an initial sales charge if you exchange into Class A and be subject to a CDSC if you exchange into Class B or Class C. If your initial investment was in Class A shares of an equity or fixed income fund and you exchange shares into a money market fund, you may exchange that amount to another fund, including dividends earned on that amount, without paying a sales charge. SELLING SHARES You may sell your shares at any time. The payment will be sent within seven days after your request is received in good order. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order, minus any applicable CDSC. REPURCHASES. You can change your mind after requesting a sale of shares and use all or part of the sale proceeds to purchase new shares of a fund in the RiverSource Family of Funds. If your original purchase was in Class A or Class B, you may use all or part of the sale proceeds to purchase new Class A shares in any fund account linked together for ROA purposes. Your repurchase will be in Class A shares at NAV, up to the amount of the sale proceeds. For a Class A repurchase on shares that were originally charged a CDSC, the amount of the CDSC will be reinvested at the NAV on the date the repurchase is processed. Repurchases of Class B shares will also be in Class A shares at NAV. Any CDSC paid upon redemption of your Class B shares will not be reimbursed. If your original purchase was in Class C, you will be allowed to reinvest in the -------------------------------------------------------------------------------- S.26 same Class C account and fund you originally purchased. In a Class C repurchase, the CDSC you paid will be reinvested and the shares will be deemed to have the original cost and purchase date for purposes of applying the CDSC (if any) to subsequent redemptions. Systematic withdrawals and purchases will be excluded from this policy. In order for you to take advantage of this repurchase waiver, you must notify your financial intermediary or the fund's transfer agent if your account is held at the fund within 90 days of the date your sale request was processed. Contact your financial intermediary for information on required documentation. The repurchase privilege may be modified or discontinued at any time and use of this option may have tax consequences. If you sold shares of a Seligman fund on or before February 3, 2009 and wish to repurchase shares, you have the option of taking advantage of the current repurchase policy (described above) within 90 days of the date your sale request was processed, or you may use all or part of your sale proceeds to purchase shares of the fund you sold or any other fund in the RiverSource Family of Funds without paying an initial sales charge or, if you paid a CDSC when you sold your shares, receiving a credit for the applicable CDSC, within 120 days of the date your sale request was processed. Contact your financial intermediary or, if you opened an account directly with the fund, the transfer agent, for more information on the required documentation to complete a repurchase transaction. The fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. PRICING AND VALUING OF FUND SHARES For classes of shares sold with an initial sales charge, the public offering or purchase price is the net asset value plus the sales charge. For funds or classes of shares sold without an initial sales charge, the public offering price is the NAV. Orders in good form are priced at the NAV next determined after you place your order. Good form or good order means that your instructions have been received in the form required by the fund. This may include, for example, providing the fund name and account number, the amount of the transaction and all required signatures. The NAV is the value of a single share of the fund. The NAV is determined by dividing the value of the fund's assets, minus any liabilities, by the number of shares outstanding. The NAV is calculated as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. For a fund organized as a fund-of-funds, the assets will consist primarily of shares of the underlying funds, which are valued at their NAVs. Securities are valued primarily on the basis of market quotations and floating rate loans are valued primarily on the basis of indicative bids. Both market quotations -------------------------------------------------------------------------------- S.27 and indicative bids are obtained from outside pricing services approved and monitored under procedures adopted by the Board. Certain short-term securities with maturities of 60 days or less are valued at amortized cost. When reliable market quotations or indicative bids are not readily available, investments are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of an investment held by a fund or underlying fund is materially affected by events that occur after the close of a securities market but prior to the time as of which the fund's or underlying fund's NAV is determined. Valuing investments at fair value involves reliance on judgment. The fair value of an investment is likely to differ from any available quoted or published price. To the extent that a fund or an underlying fund has significant holdings of small cap stocks, high yield bonds, floating rate loans, tax-exempt securities or foreign securities that may trade infrequently, fair valuation may be used more frequently than for other funds. The funds use an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of a fund's or an underlying fund's securities may be listed on foreign exchanges that trade on weekends or other days when the fund does not price its shares. In that event, the NAV of the fund's or underlying fund's shares may change on days when shareholders will not be able to purchase or sell the fund's or underlying fund's shares. For money markets funds -- The fund's investments are valued at amortized cost, which approximates market value, as explained in the SAI. Although the fund cannot guarantee it will always be able to maintain a constant net asset value of $1 per share, it will use its best efforts to do so. DISTRIBUTIONS AND TAXES As a shareholder you are entitled to your share of your fund's net income and net gains. Each fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS Your fund's net investment income is distributed to you as dividends. Dividends may be composed of qualified dividend income, which is eligible for preferential tax rates under current tax law, as well as other ordinary dividend income, which may include dividends which are non-qualified dividends, interest income and short-term capital gains. Because of the types of income earned by fixed income funds, it is unlikely the funds will distribute qualified dividend income. Generally, capital gains are realized when a security is sold for a higher price than was paid for it. Generally, capital losses are realized when a security is sold for a lower price than was paid for it. Typically, each realized capital gain or loss is long-term or short-term depending on the length of time the fund held the -------------------------------------------------------------------------------- S.28 security. Realized capital gains and losses offset each other. The fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains, if any, are included in net investment income and are taxable as ordinary income when distributed to the shareholder. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. If the fund's distributions exceed its current and accumulated earnings and profits, that portion of the fund's distributions will be treated as a return of capital to the shareholders to the extent of their basis in their shares. A return of capital will generally not be taxable; however, any amounts received in excess of basis are treated as capital gain. Forms 1099 sent to shareholders report any return of capital. Certain derivative instruments subject the fund to special tax rules, the effect of which may be to accelerate income to the fund, defer fund losses, cause adjustments in the holding periods of fund securities, convert capital gains into ordinary income and convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders. For Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025, Seligman TargETF 2015 and Seligman TargETFund Core (the Seligman TargETFunds) -- The Funds may purchase or sell (write) options. In general, option premiums which may be received by the Funds are not immediately included in the income of the Funds. Instead, such premiums are taken into account when the option contract expires, the option is exercised by the holder, or the Funds transfer or otherwise terminate the option. If an option written by a Fund is exercised and such Fund sells or delivers the underlying security, such Fund generally will recognize capital gain or loss equal to (a) the sum of the exercise price and the option premium received by the Fund minus (b) the Fund's basis in the security. Such gain or loss generally will be short-term or long- term depending upon the holding period of the underlying security. Gain or loss with respect to any termination of a Fund's obligation under an option other than through the exercise of the option and the related sale or delivery of the underlying security generally will be short-term gain or loss. Thus, for example, if an option written by a Fund expires unexercised, such Fund generally will recognize short-term gain equal to the premium received. -------------------------------------------------------------------------------- S.29 The Seligman TargETFunds generally will pay any dividends from its net investment income and distributes any net capital gains realized on investments at least annually (Seligman TargETFund Core generally will pay dividends from its net investment income on a quarterly basis). Because each Seligman TargETFund may sell underlying ETFs, US government securities and short-term debt instruments: (a) to accommodate redemptions of its shares; (b) in respect of the Target Date Funds, to implement the process of migration; and (c) to adjust the percentages of its assets invested in each underlying ETF, US government securities, short-term debt instruments, cash and cash equivalents in response to economic, market or other conditions or events, and changes in Seligman Time Horizon Matrix (the asset allocation methodology utilized by the Seligman TargETFunds), each Seligman TargETFund may generate net capital gains (including short-term capital gains that are generally taxed to shareholders at ordinary income tax rates) for investors that may be higher than the net capital gains ordinarily incurred by an investor through an investment in another asset allocation fund that has broader investment ranges or an asset allocation strategy designed by the investor. In addition, due to federal income tax laws, each Seligman TargETFund may not fully utilize capital losses (to offset capital gains) from the sale of underlying ETFs at a loss. In addition, underlying ETFs may distribute capital gains to the Seligman TargETFunds. REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the fund unless you request distributions in cash. The financial intermediary through which you purchased shares may have different policies. Distributions are reinvested at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. Generally, if you sell shares for less than their cost, the difference is a capital loss or if you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). -------------------------------------------------------------------------------- S.30 You may not create a tax loss or reduce a tax gain, based on paying a sales charge, by exchanging shares before the 91st day after the day of purchase. If you buy Class A shares and exchange into another fund before the 91st day after the day of purchase, you may not be able to include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. For more information, see the SAI. REITs often do not provide complete tax information until after the calendar year-end; generally mid to late January and continuing through early February. Consequently, if your fund has significant investments in REITs, you may not receive your Form 1099-DIV until February. Other RiverSource funds tax statements are generally mailed in January. FOR SELIGMAN TARGETFUNDS. Each of the Target Date Funds will automatically be combined with Seligman TargETFund Core during their respective target years. The investment manager expects each of these combinations to be effected as an acquisition of the assets and liabilities of the applicable Target Date Fund in exchange for shares of Seligman TargETFund Core at net asset value, with the shares of Seligman TargETFund Core then distributed to shareholders of the applicable Target Date Fund. Based on current tax rules, the investment manager expects the combination to be effected in a non-taxable transaction. Changes in such tax rules or other applicable law could negatively impact the combination of a Target Date Fund with Seligman TargETFund Core. FOR TAXABLE FUNDS. Distributions related to shares not held in IRAs or other retirement accounts are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. Shares held in an IRA or qualified retirement account are generally subject to different tax rules. Taking a distribution from your IRA or qualified retirement plan may subject you to federal taxes, withholding, penalties and reporting requirements. Please consult your tax advisor. Income received by a fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes. FOR TAX-EXEMPT FUNDS. Dividends distributed from interest earned on tax-exempt securities (exempt-interest dividends) are exempt from federal income taxes but may be subject to state and local taxes and potentially the alternative minimum tax. Dividends distributed from net capital gains, if any, and other income earned are not exempt from federal income taxes. Any taxable distributions are taxable in the year the fund declares them regardless of whether you take them in cash or reinvest them. -------------------------------------------------------------------------------- S.31 Interest on certain private activity bonds is a preference item for purposes of the individual and corporate alternative minimum tax. To the extent the fund earns such income, it will flow through to its shareholders and may affect those shareholders who are subject to the alternative minimum tax. See the SAI for more information. Because interest on municipal bonds and notes is tax-exempt for federal income tax purposes, any interest on money you borrow that is used directly or indirectly to purchase fund shares is not deductible on your federal income tax return. You should consult a tax advisor regarding its deductibility for state and local income tax purposes. FOR A FUND ORGANIZED AS A FUND-OF-FUNDS. Because most of the fund's investments are shares of underlying funds, the tax treatment of the fund's gains, losses, and distributions may differ from the tax treatment that would apply if either the fund invested directly in the types of securities held by the underlying funds or the fund shareholders invested directly in the underlying funds. As a result, fund shareholders may recognize higher amounts of capital gain distributions or ordinary income dividends than they otherwise would. IMPORTANT: This information is a brief and selective summary of some of the tax rules that apply to an investment in a fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. GENERAL INFORMATION AVAILABILITY AND TRANSFERABILITY OF FUND SHARES Please consult with your financial intermediary to determine the availability of the funds. The funds may only be purchased or sold directly or through financial intermediaries authorized by the distributor to offer the funds. NOT ALL FINANCIAL INSTITUTIONS ARE AUTHORIZED TO SELL THE RIVERSOURCE FAMILY OF FUNDS AND CERTAIN FINANCIAL INTERMEDIARIES THAT OFFER THE RIVERSOURCE FAMILY OF FUNDS MAY NOT OFFER ALL FUNDS ON ALL INVESTMENT PLATFORMS. If you set up an account at a financial intermediary that does not have, and is unable to obtain, a selling agreement with the distributor, you will not be able to transfer fund holdings to that account. In that event, you must either maintain your fund holdings with your current financial intermediary, find another financial intermediary with a selling agreement, or sell your shares, paying any applicable CDSC. Please be aware that transactions in taxable accounts are taxable events and may result in income tax liability. ADDITIONAL SERVICES AND COMPENSATION In addition to acting as the fund's investment manager, RiverSource Investments and its affiliates also receive compensation for providing other services to the funds. -------------------------------------------------------------------------------- S.32 Administration Services. Ameriprise Financial, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides or compensates others to provide administrative services to the funds. These services include administrative, accounting, treasury, and other services. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." Distribution and Shareholder Services. RiverSource Fund Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474, (the distributor), provides underwriting and distribution services to the funds. Under the Distribution Agreement and related distribution and shareholder servicing plans, the distributor receives distribution and shareholder servicing fees. The distributor may retain a portion of these fees to support its distribution and shareholder servicing activity. The distributor reallows the remainder of these fees (or the full fee) to the financial intermediaries that sell fund shares and provide services to shareholders. Fees paid by a fund for these services are set forth under "Distribution and/or service (12b-1) fees" in the expense table under "Fees and Expenses." More information on how these fees are used is set forth under "Investment Options -- Classes of Shares" and in the SAI. The distributor also administers any sales charges paid by an investor at the time of purchase or at the time of sale. See "Shareholder Fees (fees paid directly from your investment)" under "Fees and Expenses" for the scheduled sales charge of each share class. See "Buying and Selling Shares, Sales Charges" for variations in the scheduled sales charges, and for how these sales charges are used by the distributor. See "Other Investment Strategies and Risks" for the funds' policy regarding directed brokerage. Transfer Agency Services. RiverSource Service Corporation, 734 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the transfer agent or RiverSource Service Corporation), provides or compensates others to provide transfer agency services to the funds. The funds pay the transfer agent a fee that varies by class, as set forth in the SAI, and reimburses the transfer agent for its out-of-pocket expenses incurred while providing these transfer agency services to the funds. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." RiverSource Service Corporation pays a portion of these fees to financial intermediaries that provide sub-recordkeeping and other services to fund shareholders. The SAI provides additional information about the services provided and the fee schedules for the transfer agent agreements. -------------------------------------------------------------------------------- S.33 Plan Administration Services. Under a Plan Administration Services Agreement, the fund pays for plan administration services, including services such as implementation and conversion services, account set-up and maintenance, reconciliation and account recordkeeping, education services and administration to various plan types, including 529 plans, retirement plans and Health Savings Accounts. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." PAYMENTS TO FINANCIAL INTERMEDIARIES The distributor and its affiliates make or support additional cash payments out of their own resources (including profits earned from providing services to the fund) to financial intermediaries, in connection with agreements between the distributor and financial intermediaries pursuant to which these financial intermediaries sell fund shares and provide services to their clients who are shareholders of the fund. These payments and intercompany allocations (collectively, "payments") do not change the price paid by investors in the fund or fund shareholders for the purchase or ownership of fund shares of the fund, and these payments are not reflected in the fees and expenses of the fund, as they are not paid by the fund. In exchange for these payments, a financial intermediary may elevate the prominence or profile of the fund within the financial intermediary's organization, and may provide the distributor and its affiliates with preferred access to the financial intermediary's registered representatives or preferred access to the financial intermediary's customers. These arrangements are sometimes referred to as marketing and/or sales support payments, program and/or shareholder servicing payments, or revenue sharing payments. These arrangements create potential conflicts of interest between a financial intermediary's pecuniary interest and its duties to its customers, for example, if the financial intermediary receives higher payments from the sale of a certain fund than it receives from the sale of other funds, the financial intermediary or its representatives may be incented to recommend or sell shares of the fund where it receives or anticipates receiving the higher payment instead of other investment options that may be more appropriate for the customer. Employees of Ameriprise Financial and its affiliates, including employees of affiliated broker-dealers, may be separately incented to recommend or sell shares of the fund, as employee compensation and business unit operating goals at all levels are tied to the company's success. Certain employees, directly or indirectly, may receive higher compensation and other benefits as investment in the fund increases. In addition, management, sales leaders and other employees may spend more of their time and resources promoting Ameriprise Financial and its subsidiary companies, including RiverSource Investments and the distributor, and the products they offer, including the fund. -------------------------------------------------------------------------------- S.34 These payments are typically negotiated based on various factors including, but not limited to, the scope and quality of the services provided by the financial intermediary, its reputation in the industry, its ability to attract and retain assets, its access to target markets, its customer relationships, the profile the fund may obtain within the financial intermediary, and the access the distributor or other representatives of the fund may have within the financial intermediary for advertisement, training or education, including opportunities to present at or sponsor conferences for the registered representatives of the financial intermediary and its customers. These payments are usually calculated based on a percentage of fund assets owned through the financial intermediary and/or as a percentage of fund sales attributable to the financial intermediary. Certain financial intermediaries require flat fees instead of, or in addition to, these asset-based fees as compensation for including or maintaining a fund on their platforms, and, in certain situations, may require the reimbursement of ticket or operational charges -- fees that a financial intermediary charges its registered representatives for effecting transactions in the fund. The amount of payment varies by financial intermediary (e.g., initial platform set-up fees, ongoing maintenance or service fees, or asset or sales based fees). The amount of payments also varies by the type of sale. For instance, purchases of one fund may warrant a greater or lesser amount of payments than purchases of another fund. Additionally, sale and maintenance of shares on a stand alone basis may result in a greater or lesser amount of payments than the sale and maintenance of shares made through a plan, wrap or other fee-based program. Payments to affiliates may include payments as compensation to employees of RiverSource Investments who are licensed by the distributor in respect of certain sales and solicitation activity on behalf of the fund. These payments may be and often are significant. Additional information concerning the amount and calculation of these payments is available in the fund's SAI. Payments to affiliated broker-dealers are within the range of the payments the distributor pays to similarly-situated third party financial intermediaries and the payments such affiliated broker-dealers receive from third party fund sponsors related to the sale of their sponsored funds. However, because of the large amount of fund assets (from the RiverSource Family of Funds, in aggregate) currently held in customer accounts of the affiliated broker-dealers, the distributor and its affiliates, in the aggregate, pay significantly more in absolute dollars than other third-party fund sponsors pay to the affiliated broker-dealers for the sale and servicing of their sponsored funds. This level of payment creates potential conflicts of interest which the affiliated broker- dealers seek to mitigate by disclosure and implementation of internal controls, as well as the rules and regulations of applicable regulators. -------------------------------------------------------------------------------- S.35 From time to time, to the extent permitted by SEC and FINRA rules and by other applicable laws and regulations, the distributor and its affiliates may make other reimbursements or payments to financial intermediaries or their registered representatives, including non-cash compensation, in the form of gifts of nominal value, occasional meals, tickets, or other entertainment, support for due diligence trips, training and educational meetings or conference sponsorships, support for recognition programs, and other forms of non-cash compensation permissible under regulations to which these financial intermediaries and their representatives are subject. To the extent these are made as payments instead of reimbursement, they may provide profit to the financial intermediary to the extent the cost of such services was less than the actual expense of the service. The financial intermediary through which you are purchasing or own shares of the fund has been authorized directly or indirectly by the distributor to sell the fund and/or to provide services to you as a shareholder of the fund. Investors and current shareholders may wish to take such payment arrangements into account when considering and evaluating any recommendations they receive relating to fund shares. If you have questions regarding the specific details regarding the payments your financial intermediary may receive from the distributor or its affiliates related to your purchase or ownership of the fund, please contact your financial intermediary. The SAI contains additional detail regarding payments made by the distributor to financial intermediaries. The payments described in this section are in addition to fees paid by the fund to the distributor under 12b-1 plans, which fees may be used to compensate financial intermediaries for the distribution of fund shares and the servicing of fund shareholders, or paid by the fund to the transfer agent under the transfer agent agreement or plan administration agreement, which fees may be used to support networking or servicing fees to compensate financial intermediaries for supporting shareholder account maintenance, sub-accounting, plan recordkeeping or other services provided directly by the financial intermediary to shareholders or plans and plan participants, including retirement plans, 529 plans, Health Savings Account plans, or other plans, where participants beneficially own shares of the fund. Financial institutions may separately charge you additional fees. See "Buying and Selling Shares." ADDITIONAL MANAGEMENT INFORMATION AFFILIATED PRODUCTS. RiverSource Investments serves as investment manager to all funds in the RiverSource Family of Funds, including those that are structured to provide asset-allocation services to shareholders of those funds by investing in shares of other funds (funds of funds) in the RiverSource Family of Funds (collectively referred to as underlying funds) and to discretionary managed accounts (collectively referred to as affiliated products) that invest exclusively in underlying funds. These affiliated products, individually or collectively, may own -------------------------------------------------------------------------------- S.36 a significant percentage of the outstanding shares of the underlying funds, and RiverSource Investments seeks to balance potential conflicts between the affiliated products and the underlying funds in which they invest. The affiliated products investment in the underlying funds may also have the effect of creating economies of scale (including lower expense ratios) because the affiliated products may own substantial portions of the shares of underlying funds and, comparatively, a redemption of underlying fund shares by one or more affiliated products could cause the expense ratio of an underlying fund to increase as its fixed costs would be spread over a smaller asset base. Because of these large positions of the affiliated products, the underlying funds may experience relatively large purchases or redemptions. Although RiverSource Investments may seek to minimize the impact of these transactions, for example, by structuring them over a reasonable period of time or through other measures, underlying funds may experience increased expenses as they buy and sell securities to manage these transactions. When RiverSource Investments structures transactions over a reasonable period of time in order to manage the potential impact of the buy and sell decisions for the affiliated products, these affiliated products, including funds of funds, may pay more or less for shares of the underlying funds than if the transactions were executed in one transaction. In addition, substantial redemptions by the affiliated products within a short period of time could require the underlying fund to liquidate positions more rapidly than would otherwise be desirable, which may have the effect of reducing or eliminating potential gain or causing the underlying fund to realize a loss. Substantial redemptions may also adversely affect the ability of the investment manager to implement the underlying fund's investment strategy. RiverSource Investments also has an economic conflict of interest in determining the allocation of the affiliated products' assets among the underlying funds as it earns different fees from the underlying funds. RiverSource Investments monitors expense levels of the funds and is committed to offering funds that are competitively priced. RiverSource Investments reports to the Board on the steps it has taken to manage any potential conflicts. See the SAI for information on the percent of the fund owned by affiliated products. CASH RESERVES. A fund may invest its daily cash balance in a money market fund selected by RiverSource Investments, including but not limited to RiverSource Short-Term Cash Fund (Short-Term Cash Fund), a money market fund established for the exclusive use of funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. While Short-Term Cash Fund does not pay an advisory fee to RiverSource Investments, it does incur other expenses, and is expected to operate at a very low expense ratio. A fund will invest in Short-Term Cash Fund or any other money market fund selected by RiverSource Investments only to the extent it is consistent with the fund's investment objectives and policies. Short-Term Cash Fund is not insured or guaranteed by the FDIC or any other government agency. -------------------------------------------------------------------------------- S.37 FUND HOLDINGS DISCLOSURE. The Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by a fund. A description of these policies and procedures is included in the SAI. LEGAL PROCEEDINGS. 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 fund is 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 fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the fund. Information regarding certain pending and settled legal proceedings may be found in the fund's shareholder reports and in the SAI. Additionally, 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. -------------------------------------------------------------------------------- S.38 Funds in the RiverSource Family of Funds -- which include funds offered under the RiverSource, Threadneedle and Seligman brands -- can be purchased from authorized financial intermediaries. Additional information about the fund and its investments is available in the fund's SAI, and annual and semiannual reports to shareholders. In the fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the fund's performance during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, or to request other information about the fund, contact RiverSource Family of Funds or your financial intermediary. To make a shareholder inquiry, contact the financial intermediary through whom you purchased the fund. RiverSource Family of Funds 734 Ameriprise Financial Center Minneapolis, MN 55474 (800) 221-2450 RiverSource Family of Funds information available: (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com You may review and copy information about the fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202- 551-8090). Reports and other information about the fund are available on the EDGAR Database on the Commission's Internet site at www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, 100 F Street, N.E., Washington, D.C. 20549-1520 Investment Company Act File #811-5696 TICKER SYMBOL Class A: IDEAX Class B: IEMBX Class C: RMCEX Class I: RSRIX Class R2: REMRX Class R4: -- Class R5: REMFX
(THREADNEEDLE LOGO) S-6354-99 W (12/09) Prospectus (THREADNEEDLE LOGO) THREADNEEDLE GLOBAL EQUITY FUND PROSPECTUS DEC. 30, 2009 THREADNEEDLE GLOBAL EQUITY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. CLASSES A, B, C, I, R2, R3, R4, R5 AND W As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. You may qualify for sales charge discounts on purchases of Class A shares. Please notify your financial intermediary if you have other accounts holding shares of funds in the RiverSource Family of Funds to determine whether you qualify for a sales charge discount. See "Buying and Selling Shares" for more information. NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE TABLE OF CONTENTS THE FUND.......................................... 3P Objective......................................... 3p Principal Investment Strategies................... 3p Principal Risks................................... 4p Past Performance.................................. 6p Fees and Expenses................................. 11p Other Investment Strategies and Risks............. 13p Fund Management and Compensation.................. 14p FINANCIAL HIGHLIGHTS.............................. 17P BUYING AND SELLING SHARES......................... S.1 Description of Share Classes...................... S.2 Investment Options -- Classes of Shares......... S.2 Sales Charges................................... S.7 Opening an Account.............................. S.16 Exchanging or Selling Shares...................... S.20 Exchanges....................................... S.23 Selling Shares.................................. S.26 PRICING AND VALUING OF FUND SHARES................ S.27 DISTRIBUTIONS AND TAXES........................... S.28 GENERAL INFORMATION............................... S.32
RIVERSOURCE FAMILY OF FUNDS The RiverSource Family of Funds includes a comprehensive array of funds from RiverSource Investments. RiverSource Investments has also partnered with a number of professional investment managers, including its affiliate, Threadneedle Investments, to expand the array of funds offered in the RiverSource family. RiverSource funds, RiverSource Partners funds, Seligman funds and Threadneedle funds share the same Board of Directors/Trustees (the Board), and the same policies and procedures including those set forth in the service section of this prospectus. Please see the Statement of Additional Information (SAI) for a complete list of mutual funds included in the RiverSource Family of Funds. RiverSource Variable Portfolio Funds and Seligman (Variable) Portfolio Funds are sold exclusively as underlying investment options of variable insurance policies and annuity contracts offered by affiliated and unaffiliated insurance companies. -------------------------------------------------------------------------------- 2P THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS THE FUND OBJECTIVE Threadneedle Global Equity Fund (the Fund) seeks to provide shareholders with long-term capital growth. Because any investment involves risk, there is no assurance this objective can be achieved. Only shareholders can change the Fund's objective. PRINCIPAL INVESTMENT STRATEGIES 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 will provide shareholders with at least 60 days' notice of any change in the 80% policy. RiverSource Investments, LLC (RiverSource Investments) serves as the investment manager to the Fund and is responsible for oversight of the subadviser, Threadneedle International Limited (Threadneedle), an indirect wholly-owned subsidiary of Ameriprise Financial, Inc., the parent company of RiverSource Investments. Threadneedle chooses investments by: - Deploying an integrated approach to equity research that incorporates regional analyses, a global sector strategy, and stock specific perspectives. - Conducting detailed research on companies in a consistent strategic and macroeconomic framework. - Looking for catalysts of change and identifying the factors driving markets, which will vary over economic and market cycles. - Implementing rigorous risk control processes that seek to ensure that the risk and return characteristics of the Fund's portfolio are consistent with established portfolio management parameters. Using the global sector strategy, the Fund's portfolio management team constructs the portfolio using a Model List of stocks which represents the portfolio management team's ideas and highest convictions. The portfolio is then constructed from this list along with other securities selected by the Fund's portfolio managers. Stocks on the Model List are selected by: - Evaluating the opportunities and risks within regions and sectors; - Assessing valuations; and - Evaluating one or more of the following: balance sheets and cash flows, the demand for a company's products or services, its competitive position, or its management. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS 3P A number of factors may prompt the portfolio management team to sell securities. A sale may result from a change in the composition of the Fund's benchmark or a change in sector strategy. A sale may also be prompted by factors specific to a stock, such as valuation or company fundamentals. The Fund will normally have exposure to foreign currencies. The portfolio management team closely monitors the Fund's exposure to foreign currency. From time to time the team may use forward currency transactions or other derivative instruments to hedge against currency fluctuations. PRINCIPAL RISKS This Fund is designed for long-term investors with above-average risk tolerance. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. DERIVATIVES RISK. Derivatives are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, options, futures, indexes or currencies. Losses involving derivative instruments may be substantial, because a relatively small price movement in the underlying security(ies), instrument, currency or index may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund. Derivative instruments in which the Fund invests will typically increase the Fund's exposure to Principal Risks to which it is otherwise exposed, and may expose the Fund to additional risks, including counterparty credit risk, leverage risk, hedging risk, correlation risk, and liquidity risk. Counterparty credit risk is the risk that a counterparty to the derivative instrument becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, and the Fund may obtain no recovery of its investment or may only obtain a limited recovery, and any recovery may be delayed. Hedging risk is the risk that derivative instruments used to hedge against an opposite position may offset losses, but they may also offset gains. There is no guarantee that a hedging strategy will eliminate the risk which the hedging strategy is intended to offset, which may lead to losses within the Fund. Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses. -------------------------------------------------------------------------------- 4P THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS Liquidity risk is the risk that the derivative instrument may be difficult or impossible to sell or terminate, which may cause the Fund to be in a position to do something the investment manager would not otherwise choose, including accepting a lower price for the derivative instrument, selling other investments or foregoing another, more appealing investment opportunity. Derivative instruments which are not traded on an exchange, including, but not limited to, forward contracts, swaps and over-the-counter options, may have increased liquidity risk. Leverage risk is the risk that losses from the derivative instrument may be greater than the amount invested in the derivative instrument. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. See the SAI for more information on derivative instruments and related risks. RISKS OF FOREIGN INVESTING. Foreign securities are securities of issuers based outside the United States. An issuer is deemed to be based outside the United States if it is organized under the laws of another country. Foreign securities are primarily denominated in foreign currencies. In addition to the risks normally associated with domestic securities of the same type, foreign securities are subject to the following foreign risks: Country risk includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add to or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS 5P Emerging markets risk includes the dramatic pace of change (economic, social and political) in these countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. 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 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. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its stocks and bonds may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. PAST PERFORMANCE The following bar chart and table provide some illustration of the risks of investing in the Fund by showing, respectively: - how the Fund's performance has varied for each full calendar year shown on the bar chart; and - how the Fund's average annual total returns compare to recognized indexes shown on the table. Both the bar chart and the table assume that all distributions have been reinvested. The performance of different classes varies because of differences in sales charges and other fees and expenses. How the Fund has performed in the past (before and after taxes) does not indicate how the Fund will perform in the future. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of such fee waivers/expense caps, performance would have been lower. See "Fees and Expenses" for any current fee waivers/expense caps. -------------------------------------------------------------------------------- 6P THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS Bar Chart. Class A share information is shown in the bar chart; the sales charge for Class A shares is not reflected in the bar chart. Table. The table shows total returns from hypothetical investments in Class A, Class B, Class C, Class R2, Class R3, Class R4, Class R5 and Class W shares of the Fund. These returns are compared to the indexes shown for the same periods. For purposes of the performance calculation in the table we assumed: - the maximum sales charge for Class A shares; - sales at the end of the period and deduction of the applicable contingent deferred sales charge (CDSC) for Class B and Class C shares; - no sales charge for Class R2, Class R3, Class R4, Class R5 and Class W shares; and - with the exception of Class A shares, no adjustments for taxes paid by an investor on the reinvested income and capital gains. AFTER-TAX RETURNS After-tax returns are shown only for Class A shares. After-tax returns for the other classes will vary. After-tax returns are calculated using the highest historical individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax returns will depend on your tax situation and most likely will differ from the returns shown in the table. If you hold your shares in a tax-deferred account, such as a 401(k) plan or an IRA, the after-tax returns do not apply to you since you will not incur taxes until you begin to withdraw from your account. The return after taxes on distributions for a period may be the same as the return before taxes for the same period if there were no distributions or if the distributions were small. The return after taxes on distributions and sale of Fund shares for a period may be greater than the return before taxes for the same period if there was a tax loss realized on sale of Fund shares. The benefit of the tax loss (since it can be used to offset other gains) may result in a higher return. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS 7P CLASS A SHARE PERFORMANCE (based on calendar years) (BAR CHART) +37.02% -23.37% -22.29% -23.38% +25.16% +16.08% +18.41% +19.15% +13.60% -42.15% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
During the periods shown in the bar chart, the highest return for a calendar quarter was +32.17% (quarter ended Dec. 31, 1999) and the lowest return for a calendar quarter was -19.76% (quarter ended Dec. 31, 2008). The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart; if reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. The Fund's Class A year-to-date return at Sept. 30, 2009 was +24.09%. The Fund formerly was a "feeder" fund in a master/feeder arrangement where the Fund invested all of its assets in a corresponding "master" fund with an identical investment objective and investment strategies. As of Nov. 8, 2005, the Fund became a stand-alone fund that invests directly in a portfolio of securities. The information shown in the table and in the financial highlights for the Fund includes the activity of the Fund when it was a feeder in a master/feeder arrangement. -------------------------------------------------------------------------------- 8P THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS AVERAGE ANNUAL TOTAL RETURNS (for periods ended Dec. 31, 2008)
CLASSES R2, CLASS C R3 & R5 CLASS W SINCE SINCE SINCE INCEPTION INCEPTION INCEPTION 1 YEAR 5 YEARS 10 YEARS (6/26/00) (12/11/06) (12/1/06) Threadneedle Global Equity Fund: Class A Return before taxes -45.47% +0.29% -2.28% N/A N/A N/A Return after taxes on distributions -45.63% +0.08% -2.99% N/A N/A N/A Return after taxes on distributions and sale of fund shares -29.56% +0.14% -2.06% N/A N/A N/A Class B Return before taxes -45.52% +0.30% -2.46% N/A N/A N/A Class C Return before taxes -43.16% +0.73% N/A -5.62% N/A N/A Class R2 Return before taxes -42.08% N/A N/A N/A -18.02% N/A Class R3 Return before taxes -41.96% N/A N/A N/A -17.81% N/A Class R4 Return before taxes -42.00% +1.67% -1.53% N/A N/A N/A Class R5 Return before taxes -41.82% N/A N/A N/A -17.60% N/A Class W Return before taxes -42.14% N/A N/A N/A N/A -17.45% MSCI All Country World Index (reflects no deduction for fees, expenses or taxes) -41.85% +0.44% +0.23% -2.10% -18.26% -17.61% Lipper Global Funds Index -38.78% +0.42% +1.23% -1.93% -17.35% -16.64%
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 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. See "Fund Management and Compensation" for more information. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS 9P Class I shares has not been in existence for a full calendar year and therefore performance information for this class is not shown. Past performance for Class R2 for the period prior to the beginning of operations for that class may be calculated based on the performance of Class B. Past performance for Class R3 and Class W for the period prior to the beginning of operations for that class may be calculated based on the performance of Class A. Past performance for Class R5 for the period prior to the beginning of operations for that class may be calculated based on the performance of Class R4. In each case, the blended class performance will be adjusted to reflect differences in sales charges, but not differences in annual Fund operating expenses (for example, 12b-1 fees). The use of blended performance generally results in a presentation of higher performance for classes with higher operating expenses than those of the class with which they are blended, and a presentation of lower performance for classes with lower operating expenses than those of the class with which they are blended. -------------------------------------------------------------------------------- 10P THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund. Annual fund operating expenses are based on expenses incurred during the Fund's most recently completed fiscal year, and are expressed as a percentage (expense ratio) of the Fund's average net assets during the period. The expense ratios have been adjusted to reflect current fee schedules but have not been adjusted to reflect the Fund's assets as of a different period or point in time, as asset levels will fluctuate. As of the date of this prospectus, the Fund's net assets are higher than the Fund's average net assets during the most recently completed fiscal year. In general, a fund's annual operating expenses will increase as the fund's assets decrease. Accordingly, the Fund's annual operating expenses, if adjusted based on net assets as of the date of this prospectus, would be lower than are expressed in the fee and expense table below. SHAREHOLDER FEES (fees paid directly from your investment)
CLASS I CLASS R2 CLASS R3 CLASS R4 CLASS R5 CLASS A CLASS B CLASS C CLASS W Maximum sales charge (load) imposed on purchases (as a percentage of offering price) 5.75%(a) None None None Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) None(b) 5% 1% None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS: CLASS A CLASS B CLASS C CLASS W Management fees(c) 0.68% 0.68% 0.68% 0.68% Distribution and/or service (12b- 1) fees 0.25% 1.00% 1.00% 0.25% Other expenses(d) 0.51% 0.53% 0.52% 0.37% Total annual fund operating expenses 1.44% 2.21% 2.20% 1.30%
CLASS I CLASS R2 CLASS R3 CLASS R4 CLASS R5 Management fees(c) 0.68% 0.68% 0.68% 0.68% 0.68% Distribution and/or service (12b-1) fees 0.00% 0.50% 0.25% 0.00% 0.00% Other expenses(d) 0.16% 0.51% 0.45% 0.47% 0.22% Total annual fund operating expenses 0.84% 1.69% 1.38% 1.15% 0.90%
(a) This charge may be reduced depending on the total value of your investments in the RiverSource Family of Funds. See "Sales Charges." (b) A 1% CDSC may be assessed on Class A shares purchased without an initial sales charge and sold within 18 months after purchase. See "Sales Charges." (c) Includes the impact of a performance incentive adjustment fee that decreased the management fee by 0.11% for the most recent fiscal year. The index against which the Fund's performance is measured for purposes of determining the performance incentive adjustment is the Lipper Global Funds Index. See "Fund Management and Compensation" for more information. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS 11P (d) Other expenses include an administrative services fee, a transfer agency fee (for all classes except Class I), a custody fee, other nonadvisory expenses and a plan administration services fee (for Class R2, Class R3 and Class R4). Other expenses may also include fees and expenses of affiliated and unaffiliated funds (acquired funds) which the Fund indirectly bears when it invests in the acquired funds. The impact of these acquired funds' fees and expenses for the most recent fiscal period was less than 0.01%. Because acquired funds will 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 by the Fund with respect to such investments will vary. EXAMPLES These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. These examples assume that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. These examples also assume that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $713 $1,005 $1,318 $2,205 Class B $724(b) $ 991(b) $1,386(b) $2,354(c) Class C $323(b) $ 688 $1,181 $2,539 Class I $ 86 $ 268 $ 467 $1,041 Class R2 $172 $ 533 $ 919 $2,003 Class R3 $140 $ 437 $ 756 $1,662 Class R4 $117 $ 366 $ 634 $1,402 Class R5 $ 92 $ 287 $ 499 $1,112 Class W $132 $ 412 $ 714 $1,573
(a) Includes a 5.75% sales charge. (b) Includes the applicable CDSC. (c) Based on conversion of Class B shares to Class A shares one month after the completion of the eighth year of ownership. You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $713 $1,005 $1,318 $2,205 Class B $224 $ 691 $1,186 $2,354(b) Class C $223 $ 688 $1,181 $2,539 Class I $ 86 $ 268 $ 467 $1,041 Class R2 $172 $ 533 $ 919 $2,003 Class R3 $140 $ 437 $ 756 $1,662 Class R4 $117 $ 366 $ 634 $1,402 Class R5 $ 92 $ 287 $ 499 $1,112 Class W $132 $ 412 $ 714 $1,573
(a) Includes a 5.75% sales charge. (b) Based on conversion of Class B shares to Class A shares one month after the completion of the eighth year of ownership. -------------------------------------------------------------------------------- 12P THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS OTHER INVESTMENT STRATEGIES AND RISKS Other Investment Strategies. In addition to the principal investment strategies previously described, the Fund may utilize investment strategies that are not principal investment strategies, including investment in affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds (ETFs), also referred to as "acquired funds") ownership of which results in the Fund bearing its proportionate share of the acquired funds' fees and expenses and proportionate exposure to the risks associated with the acquired funds' underlying investments. ETFs are generally designed to replicate the price and yield of a specified market index. An ETF's share price may not track its specified market index and may trade below its net asset value, resulting in a loss. ETFs generally use a "passive" investment strategy and will not attempt to take defensive positions in volatile or declining markets. An active secondary market in an ETF's shares may not develop or be maintained and may be halted or interrupted due to actions by its listing exchange, unusual market conditions or other reasons. There can be no assurance an ETF's shares will continue to be listed on an active exchange. For more information on strategies and holdings, and the risks of such strategies, including derivative instruments that the Fund may use, see the Fund's SAI and its annual and semiannual reports. Unusual Market Conditions. During unusual market conditions, the Fund may temporarily invest more of its assets in money market securities than during normal market conditions. Although investing in these securities would serve primarily to attempt to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the portfolio managers may make frequent securities trades that could result in increased fees, expenses and taxes, and decreased performance. Instead of investing in money market securities directly, the Fund may invest in shares of an affiliated or unaffiliated money market fund. See "Cash Reserves" under the section "General Information" for more information. Securities Transaction Commissions. Securities transactions involve the payment by the Fund of brokerage commissions to broker-dealers, on occasion as compensation for research or brokerage services (commonly referred to as "soft dollars"), as the portfolio managers buy and sell securities for the Fund in pursuit of its objective. A description of the policies governing the Fund's securities transactions and the dollar value of brokerage commissions paid by the Fund are set forth in the SAI. The brokerage commissions set forth in the SAI do not include implied commissions or mark-ups (implied commissions) paid by the Fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities (and certain other instruments, including derivatives). Brokerage commissions do not reflect other elements of transaction costs, including the extent to which the Fund's purchase and sale transactions may cause the market to move and change the market price for an investment. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS 13P Although brokerage commissions and implied commissions are not reflected in the expense table under "Fees and Expenses," they are reflected in the total return of the Fund. Portfolio Turnover. Trading of securities may produce capital gains, which are taxable to shareholders when distributed. Active trading may also increase the amount of brokerage commissions paid or mark-ups to broker-dealers that the Fund pays when it buys and sells securities. Capital gains and increased brokerage commissions or mark-ups paid to broker-dealers may adversely affect a fund's performance. The Fund's historical portfolio turnover rate, which measures how frequently the Fund buys and sells investments, is shown in the "Financial Highlights." Directed Brokerage. The Fund's Board has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Fund as a factor in the selection of broker-dealers through which to execute securities transactions. Additional information regarding securities transactions can be found in the SAI. FUND MANAGEMENT AND COMPENSATION INVESTMENT MANAGER RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource Family of Funds (including the RiverSource funds, RiverSource Partners funds, Seligman funds and Threadneedle funds), and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for the RiverSource Family of Funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the SAI for more information. -------------------------------------------------------------------------------- 14P THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS The RiverSource Family of Funds has received an order from the Securities and Exchange Commission that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for a fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or change the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. RiverSource Investments and its affiliates may have other relationships, including significant financial relationships, with current or potential subadvisers or their affiliates, which may create a conflict of interest. In making recommendations to the Board to appoint or to change a subadviser, or to change the terms of a subadvisory agreement, RiverSource Investments does not consider any other relationship it or its affiliates may have with a subadviser, and RiverSource Investments discloses the nature of any material relationships it has with a subadviser to the Board. The Fund pays RiverSource Investments a fee for managing its assets. Under the Investment Management Services Agreement (Agreement), the fee for the most recent fiscal year was 0.68% of the Fund's average daily net assets, including an adjustment under the terms of a performance incentive arrangement. The adjustment is computed by comparing the Fund's performance to the performance of an index of comparable funds published by Lipper Inc. The index against which the Fund's performance is currently measured for purposes of the performance incentive adjustment is the Lipper Global Funds Index. In certain circumstances, the Fund's Board may approve a change in the index without shareholder approval. The maximum adjustment (increase or decrease) is 0.12% of the Fund's average net assets on an annual basis. Under the Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. A discussion regarding the basis for the Board approving the Agreement is available in the Fund's most recent annual or semiannual shareholder report. RiverSource Investments contracts with and compensates Threadneedle International Limited (Subadviser or Threadneedle) to manage the investment of the Fund's assets. RiverSource Investments monitors the compliance of Threadneedle with the investment objective and related policies of the Fund, reviews the performance of Threadneedle, and reports periodically to the Board. Threadneedle manages the Fund's assets based upon its experience managing funds with investment goals and strategies substantially similar to those of the Fund. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS 15P THREADNEEDLE Threadneedle, located at 60 St. Mary Axe, London EC3A 8JQ, England, is an affiliate of RiverSource Investments, and an indirect wholly-owned subsidiary of Ameriprise Financial, Inc. The portfolio managers who lead the team responsible for the day-to-day management of the Fund are: Stephen Thornber, Portfolio Manager - Head of global oil sector. - Managed the Fund since 2003. - Joined Threadneedle in 1993 as a fund manager. - Began investment career in 1987. - BA, Plymouth Polytechnic. Andrew Holliman, CFA, Deputy Portfolio Manager - Deputy managed the Fund since 2008. - Joined Threadneedle in 2004 as a fund manager. - Began investment career in 1997 as an investment analyst and portfolio manager, Baillie Gifford & Co., 1997 to 2004. - BCom (Hons), University of Edinburgh; MSc, University of Stirling. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. -------------------------------------------------------------------------------- 16P THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. For periods ended 2007 and after, per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). Total returns do not reflect payment of sales charges, if any, and are not annualized for periods of less than one year. The information for the fiscal years ended on or after Oct. 31, 2007 has been derived from the financial statements audited by Ernst & Young LLP, whose report, along with the Fund's financial statements and financial highlights, is included in the annual report which, if not included with this prospectus, is available upon request. The information for the periods ended on or before Oct. 31, 2006 has been audited by other auditors.
YEAR ENDED OCT. 31, CLASS A ------------------------------------------------------- PER SHARE DATA 2009 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) .05 .05 .02 .01 .02 Net gains (losses) (both realized and unrealized) .95 (4.41) 2.13 1.30 1.08 ---------------------------------------------------------------------------------------------------------- Total from investment operations 1.00 (4.36) 2.15 1.31 1.10 ---------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) (.04) (.06) (.02) (.03) ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.13 $5.21 $9.61 $7.52 $6.23 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 19.39%(a) (45.55%) 28.82% 21.01% 21.48% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses 1.44% 1.46% 1.39% 1.51% 1.57% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) .92% .65% .28% .23% .33% ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $395 $380 $737 $608 $446 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 81% 97% 100% 112% 93% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS 17P
YEAR ENDED OCT. 31, CLASS B ------------------------------------------------------- PER SHARE DATA 2009 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 (.01) (.04) (.01) (.02) Net gains (losses) (both realized and unrealized) .89 (4.14) 2.00 1.19 1.03 ---------------------------------------------------------------------------------------------------------- Total from investment operations .90 (4.15) 1.96 1.18 1.01 ---------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- -- .00(c) -- -- ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.77 $4.87 $9.02 $7.06 $5.88 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 18.48%(a) (46.01%) 27.81% 20.07% 20.74% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses 2.21% 2.23% 2.15% 2.28% 2.34% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) .22% (.11%) (.45%) (.54%) (.41%) ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $33 $42 $104 $110 $102 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 81% 97% 100% 112% 93% ----------------------------------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS C ------------------------------------------------------- PER SHARE DATA 2009 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) .00(c) (.01) (.04) (.01) (.02) Net gains (losses) (both realized and unrealized) .89 (4.09) 1.98 1.18 1.03 ---------------------------------------------------------------------------------------------------------- Total from investment operations .89 (4.10) 1.94 1.17 1.01 ---------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.01) -- (.03) -- (.01) ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.71 $4.83 $8.93 $7.02 $5.85 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 18.39%(a) (45.91%) 27.76% 20.03% 20.89% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses 2.20% 2.22% 2.15% 2.27% 2.33% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) (.08%) (.09%) (.48%) (.50%) (.53%) ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $11 $5 $8 $6 $2 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 81% 97% 100% 112% 93% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 18P THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS
YEAR ENDED OCT. 31, CLASS I ------------------- PER SHARE DATA 2009 2008(d) Net asset value, beginning of period $5.25 $7.47 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09 .03 Net gains (losses) (both realized and unrealized) .95 (2.25) ---------------------------------------------------------------------- Total from investment operations 1.04 (2.22) ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.13) -- ---------------------------------------------------------------------- Net asset value, end of period $6.16 $5.25 ---------------------------------------------------------------------- TOTAL RETURN 20.21%(a) (29.72%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses .84% .85%(e) ---------------------------------------------------------------------- Net investment income (loss) 1.56% 1.55%(e) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $33 $-- ---------------------------------------------------------------------- Portfolio turnover rate 81% 97% ----------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R2 -------------------------------- PER SHARE DATA 2009 2008 2007(f) Net asset value, beginning of period $5.23 $9.62 $7.89 ----------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01) .05 (.01) Net gains (losses) (both realized and unrealized) 1.00 (4.42) 1.84 ----------------------------------------------------------------------------------- Total from investment operations .99 (4.37) 1.83 ----------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) (.02) (.10) ----------------------------------------------------------------------------------- Net asset value, end of period $6.14 $5.23 $9.62 ----------------------------------------------------------------------------------- TOTAL RETURN 19.13%(a) (45.48%) 23.41% ----------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.69% 1.79% 1.74%(e) ----------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(g) 1.69% 1.54% 1.74%(e) ----------------------------------------------------------------------------------- Net investment income (loss) (.16%) .57% (.13%)(e) ----------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- ----------------------------------------------------------------------------------- Portfolio turnover rate 81% 97% 100% -----------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS 19P
YEAR ENDED OCT. 31, CLASS R3 -------------------------------- PER SHARE DATA 2009 2008 2007(f) Net asset value, beginning of period $5.24 $9.65 $7.89 ----------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .05 .06 .01 Net gains (losses) (both realized and unrealized) .96 (4.43) 1.85 ----------------------------------------------------------------------------------- Total from investment operations 1.01 (4.37) 1.86 ----------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.10) (.04) (.10) ----------------------------------------------------------------------------------- Net asset value, end of period $6.15 $5.24 $9.65 ----------------------------------------------------------------------------------- TOTAL RETURN 19.63%(a) (45.43%) 23.80% ----------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.38% 1.54% 1.49%(e) ----------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(g) 1.32% 1.29% 1.49%(e) ----------------------------------------------------------------------------------- Net investment income (loss) 1.03% .82% .12%(e) ----------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- ----------------------------------------------------------------------------------- Portfolio turnover rate 81% 97% 100% -----------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R4 ------------------------------------------------------- PER SHARE DATA 2009 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) .06 .07 .04 .02 .04 Net gains (losses) (both realized and unrealized) .96 (4.46) 2.13 1.31 1.09 ---------------------------------------------------------------------------------------------------------- Total from investment operations 1.02 (4.39) 2.17 1.33 1.13 ---------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.10) (.05) (.07) (.02) (.04) ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.18 $5.26 $9.70 $7.60 $6.29 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 19.72%(a) (45.47%) 28.85% 21.26% 21.90% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.15% 1.29% 1.23% 1.32% 1.38% ---------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(g) 1.15% 1.28% 1.23% 1.32% 1.38% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.22% .83% .45% .44% .49% ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $6 $5 $10 $9 $6 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 81% 97% 100% 112% 93% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 20P THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS
YEAR ENDED OCT. 31, CLASS R5 -------------------------------- PER SHARE DATA 2009 2008 2007(f) Net asset value, beginning of period $5.25 $9.69 $7.89 ----------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .08 .08 .05 Net gains (losses) (both realized and unrealized) .96 (4.45) 1.85 ----------------------------------------------------------------------------------- Total from investment operations 1.04 (4.37) 1.90 ----------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.13) (.07) (.10) ----------------------------------------------------------------------------------- Net asset value, end of period $6.16 $5.25 $9.69 ----------------------------------------------------------------------------------- TOTAL RETURN 20.20%(a) (45.40%) 24.33% ----------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses .90% 1.04% .99%(e) ----------------------------------------------------------------------------------- Net investment income (loss) 1.39% 1.07% .62%(e) ----------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- ----------------------------------------------------------------------------------- Portfolio turnover rate 81% 97% 100% -----------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS 21P
YEAR ENDED OCT. 31, CLASS W -------------------------------- PER SHARE DATA 2009 2008 2007(h) Net asset value, beginning of period $5.23 $9.66 $7.83 ----------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .06 .05 .02 Net gains (losses) (both realized and unrealized) .96 (4.44) 1.91 ----------------------------------------------------------------------------------- Total from investment operations 1.02 (4.39) 1.93 ----------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.09) (.04) (.10) ----------------------------------------------------------------------------------- Net asset value, end of period $6.16 $5.23 $9.66 ----------------------------------------------------------------------------------- TOTAL RETURN 19.70%(a) (45.62%) 24.87% ----------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses 1.30% 1.43% 1.39%(e) ----------------------------------------------------------------------------------- Net investment income (loss) 1.05% .68% .20%(e) ----------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- ----------------------------------------------------------------------------------- Portfolio turnover rate 81% 97% 100% -----------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) During the year ended Oct. 31, 2009, the Fund received proceeds from regulatory settlement. Had the Fund not received these proceeds, the total return would have been lower by 0.02% (b) Expense ratios include the impact of a performance incentive adjustment, if any. 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 reported expense ratios. (c) Rounds to zero. (d) For the period from Aug. 1, 2008 (when shares became public available) to Oct. 31, 2008. (e) Annualized. (f) For the period from Dec. 11, 2006 (when shares became public available) to Oct. 31, 2007. (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) For the period from Dec. 1, 2006 (when shares became public available) to Oct. 31, 2007. -------------------------------------------------------------------------------- 22P THREADNEEDLE GLOBAL EQUITY FUND -- 2009 PROSPECTUS RIVERSOURCE FAMILY OF FUNDS THE RIVERSOURCE FAMILY OF FUNDS (EACH INDIVIDUALLY A "FUND" AND, COLLECTIVELY, THE "FUNDS") INCLUDES "RIVERSOURCE" FUNDS, "RIVERSOURCE PARTNERS" FUNDS, "SELIGMAN" FUNDS AND "THREADNEEDLE" FUNDS. (THE RIVERSOURCE FUNDS, RIVERSOURCE PARTNERS FUNDS AND THREADNEEDLE FUNDS MAY BE COLLECTIVELY REFERRED TO AS THE "RIVERSOURCE FUNDS".) THE FUNDS SHARE THE SAME BOARD OF DIRECTORS/TRUSTEES (THE "BOARD") AND THE SAME POLICIES AND PROCEDURES INCLUDING THOSE SET FORTH IN THE SERVICE SECTION OF THIS PROSPECTUS. FOR EXAMPLE, FOR PURPOSES OF CALCULATING THE INITIAL SALES CHARGE ON THE PURCHASE OF CLASS A SHARES OF A FUND, AN INVESTOR OR FINANCIAL ADVISOR SHOULD CONSIDER THE COMBINED MARKET VALUE OF ALL FUNDS IN THE RIVERSOURCE FAMILY OF FUNDS OWNED BY THE INVESTOR AS DEFINED UNDER "INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA)." BUYING AND SELLING SHARES The funds are available directly and through broker-dealers, banks and other financial intermediaries or institutions (financial intermediaries), and through certain qualified and non-qualified plans, wrap fee products or other investment products sponsored by financial intermediaries. NOT ALL FINANCIAL INTERMEDIARIES OFFER THE FUNDS. FINANCIAL INTERMEDIARIES THAT OFFER THE FUNDS MAY CHARGE YOU ADDITIONAL FEES FOR THE SERVICES THEY PROVIDE AND THEY MAY HAVE DIFFERENT POLICIES NOT DESCRIBED IN THIS PROSPECTUS. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. Additionally, recordkeeping, transaction processing and payments of distributions relating to your account may be performed by the financial intermediaries through which your shares of the fund are held. Since the fund (and its service providers) may not have a record of your account transactions, you should always contact the financial intermediary through which you purchased or at which you maintain your shares of the fund to make changes to your account or to give instructions concerning your account, or to obtain information about your account. The fund and its service providers, including the distributor and the transfer agent, are not responsible for the failure of one of these financial intermediaries to carry out its obligations to its customers. -------------------------------------------------------------------------------- S.1 S-6400-9 DESCRIPTION OF SHARE CLASSES INVESTMENT OPTIONS -- CLASSES OF SHARES The funds offer different classes of shares. There are differences among the fees and expenses for each share class. See the "Fees and Expenses" table for more information. Not everyone is eligible to buy every share class. After determining which share classes you are eligible to buy, decide which share class best suits your needs. Your financial advisor can help you with this decision. The following table shows the key features of each share class. Not all funds offer all classes of shares. INVESTMENT OPTIONS SUMMARY
CONTINGENT DISTRIBUTION PLAN INITIAL DEFERRED SALES AND/OR ADMINISTRATION AVAILABILITY(a) SALES CHARGE CHARGE (CDSC) SERVICE FEE(b) SERVICES FEE -------------------------------------------------------------------------------------------------------------------------------- Class A Available to Yes. Payable at No.(c) Yes. No. all investors. time of purchase. 0.25%(g) Lower or no sales charge for larger investments. -------------------------------------------------------------------------------------------------------------------------------- Class B(d)(e)(f) Available to No. Entire Maximum 5% CDSC Yes. No. all investors. purchase price is during the first 1.00%(g) invested in shares year decreasing to of the fund. 0% after six years. -------------------------------------------------------------------------------------------------------------------------------- Class C(f) Available to No. Entire 1% CDSC may apply Yes. No. all investors. purchase price is if you sell shares 1.00%(g) invested in shares within one year of the fund. after purchase. -------------------------------------------------------------------------------------------------------------------------------- Class I Limited to No. No. No. No. qualifying institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R2 Limited to No. No. Yes. Yes. qualifying 0.50% 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R3 Limited to No. No. Yes. Yes. qualifying 0.25% 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R4 Limited to No. No. No. Yes. qualifying 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R5 Limited to No. No. No. No. qualifying institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class W Limited to No. No. Yes. No. qualifying 0.25%(g) discretionary managed accounts. --------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- S.2 INVESTMENT OPTIONS SUMMARY (CONTINUED)
CONTINGENT DISTRIBUTION PLAN INITIAL DEFERRED SALES AND/OR ADMINISTRATION AVAILABILITY(a) SALES CHARGE CHARGE (CDSC) SERVICE FEE(b) SERVICES FEE -------------------------------------------------------------------------------------------------------------------------------- Class Y Limited to No. No. No. Yes. qualifying 0.15% institutional investors. --------------------------------------------------------------------------------------------------------------------------------
(a) See "Buying and Selling Shares, Determining which class of shares to purchase" for more information on availability of share classes and eligible investors. See "Buying and Selling Shares, Opening an Account" for information on minimum investment and account balance requirements. (b) For each of Class A, Class B, Class C, Class R2, Class R3 and Class W shares, as applicable, each fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940, as amended, that allows it to pay distribution and shareholder servicing-related expenses for the sale of shares and the servicing of shareholders. This plan has been reviewed and approved by the Board. Because these fees are paid out of fund assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of distribution (sales) or servicing charges. (c) A 1% CDSC may be assessed on Class A shares sold within 18 months after purchase. See "Buying and Selling Shares, Sales Charges, Class A -- contingent deferred sales charge" for more information. For all funds except money market funds. (d) Class B shares automatically convert to Class A shares. See "Buying and Selling Shares, Sales Charges, Class B and Class C -- CDSC alternative" for more information on the timing of conversion of Class B shares to Class A shares. Timing of conversion will vary depending on the date of your original purchase of the Class B shares. (e) Class B shares of RiverSource Absolute Return Currency and Income Fund are only available for exchanges from Class B shares of another fund in the RiverSource Family of Funds. Class B shares of each of RiverSource Floating Rate Fund, RiverSource Inflation Protected Securities Fund, RiverSource Intermediate Tax-Exempt Fund, RiverSource Limited Duration Bond Fund and RiverSource Short Duration U.S. Government Fund are closed to new investors and new purchases. (Existing shareholders in these funds may continue to own Class B shares and make exchanges into and out of existing accounts where Class B shares of these funds are maintained.) (f) The money market funds may offer Class B and Class C shares, but only to facilitate exchanges with other funds offering Class B and Class C shares, respectively. (g) For RiverSource Cash Management Fund and RiverSource Tax-Exempt Money Market Fund, Class A is 0.10%. For RiverSource Cash Management Fund, Class B is 0.85%, Class C is 0.75% and Class W is 0.10%. DISTRIBUTION AND SERVICE FEES The distribution and shareholder servicing fees for Class A, Class B, Class C, Class R2, Class R3 and Class W shares, as applicable, are subject to the requirements of Rule 12b-1 under the Investment Company Act of 1940, as amended, and are used to reimburse the distributor for certain expenses it incurs in connection with distributing the fund's shares and directly or indirectly providing services to fund shareholders. These expenses include payment of distribution and/or shareholder servicing fees to financial intermediaries that sell shares of the fund or provide services to fund shareholders, up to 0.50% of the average daily net assets of Class R2 shares sold and held through them and up to 0.25%* of the average daily net assets of Class A, Class B, Class C, Class R3 and Class W shares sold and held through them. For Class A, Class B, Class R2, Class R3 and Class W shares, the distributor begins to pay these fees immediately after purchase. For Class C shares, the distributor pays these fees in advance for the first 12 months. Financial intermediaries also receive distribution fees up to 0.75% of the average daily net assets of Class C shares sold and held -------------------------------------------------------------------------------- S.3 through them, which the distributor begins to pay 12 months after purchase. For Class B shares, and, for the first 12 months following the sale of Class C shares, the fund's distributor retains the distribution fee of up to 0.75% in order to finance the payment of sales commissions to financial intermediaries, and to pay for other distribution related expenses. Financial intermediaries may compensate their financial advisors with the shareholder servicing and distribution fees paid to them by the distributor. IF YOU MAINTAIN SHARES OF THE FUND DIRECTLY WITH THE FUND, WITHOUT WORKING DIRECTLY WITH A FINANCIAL INTERMEDIARY OR FINANCIAL ADVISOR, DISTRIBUTION AND SERVICE FEES MAY BE RETAINED BY THE DISTRIBUTOR AS REIMBURSEMENT FOR INCURRING CERTAIN DISTRIBUTION AND SHAREHOLDER SERVICING RELATED EXPENSES. * For RiverSource Cash Management Fund, financial intermediaries receive fees up to 0.10% of the average daily net assets of Class A, Class B and Class W shares sold and held through them. PLAN ADMINISTRATION FEE Class R2, Class R3, Class R4 and Class Y shares pay an annual plan administration services fee for the provision of various administrative, recordkeeping, communication and educational services. The fee for Class R2, Class R3 and Class R4 shares is equal on an annual basis to 0.25% of average daily net assets attributable to the respective class. The fee for Class Y shares is equal on an annual basis to 0.15% of average daily net assets attributable to the class. DETERMINING WHICH CLASS OF SHARES TO PURCHASE Each of the fund's classes represent an interest in the same portfolio of investments. However, as set forth above, each class has its own sales charge schedule, and its ongoing distribution and shareholder service fees may differ from other classes. When deciding which class of shares to buy, you should consider, among other things: - The amount you plan to invest. - How long you intend to remain invested in the fund or another fund in the RiverSource Family of Funds. - Whether you may be eligible for reduced or no sales charges when you buy or sell shares. Your authorized financial intermediary or financial advisor will be able to help you decide which class of shares best meets your needs. -------------------------------------------------------------------------------- S.4 CLASS A, CLASS B AND CLASS C SHARES* Class B shares of RiverSource Absolute Return Currency and Income Fund are not currently available for new purchases. However, if you own Class B shares of another fund in the RiverSource Family of Funds, you may exchange into Class B shares of RiverSource Absolute Return Currency and Income Fund, if you meet the minimum investment and account balance requirements set forth in "Opening an Account," subject to the limitations set forth in this section. New purchases of Class B shares will not be permitted if your rights of accumulation are $50,000 or higher, and new purchases of Class C shares will not be permitted if your rights of accumulation are $1,000,000 or higher. See "Sales Charges, Initial Sales Charge -- Rights of Accumulation" for information on rights of accumulation. Class B shares have a higher annual distribution fee than Class A shares and a contingent deferred sales charge (CDSC) for six years. Class B shares convert to Class A shares. Class B shares purchased through reinvested dividends and distributions will convert to Class A shares in the same proportion as the other Class B shares. See "Class B and Class C -- CDSC alternative" for information on timing of Class B share conversion to Class A shares. Class C shares have a higher annual distribution fee than Class A shares and a CDSC for one year. Class C shares have no sales charge if you hold the shares for longer than one year. Unlike Class B shares, Class C shares do not convert to Class A shares. As a result, you will pay a distribution fee for as long as you hold Class C shares. If you choose a share class with a CDSC (Class B or Class C), you should consider the length of time you intend to hold your shares. To help you determine which investment is best for you, consult your financial intermediary or financial advisor. * For money market funds, new investments must be made in Class A shares of the fund. The money market funds offer Class B and Class C shares only to facilitate exchanges between classes of these shares in other funds. CLASS I SHARES. The following eligible investors may purchase Class I shares: - Any fund distributed by the distributor, if the fund seeks to achieve its investment objective by investing primarily in shares of funds in the RiverSource Family of Funds. Class I shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. CLASS R AND CLASS Y SHARES. The following eligible institutional investors may purchase Class R2, Class R3, Class R4, Class R5 and Class Y shares: -------------------------------------------------------------------------------- S.5 - Qualified employee benefit plans. - Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code. - Non-qualified deferred compensation plans whose participants are included in a qualified employee benefit plan described above. - State sponsored college savings plans established under Section 529 of the Internal Revenue Code. - Health Savings Accounts created pursuant to public law 108-173. Additionally, if approved by the distributor, the following eligible institutional investors may purchase Class R5 shares: - Institutional or corporate accounts above a threshold established by the distributor (currently $1 million per fund or $10 million in all funds in the RiverSource Family of Funds). - Bank trust departments. Class R and Class Y shares generally are not available to retail non-retirement accounts, traditional and Roth IRAs, Coverdell Educational Savings Accounts, SEPs, SARSEPs, SIMPLE IRAs and individual 403(b) plans. Class R shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. CLASS W SHARES. The following eligible investors may purchase Class W shares: - Investors purchasing through authorized investment programs managed by investment professionals, including discretionary managed account programs. Class W shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. Shares originally purchased in a discretionary managed account may continue to be held in Class W outside of a discretionary managed account, but no additional Class W purchases may be made and no exchanges to Class W shares of another fund may be made outside of a discretionary managed account. IN ADDITION, FOR CLASS I, CLASS R AND CLASS Y SHARES, THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY ACCEPT OR AUTHORIZE FINANCIAL INTERMEDIARIES TO ACCEPT INVESTMENTS FROM OTHER INSTITUTIONAL INVESTORS NOT LISTED ABOVE. IN ADDITION, FOR CLASS W SHARES, THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY ACCEPT OR AUTHORIZE FINANCIAL INTERMEDIARIES TO ACCEPT INVESTMENTS FROM OTHER INVESTORS NOT LISTED ABOVE. Please consult your financial advisor for assistance in selecting the appropriate class of shares. For more information, see the SAI. -------------------------------------------------------------------------------- S.6 SALES CHARGES FOR FUNDS OTHER THAN MONEY MARKET FUNDS CLASS A -- INITIAL SALES CHARGE ALTERNATIVE: Your purchase price for Class A shares is generally the net asset value (NAV) plus a front-end sales charge. The distributor receives the sales charge and re- allows a portion of the sales charge to the financial intermediary through which you purchased the shares. The distributor retains the balance of the sales charge. The distributor retains the full sales charge you pay when you purchase shares of the fund directly from the fund (not through an authorized financial intermediary). Sales charges vary depending on the amount of your purchase. INITIAL SALES CHARGE(A) FOR CLASS A SHARES For equity funds and funds-of-funds (equity)*
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 5.75% 6.10% 5.00% $50,000--$99,999 4.75 4.99 4.00 $100,000--$249,999 3.50 3.63 3.00 $250,000--$499,999 2.50 2.56 2.15 $500,000--$999,999 2.00 2.04 1.75 $1,000,000 or more 0.00 0.00 0.00(c),(d)
For fixed income funds except those listed below and funds-of-funds (fixed income)*
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 4.75% 4.99% 4.00% $50,000--$99,999 4.25 4.44 3.50 $100,000--$249,999 3.50 3.63 3.00 $250,000--$499,999 2.50 2.56 2.15 $500,000--$999,999 2.00 2.04 1.75 $1,000,000 or more 0.00 0.00 0.00(c),(d)
-------------------------------------------------------------------------------- S.7 For RiverSource Absolute Return Currency and Income Fund, RiverSource Floating Rate Fund, RiverSource Inflation Protected Securities Fund, RiverSource Intermediate Tax-Exempt Fund, RiverSource Limited Duration Bond Fund and RiverSource Short Duration U.S. Government Fund
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 3.00% 3.09% 2.50% $50,000--$99,999 3.00 3.09 2.50 $100,000--$249,999 2.50 2.56 2.15 $250,000--$499,999 2.00 2.04 1.75 $500,000--$999,999 1.50 1.52 1.25 $1,000,000 or more 0.00 0.00 0.00(c),(d)
* "Funds-of-funds (equity)" includes -- RiverSource Portfolio Builder Aggressive Fund, RiverSource Portfolio Builder Moderate Aggressive Fund, RiverSource Portfolio Builder Moderate Fund, RiverSource Portfolio Builder Total Equity Fund, RiverSource Retirement Plus 2010 Fund, RiverSource Retirement Plus 2015 Fund, RiverSource Retirement Plus 2020 Fund, RiverSource Retirement Plus 2025 Fund, RiverSource Retirement Plus 2030 Fund, RiverSource Retirement Plus 2035 Fund, RiverSource Retirement Plus 2040 Fund, RiverSource Retirement Plus 2045 Fund, Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025, Seligman TargETFund 2015 and Seligman TargETFund Core. "Funds-of-funds (fixed income)" includes -- RiverSource Income Builder Basic Income Fund, RiverSource Income Builder Enhanced Income Fund, RiverSource Income Builder Moderate Income Fund, RiverSource Portfolio Builder Conservative Fund and RiverSource Portfolio Builder Moderate Conservative Fund. (a) Because of rounding in the calculation of the offering price, the portion of the sales charge retained by the distributor may vary and the actual sales charge you pay may be more or less than the sales charge calculated using these percentages. (b) Purchase price includes the sales charge. (c) Although there is no sales charge for purchases with a total market value over $1,000,000, and therefore no re-allowance, the distributor may pay a financial intermediary the following out of its own resources: a sales commission of up to 1.00% for a sale of $1,000,000 to $3,999,999; a sales commission up to 0.50% for a sale of $4,000,000 to $49,999,999; and a sales commission up to 0.25% for a sale of $50,000,000 or more. (d) For certain eligible employee benefit plans defined under section 401(a), 401(k), 457 and 403(b) which meet eligibility rules for the waiver of applicable sales charges, the distributor may pay the following out of its own resources: a sales commission of 1.00% for a sale of $1 to $3,999,999 received in eligible employee benefit plans; a sales commission up to 0.50% for a sale of $4,000,000 to $49,999,999; and a sales commission up to 0.25% for a sale of $50,000,000 or more. See "Initial Sales Charge -- Waivers of the sales charge for Class A shares" for employee benefit plan eligibility rules. There is no initial sales charge on reinvested dividends or capital gain distributions. INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA). You may be able to reduce the sales charge on Class A shares, based on the combined market value of accounts in your ROA group. Your ROA group includes the current market values of the following investments which are eligible to be added together for purposes of determining the sales charge on your next purchase: - Your current investment in a fund; and -------------------------------------------------------------------------------- S.8 - Previous investments you and members of your household have made in Class A, Class B or Class C shares in the fund and other funds in the RiverSource Family of Funds, provided your investment was subject to a sales charge. Your household consists of you, your spouse or domestic partner and your unmarried children under age 21, all of whom share a mailing address. The following accounts are eligible to be included in your ROA group in order to determine the sales charge on your purchase: - Individual or joint accounts; - Roth and traditional IRAs, SEPs, SIMPLEs and TSCAs, provided they are invested in Class A, Class B or Class C shares that were subject to a sales charge; - UGMA/UTMA accounts for which you, your spouse, or your domestic partner is parent or guardian of the minor child; - Revocable trust accounts for which you or a member of your household, individually, is the beneficial owner/grantor; - Accounts held in the name of your, your spouse's, or your domestic partner's sole proprietorship or single owner limited liability company or S corporation; and - Qualified retirement plan assets, provided that you are the sole owner of the business sponsoring the plan, are the sole participant (other than a spouse) in the plan, and have no intention of adding participants to the plan. The following accounts are NOT eligible to be included in your ROA group in order to determine the sales charge on your purchase: - Accounts of pension and retirement plans with multiple participants, such as 401(k) plans (which are combined to reduce the sales charge for the entire pension or retirement plan and therefore are not used to reduce the sales charge for your individual accounts); - Investments in Class A shares where the sales charge is waived, for example, purchases through wrap accounts; - Investments in Class I, Class R2, Class R3, Class R4, Class R5, Class W or Class Y shares; - Investments in 529 plans, donor advised funds, variable annuities, variable life insurance products, wrap accounts or managed separate accounts; and - Charitable and irrevocable trust accounts. If you purchase fund shares through different financial intermediaries, and you want to include those assets toward a reduced sales charge, you must inform your financial intermediary in writing about the other accounts when placing your purchase order. Contact your financial intermediary to determine what information is required. -------------------------------------------------------------------------------- S.9 Unless you provide your financial intermediary in writing with information about all of the accounts that may count toward a sales charge reduction, there can be no assurance that you will receive all of the reductions for which you may be eligible. You should request that your financial intermediary provide this information to the fund when placing your purchase order. For more information on ROA, please see the SAI. INITIAL SALES CHARGE -- LETTER OF INTENT (LOI). Generally, if you intend to invest $50,000 or more (including any existing ROA) over a period of up to 13 months, you may be able to reduce the front-end sales charge(s) for investments in Class A shares by completing and filing an LOI. The required form of LOI may vary by financial intermediary. Existing ROA can be included in your LOI. Each purchase of fund shares normally subject to an initial sales charge made during the 13-month period will be made at the public offering price applicable to a single transaction of the total dollar amount indicated by the LOI. Five percent of the commitment amount will be placed in escrow. At the end of the 13-month period, the LOI will end and the shares will be released from escrow. If you do not invest the commitment amount by the end of the 13 months, the remaining amount of the unpaid sales charge will be redeemed from the escrowed shares and the remaining balance released from escrow. Existing ROA Example. Shareholder currently has $60,000 ROA in the funds. Shareholder completes an LOI to invest $100,000 in the funds (ROA eligible accounts). Shareholder only needs to invest an additional $40,000 in the funds' Class A shares (any non-money market fund in the RiverSource Family of Funds) in order to fulfill the LOI commitment and receive reduced front-end sales charge(s) over the next 13 months. Notification Obligation. You must request the reduced sales charge when you buy shares. If you do not complete and file an LOI, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge. You should request that your financial intermediary provide this information to the fund when placing your purchase order. For more detail on LOIs, please contact your financial intermediary or see the SAI. INITIAL SALES CHARGE -- WAIVERS OF THE SALES CHARGE FOR CLASS A SHARES. Sales charges do not apply to: - current or retired Board members, officers or employees of the funds or RiverSource Investments or its affiliates, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - current or retired Ameriprise Financial Services, Inc. financial advisors, employees of financial advisors, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. -------------------------------------------------------------------------------- S.10 - registered representatives and other employees of affiliated or unaffiliated financial intermediaries having a selling agreement with the distributor, including their spouses, domestic partners, children, parents and their spouse's or domestic partner's parents. - portfolio managers employed by subadvisers of the funds, including their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - partners and employees of outside legal counsel to the funds or the funds' directors or trustees who regularly provide advice and services to the funds, or to their directors or trustees. - direct rollovers from qualified employee benefit plans, provided that the rollover involves a transfer to Class A shares in the same fund. - purchases made: - with dividend or capital gain distributions from a fund or from the same class of another fund in the RiverSource Family of Funds; - through or under a wrap fee product or other investment product sponsored by a financial intermediary that charges an account management fee that has, or that clear trades through a financial intermediary that has, a selling agreement with the distributor; - through state sponsored college savings plans established under Section 529 of the Internal Revenue Code; or - through bank trust departments. - separate accounts established and maintained by an insurance company which are exempt from registration under Section 3(c)(11). - purchases made through "employee benefit plans" created under section 401(a), 401(k), 457 and 403(b) which: - have at least $1 million in plan assets at the time of investment; and - have a plan level or omnibus account that is maintained with the fund or its transfer agent; and - transact directly with the fund or its transfer agent through a third party administrator or third party recordkeeper. For more information regarding waivers of sales charge for Class A purchases, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of sales charges for additional classes of investors. Policies related to reducing or waiving the sales charge may be modified or withdrawn at any time. -------------------------------------------------------------------------------- S.11 Unless you provide your financial intermediary with information in writing about all of the factors that may count toward a waiver of the sales charge, there can be no assurance that you will receive all of the waivers for which you may be eligible. You should request that your financial intermediary provide this information to the fund when placing your purchase order. Because the current prospectus is available on the funds' website (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com free of charge, information regarding breakpoint discounts is not separately disclosed on the website. CDSCS AND THE COMBINATION OF TARGET DATE FUNDS WITH SELIGMAN TARGETFUND CORE. Each of Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025 and Seligman TargETFund 2015 (the Target Date Funds) will automatically be combined with Seligman TargETFund Core during their respective target year. The investment manager expects each of these combinations to be effected as an acquisition of the assets and liabilities of the applicable Target Date Fund in exchange for shares of Seligman TargETFund Core at net asset value, with the shares of Seligman TargETFund Core then distributed to shareholders of the applicable Target Date Fund. For the purpose of calculating CDSCs, holding periods in respect of shares of a Target Date Fund will be carried over to shares of Seligman TargETFund Core acquired as a result of the combination of a Target Date Fund with Seligman TargETFund Core. CLASS A -- CONTINGENT DEFERRED SALES CHARGE For Class A shares purchased without a sales charge where a commission was separately paid by the distributor to an authorized financial intermediary effecting the purchase, a 1% CDSC may be charged if you sell your shares within 18 months after purchase. A CDSC will be based on the original purchase cost or the current market value of the shares being sold, whichever is less. CDSC -- WAIVERS OF THE CDSC FOR CLASS A SHARES. The CDSC will be waived on sales of shares: - to which no sales commission or transaction fee was paid to an authorized financial intermediary at the time of purchase. - purchased through reinvestment of dividends and capital gain distributions. - in the event of the shareholder's death. - from a monthly, quarterly or annual systematic redemption plan of up to an annual amount of 12% of the account value on a per fund basis. - in an account that has been closed because it falls below the minimum account balance. - that result from required minimum distributions taken from retirement accounts upon the shareholders attainment of age 70 1/2. -------------------------------------------------------------------------------- S.12 - that result from returns of excess contributions or excess deferral amounts made to a retirement plan participant. - of RiverSource funds purchased prior to Dec. 1, 2008. - initially purchased by an employee benefit plan that is not connected with a plan level termination. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. CLASS B AND CLASS C -- CDSC ALTERNATIVE The money market funds (except RiverSource Tax-Exempt Money Market Fund) offer Class B and Class C shares, but only to facilitate exchanges with other funds offering Class B and Class C shares, respectively. For example, if you own Class B or Class C shares of another fund, but want to hold your money in a money market fund, you may exchange into Class B or Class C shares of a money market fund. Funds that offer Class B and Class C shares have limitations on the amount you may invest in those share classes. If you are considering purchasing Class B or Class C shares of a fund, please see the prospectus for that fund for any effective purchase limitations. Although you may not purchase Class B and Class C shares of the money market funds directly, if you exchange into Class B or Class C shares of a money market fund from another fund, you will be subject to the rules governing CDSC set forth in this section. To minimize the amount of CDSC you may pay when you sell your shares, the fund assumes that shares acquired through reinvested dividends and capital gain distributions (which are not subject to CDSC) are sold first. Shares that have been in your account long enough so that they are not subject to a CDSC are sold next. After these shares are exhausted, shares will be sold in the order they were purchased (earliest to latest). -------------------------------------------------------------------------------- S.13 FOR CLASS B, the CDSC is based on the sale amount and the number of years between purchase and sale. The following table shows how CDSC percentages on sales decline over time:
IF THE SALE IS MADE DURING THE: THE CDSC PERCENTAGE RATE IS:* First year 5% Second year 4% Third year 3%** Fourth year 3% Fifth year 2% Sixth year 1% Seventh or eighth year 0%
* Because of rounding in the calculation, the portion of the CDSC retained by the distributor may vary and the actual CDSC you pay may be more or less than the CDSC calculated using these percentages. ** For shares purchased in a RiverSource fund on or prior to June 12, 2009, the CDSC percentage for the third year is 4%. Although there is no front-end sales charge when you buy Class B shares, the distributor pays a sales commission of 4% to financial intermediaries that sell Class B shares. A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class B shares. You may not make additional purchases of Class B shares if your ROA exceeds $49,999.99. Class B shares purchased in a RiverSource fund prior to May 21, 2005 age on a calendar year basis. Class B shares purchases made in a RiverSource fund beginning May 21, 2005 age on a daily basis. For example, a purchase made on Nov. 12, 2004 completed its first year on Dec. 31, 2004 under calendar year aging. However, a purchase made on Nov. 12, 2005 completed its first year on Nov. 11, 2006 under daily aging. Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund on or prior to June 12, 2009 will convert to Class A shares in the month prior to the ninth year of ownership. Class B shares purchased in a RiverSource fund beginning May 21, 2005 and Class B shares purchased in a Seligman fund beginning June 13, 2009 will convert to Class A shares one month after the completion of the eighth year of ownership. -------------------------------------------------------------------------------- S.14 FOR CLASS C, a 1% CDSC may be charged if you sell your shares within one year after purchase. Although there is no front-end sales charge when you buy Class C shares, the distributor pays a total amount up to 1% (including sales commission and advance of service fees) to financial intermediaries that sell Class C shares. See "Buying and Selling Shares -- Distribution and Service Fees." A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class C shares. You may not make additional purchases of Class C shares if your ROA exceeds $999,999.99. For both Class B and Class C shares, the amount of any CDSC you pay will be based on the lower of the original purchase price of those shares or current net asset value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you do not have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. EXAMPLE Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3 1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase. CDSC -- WAIVERS OF THE CDSC FOR CLASS B SHARES. The CDSC will be waived on sales of shares: - in the event of the shareholder's death. - that result from required minimum distributions taken from retirement accounts upon the shareholders' attainment of age 70 1/2. - sold under an approved substantially equal periodic payment arrangement. - by certain other investors, including certain institutions as set forth in more detail in the SAI. For more information regarding waivers of the CDSC for Class B shares, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. -------------------------------------------------------------------------------- S.15 CDSC -- WAIVERS OF THE CDSC FOR CLASS C SHARES. The CDSC will be waived on sales of shares: - in the event of the shareholder's death. - to which no sales commission or transaction fee was paid to an authorized financial intermediary at the time of purchase. - that result from required minimum distributions taken from retirement accounts upon the shareholders' attainment of age 70 1/2. - initially purchased by an eligible employee benefit plan that are not connected with a plan level termination. - by certain other investors, including certain institutions as set forth in more detail in the SAI. For more information regarding waivers of the CDSC for Class C shares, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. CLASS I, CLASS R2, CLASS R3, CLASS R4, CLASS R5, CLASS W AND CLASS Y -- NO SALES CHARGE. For each of Class I, Class R2, Class R3, Class R4, Class R5 and Class W there is no initial sales charge or CDSC. OPENING AN ACCOUNT Financial institutions are required by law to obtain certain personal information from each person who opens an account in order to verify the identity of the person. As a result, when you open an account you will be asked to provide your name, permanent street address, date of birth, and Social Security or Employer Identification number. You may also be asked for other identifying documents or information. If you do not provide this information, the fund or the financial intermediary through which you are investing in the fund may not be able to open an account for you. If the fund or the financial intermediary through which you are investing in the fund is unable to verify your identity, your account may be closed, or other steps may be taken, as deemed appropriate. When you buy shares, your order will be priced at the next NAV calculated after your order is accepted by the fund or an authorized financial intermediary. Any applicable sales charge will be added to the purchase price for Class A shares. You may establish and maintain your account with an authorized financial intermediary or directly with the fund. The fund may appoint servicing agents to accept purchase orders and to accept exchange (and sale) orders on its behalf. Accounts established with the fund will be supported by the fund's transfer agent. -------------------------------------------------------------------------------- S.16 METHODS OF PURCHASING SHARES These methods of purchasing shares generally apply to Class A, Class B, and Class C shares. CLASS B SHARES OF RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND IS CURRENTLY CLOSED TO INVESTORS FOR NEW PURCHASES. CLASS B SHARES FOR RIVERSOURCE FLOATING RATE FUND, RIVERSOURCE INFLATION PROTECTED SECURITIES FUND, RIVERSOURCE INTERMEDIATE TAX-EXEMPT FUND, RIVERSOURCE LIMITED DURATION BOND FUND AND RIVERSOURCE SHORT DURATION U.S. GOVERNMENT FUND ARE CLOSED TO NEW INVESTORS AND NEW PURCHASES. EXISTING SHAREHOLDERS IN THESE FUNDS MAY CONTINUE TO OWN CLASS B SHARES AND MAKE EXCHANGES INTO AND OUT OF EXISTING ACCOUNTS WHERE CLASS B SHARES OF THESE FUNDS ARE MAINTAINED. ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INTERMEDIARY ALL REQUESTS The financial intermediary through which you buy shares may have different policies not described in this prospectus, including different minimum investment amounts and minimum account balances. -------------------------------------------------------------------------------- ACCOUNT ESTABLISHED WITH THE FUND BY MAIL You or the financial intermediary through which you buy shares may establish an account with the fund. To establish an account in this fashion, complete a fund account application with your financial advisor or investment professional, and mail the account application to the address below. Account applications may be obtained (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com or may be requested by calling (800) 221-2450. Make your check payable to the fund. The fund does not accept cash, credit card convenience checks, money orders, traveler's checks, starter checks, third or fourth party checks, or other cash equivalents. ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.17 METHODS OF PURCHASING SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) Mail your check and completed application to: REGULAR MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL P.O. BOX 8041 BOSTON, MA 02266-8041 EXPRESS MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL 30 DAN ROAD CANTON, MA 02021-2809 If you already have an account, include your name, account number, and the name of the fund and class of shares you wish to purchase along with your check. You can make scheduled investments in the fund by moving money from your checking account or savings account. See the Minimum Investment and Account Balance chart below for more information regarding scheduled investment plans. -------------------------------------------------------------------------------- BY WIRE OR ACH Fund shares purchased in an account established and maintained with the fund may be paid for by federal funds wire. Before sending a wire, call (800) 221-2450 to notify the fund's transfer agent of the wire and to receive further instructions. If you are establishing an account with a wire purchase, you are required to send a signed account application to the address above. Please include the wire control number or your new account number on the application. Your bank or financial intermediary may charge additional fees for wire transactions. -------------------------------------------------------------------------------- BY EXCHANGE Call (800) 221-2450 or send signed written instructions to the address above. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.18 METHODS OF PURCHASING SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) MINIMUM INVESTMENT AND ACCOUNT BALANCE
RIVERSOURCE RIVERSOURCE 120/20 DISCIPLINED CONTRARIAN SMALL CAP EQUITY FUND VALUE FUND THREADNEEDLE RIVERSOURCE FOR ALL FUNDS, GLOBAL EXTENDED FLOATING RATE CLASSES AND ALPHA FUND FUND ACCOUNTS EXCEPT RIVERSOURCE RIVERSOURCE THOSE LISTED TO ABSOLUTE RETURN INFLATION THE RIGHT TAX QUALIFIED CURRENCY AND PROTECTED (NONQUALIFIED) ACCOUNTS INCOME FUND SECURITIES FUND CLASS W --------------------------------------------------------------------------------------------------------------- INITIAL INVESTMENT $2,000 $1,000 $10,000 $5,000 $500 --------------------------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $100 $100 $100 None --------------------------------------------------------------------------------------------------------------- ACCOUNT BALANCE* $1,000 None $5,000 $2,500 $500
*If your fund account balance falls below the minimum account balance for any reason, including a market decline, you may be asked to increase it to the minimum account balance or establish a scheduled investment plan. If you do not do so within 30 days, your shares may be automatically redeemed and the proceeds mailed to you. ------------------------------------------------------------------------------- MINIMUM INVESTMENT AND ACCOUNT BALANCE -- SCHEDULED INVESTMENT PLANS
RIVERSOURCE RIVERSOURCE 120/20 DISCIPLINED CONTRARIAN SMALL CAP EQUITY FUND VALUE FUND THREADNEEDLE RIVERSOURCE FOR ALL FUNDS, GLOBAL EXTENDED FLOATING RATE CLASSES AND ALPHA FUND FUND ACCOUNTS EXCEPT RIVERSOURCE RIVERSOURCE THOSE LISTED TO ABSOLUTE RETURN INFLATION THE RIGHT TAX QUALIFIED CURRENCY AND PROTECTED (NONQUALIFIED) ACCOUNTS INCOME FUND SECURITIES FUND CLASS W --------------------------------------------------------------------------------------------------------------- INITIAL INVESTMENT $100(a) $100(b) $10,000 $5,000 $500 --------------------------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $50 $100 $100 None --------------------------------------------------------------------------------------------------------------- ACCOUNT BALANCE** None(b) None $5,000 $2,500 $500
**If your fund account balance is below the minimum initial investment described above, you must make payments at least monthly. (a)Money Market Funds -- $2,000 (b)Money Market Funds -- $1,000 ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.19 These minimums may be waived for accounts that are managed by an investment professional, for accounts held in approved discretionary or non-discretionary wrap programs, for accounts that are a part of an employer-sponsored retirement plan, or for other account types if approved by the distributor. The fund reserves the right to modify its minimum account requirements at any time, with or without prior notice. Please contact your financial intermediary for information regarding wire or electronic funds transfer. IMPORTANT: Payments sent by electronic fund transfers (ACH), a bank authorization or check that are not guaranteed may take up to 14 days to clear. If you request a sale within 14 days of purchase, this may cause your sale request to fail to process if the requested amount includes unguaranteed funds. EXCHANGING OR SELLING SHARES You may exchange or sell shares by having your financial intermediary process your transaction. If you maintain your account directly with your financial intermediary, you must contact that financial intermediary to exchange or sell shares of the fund. If your account was established with the fund, there are a variety of methods you may use to exchange or sell shares of the fund. WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INTERMEDIARY ALL REQUESTS You can exchange or sell shares by having your financial intermediary process your transaction. The financial intermediary through which you purchased shares may have different policies not described in this prospectus, including different transaction limits, exchange policies and sale procedures. -------------------------------------------------------------------------------- ACCOUNT ESTABLISHED WITH THE FUND BY MAIL Mail your exchange or sale request to: REGULAR MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL P.O. BOX 8041 BOSTON, MA 02266-8041 EXPRESS MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL 30 DAN ROAD CANTON, MA 02021-2809 ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.20 WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) Include in your letter: - your name - the name of the fund(s) - your account number - the class of shares to be exchanged or sold - your Social Security number or Employer Identification number - the dollar amount or number of shares you want to exchange or sell - specific instructions regarding delivery or exchange destination - signature(s) of registered account owner(s) - any special documents the transfer agent may require in order to process your order Corporate, trust or partnership accounts may need to send additional documents. Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners. A Medallion Signature Guarantee is required if: - Amount is over $50,000. - You want your check made payable to someone other than the registered account owner(s). - Your address of record has changed within the last 30 days. - You want the check mailed to an address other than the address of record. - You want the proceeds sent to a bank account not on file. - You are the beneficiary of the account and the account owner is deceased (additional documents may be required). A Medallion Signature Guarantee assures that a signature is genuine and not a forgery. The financial intermediary providing the Guarantee is financially liable for the transaction if the signature is a forgery. Eligible guarantors include commercial banks, trust companies, savings associations, and credit unions as defined by the Federal Deposit Insurance Act. Note: A guarantee from a notary public is not acceptable. ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.21 WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) NOTE: Any express mail delivery charges you pay will vary depending on domestic or international delivery instructions. -------------------------------------------------------------------------------- BY TELEPHONE Call (800) 221-2450. Unless you elect not to have telephone exchange and sale privileges, they will automatically be available to you. Reasonable procedures will be used to confirm authenticity of telephone exchange or sale requests. Telephone privileges may be modified or discontinued at any time. Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate, qualified retirement accounts and trust accounts which the current trustee is not listed. You may request that these privileges NOT apply by writing to the address above. Payment will be mailed to the address of record and made payable to the names listed on the account. Telephone sale requests are limited to $50,000 per day. -------------------------------------------------------------------------------- BY WIRE OR ACH You can wire money from your fund account to your bank account. Make sure we have your bank account information on file. If we do not have this information, you will need to send written instructions with your bank's name and a voided check or savings account deposit slip. Call (800) 221-2450 or send a letter of instruction, with a Medallion Signature Guarantee if required, to the address above. A service fee may be charged against your account for each wire sent. Minimum amount: by ACH: $100 by wire: $500 Your bank or financial intermediary may charge additional fees for wire transactions. -------------------------------------------------------------------------------- BY SCHEDULED You may elect to receive regular periodic payments through an PAYOUT PLAN automatic sale of shares. See the SAI for more information. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.22 CHECK REDEMPTION SERVICE Class A shares of the money market funds offer check writing privileges. If you have $2000 in a money market fund, you may request checks which may be drawn against your account. You can elect this service on your initial application, or, thereafter. Call (800) 221-2450 for the appropriate forms to establish this service. If you own Class A shares that were both in another fund at NAV because of the size of the purchase, and then exchanged into a money market fund, check redemptions may be subject to a CDSC. EXCHANGES Generally, you may exchange your fund shares for shares of the same class of any other publicly offered fund in the RiverSource Family of Funds without a sales charge. For complete information on the fund you are exchanging into, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after your transaction request is received in good order. You may be subject to a sales charge if you exchange from a money market fund into an equity or fixed income fund. IF YOU HOLD YOUR FUND SHARES IN AN ACCOUNT WITH AMERIPRISE FINANCIAL SERVICES, YOU MAY HAVE LIMITED EXCHANGEABILITY WITHIN THE RIVERSOURCE FAMILY OF FUNDS. MARKET TIMING SHORT-TERM TRADING AND OTHER SO-CALLED MARKET TIMING PRACTICES ARE FREQUENT TRADING PRACTICES BY CERTAIN SHAREHOLDERS INTENDED TO PROFIT AT THE EXPENSE OF OTHER SHAREHOLDERS BY SELLING SHARES OF A FUND SHORTLY AFTER PURCHASE. MARKET TIMING MAY ADVERSELY IMPACT A FUND'S PERFORMANCE BY PREVENTING THE INVESTMENT MANAGER FROM FULLY INVESTING THE ASSETS OF THE FUND, DILUTING THE VALUE OF SHARES HELD BY LONG-TERM SHAREHOLDERS, OR INCREASING THE FUND'S TRANSACTION COSTS. -------------------------------------------------------------------------------- S.23 FOR A FUND ORGANIZED AS A FUND-OF-FUNDS, ITS ASSETS CONSIST PRIMARILY OF SHARES OF THE UNDERLYING FUNDS IN WHICH IT INVESTS. THE UNDERLYING FUNDS MAY BE MORE SUSCEPTIBLE TO THE RISKS OF MARKET TIMING. FUNDS THAT INVEST DIRECTLY IN SECURITIES THAT TRADE INFREQUENTLY MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF INEFFICIENCIES IN THE SECURITIES MARKETS. FUNDS AND THE UNDERLYING FUNDS THAT INVEST IN SECURITIES THAT TRADE ON OVERSEAS SECURITIES MARKETS MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF CHANGES IN THE VALUES OF SECURITIES BETWEEN THE CLOSE OF OVERSEAS MARKETS AND THE CLOSE OF U.S. MARKETS, WHICH IS GENERALLY THE TIME AT WHICH A FUND'S NAV IS CALCULATED. TO THE EXTENT THAT A FUND OR UNDERLYING FUND HAS SIGNIFICANT HOLDINGS OF SMALL CAP STOCKS, FLOATING RATE LOANS, HIGH YIELD BONDS, TAX-EXEMPT SECURITIES OR FOREIGN SECURITIES, THE RISKS OF MARKET TIMING MAY BE GREATER FOR THE FUND THAN FOR OTHER FUNDS. SEE "PRINCIPAL INVESTMENT STRATEGIES" FOR A DISCUSSION OF THE TYPES OF SECURITIES IN WHICH YOUR FUND INVESTS. SEE "PRICING AND VALUING OF FUND SHARES" FOR A DISCUSSION OF THE FUNDS' POLICY ON FAIR VALUE PRICING, WHICH IS INTENDED, IN PART, TO REDUCE THE FREQUENCY AND EFFECT OF MARKET TIMING. THE FUNDS' BOARD HAS ADOPTED A POLICY THAT IS DESIGNED TO DETECT AND DETER MARKET TIMING THAT MAY BE HARMFUL TO THE FUNDS. EACH FUND SEEKS TO ENFORCE THIS POLICY THROUGH ITS SERVICE PROVIDERS AS FOLLOWS: - The fund tries to distinguish market timing from trading that it believes is not harmful, such as periodic rebalancing for purposes of asset allocation or dollar cost averaging or other purchase and exchange transactions not believed to be inconsistent with the best interest of fund shareholders or the Board's policy. The fund uses a variety of techniques to monitor for and detect abusive trading practices. These techniques may vary depending on the type of fund, the class of shares and where the shares are maintained. Under the fund's procedures, there is no set number of transactions in the fund that constitutes market timing. Even one purchase and subsequent sale by related accounts may be market timing. Generally, the fund seeks to restrict the exchange privilege of an investor who makes more than three exchanges into or out of the fund in any 90-day period. Accounts held by a retirement plan or a financial intermediary for the benefit of its participants or clients, which typically engage in daily transactions, are not subject to this limit, although the fund may seek the assistance of financial intermediaries in applying similar restrictions on their participants or clients. The fund's ability to monitor and discourage abusive trading practices in omnibus accounts is more limited. - The fund may rely on the monitoring policy of a financial intermediary, for example, a retirement plan administrator or similar financial intermediary authorized to distribute the funds, if it determines the policy and procedures of such financial intermediaries are sufficient to protect the fund and its shareholders. -------------------------------------------------------------------------------- S.24 - If an investor's trading activity is determined to be market timing or otherwise harmful to existing shareholders, the fund reserves the right to modify or discontinue the investor's exchange privilege or reject the investor's purchases or exchanges, including purchases or exchanges accepted by a financial intermediary. The fund may treat accounts it believes to be under common control as a single account for these purposes, although it may not be able to identify all such accounts. - Although the fund does not knowingly permit market timing, it cannot guarantee that it will be able to identify and restrict all short-term trading activity. The fund receives purchase and sale orders through financial intermediaries where market timing activity may not always be successfully detected. Other exchange policies: - Exchanges must be made into the same class of shares of the share class being exchanged out of. - Exchanges into RiverSource Tax-Exempt Money Market Fund may be made only from Class A shares. - If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. - Once the fund receives your exchange request, you cannot cancel it after the market closes. - Shares of the purchased fund may not be used on the same day for another exchange or sale. - New investments in Class A shares of a money market fund may be exchanged for either Class A, Class B or Class C shares of any other publicly offered fund in the RiverSource Family of Funds. - If you exchange shares from Class A shares of a money market fund to another fund in the RiverSource Family of Funds, any further exchanges must be between shares of the same class. For example, if you exchange from Class A shares of a money market fund into Class B shares of another fund in the RiverSource Family of Funds, you may not exchange from Class B shares of that fund back to Class A shares of a money market fund. Exchange rules for money market funds are illustrated in the following tables. - Shares of Class W originally purchased, but no longer held in a discretionary managed account, may not be exchanged for Class W shares of another fund. You may continue to hold these shares in the fund. Changing your investment to a different fund will be treated as a sale and purchase, and you will be subject to applicable taxes on the sale and sales charges on the purchase of the new fund. -------------------------------------------------------------------------------- S.25 - If your shares are subject to a CDSC, you will not be charged a CDSC upon the exchange of those shares. Any CDSC will be deducted when you sell the shares you received from the exchange. The CDSC imposed at that time will be based on the period that begins when you bought shares of the original fund and ends when you sell the shares of the fund you exchanged to.
TO OTHER FUNDS FROM A MONEY MARKET FUND ----------------------------- CLASS A CLASS B CLASS C -------------------------------------------------------------------- Class A Yes Yes Yes Class B No Yes No Class C No No Yes
TO A MONEY MARKET FUND FROM OTHER FUNDS ----------------------------- CLASS A CLASS B CLASS C -------------------------------------------------------------------- Class A Yes No No Class B No Yes No Class C No No Yes
If your initial investment was in a money market fund and you exchange into an equity or fixed income fund, you will pay an initial sales charge if you exchange into Class A and be subject to a CDSC if you exchange into Class B or Class C. If your initial investment was in Class A shares of an equity or fixed income fund and you exchange shares into a money market fund, you may exchange that amount to another fund, including dividends earned on that amount, without paying a sales charge. SELLING SHARES You may sell your shares at any time. The payment will be sent within seven days after your request is received in good order. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order, minus any applicable CDSC. REPURCHASES. You can change your mind after requesting a sale of shares and use all or part of the sale proceeds to purchase new shares of a fund in the RiverSource Family of Funds. If your original purchase was in Class A or Class B, you may use all or part of the sale proceeds to purchase new Class A shares in any fund account linked together for ROA purposes. Your repurchase will be in Class A shares at NAV, up to the amount of the sale proceeds. For a Class A repurchase on shares that were originally charged a CDSC, the amount of the CDSC will be reinvested at the NAV on the date the repurchase is processed. Repurchases of Class B shares will also be in Class A shares at NAV. Any CDSC paid upon redemption of your Class B shares will not be reimbursed. If your original purchase was in Class C, you will be allowed to reinvest in the -------------------------------------------------------------------------------- S.26 same Class C account and fund you originally purchased. In a Class C repurchase, the CDSC you paid will be reinvested and the shares will be deemed to have the original cost and purchase date for purposes of applying the CDSC (if any) to subsequent redemptions. Systematic withdrawals and purchases will be excluded from this policy. In order for you to take advantage of this repurchase waiver, you must notify your financial intermediary or the fund's transfer agent if your account is held at the fund within 90 days of the date your sale request was processed. Contact your financial intermediary for information on required documentation. The repurchase privilege may be modified or discontinued at any time and use of this option may have tax consequences. If you sold shares of a Seligman fund on or before February 3, 2009 and wish to repurchase shares, you have the option of taking advantage of the current repurchase policy (described above) within 90 days of the date your sale request was processed, or you may use all or part of your sale proceeds to purchase shares of the fund you sold or any other fund in the RiverSource Family of Funds without paying an initial sales charge or, if you paid a CDSC when you sold your shares, receiving a credit for the applicable CDSC, within 120 days of the date your sale request was processed. Contact your financial intermediary or, if you opened an account directly with the fund, the transfer agent, for more information on the required documentation to complete a repurchase transaction. The fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. PRICING AND VALUING OF FUND SHARES For classes of shares sold with an initial sales charge, the public offering or purchase price is the net asset value plus the sales charge. For funds or classes of shares sold without an initial sales charge, the public offering price is the NAV. Orders in good form are priced at the NAV next determined after you place your order. Good form or good order means that your instructions have been received in the form required by the fund. This may include, for example, providing the fund name and account number, the amount of the transaction and all required signatures. The NAV is the value of a single share of the fund. The NAV is determined by dividing the value of the fund's assets, minus any liabilities, by the number of shares outstanding. The NAV is calculated as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. For a fund organized as a fund-of-funds, the assets will consist primarily of shares of the underlying funds, which are valued at their NAVs. Securities are valued primarily on the basis of market quotations and floating rate loans are valued primarily on the basis of indicative bids. Both market quotations -------------------------------------------------------------------------------- S.27 and indicative bids are obtained from outside pricing services approved and monitored under procedures adopted by the Board. Certain short-term securities with maturities of 60 days or less are valued at amortized cost. When reliable market quotations or indicative bids are not readily available, investments are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of an investment held by a fund or underlying fund is materially affected by events that occur after the close of a securities market but prior to the time as of which the fund's or underlying fund's NAV is determined. Valuing investments at fair value involves reliance on judgment. The fair value of an investment is likely to differ from any available quoted or published price. To the extent that a fund or an underlying fund has significant holdings of small cap stocks, high yield bonds, floating rate loans, tax-exempt securities or foreign securities that may trade infrequently, fair valuation may be used more frequently than for other funds. The funds use an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of a fund's or an underlying fund's securities may be listed on foreign exchanges that trade on weekends or other days when the fund does not price its shares. In that event, the NAV of the fund's or underlying fund's shares may change on days when shareholders will not be able to purchase or sell the fund's or underlying fund's shares. For money markets funds -- The fund's investments are valued at amortized cost, which approximates market value, as explained in the SAI. Although the fund cannot guarantee it will always be able to maintain a constant net asset value of $1 per share, it will use its best efforts to do so. DISTRIBUTIONS AND TAXES As a shareholder you are entitled to your share of your fund's net income and net gains. Each fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS Your fund's net investment income is distributed to you as dividends. Dividends may be composed of qualified dividend income, which is eligible for preferential tax rates under current tax law, as well as other ordinary dividend income, which may include dividends which are non-qualified dividends, interest income and short-term capital gains. Because of the types of income earned by fixed income funds, it is unlikely the funds will distribute qualified dividend income. Generally, capital gains are realized when a security is sold for a higher price than was paid for it. Generally, capital losses are realized when a security is sold for a lower price than was paid for it. Typically, each realized capital gain or loss is long-term or short-term depending on the length of time the fund held the -------------------------------------------------------------------------------- S.28 security. Realized capital gains and losses offset each other. The fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains, if any, are included in net investment income and are taxable as ordinary income when distributed to the shareholder. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. If the fund's distributions exceed its current and accumulated earnings and profits, that portion of the fund's distributions will be treated as a return of capital to the shareholders to the extent of their basis in their shares. A return of capital will generally not be taxable; however, any amounts received in excess of basis are treated as capital gain. Forms 1099 sent to shareholders report any return of capital. Certain derivative instruments subject the fund to special tax rules, the effect of which may be to accelerate income to the fund, defer fund losses, cause adjustments in the holding periods of fund securities, convert capital gains into ordinary income and convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders. For Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025, Seligman TargETF 2015 and Seligman TargETFund Core (the Seligman TargETFunds) -- The Funds may purchase or sell (write) options. In general, option premiums which may be received by the Funds are not immediately included in the income of the Funds. Instead, such premiums are taken into account when the option contract expires, the option is exercised by the holder, or the Funds transfer or otherwise terminate the option. If an option written by a Fund is exercised and such Fund sells or delivers the underlying security, such Fund generally will recognize capital gain or loss equal to (a) the sum of the exercise price and the option premium received by the Fund minus (b) the Fund's basis in the security. Such gain or loss generally will be short-term or long- term depending upon the holding period of the underlying security. Gain or loss with respect to any termination of a Fund's obligation under an option other than through the exercise of the option and the related sale or delivery of the underlying security generally will be short-term gain or loss. Thus, for example, if an option written by a Fund expires unexercised, such Fund generally will recognize short-term gain equal to the premium received. -------------------------------------------------------------------------------- S.29 The Seligman TargETFunds generally will pay any dividends from its net investment income and distributes any net capital gains realized on investments at least annually (Seligman TargETFund Core generally will pay dividends from its net investment income on a quarterly basis). Because each Seligman TargETFund may sell underlying ETFs, US government securities and short-term debt instruments: (a) to accommodate redemptions of its shares; (b) in respect of the Target Date Funds, to implement the process of migration; and (c) to adjust the percentages of its assets invested in each underlying ETF, US government securities, short-term debt instruments, cash and cash equivalents in response to economic, market or other conditions or events, and changes in Seligman Time Horizon Matrix (the asset allocation methodology utilized by the Seligman TargETFunds), each Seligman TargETFund may generate net capital gains (including short-term capital gains that are generally taxed to shareholders at ordinary income tax rates) for investors that may be higher than the net capital gains ordinarily incurred by an investor through an investment in another asset allocation fund that has broader investment ranges or an asset allocation strategy designed by the investor. In addition, due to federal income tax laws, each Seligman TargETFund may not fully utilize capital losses (to offset capital gains) from the sale of underlying ETFs at a loss. In addition, underlying ETFs may distribute capital gains to the Seligman TargETFunds. REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the fund unless you request distributions in cash. The financial intermediary through which you purchased shares may have different policies. Distributions are reinvested at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. Generally, if you sell shares for less than their cost, the difference is a capital loss or if you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). -------------------------------------------------------------------------------- S.30 You may not create a tax loss or reduce a tax gain, based on paying a sales charge, by exchanging shares before the 91st day after the day of purchase. If you buy Class A shares and exchange into another fund before the 91st day after the day of purchase, you may not be able to include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. For more information, see the SAI. REITs often do not provide complete tax information until after the calendar year-end; generally mid to late January and continuing through early February. Consequently, if your fund has significant investments in REITs, you may not receive your Form 1099-DIV until February. Other RiverSource funds tax statements are generally mailed in January. FOR SELIGMAN TARGETFUNDS. Each of the Target Date Funds will automatically be combined with Seligman TargETFund Core during their respective target years. The investment manager expects each of these combinations to be effected as an acquisition of the assets and liabilities of the applicable Target Date Fund in exchange for shares of Seligman TargETFund Core at net asset value, with the shares of Seligman TargETFund Core then distributed to shareholders of the applicable Target Date Fund. Based on current tax rules, the investment manager expects the combination to be effected in a non-taxable transaction. Changes in such tax rules or other applicable law could negatively impact the combination of a Target Date Fund with Seligman TargETFund Core. FOR TAXABLE FUNDS. Distributions related to shares not held in IRAs or other retirement accounts are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. Shares held in an IRA or qualified retirement account are generally subject to different tax rules. Taking a distribution from your IRA or qualified retirement plan may subject you to federal taxes, withholding, penalties and reporting requirements. Please consult your tax advisor. Income received by a fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes. FOR TAX-EXEMPT FUNDS. Dividends distributed from interest earned on tax-exempt securities (exempt-interest dividends) are exempt from federal income taxes but may be subject to state and local taxes and potentially the alternative minimum tax. Dividends distributed from net capital gains, if any, and other income earned are not exempt from federal income taxes. Any taxable distributions are taxable in the year the fund declares them regardless of whether you take them in cash or reinvest them. -------------------------------------------------------------------------------- S.31 Interest on certain private activity bonds is a preference item for purposes of the individual and corporate alternative minimum tax. To the extent the fund earns such income, it will flow through to its shareholders and may affect those shareholders who are subject to the alternative minimum tax. See the SAI for more information. Because interest on municipal bonds and notes is tax-exempt for federal income tax purposes, any interest on money you borrow that is used directly or indirectly to purchase fund shares is not deductible on your federal income tax return. You should consult a tax advisor regarding its deductibility for state and local income tax purposes. FOR A FUND ORGANIZED AS A FUND-OF-FUNDS. Because most of the fund's investments are shares of underlying funds, the tax treatment of the fund's gains, losses, and distributions may differ from the tax treatment that would apply if either the fund invested directly in the types of securities held by the underlying funds or the fund shareholders invested directly in the underlying funds. As a result, fund shareholders may recognize higher amounts of capital gain distributions or ordinary income dividends than they otherwise would. IMPORTANT: This information is a brief and selective summary of some of the tax rules that apply to an investment in a fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. GENERAL INFORMATION AVAILABILITY AND TRANSFERABILITY OF FUND SHARES Please consult with your financial intermediary to determine the availability of the funds. The funds may only be purchased or sold directly or through financial intermediaries authorized by the distributor to offer the funds. NOT ALL FINANCIAL INSTITUTIONS ARE AUTHORIZED TO SELL THE RIVERSOURCE FAMILY OF FUNDS AND CERTAIN FINANCIAL INTERMEDIARIES THAT OFFER THE RIVERSOURCE FAMILY OF FUNDS MAY NOT OFFER ALL FUNDS ON ALL INVESTMENT PLATFORMS. If you set up an account at a financial intermediary that does not have, and is unable to obtain, a selling agreement with the distributor, you will not be able to transfer fund holdings to that account. In that event, you must either maintain your fund holdings with your current financial intermediary, find another financial intermediary with a selling agreement, or sell your shares, paying any applicable CDSC. Please be aware that transactions in taxable accounts are taxable events and may result in income tax liability. ADDITIONAL SERVICES AND COMPENSATION In addition to acting as the fund's investment manager, RiverSource Investments and its affiliates also receive compensation for providing other services to the funds. -------------------------------------------------------------------------------- S.32 Administration Services. Ameriprise Financial, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides or compensates others to provide administrative services to the funds. These services include administrative, accounting, treasury, and other services. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." Distribution and Shareholder Services. RiverSource Fund Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474, (the distributor), provides underwriting and distribution services to the funds. Under the Distribution Agreement and related distribution and shareholder servicing plans, the distributor receives distribution and shareholder servicing fees. The distributor may retain a portion of these fees to support its distribution and shareholder servicing activity. The distributor reallows the remainder of these fees (or the full fee) to the financial intermediaries that sell fund shares and provide services to shareholders. Fees paid by a fund for these services are set forth under "Distribution and/or service (12b-1) fees" in the expense table under "Fees and Expenses." More information on how these fees are used is set forth under "Investment Options -- Classes of Shares" and in the SAI. The distributor also administers any sales charges paid by an investor at the time of purchase or at the time of sale. See "Shareholder Fees (fees paid directly from your investment)" under "Fees and Expenses" for the scheduled sales charge of each share class. See "Buying and Selling Shares, Sales Charges" for variations in the scheduled sales charges, and for how these sales charges are used by the distributor. See "Other Investment Strategies and Risks" for the funds' policy regarding directed brokerage. Transfer Agency Services. RiverSource Service Corporation, 734 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the transfer agent or RiverSource Service Corporation), provides or compensates others to provide transfer agency services to the funds. The funds pay the transfer agent a fee that varies by class, as set forth in the SAI, and reimburses the transfer agent for its out-of-pocket expenses incurred while providing these transfer agency services to the funds. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." RiverSource Service Corporation pays a portion of these fees to financial intermediaries that provide sub-recordkeeping and other services to fund shareholders. The SAI provides additional information about the services provided and the fee schedules for the transfer agent agreements. -------------------------------------------------------------------------------- S.33 Plan Administration Services. Under a Plan Administration Services Agreement, the fund pays for plan administration services, including services such as implementation and conversion services, account set-up and maintenance, reconciliation and account recordkeeping, education services and administration to various plan types, including 529 plans, retirement plans and Health Savings Accounts. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." PAYMENTS TO FINANCIAL INTERMEDIARIES The distributor and its affiliates make or support additional cash payments out of their own resources (including profits earned from providing services to the fund) to financial intermediaries, in connection with agreements between the distributor and financial intermediaries pursuant to which these financial intermediaries sell fund shares and provide services to their clients who are shareholders of the fund. These payments and intercompany allocations (collectively, "payments") do not change the price paid by investors in the fund or fund shareholders for the purchase or ownership of fund shares of the fund, and these payments are not reflected in the fees and expenses of the fund, as they are not paid by the fund. In exchange for these payments, a financial intermediary may elevate the prominence or profile of the fund within the financial intermediary's organization, and may provide the distributor and its affiliates with preferred access to the financial intermediary's registered representatives or preferred access to the financial intermediary's customers. These arrangements are sometimes referred to as marketing and/or sales support payments, program and/or shareholder servicing payments, or revenue sharing payments. These arrangements create potential conflicts of interest between a financial intermediary's pecuniary interest and its duties to its customers, for example, if the financial intermediary receives higher payments from the sale of a certain fund than it receives from the sale of other funds, the financial intermediary or its representatives may be incented to recommend or sell shares of the fund where it receives or anticipates receiving the higher payment instead of other investment options that may be more appropriate for the customer. Employees of Ameriprise Financial and its affiliates, including employees of affiliated broker-dealers, may be separately incented to recommend or sell shares of the fund, as employee compensation and business unit operating goals at all levels are tied to the company's success. Certain employees, directly or indirectly, may receive higher compensation and other benefits as investment in the fund increases. In addition, management, sales leaders and other employees may spend more of their time and resources promoting Ameriprise Financial and its subsidiary companies, including RiverSource Investments and the distributor, and the products they offer, including the fund. -------------------------------------------------------------------------------- S.34 These payments are typically negotiated based on various factors including, but not limited to, the scope and quality of the services provided by the financial intermediary, its reputation in the industry, its ability to attract and retain assets, its access to target markets, its customer relationships, the profile the fund may obtain within the financial intermediary, and the access the distributor or other representatives of the fund may have within the financial intermediary for advertisement, training or education, including opportunities to present at or sponsor conferences for the registered representatives of the financial intermediary and its customers. These payments are usually calculated based on a percentage of fund assets owned through the financial intermediary and/or as a percentage of fund sales attributable to the financial intermediary. Certain financial intermediaries require flat fees instead of, or in addition to, these asset-based fees as compensation for including or maintaining a fund on their platforms, and, in certain situations, may require the reimbursement of ticket or operational charges -- fees that a financial intermediary charges its registered representatives for effecting transactions in the fund. The amount of payment varies by financial intermediary (e.g., initial platform set-up fees, ongoing maintenance or service fees, or asset or sales based fees). The amount of payments also varies by the type of sale. For instance, purchases of one fund may warrant a greater or lesser amount of payments than purchases of another fund. Additionally, sale and maintenance of shares on a stand alone basis may result in a greater or lesser amount of payments than the sale and maintenance of shares made through a plan, wrap or other fee-based program. Payments to affiliates may include payments as compensation to employees of RiverSource Investments who are licensed by the distributor in respect of certain sales and solicitation activity on behalf of the fund. These payments may be and often are significant. Additional information concerning the amount and calculation of these payments is available in the fund's SAI. Payments to affiliated broker-dealers are within the range of the payments the distributor pays to similarly-situated third party financial intermediaries and the payments such affiliated broker-dealers receive from third party fund sponsors related to the sale of their sponsored funds. However, because of the large amount of fund assets (from the RiverSource Family of Funds, in aggregate) currently held in customer accounts of the affiliated broker-dealers, the distributor and its affiliates, in the aggregate, pay significantly more in absolute dollars than other third-party fund sponsors pay to the affiliated broker-dealers for the sale and servicing of their sponsored funds. This level of payment creates potential conflicts of interest which the affiliated broker- dealers seek to mitigate by disclosure and implementation of internal controls, as well as the rules and regulations of applicable regulators. -------------------------------------------------------------------------------- S.35 From time to time, to the extent permitted by SEC and FINRA rules and by other applicable laws and regulations, the distributor and its affiliates may make other reimbursements or payments to financial intermediaries or their registered representatives, including non-cash compensation, in the form of gifts of nominal value, occasional meals, tickets, or other entertainment, support for due diligence trips, training and educational meetings or conference sponsorships, support for recognition programs, and other forms of non-cash compensation permissible under regulations to which these financial intermediaries and their representatives are subject. To the extent these are made as payments instead of reimbursement, they may provide profit to the financial intermediary to the extent the cost of such services was less than the actual expense of the service. The financial intermediary through which you are purchasing or own shares of the fund has been authorized directly or indirectly by the distributor to sell the fund and/or to provide services to you as a shareholder of the fund. Investors and current shareholders may wish to take such payment arrangements into account when considering and evaluating any recommendations they receive relating to fund shares. If you have questions regarding the specific details regarding the payments your financial intermediary may receive from the distributor or its affiliates related to your purchase or ownership of the fund, please contact your financial intermediary. The SAI contains additional detail regarding payments made by the distributor to financial intermediaries. The payments described in this section are in addition to fees paid by the fund to the distributor under 12b-1 plans, which fees may be used to compensate financial intermediaries for the distribution of fund shares and the servicing of fund shareholders, or paid by the fund to the transfer agent under the transfer agent agreement or plan administration agreement, which fees may be used to support networking or servicing fees to compensate financial intermediaries for supporting shareholder account maintenance, sub-accounting, plan recordkeeping or other services provided directly by the financial intermediary to shareholders or plans and plan participants, including retirement plans, 529 plans, Health Savings Account plans, or other plans, where participants beneficially own shares of the fund. Financial institutions may separately charge you additional fees. See "Buying and Selling Shares." ADDITIONAL MANAGEMENT INFORMATION AFFILIATED PRODUCTS. RiverSource Investments serves as investment manager to all funds in the RiverSource Family of Funds, including those that are structured to provide asset-allocation services to shareholders of those funds by investing in shares of other funds (funds of funds) in the RiverSource Family of Funds (collectively referred to as underlying funds) and to discretionary managed accounts (collectively referred to as affiliated products) that invest exclusively in underlying funds. These affiliated products, individually or collectively, may own -------------------------------------------------------------------------------- S.36 a significant percentage of the outstanding shares of the underlying funds, and RiverSource Investments seeks to balance potential conflicts between the affiliated products and the underlying funds in which they invest. The affiliated products investment in the underlying funds may also have the effect of creating economies of scale (including lower expense ratios) because the affiliated products may own substantial portions of the shares of underlying funds and, comparatively, a redemption of underlying fund shares by one or more affiliated products could cause the expense ratio of an underlying fund to increase as its fixed costs would be spread over a smaller asset base. Because of these large positions of the affiliated products, the underlying funds may experience relatively large purchases or redemptions. Although RiverSource Investments may seek to minimize the impact of these transactions, for example, by structuring them over a reasonable period of time or through other measures, underlying funds may experience increased expenses as they buy and sell securities to manage these transactions. When RiverSource Investments structures transactions over a reasonable period of time in order to manage the potential impact of the buy and sell decisions for the affiliated products, these affiliated products, including funds of funds, may pay more or less for shares of the underlying funds than if the transactions were executed in one transaction. In addition, substantial redemptions by the affiliated products within a short period of time could require the underlying fund to liquidate positions more rapidly than would otherwise be desirable, which may have the effect of reducing or eliminating potential gain or causing the underlying fund to realize a loss. Substantial redemptions may also adversely affect the ability of the investment manager to implement the underlying fund's investment strategy. RiverSource Investments also has an economic conflict of interest in determining the allocation of the affiliated products' assets among the underlying funds as it earns different fees from the underlying funds. RiverSource Investments monitors expense levels of the funds and is committed to offering funds that are competitively priced. RiverSource Investments reports to the Board on the steps it has taken to manage any potential conflicts. See the SAI for information on the percent of the fund owned by affiliated products. CASH RESERVES. A fund may invest its daily cash balance in a money market fund selected by RiverSource Investments, including but not limited to RiverSource Short-Term Cash Fund (Short-Term Cash Fund), a money market fund established for the exclusive use of funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. While Short-Term Cash Fund does not pay an advisory fee to RiverSource Investments, it does incur other expenses, and is expected to operate at a very low expense ratio. A fund will invest in Short-Term Cash Fund or any other money market fund selected by RiverSource Investments only to the extent it is consistent with the fund's investment objectives and policies. Short-Term Cash Fund is not insured or guaranteed by the FDIC or any other government agency. -------------------------------------------------------------------------------- S.37 FUND HOLDINGS DISCLOSURE. The Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by a fund. A description of these policies and procedures is included in the SAI. LEGAL PROCEEDINGS. 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 fund is 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 fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the fund. Information regarding certain pending and settled legal proceedings may be found in the fund's shareholder reports and in the SAI. Additionally, 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. -------------------------------------------------------------------------------- S.38 Funds in the RiverSource Family of Funds -- which include funds offered under the RiverSource, Threadneedle and Seligman brands -- can be purchased from authorized financial intermediaries. Additional information about the fund and its investments is available in the fund's SAI, and annual and semiannual reports to shareholders. In the fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the fund's performance during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, or to request other information about the fund, contact RiverSource Family of Funds or your financial intermediary. To make a shareholder inquiry, contact the financial intermediary through whom you purchased the fund. RiverSource Family of Funds 734 Ameriprise Financial Center Minneapolis, MN 55474 (800) 221-2450 RiverSource Family of Funds information available: (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com You may review and copy information about the fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202- 551-8090). Reports and other information about the fund are available on the EDGAR Database on the Commission's Internet site at www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, 100 F Street, N.E., Washington, D.C. 20549-1520. Investment Company Act File #811-5696 TICKER SYMBOL Class A: IGLGX Class B: IDGBX Class C: RGCEX Class I: -- Class R2: -- Class R3: -- Class R4: IDGYX Class R5: RGERX Class W: --
(THREADNEEDLE LOGO) S-6334-99 AH (12/09) Prospectus (THREADNEEDLE LOGO) THREADNEEDLE GLOBAL EQUITY INCOME FUND PROSPECTUS DEC. 30, 2009 THREADNEEDLE GLOBAL EQUITY INCOME FUND SEEKS TO PROVIDE SHAREHOLDERS WITH A HIGH LEVEL OF CURRENT INCOME AND SECONDARILY, GROWTH OF CAPITAL. Classes A, B, C, I, R2, R3, R4 and R5 As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. You may qualify for sales charge discounts on purchases of Class A shares. Please notify your financial intermediary if you have other accounts holding shares of funds in the RiverSource Family of Funds to determine whether you qualify for a sales charge discount. See "Buying and Selling Shares" for more information. NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE TABLE OF CONTENTS THE FUND.......................................... 3P Objective......................................... 3p Principal Investment Strategies................... 3p Principal Risks................................... 4p Past Performance.................................. 6p Fees and Expenses................................. 7p Other Investment Strategies and Risks............. 10p Fund Management and Compensation.................. 11p FINANCIAL HIGHLIGHTS.............................. 13P BUYING AND SELLING SHARES......................... S.1 Description of Share Classes...................... S.2 Investment Options -- Classes of Shares......... S.2 Sales Charges................................... S.7 Opening an Account.............................. S.16 Exchanging or Selling Shares...................... S.20 Exchanges....................................... S.23 Selling Shares.................................. S.26 PRICING AND VALUING OF FUND SHARES................ S.27 DISTRIBUTIONS AND TAXES........................... S.28 GENERAL INFORMATION............................... S.32
RIVERSOURCE FAMILY OF FUNDS The RiverSource Family of Funds includes a comprehensive array of funds from RiverSource Investments. RiverSource Investments has also partnered with a number of professional investment managers, including its affiliate, Threadneedle Investments, to expand the array of funds offered in the RiverSource family. RiverSource funds, RiverSource Partners funds, Seligman funds and Threadneedle funds share the same Board of Directors/Trustees (the Board), and the same policies and procedures including those set forth in the service section of this prospectus. Please see the Statement of Additional Information (SAI) for a complete list of mutual funds included in the RiverSource Family of Funds. RiverSource Variable Portfolio Funds and Seligman (Variable) Portfolio Funds are sold exclusively as underlying investment options of variable insurance policies and annuity contracts offered by affiliated and unaffiliated insurance companies. -------------------------------------------------------------------------------- 2P THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 PROSPECTUS THE FUND OBJECTIVE Threadneedle Global Equity Income Fund (the Fund) seeks to provide shareholders with a high level of current income and secondarily, growth of capital. Because any investment involves risk, there is no assurance that these objectives can be achieved. Only shareholders can change the Fund's objectives. PRINCIPAL INVESTMENT STRATEGIES Under normal market conditions, the Fund will invest at least 80% of its net assets in equity securities. The Fund will normally invest at least 40% of its net assets in equity securities of companies located in (non U.S.) developed and emerging markets. The securities in which the Fund invests will typically include dividend-paying common and preferred stocks that produce current income or that offer potential to produce income. The Fund may invest in any economic sector and, at times, it may emphasize one or more particular sectors. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. RiverSource Investments, LLC (RiverSource Investments) serves as the investment manager to the Fund and is responsible for oversight of the subadviser, Threadneedle International Limited (Threadneedle), an indirect wholly-owned subsidiary of Ameriprise Financial, Inc., the parent company of RiverSource Investments. Threadneedle's investment process includes: - Deploying an integrated approach to equity research that incorporates regional analyses, a global sector strategy, and stock specific perspectives; - Conducting detailed research on companies across the capitalization spectrum (large-, mid- and small-cap companies) in a consistent strategic and macroeconomic framework; - Looking for catalysts of change in making and identifying the factors driving markets, which will vary over economic and market cycles; and - Implementing rigorous risk control processes that are designed to ensure that the risk and return characteristics of the Fund's portfolio are consistent with established portfolio management parameters. Threadneedle determines stock selection and recommended weightings for each stock by researching regions, sectors and specific companies, taking into account factors such as: - Current yield; - Dividend growth capability (considering a company's financial statements and its management's ability to increase the dividend if it chooses to do so) and dividend history; -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 PROSPECTUS 3P - Balance sheet strength; - Earnings per share and free cash flow sustainability; - Dividend payout ratio (the percentage of earnings paid to shareholders in dividends); and - Competitive position within its industry. A number of factors may prompt Threadneedle to sell securities. For example, a sale may result from a change in the composition of the Fund's benchmark or a change in sector strategy. A sale may also be prompted by factors specific to a stock, such as valuation or company fundamentals. The Fund will normally have exposure to foreign currencies. Threadneedle closely monitors the Fund's exposure to foreign currency. From time to time the team may use forward currency transactions or other derivative instruments to hedge against currency fluctuations. Threadneedle may use derivatives such as futures, options, swaps, forward contracts and structured investments, to produce incremental earnings, to hedge existing positions and/or currency fluctuations, or to increase flexibility. PRINCIPAL RISKS This Fund is designed for long-term investors with above-average risk tolerance. The Fund has a higher potential for volatility and loss of principal. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objectives. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. DERIVATIVES RISK. Derivatives are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, options, futures, indexes or currencies. Losses involving derivative instruments may be substantial, because a relatively small price movement in the underlying security(ies), instrument, currency or index may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund. Derivative instruments in which the Fund invests will typically increase the Fund's exposure to Principal Risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty credit risk, hedging risk, leverage risk and liquidity risk. Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses. -------------------------------------------------------------------------------- 4P THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 PROSPECTUS Counterparty credit risk is the risk that a counterparty to the derivative instrument becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, and the Fund may obtain no recovery of its investment or may only obtain a limited recovery, and any recovery may be delayed. Hedging risk is the risk that derivative instruments used to hedge against an opposite position may offset losses, but they may also offset gains. There is no guarantee that a hedging strategy will eliminate the risk which the hedging strategy is intended to offset, which may lead to losses within the Fund. Leverage risk is the risk that losses from the derivative instrument may be greater than the amount invested in the derivative instrument. Liquidity risk is the risk that the derivative instrument may be difficult or impossible to sell or terminate, which may cause the Fund to be in a position to do something the investment manager would not otherwise choose, including accepting a lower price for the derivative instrument, selling other investments or foregoing another, more appealing investment opportunity. Derivative instruments which are not traded on an exchange, including, but not limited to, forward contracts, swaps and over-the-counter options, may have increased liquidity risk. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. See the SAI for more information on derivative instruments and related risks. RISKS OF FOREIGN INVESTING. Foreign securities are securities of issuers based outside the United States. An issuer is deemed to be based outside the United States if it is organized under the laws of another country. Foreign securities are primarily denominated in foreign currencies. In addition to the risks normally associated with domestic securities of the same type, foreign securities are subject to the following foreign risks: Country risk includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times, it may be difficult to sell foreign securities at desirable prices. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add to or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 PROSPECTUS 5P or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. Emerging markets risk includes the dramatic pace of change (economic, social and political) in these countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its stocks and bonds may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. When an issuer performs poorly, it may realize a reduction in earned income which will impact its ability to pay dividends. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. SECTOR RISK. Investments that are concentrated in a particular issuer, geographic region or sector will be more susceptible to changes in price. The more a fund diversifies, the more it spreads risk and potentially reduces the risks of loss and volatility. SMALL AND MID-SIZED COMPANY RISK. Investments in small and medium companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, experience and competitive strengths of larger companies. Additionally, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less and may be more volatile than is typical of larger companies. PAST PERFORMANCE The bar chart and past performance table are not presented because the Fund has not had a full calendar year of operations. The Fund's shares became available to the public on Aug. 1, 2008. When available, the Fund intends to compare its performance to the performance of the Morgan Stanley Capital International (MSCI) All Country World Index, an unmanaged index of equity securities that 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. See "Fund Management and Compensation" for more information. -------------------------------------------------------------------------------- 6P THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 PROSPECTUS FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund. Annual fund operating expenses are based on expenses incurred during the Fund's most recently completed fiscal year, and are expressed as a percentage (expense ratio) of the Fund's average net assets during the period. The expense ratios have been adjusted to reflect current fee schedules but have not been adjusted to reflect the Fund's assets as of a different period or point in time, as asset levels will fluctuate. As of the date of this prospectus, the Fund's net assets are higher than the Fund's average net assets during the most recently completed fiscal year. In general, a fund's annual operating expenses will increase as the fund's assets decrease. Accordingly, the Fund's annual operating expenses, if adjusted based on net assets as of the date of this prospectus, would be lower than are expressed in the fee and expense table below. The commitment by the investment manager and its affiliates to waive fees and/or cap (reimburse) expenses limits the impact that any decrease in the Fund's assets will have on its total annual (net) operating expenses in the current fiscal year. SHAREHOLDER FEES (fees paid directly from your investment)
CLASS I CLASS R2 CLASS R3 CLASS R4 CLASS A CLASS B CLASS C CLASS R5 Maximum sales charge (load) imposed on purchases (as a percentage of offering price) 5.75%(a) None None None Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) None(b) 5% 1% None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS: CLASS A CLASS B CLASS C Management fees(c) 0.85% 0.85% 0.85% Distribution and/or service (12b-1) fees 0.25% 1.00% 1.00% Other expenses(d) 1.25% 1.33% 1.20% Total annual fund operating expenses 2.35% 3.18% 3.05% Fee waiver/expense reimbursement 0.85% 0.92% 0.79% Total annual (net) fund operating expenses(e) 1.50% 2.26% 2.26%
CLASS I CLASS R2 CLASS R3 CLASS R4 CLASS R5 Management fees(c) 0.85% 0.85% 0.85% 0.85% 0.85% Distribution and/or service (12b-1) fees 0.00% 0.50% 0.25% 0.00% 0.00% Other expenses(d) 1.03% 1.33% 1.33% 1.35% 1.08% Total annual fund operating expenses 1.88% 2.68% 2.43% 2.20% 1.93% Fee waiver/expense reimbursement 0.77% 0.77% 0.77% 0.79% 0.77% Total annual (net) fund operating expenses(e) 1.11% 1.91% 1.66% 1.41% 1.16%
-------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 PROSPECTUS 7P ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) cont. (a) This charge may be reduced depending on the total value of your investments in the RiverSource Family of Funds. See "Sales Charges." (b) A 1% CDSC may be assessed on Class A shares purchased without an initial sales charge and sold within 18 months after purchase. See "Sales Charges." (c) Includes the impact of a performance incentive adjustment fee that increased the management fee by 0.05% for the most recent fiscal year. The index against which the Fund's performance is measured for purposes of determining the performance incentive adjustment is the MSCI All Country World Index. See "Fund Management and Compensation" for more information. (d) Other expenses include an administrative services fee, a transfer agency fee (for all classes except Class I), a custody fee, other nonadvisory expenses and a plan administration services fee (for Class R2, Class R3 and Class R4). Other expenses may also include fees and expenses of affiliated and unaffiliated funds (acquired funds) which the Fund indirectly bears when it invests in the acquired funds. The impact of these acquired funds' fees and expenses for the most recent fiscal period was less than 0.01%. Because acquired funds will 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 by the Fund with respect to such investments will vary. (e) The investment manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Dec. 31, 2010, 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, 2.21% for Class C, 1.06% for Class I, 1.86% for Class R2, 1.61% for Class R3, 1.36% for Class R4 and 1.11% for Class R5. -------------------------------------------------------------------------------- 8P THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 PROSPECTUS EXAMPLES These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. These examples assume that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. These examples also assume that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $719 $1,190 $1,687 $3,050 Class B $729(b) $1,195(b) $1,785(b) $3,232(c) Class C $329(b) $ 868 $1,533 $3,313 Class I $113 $ 516 $ 946 $2,144 Class R2 $194 $ 760 $1,352 $2,960 Class R3 $169 $ 684 $1,227 $2,713 Class R4 $144 $ 613 $1,109 $2,477 Class R5 $118 $ 532 $ 972 $2,197
(a) Includes a 5.75% sales charge. (b) Includes the applicable CDSC. (c) Based on conversion of Class B shares to Class A shares one month after the completion of the eighth year of ownership. You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $719 $1,190 $1,687 $3,050 Class B $229 $ 895 $1,585 $3,232(b) Class C $229 $ 868 $1,533 $3,313 Class I $113 $ 516 $ 946 $2,144 Class R2 $194 $ 760 $1,352 $2,960 Class R3 $169 $ 684 $1,227 $2,713 Class R4 $144 $ 613 $1,109 $2,477 Class R5 $118 $ 532 $ 972 $2,197
(a) Includes a 5.75% sales charge. (b) Based on conversion of Class B shares to Class A shares one month after the completion of the eighth year of ownership. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 PROSPECTUS 9P OTHER INVESTMENT STRATEGIES AND RISKS Other Investment Strategies. In addition to the principal investment strategies previously described, the Fund may utilize investment strategies that are not principal investment strategies, including investment in affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds (ETFs), also referred to as "acquired funds") ownership of which results in the Fund bearing its proportionate share of the acquired funds' fees and expenses and proportionate exposure to the risks associated with the acquired funds' underlying investments. ETFs are generally designed to replicate the price and yield of a specified market index. An ETF's share price may not track its specified market index and may trade below its net asset value, resulting in a loss. ETFs generally use a "passive" investment strategy and will not attempt to take defensive positions in volatile or declining markets. An active secondary market in an ETF's shares may not develop or be maintained and may be halted or interrupted due to actions by its listing exchange, unusual market conditions or other reasons. There can be no assurance an ETF's shares will continue to be listed on an active exchange. For more information on strategies and holdings, and the risks of such strategies, including derivative instruments that the Fund may use, see the Fund's SAI and its annual and semiannual reports. Unusual Market Conditions. During unusual market conditions, the Fund may temporarily invest more of its assets in money market securities than during normal market conditions. Although investing in these securities would serve primarily to attempt to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the portfolio managers may make frequent securities trades that could result in increased fees, expenses and taxes, and decreased performance. Instead of investing in money market securities directly, the Fund may invest in shares of an affiliated or unaffiliated money market fund. See "Cash Reserves" under the section "General Information" for more information. Securities Transaction Commissions. Securities transactions involve the payment by the Fund of brokerage commissions to broker-dealers, on occasion as compensation for research or brokerage services (commonly referred to as "soft dollars"), as the portfolio managers buy and sell securities for the Fund in pursuit of its objective. A description of the policies governing the Fund's securities transactions and the dollar value of brokerage commissions paid by the Fund are set forth in the SAI. The brokerage commissions set forth in the SAI do not include implied commissions or mark-ups (implied commissions) paid by the Fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities (and certain other instruments, including derivatives). Brokerage commissions do not reflect other elements of transaction costs, including the extent to which the Fund's purchase and sale transactions may cause the market to move and change the market price for an investment. Although brokerage commissions and implied commissions are not reflected in the expense table under "Fees and Expenses," they are reflected in the total return of the Fund. -------------------------------------------------------------------------------- 10P THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 PROSPECTUS Portfolio Turnover. Trading of securities may produce capital gains, which are taxable to shareholders when distributed. Active trading may also increase the amount of brokerage commissions paid or mark-ups to broker-dealers that the Fund pays when it buys and sells securities. Capital gains and increased brokerage commissions or mark-ups paid to broker-dealers may adversely affect a fund's performance. The Fund's historical portfolio turnover rate, which measures how frequently the Fund buys and sells investments, is shown in the "Financial Highlights." Directed Brokerage. The Fund's Board has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Fund as a factor in the selection of broker-dealers through which to execute securities transactions. Additional information regarding securities transactions can be found in the SAI. FUND MANAGEMENT AND COMPENSATION INVESTMENT MANAGER RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource Family of Funds (including the RiverSource funds, RiverSource Partners funds, Seligman funds and Threadneedle funds), and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for the RiverSource Family of Funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the SAI for more information. The RiverSource Family of Funds has received an order from the Securities and Exchange Commission that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for a fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or change the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. RiverSource Investments and its affiliates may have other relationships, including significant financial relationships, with current or potential subadvisers or their affiliates, which may create a conflict of interest. In making recommendations to the Board to appoint or to change a subadviser, or to change the terms of a subadvisory -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 PROSPECTUS 11P agreement, RiverSource Investments does not consider any other relationship it or its affiliates may have with a subadviser, and RiverSource Investments discloses the nature of any material relationships it has with a subadviser to the Board. The Fund pays RiverSource Investments a fee for managing its assets. Under the Investment Management Services Agreement (Agreement), the fee for the most recent fiscal year was 0.85% of the Fund's average daily net assets, including an adjustment under the terms of a performance incentive arrangement. The adjustment is computed by comparing the Fund's performance to the performance of the MSCI All Country World Index. In certain circumstances, the Fund's Board may approve a change in the index without shareholder approval. The maximum adjustment (increase or decrease) is 0.12% of the Fund's average net assets on an annual basis. Under the Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. A discussion regarding the basis for the Board approving the Agreement is available in the Fund's most recent annual or semiannual shareholder report. RiverSource Investments contracts with and compensates Threadneedle International Limited (Subadviser or Threadneedle) to manage the investment of the Fund's assets. RiverSource Investments monitors the compliance of Threadneedle with the investment objective and related policies of the Fund, reviews the performance of Threadneedle, and reports periodically to the Board. THREADNEEDLE Threadneedle, located at 60 St. Mary Axe, London EC3A 8JQ, England, is an affiliate of RiverSource Investments, and an indirect wholly-owned subsidiary of Ameriprise Financial, Inc. The portfolio managers who lead the team responsible for the day-to-day management of the Fund are: Stephen Thornber, Portfolio Manager - Head of global oil sector. - Managed the Fund since 2008. - Joined Threadneedle in 1993 as a fund manager. - Began investment career in 1987. - BA, Plymouth Polytechnic. Jeremy Podger, Deputy Portfolio Manager - Head of global equity team. - Deputy managed the Fund since 2008. - Joined Threadneedle in 2003 as a fund manager. - Began investment career in 1987. - BA, Cambridge University; MBA, London Business School. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. -------------------------------------------------------------------------------- 12P THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 PROSPECTUS FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). Total returns do not reflect payment of sales charges, if any, and are not annualized for periods of less than one year. The information has been derived from the financial statements audited by Ernst & Young LLP, whose report, along with the Fund's financial statements and financial highlights, is included in the annual report which, if not included with this prospectus, is available upon request.
YEAR ENDED OCT. 31, CLASS A ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $7.24 $9.96 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .30 .07 Net gains (losses) (both realized and unrealized) 1.14 (2.77) ---------------------------------------------------------------------- Total from investment operations 1.44 (2.70) ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.19) (.02) Tax return of capital -- (.00)(b) ---------------------------------------------------------------------- Total distributions (.19) (.02) ---------------------------------------------------------------------- Net asset value, end of period $8.49 $7.24 ---------------------------------------------------------------------- TOTAL RETURN 20.16% (27.12%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 2.35% 4.71%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.50% 1.45%(d) ---------------------------------------------------------------------- Net investment income (loss) 4.19% 3.78%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $21 $5 ---------------------------------------------------------------------- Portfolio turnover rate 45% 10% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 PROSPECTUS 13P
YEAR ENDED OCT. 31, CLASS B ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $7.24 $9.96 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .26 .06 Net gains (losses) (both realized and unrealized) 1.11 (2.76) ---------------------------------------------------------------------- Total from investment operations 1.37 (2.70) ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.14) (.02) Tax return of capital -- (.00)(b) ---------------------------------------------------------------------- Total distributions (.14) (.02) ---------------------------------------------------------------------- Net asset value, end of period $8.47 $7.24 ---------------------------------------------------------------------- TOTAL RETURN 19.14% (27.15%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 3.18% 5.48%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 2.26% 2.21%(d) ---------------------------------------------------------------------- Net investment income (loss) 3.64% 3.11%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $1 ---------------------------------------------------------------------- Portfolio turnover rate 45% 10% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 14P THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 PROSPECTUS
YEAR ENDED OCT. 31, CLASS C ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $7.24 $9.96 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .25 .07 Net gains (losses) (both realized and unrealized) 1.13 (2.77) ---------------------------------------------------------------------- Total from investment operations 1.38 (2.70) ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.15) (.02) Tax return of capital -- (.00)(b) ---------------------------------------------------------------------- Total distributions (.15) (.02) ---------------------------------------------------------------------- Net asset value, end of period $8.47 $7.24 ---------------------------------------------------------------------- TOTAL RETURN 19.21% (27.18%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 3.05% 5.15%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 2.25% 2.21%(d) ---------------------------------------------------------------------- Net investment income (loss) 3.44% 3.31%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 45% 10% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 PROSPECTUS 15P
YEAR ENDED OCT. 31, CLASS I ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $7.25 $9.96 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .33 .09 Net gains (losses) (both realized and unrealized) 1.13 (2.77) ---------------------------------------------------------------------- Total from investment operations 1.46 (2.68) ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.21) (.03) Tax return of capital -- (.00)(b) ---------------------------------------------------------------------- Total distributions (.21) (.03) ---------------------------------------------------------------------- Net asset value, end of period $8.50 $7.25 ---------------------------------------------------------------------- TOTAL RETURN 20.53% (27.00%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.88% 4.12%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.09% 1.07%(d) ---------------------------------------------------------------------- Net investment income (loss) 4.52% 3.95%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $4 $4 ---------------------------------------------------------------------- Portfolio turnover rate 45% 10% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 16P THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 PROSPECTUS
YEAR ENDED OCT. 31, CLASS R2 ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $7.25 $9.96 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .27 .07 Net gains (losses) (both realized and unrealized) 1.13 (2.77) ---------------------------------------------------------------------- Total from investment operations 1.40 (2.70) ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.16) (.01) Tax return of capital -- (.00)(b) ---------------------------------------------------------------------- Total distributions (.16) (.01) ---------------------------------------------------------------------- Net asset value, end of period $8.49 $7.25 ---------------------------------------------------------------------- TOTAL RETURN 19.63% (27.10%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 2.68% 4.92%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.83% 1.72%(d) ---------------------------------------------------------------------- Net investment income (loss) 3.78% 3.36%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 45% 10% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 PROSPECTUS 17P
YEAR ENDED OCT. 31, CLASS R3 ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $7.25 $9.96 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .29 .08 Net gains (losses) (both realized and unrealized) 1.14 (2.77) ---------------------------------------------------------------------- Total from investment operations 1.43 (2.69) ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.18) (.02) Tax return of capital -- (.00)(b) ---------------------------------------------------------------------- Total distributions (.18) (.02) ---------------------------------------------------------------------- Net asset value, end of period $8.50 $7.25 ---------------------------------------------------------------------- TOTAL RETURN 20.04% (27.07%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 2.43% 4.68%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.58% 1.47%(d) ---------------------------------------------------------------------- Net investment income (loss) 4.03% 3.61%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 45% 10% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 18P THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 PROSPECTUS
YEAR ENDED OCT. 31, CLASS R4 ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $7.25 $9.96 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .28 .08 Net gains (losses) (both realized and unrealized) 1.17 (2.77) ---------------------------------------------------------------------- Total from investment operations 1.45 (2.69) ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.20) (.02) Tax return of capital -- (.00)(b) ---------------------------------------------------------------------- Total distributions (.20) (.02) ---------------------------------------------------------------------- Net asset value, end of period $8.50 $7.25 ---------------------------------------------------------------------- TOTAL RETURN 20.26% (27.04%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 2.20% 4.42%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.33% 1.24%(d) ---------------------------------------------------------------------- Net investment income (loss) 4.02% 3.89%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 45% 10% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 PROSPECTUS 19P
YEAR ENDED OCT. 31, CLASS R5 ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $7.25 $9.96 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .32 .09 Net gains (losses) (both realized and unrealized) 1.14 (2.77) ---------------------------------------------------------------------- Total from investment operations 1.46 (2.68) ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.21) (.03) Tax return of capital -- (.00)(b) ---------------------------------------------------------------------- Total distributions (.21) (.03) ---------------------------------------------------------------------- Net asset value, end of period $8.50 $7.25 ---------------------------------------------------------------------- TOTAL RETURN 20.47% (27.00%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.93% 4.17%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.14% 1.12%(d) ---------------------------------------------------------------------- Net investment income (loss) 4.47% 3.91%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 45% 10% ----------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (b) Rounds to zero. (c) Expense ratios include the impact of a performance incentive adjustment, if any. 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 reported expense ratios. (d) Annualized. (e) 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. -------------------------------------------------------------------------------- 20P THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 PROSPECTUS RIVERSOURCE FAMILY OF FUNDS THE RIVERSOURCE FAMILY OF FUNDS (EACH INDIVIDUALLY A "FUND" AND, COLLECTIVELY, THE "FUNDS") INCLUDES "RIVERSOURCE" FUNDS, "RIVERSOURCE PARTNERS" FUNDS, "SELIGMAN" FUNDS AND "THREADNEEDLE" FUNDS. (THE RIVERSOURCE FUNDS, RIVERSOURCE PARTNERS FUNDS AND THREADNEEDLE FUNDS MAY BE COLLECTIVELY REFERRED TO AS THE "RIVERSOURCE FUNDS".) THE FUNDS SHARE THE SAME BOARD OF DIRECTORS/TRUSTEES (THE "BOARD") AND THE SAME POLICIES AND PROCEDURES INCLUDING THOSE SET FORTH IN THE SERVICE SECTION OF THIS PROSPECTUS. FOR EXAMPLE, FOR PURPOSES OF CALCULATING THE INITIAL SALES CHARGE ON THE PURCHASE OF CLASS A SHARES OF A FUND, AN INVESTOR OR FINANCIAL ADVISOR SHOULD CONSIDER THE COMBINED MARKET VALUE OF ALL FUNDS IN THE RIVERSOURCE FAMILY OF FUNDS OWNED BY THE INVESTOR AS DEFINED UNDER "INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA)." BUYING AND SELLING SHARES The funds are available directly and through broker-dealers, banks and other financial intermediaries or institutions (financial intermediaries), and through certain qualified and non-qualified plans, wrap fee products or other investment products sponsored by financial intermediaries. NOT ALL FINANCIAL INTERMEDIARIES OFFER THE FUNDS. FINANCIAL INTERMEDIARIES THAT OFFER THE FUNDS MAY CHARGE YOU ADDITIONAL FEES FOR THE SERVICES THEY PROVIDE AND THEY MAY HAVE DIFFERENT POLICIES NOT DESCRIBED IN THIS PROSPECTUS. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. Additionally, recordkeeping, transaction processing and payments of distributions relating to your account may be performed by the financial intermediaries through which your shares of the fund are held. Since the fund (and its service providers) may not have a record of your account transactions, you should always contact the financial intermediary through which you purchased or at which you maintain your shares of the fund to make changes to your account or to give instructions concerning your account, or to obtain information about your account. The fund and its service providers, including the distributor and the transfer agent, are not responsible for the failure of one of these financial intermediaries to carry out its obligations to its customers. -------------------------------------------------------------------------------- S.1 S-6400-9 DESCRIPTION OF SHARE CLASSES INVESTMENT OPTIONS -- CLASSES OF SHARES The funds offer different classes of shares. There are differences among the fees and expenses for each share class. See the "Fees and Expenses" table for more information. Not everyone is eligible to buy every share class. After determining which share classes you are eligible to buy, decide which share class best suits your needs. Your financial advisor can help you with this decision. The following table shows the key features of each share class. Not all funds offer all classes of shares. INVESTMENT OPTIONS SUMMARY
CONTINGENT DISTRIBUTION PLAN INITIAL DEFERRED SALES AND/OR ADMINISTRATION AVAILABILITY(a) SALES CHARGE CHARGE (CDSC) SERVICE FEE(b) SERVICES FEE -------------------------------------------------------------------------------------------------------------------------------- Class A Available to Yes. Payable at No.(c) Yes. No. all investors. time of purchase. 0.25%(g) Lower or no sales charge for larger investments. -------------------------------------------------------------------------------------------------------------------------------- Class B(d)(e)(f) Available to No. Entire Maximum 5% CDSC Yes. No. all investors. purchase price is during the first 1.00%(g) invested in shares year decreasing to of the fund. 0% after six years. -------------------------------------------------------------------------------------------------------------------------------- Class C(f) Available to No. Entire 1% CDSC may apply Yes. No. all investors. purchase price is if you sell shares 1.00%(g) invested in shares within one year of the fund. after purchase. -------------------------------------------------------------------------------------------------------------------------------- Class I Limited to No. No. No. No. qualifying institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R2 Limited to No. No. Yes. Yes. qualifying 0.50% 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R3 Limited to No. No. Yes. Yes. qualifying 0.25% 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R4 Limited to No. No. No. Yes. qualifying 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R5 Limited to No. No. No. No. qualifying institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class W Limited to No. No. Yes. No. qualifying 0.25%(g) discretionary managed accounts. --------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- S.2 INVESTMENT OPTIONS SUMMARY (CONTINUED)
CONTINGENT DISTRIBUTION PLAN INITIAL DEFERRED SALES AND/OR ADMINISTRATION AVAILABILITY(a) SALES CHARGE CHARGE (CDSC) SERVICE FEE(b) SERVICES FEE -------------------------------------------------------------------------------------------------------------------------------- Class Y Limited to No. No. No. Yes. qualifying 0.15% institutional investors. --------------------------------------------------------------------------------------------------------------------------------
(a) See "Buying and Selling Shares, Determining which class of shares to purchase" for more information on availability of share classes and eligible investors. See "Buying and Selling Shares, Opening an Account" for information on minimum investment and account balance requirements. (b) For each of Class A, Class B, Class C, Class R2, Class R3 and Class W shares, as applicable, each fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940, as amended, that allows it to pay distribution and shareholder servicing-related expenses for the sale of shares and the servicing of shareholders. This plan has been reviewed and approved by the Board. Because these fees are paid out of fund assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of distribution (sales) or servicing charges. (c) A 1% CDSC may be assessed on Class A shares sold within 18 months after purchase. See "Buying and Selling Shares, Sales Charges, Class A -- contingent deferred sales charge" for more information. For all funds except money market funds. (d) Class B shares automatically convert to Class A shares. See "Buying and Selling Shares, Sales Charges, Class B and Class C -- CDSC alternative" for more information on the timing of conversion of Class B shares to Class A shares. Timing of conversion will vary depending on the date of your original purchase of the Class B shares. (e) Class B shares of RiverSource Absolute Return Currency and Income Fund are only available for exchanges from Class B shares of another fund in the RiverSource Family of Funds. Class B shares of each of RiverSource Floating Rate Fund, RiverSource Inflation Protected Securities Fund, RiverSource Intermediate Tax-Exempt Fund, RiverSource Limited Duration Bond Fund and RiverSource Short Duration U.S. Government Fund are closed to new investors and new purchases. (Existing shareholders in these funds may continue to own Class B shares and make exchanges into and out of existing accounts where Class B shares of these funds are maintained.) (f) The money market funds may offer Class B and Class C shares, but only to facilitate exchanges with other funds offering Class B and Class C shares, respectively. (g) For RiverSource Cash Management Fund and RiverSource Tax-Exempt Money Market Fund, Class A is 0.10%. For RiverSource Cash Management Fund, Class B is 0.85%, Class C is 0.75% and Class W is 0.10%. DISTRIBUTION AND SERVICE FEES The distribution and shareholder servicing fees for Class A, Class B, Class C, Class R2, Class R3 and Class W shares, as applicable, are subject to the requirements of Rule 12b-1 under the Investment Company Act of 1940, as amended, and are used to reimburse the distributor for certain expenses it incurs in connection with distributing the fund's shares and directly or indirectly providing services to fund shareholders. These expenses include payment of distribution and/or shareholder servicing fees to financial intermediaries that sell shares of the fund or provide services to fund shareholders, up to 0.50% of the average daily net assets of Class R2 shares sold and held through them and up to 0.25%* of the average daily net assets of Class A, Class B, Class C, Class R3 and Class W shares sold and held through them. For Class A, Class B, Class R2, Class R3 and Class W shares, the distributor begins to pay these fees immediately after purchase. For Class C shares, the distributor pays these fees in advance for the first 12 months. Financial intermediaries also receive distribution fees up to 0.75% of the average daily net assets of Class C shares sold and held -------------------------------------------------------------------------------- S.3 through them, which the distributor begins to pay 12 months after purchase. For Class B shares, and, for the first 12 months following the sale of Class C shares, the fund's distributor retains the distribution fee of up to 0.75% in order to finance the payment of sales commissions to financial intermediaries, and to pay for other distribution related expenses. Financial intermediaries may compensate their financial advisors with the shareholder servicing and distribution fees paid to them by the distributor. IF YOU MAINTAIN SHARES OF THE FUND DIRECTLY WITH THE FUND, WITHOUT WORKING DIRECTLY WITH A FINANCIAL INTERMEDIARY OR FINANCIAL ADVISOR, DISTRIBUTION AND SERVICE FEES MAY BE RETAINED BY THE DISTRIBUTOR AS REIMBURSEMENT FOR INCURRING CERTAIN DISTRIBUTION AND SHAREHOLDER SERVICING RELATED EXPENSES. * For RiverSource Cash Management Fund, financial intermediaries receive fees up to 0.10% of the average daily net assets of Class A, Class B and Class W shares sold and held through them. PLAN ADMINISTRATION FEE Class R2, Class R3, Class R4 and Class Y shares pay an annual plan administration services fee for the provision of various administrative, recordkeeping, communication and educational services. The fee for Class R2, Class R3 and Class R4 shares is equal on an annual basis to 0.25% of average daily net assets attributable to the respective class. The fee for Class Y shares is equal on an annual basis to 0.15% of average daily net assets attributable to the class. DETERMINING WHICH CLASS OF SHARES TO PURCHASE Each of the fund's classes represent an interest in the same portfolio of investments. However, as set forth above, each class has its own sales charge schedule, and its ongoing distribution and shareholder service fees may differ from other classes. When deciding which class of shares to buy, you should consider, among other things: - The amount you plan to invest. - How long you intend to remain invested in the fund or another fund in the RiverSource Family of Funds. - Whether you may be eligible for reduced or no sales charges when you buy or sell shares. Your authorized financial intermediary or financial advisor will be able to help you decide which class of shares best meets your needs. -------------------------------------------------------------------------------- S.4 CLASS A, CLASS B AND CLASS C SHARES* Class B shares of RiverSource Absolute Return Currency and Income Fund are not currently available for new purchases. However, if you own Class B shares of another fund in the RiverSource Family of Funds, you may exchange into Class B shares of RiverSource Absolute Return Currency and Income Fund, if you meet the minimum investment and account balance requirements set forth in "Opening an Account," subject to the limitations set forth in this section. New purchases of Class B shares will not be permitted if your rights of accumulation are $50,000 or higher, and new purchases of Class C shares will not be permitted if your rights of accumulation are $1,000,000 or higher. See "Sales Charges, Initial Sales Charge -- Rights of Accumulation" for information on rights of accumulation. Class B shares have a higher annual distribution fee than Class A shares and a contingent deferred sales charge (CDSC) for six years. Class B shares convert to Class A shares. Class B shares purchased through reinvested dividends and distributions will convert to Class A shares in the same proportion as the other Class B shares. See "Class B and Class C -- CDSC alternative" for information on timing of Class B share conversion to Class A shares. Class C shares have a higher annual distribution fee than Class A shares and a CDSC for one year. Class C shares have no sales charge if you hold the shares for longer than one year. Unlike Class B shares, Class C shares do not convert to Class A shares. As a result, you will pay a distribution fee for as long as you hold Class C shares. If you choose a share class with a CDSC (Class B or Class C), you should consider the length of time you intend to hold your shares. To help you determine which investment is best for you, consult your financial intermediary or financial advisor. * For money market funds, new investments must be made in Class A shares of the fund. The money market funds offer Class B and Class C shares only to facilitate exchanges between classes of these shares in other funds. CLASS I SHARES. The following eligible investors may purchase Class I shares: - Any fund distributed by the distributor, if the fund seeks to achieve its investment objective by investing primarily in shares of funds in the RiverSource Family of Funds. Class I shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. CLASS R AND CLASS Y SHARES. The following eligible institutional investors may purchase Class R2, Class R3, Class R4, Class R5 and Class Y shares: -------------------------------------------------------------------------------- S.5 - Qualified employee benefit plans. - Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code. - Non-qualified deferred compensation plans whose participants are included in a qualified employee benefit plan described above. - State sponsored college savings plans established under Section 529 of the Internal Revenue Code. - Health Savings Accounts created pursuant to public law 108-173. Additionally, if approved by the distributor, the following eligible institutional investors may purchase Class R5 shares: - Institutional or corporate accounts above a threshold established by the distributor (currently $1 million per fund or $10 million in all funds in the RiverSource Family of Funds). - Bank trust departments. Class R and Class Y shares generally are not available to retail non-retirement accounts, traditional and Roth IRAs, Coverdell Educational Savings Accounts, SEPs, SARSEPs, SIMPLE IRAs and individual 403(b) plans. Class R shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. CLASS W SHARES. The following eligible investors may purchase Class W shares: - Investors purchasing through authorized investment programs managed by investment professionals, including discretionary managed account programs. Class W shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. Shares originally purchased in a discretionary managed account may continue to be held in Class W outside of a discretionary managed account, but no additional Class W purchases may be made and no exchanges to Class W shares of another fund may be made outside of a discretionary managed account. IN ADDITION, FOR CLASS I, CLASS R AND CLASS Y SHARES, THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY ACCEPT OR AUTHORIZE FINANCIAL INTERMEDIARIES TO ACCEPT INVESTMENTS FROM OTHER INSTITUTIONAL INVESTORS NOT LISTED ABOVE. IN ADDITION, FOR CLASS W SHARES, THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY ACCEPT OR AUTHORIZE FINANCIAL INTERMEDIARIES TO ACCEPT INVESTMENTS FROM OTHER INVESTORS NOT LISTED ABOVE. Please consult your financial advisor for assistance in selecting the appropriate class of shares. For more information, see the SAI. -------------------------------------------------------------------------------- S.6 SALES CHARGES FOR FUNDS OTHER THAN MONEY MARKET FUNDS CLASS A -- INITIAL SALES CHARGE ALTERNATIVE: Your purchase price for Class A shares is generally the net asset value (NAV) plus a front-end sales charge. The distributor receives the sales charge and re- allows a portion of the sales charge to the financial intermediary through which you purchased the shares. The distributor retains the balance of the sales charge. The distributor retains the full sales charge you pay when you purchase shares of the fund directly from the fund (not through an authorized financial intermediary). Sales charges vary depending on the amount of your purchase. INITIAL SALES CHARGE(A) FOR CLASS A SHARES For equity funds and funds-of-funds (equity)*
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 5.75% 6.10% 5.00% $50,000--$99,999 4.75 4.99 4.00 $100,000--$249,999 3.50 3.63 3.00 $250,000--$499,999 2.50 2.56 2.15 $500,000--$999,999 2.00 2.04 1.75 $1,000,000 or more 0.00 0.00 0.00(c),(d)
For fixed income funds except those listed below and funds-of-funds (fixed income)*
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 4.75% 4.99% 4.00% $50,000--$99,999 4.25 4.44 3.50 $100,000--$249,999 3.50 3.63 3.00 $250,000--$499,999 2.50 2.56 2.15 $500,000--$999,999 2.00 2.04 1.75 $1,000,000 or more 0.00 0.00 0.00(c),(d)
-------------------------------------------------------------------------------- S.7 For RiverSource Absolute Return Currency and Income Fund, RiverSource Floating Rate Fund, RiverSource Inflation Protected Securities Fund, RiverSource Intermediate Tax-Exempt Fund, RiverSource Limited Duration Bond Fund and RiverSource Short Duration U.S. Government Fund
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 3.00% 3.09% 2.50% $50,000--$99,999 3.00 3.09 2.50 $100,000--$249,999 2.50 2.56 2.15 $250,000--$499,999 2.00 2.04 1.75 $500,000--$999,999 1.50 1.52 1.25 $1,000,000 or more 0.00 0.00 0.00(c),(d)
* "Funds-of-funds (equity)" includes -- RiverSource Portfolio Builder Aggressive Fund, RiverSource Portfolio Builder Moderate Aggressive Fund, RiverSource Portfolio Builder Moderate Fund, RiverSource Portfolio Builder Total Equity Fund, RiverSource Retirement Plus 2010 Fund, RiverSource Retirement Plus 2015 Fund, RiverSource Retirement Plus 2020 Fund, RiverSource Retirement Plus 2025 Fund, RiverSource Retirement Plus 2030 Fund, RiverSource Retirement Plus 2035 Fund, RiverSource Retirement Plus 2040 Fund, RiverSource Retirement Plus 2045 Fund, Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025, Seligman TargETFund 2015 and Seligman TargETFund Core. "Funds-of-funds (fixed income)" includes -- RiverSource Income Builder Basic Income Fund, RiverSource Income Builder Enhanced Income Fund, RiverSource Income Builder Moderate Income Fund, RiverSource Portfolio Builder Conservative Fund and RiverSource Portfolio Builder Moderate Conservative Fund. (a) Because of rounding in the calculation of the offering price, the portion of the sales charge retained by the distributor may vary and the actual sales charge you pay may be more or less than the sales charge calculated using these percentages. (b) Purchase price includes the sales charge. (c) Although there is no sales charge for purchases with a total market value over $1,000,000, and therefore no re-allowance, the distributor may pay a financial intermediary the following out of its own resources: a sales commission of up to 1.00% for a sale of $1,000,000 to $3,999,999; a sales commission up to 0.50% for a sale of $4,000,000 to $49,999,999; and a sales commission up to 0.25% for a sale of $50,000,000 or more. (d) For certain eligible employee benefit plans defined under section 401(a), 401(k), 457 and 403(b) which meet eligibility rules for the waiver of applicable sales charges, the distributor may pay the following out of its own resources: a sales commission of 1.00% for a sale of $1 to $3,999,999 received in eligible employee benefit plans; a sales commission up to 0.50% for a sale of $4,000,000 to $49,999,999; and a sales commission up to 0.25% for a sale of $50,000,000 or more. See "Initial Sales Charge -- Waivers of the sales charge for Class A shares" for employee benefit plan eligibility rules. There is no initial sales charge on reinvested dividends or capital gain distributions. INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA). You may be able to reduce the sales charge on Class A shares, based on the combined market value of accounts in your ROA group. Your ROA group includes the current market values of the following investments which are eligible to be added together for purposes of determining the sales charge on your next purchase: - Your current investment in a fund; and -------------------------------------------------------------------------------- S.8 - Previous investments you and members of your household have made in Class A, Class B or Class C shares in the fund and other funds in the RiverSource Family of Funds, provided your investment was subject to a sales charge. Your household consists of you, your spouse or domestic partner and your unmarried children under age 21, all of whom share a mailing address. The following accounts are eligible to be included in your ROA group in order to determine the sales charge on your purchase: - Individual or joint accounts; - Roth and traditional IRAs, SEPs, SIMPLEs and TSCAs, provided they are invested in Class A, Class B or Class C shares that were subject to a sales charge; - UGMA/UTMA accounts for which you, your spouse, or your domestic partner is parent or guardian of the minor child; - Revocable trust accounts for which you or a member of your household, individually, is the beneficial owner/grantor; - Accounts held in the name of your, your spouse's, or your domestic partner's sole proprietorship or single owner limited liability company or S corporation; and - Qualified retirement plan assets, provided that you are the sole owner of the business sponsoring the plan, are the sole participant (other than a spouse) in the plan, and have no intention of adding participants to the plan. The following accounts are NOT eligible to be included in your ROA group in order to determine the sales charge on your purchase: - Accounts of pension and retirement plans with multiple participants, such as 401(k) plans (which are combined to reduce the sales charge for the entire pension or retirement plan and therefore are not used to reduce the sales charge for your individual accounts); - Investments in Class A shares where the sales charge is waived, for example, purchases through wrap accounts; - Investments in Class I, Class R2, Class R3, Class R4, Class R5, Class W or Class Y shares; - Investments in 529 plans, donor advised funds, variable annuities, variable life insurance products, wrap accounts or managed separate accounts; and - Charitable and irrevocable trust accounts. If you purchase fund shares through different financial intermediaries, and you want to include those assets toward a reduced sales charge, you must inform your financial intermediary in writing about the other accounts when placing your purchase order. Contact your financial intermediary to determine what information is required. -------------------------------------------------------------------------------- S.9 Unless you provide your financial intermediary in writing with information about all of the accounts that may count toward a sales charge reduction, there can be no assurance that you will receive all of the reductions for which you may be eligible. You should request that your financial intermediary provide this information to the fund when placing your purchase order. For more information on ROA, please see the SAI. INITIAL SALES CHARGE -- LETTER OF INTENT (LOI). Generally, if you intend to invest $50,000 or more (including any existing ROA) over a period of up to 13 months, you may be able to reduce the front-end sales charge(s) for investments in Class A shares by completing and filing an LOI. The required form of LOI may vary by financial intermediary. Existing ROA can be included in your LOI. Each purchase of fund shares normally subject to an initial sales charge made during the 13-month period will be made at the public offering price applicable to a single transaction of the total dollar amount indicated by the LOI. Five percent of the commitment amount will be placed in escrow. At the end of the 13-month period, the LOI will end and the shares will be released from escrow. If you do not invest the commitment amount by the end of the 13 months, the remaining amount of the unpaid sales charge will be redeemed from the escrowed shares and the remaining balance released from escrow. Existing ROA Example. Shareholder currently has $60,000 ROA in the funds. Shareholder completes an LOI to invest $100,000 in the funds (ROA eligible accounts). Shareholder only needs to invest an additional $40,000 in the funds' Class A shares (any non-money market fund in the RiverSource Family of Funds) in order to fulfill the LOI commitment and receive reduced front-end sales charge(s) over the next 13 months. Notification Obligation. You must request the reduced sales charge when you buy shares. If you do not complete and file an LOI, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge. You should request that your financial intermediary provide this information to the fund when placing your purchase order. For more detail on LOIs, please contact your financial intermediary or see the SAI. INITIAL SALES CHARGE -- WAIVERS OF THE SALES CHARGE FOR CLASS A SHARES. Sales charges do not apply to: - current or retired Board members, officers or employees of the funds or RiverSource Investments or its affiliates, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - current or retired Ameriprise Financial Services, Inc. financial advisors, employees of financial advisors, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. -------------------------------------------------------------------------------- S.10 - registered representatives and other employees of affiliated or unaffiliated financial intermediaries having a selling agreement with the distributor, including their spouses, domestic partners, children, parents and their spouse's or domestic partner's parents. - portfolio managers employed by subadvisers of the funds, including their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - partners and employees of outside legal counsel to the funds or the funds' directors or trustees who regularly provide advice and services to the funds, or to their directors or trustees. - direct rollovers from qualified employee benefit plans, provided that the rollover involves a transfer to Class A shares in the same fund. - purchases made: - with dividend or capital gain distributions from a fund or from the same class of another fund in the RiverSource Family of Funds; - through or under a wrap fee product or other investment product sponsored by a financial intermediary that charges an account management fee that has, or that clear trades through a financial intermediary that has, a selling agreement with the distributor; - through state sponsored college savings plans established under Section 529 of the Internal Revenue Code; or - through bank trust departments. - separate accounts established and maintained by an insurance company which are exempt from registration under Section 3(c)(11). - purchases made through "employee benefit plans" created under section 401(a), 401(k), 457 and 403(b) which: - have at least $1 million in plan assets at the time of investment; and - have a plan level or omnibus account that is maintained with the fund or its transfer agent; and - transact directly with the fund or its transfer agent through a third party administrator or third party recordkeeper. For more information regarding waivers of sales charge for Class A purchases, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of sales charges for additional classes of investors. Policies related to reducing or waiving the sales charge may be modified or withdrawn at any time. -------------------------------------------------------------------------------- S.11 Unless you provide your financial intermediary with information in writing about all of the factors that may count toward a waiver of the sales charge, there can be no assurance that you will receive all of the waivers for which you may be eligible. You should request that your financial intermediary provide this information to the fund when placing your purchase order. Because the current prospectus is available on the funds' website (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com free of charge, information regarding breakpoint discounts is not separately disclosed on the website. CDSCS AND THE COMBINATION OF TARGET DATE FUNDS WITH SELIGMAN TARGETFUND CORE. Each of Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025 and Seligman TargETFund 2015 (the Target Date Funds) will automatically be combined with Seligman TargETFund Core during their respective target year. The investment manager expects each of these combinations to be effected as an acquisition of the assets and liabilities of the applicable Target Date Fund in exchange for shares of Seligman TargETFund Core at net asset value, with the shares of Seligman TargETFund Core then distributed to shareholders of the applicable Target Date Fund. For the purpose of calculating CDSCs, holding periods in respect of shares of a Target Date Fund will be carried over to shares of Seligman TargETFund Core acquired as a result of the combination of a Target Date Fund with Seligman TargETFund Core. CLASS A -- CONTINGENT DEFERRED SALES CHARGE For Class A shares purchased without a sales charge where a commission was separately paid by the distributor to an authorized financial intermediary effecting the purchase, a 1% CDSC may be charged if you sell your shares within 18 months after purchase. A CDSC will be based on the original purchase cost or the current market value of the shares being sold, whichever is less. CDSC -- WAIVERS OF THE CDSC FOR CLASS A SHARES. The CDSC will be waived on sales of shares: - to which no sales commission or transaction fee was paid to an authorized financial intermediary at the time of purchase. - purchased through reinvestment of dividends and capital gain distributions. - in the event of the shareholder's death. - from a monthly, quarterly or annual systematic redemption plan of up to an annual amount of 12% of the account value on a per fund basis. - in an account that has been closed because it falls below the minimum account balance. - that result from required minimum distributions taken from retirement accounts upon the shareholders attainment of age 70 1/2. -------------------------------------------------------------------------------- S.12 - that result from returns of excess contributions or excess deferral amounts made to a retirement plan participant. - of RiverSource funds purchased prior to Dec. 1, 2008. - initially purchased by an employee benefit plan that is not connected with a plan level termination. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. CLASS B AND CLASS C -- CDSC ALTERNATIVE The money market funds (except RiverSource Tax-Exempt Money Market Fund) offer Class B and Class C shares, but only to facilitate exchanges with other funds offering Class B and Class C shares, respectively. For example, if you own Class B or Class C shares of another fund, but want to hold your money in a money market fund, you may exchange into Class B or Class C shares of a money market fund. Funds that offer Class B and Class C shares have limitations on the amount you may invest in those share classes. If you are considering purchasing Class B or Class C shares of a fund, please see the prospectus for that fund for any effective purchase limitations. Although you may not purchase Class B and Class C shares of the money market funds directly, if you exchange into Class B or Class C shares of a money market fund from another fund, you will be subject to the rules governing CDSC set forth in this section. To minimize the amount of CDSC you may pay when you sell your shares, the fund assumes that shares acquired through reinvested dividends and capital gain distributions (which are not subject to CDSC) are sold first. Shares that have been in your account long enough so that they are not subject to a CDSC are sold next. After these shares are exhausted, shares will be sold in the order they were purchased (earliest to latest). -------------------------------------------------------------------------------- S.13 FOR CLASS B, the CDSC is based on the sale amount and the number of years between purchase and sale. The following table shows how CDSC percentages on sales decline over time:
IF THE SALE IS MADE DURING THE: THE CDSC PERCENTAGE RATE IS:* First year 5% Second year 4% Third year 3%** Fourth year 3% Fifth year 2% Sixth year 1% Seventh or eighth year 0%
* Because of rounding in the calculation, the portion of the CDSC retained by the distributor may vary and the actual CDSC you pay may be more or less than the CDSC calculated using these percentages. ** For shares purchased in a RiverSource fund on or prior to June 12, 2009, the CDSC percentage for the third year is 4%. Although there is no front-end sales charge when you buy Class B shares, the distributor pays a sales commission of 4% to financial intermediaries that sell Class B shares. A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class B shares. You may not make additional purchases of Class B shares if your ROA exceeds $49,999.99. Class B shares purchased in a RiverSource fund prior to May 21, 2005 age on a calendar year basis. Class B shares purchases made in a RiverSource fund beginning May 21, 2005 age on a daily basis. For example, a purchase made on Nov. 12, 2004 completed its first year on Dec. 31, 2004 under calendar year aging. However, a purchase made on Nov. 12, 2005 completed its first year on Nov. 11, 2006 under daily aging. Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund on or prior to June 12, 2009 will convert to Class A shares in the month prior to the ninth year of ownership. Class B shares purchased in a RiverSource fund beginning May 21, 2005 and Class B shares purchased in a Seligman fund beginning June 13, 2009 will convert to Class A shares one month after the completion of the eighth year of ownership. -------------------------------------------------------------------------------- S.14 FOR CLASS C, a 1% CDSC may be charged if you sell your shares within one year after purchase. Although there is no front-end sales charge when you buy Class C shares, the distributor pays a total amount up to 1% (including sales commission and advance of service fees) to financial intermediaries that sell Class C shares. See "Buying and Selling Shares -- Distribution and Service Fees." A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class C shares. You may not make additional purchases of Class C shares if your ROA exceeds $999,999.99. For both Class B and Class C shares, the amount of any CDSC you pay will be based on the lower of the original purchase price of those shares or current net asset value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you do not have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. EXAMPLE Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3 1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase. CDSC -- WAIVERS OF THE CDSC FOR CLASS B SHARES. The CDSC will be waived on sales of shares: - in the event of the shareholder's death. - that result from required minimum distributions taken from retirement accounts upon the shareholders' attainment of age 70 1/2. - sold under an approved substantially equal periodic payment arrangement. - by certain other investors, including certain institutions as set forth in more detail in the SAI. For more information regarding waivers of the CDSC for Class B shares, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. -------------------------------------------------------------------------------- S.15 CDSC -- WAIVERS OF THE CDSC FOR CLASS C SHARES. The CDSC will be waived on sales of shares: - in the event of the shareholder's death. - to which no sales commission or transaction fee was paid to an authorized financial intermediary at the time of purchase. - that result from required minimum distributions taken from retirement accounts upon the shareholders' attainment of age 70 1/2. - initially purchased by an eligible employee benefit plan that are not connected with a plan level termination. - by certain other investors, including certain institutions as set forth in more detail in the SAI. For more information regarding waivers of the CDSC for Class C shares, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. CLASS I, CLASS R2, CLASS R3, CLASS R4, CLASS R5, CLASS W AND CLASS Y -- NO SALES CHARGE. For each of Class I, Class R2, Class R3, Class R4, Class R5 and Class W there is no initial sales charge or CDSC. OPENING AN ACCOUNT Financial institutions are required by law to obtain certain personal information from each person who opens an account in order to verify the identity of the person. As a result, when you open an account you will be asked to provide your name, permanent street address, date of birth, and Social Security or Employer Identification number. You may also be asked for other identifying documents or information. If you do not provide this information, the fund or the financial intermediary through which you are investing in the fund may not be able to open an account for you. If the fund or the financial intermediary through which you are investing in the fund is unable to verify your identity, your account may be closed, or other steps may be taken, as deemed appropriate. When you buy shares, your order will be priced at the next NAV calculated after your order is accepted by the fund or an authorized financial intermediary. Any applicable sales charge will be added to the purchase price for Class A shares. You may establish and maintain your account with an authorized financial intermediary or directly with the fund. The fund may appoint servicing agents to accept purchase orders and to accept exchange (and sale) orders on its behalf. Accounts established with the fund will be supported by the fund's transfer agent. -------------------------------------------------------------------------------- S.16 METHODS OF PURCHASING SHARES These methods of purchasing shares generally apply to Class A, Class B, and Class C shares. CLASS B SHARES OF RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND IS CURRENTLY CLOSED TO INVESTORS FOR NEW PURCHASES. CLASS B SHARES FOR RIVERSOURCE FLOATING RATE FUND, RIVERSOURCE INFLATION PROTECTED SECURITIES FUND, RIVERSOURCE INTERMEDIATE TAX-EXEMPT FUND, RIVERSOURCE LIMITED DURATION BOND FUND AND RIVERSOURCE SHORT DURATION U.S. GOVERNMENT FUND ARE CLOSED TO NEW INVESTORS AND NEW PURCHASES. EXISTING SHAREHOLDERS IN THESE FUNDS MAY CONTINUE TO OWN CLASS B SHARES AND MAKE EXCHANGES INTO AND OUT OF EXISTING ACCOUNTS WHERE CLASS B SHARES OF THESE FUNDS ARE MAINTAINED. ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INTERMEDIARY ALL REQUESTS The financial intermediary through which you buy shares may have different policies not described in this prospectus, including different minimum investment amounts and minimum account balances. -------------------------------------------------------------------------------- ACCOUNT ESTABLISHED WITH THE FUND BY MAIL You or the financial intermediary through which you buy shares may establish an account with the fund. To establish an account in this fashion, complete a fund account application with your financial advisor or investment professional, and mail the account application to the address below. Account applications may be obtained (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com or may be requested by calling (800) 221-2450. Make your check payable to the fund. The fund does not accept cash, credit card convenience checks, money orders, traveler's checks, starter checks, third or fourth party checks, or other cash equivalents. ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.17 METHODS OF PURCHASING SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) Mail your check and completed application to: REGULAR MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL P.O. BOX 8041 BOSTON, MA 02266-8041 EXPRESS MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL 30 DAN ROAD CANTON, MA 02021-2809 If you already have an account, include your name, account number, and the name of the fund and class of shares you wish to purchase along with your check. You can make scheduled investments in the fund by moving money from your checking account or savings account. See the Minimum Investment and Account Balance chart below for more information regarding scheduled investment plans. -------------------------------------------------------------------------------- BY WIRE OR ACH Fund shares purchased in an account established and maintained with the fund may be paid for by federal funds wire. Before sending a wire, call (800) 221-2450 to notify the fund's transfer agent of the wire and to receive further instructions. If you are establishing an account with a wire purchase, you are required to send a signed account application to the address above. Please include the wire control number or your new account number on the application. Your bank or financial intermediary may charge additional fees for wire transactions. -------------------------------------------------------------------------------- BY EXCHANGE Call (800) 221-2450 or send signed written instructions to the address above. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.18 METHODS OF PURCHASING SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) MINIMUM INVESTMENT AND ACCOUNT BALANCE
RIVERSOURCE RIVERSOURCE 120/20 DISCIPLINED CONTRARIAN SMALL CAP EQUITY FUND VALUE FUND THREADNEEDLE RIVERSOURCE FOR ALL FUNDS, GLOBAL EXTENDED FLOATING RATE CLASSES AND ALPHA FUND FUND ACCOUNTS EXCEPT RIVERSOURCE RIVERSOURCE THOSE LISTED TO ABSOLUTE RETURN INFLATION THE RIGHT TAX QUALIFIED CURRENCY AND PROTECTED (NONQUALIFIED) ACCOUNTS INCOME FUND SECURITIES FUND CLASS W --------------------------------------------------------------------------------------------------------------- INITIAL INVESTMENT $2,000 $1,000 $10,000 $5,000 $500 --------------------------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $100 $100 $100 None --------------------------------------------------------------------------------------------------------------- ACCOUNT BALANCE* $1,000 None $5,000 $2,500 $500
*If your fund account balance falls below the minimum account balance for any reason, including a market decline, you may be asked to increase it to the minimum account balance or establish a scheduled investment plan. If you do not do so within 30 days, your shares may be automatically redeemed and the proceeds mailed to you. ------------------------------------------------------------------------------- MINIMUM INVESTMENT AND ACCOUNT BALANCE -- SCHEDULED INVESTMENT PLANS
RIVERSOURCE RIVERSOURCE 120/20 DISCIPLINED CONTRARIAN SMALL CAP EQUITY FUND VALUE FUND THREADNEEDLE RIVERSOURCE FOR ALL FUNDS, GLOBAL EXTENDED FLOATING RATE CLASSES AND ALPHA FUND FUND ACCOUNTS EXCEPT RIVERSOURCE RIVERSOURCE THOSE LISTED TO ABSOLUTE RETURN INFLATION THE RIGHT TAX QUALIFIED CURRENCY AND PROTECTED (NONQUALIFIED) ACCOUNTS INCOME FUND SECURITIES FUND CLASS W --------------------------------------------------------------------------------------------------------------- INITIAL INVESTMENT $100(a) $100(b) $10,000 $5,000 $500 --------------------------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $50 $100 $100 None --------------------------------------------------------------------------------------------------------------- ACCOUNT BALANCE** None(b) None $5,000 $2,500 $500
**If your fund account balance is below the minimum initial investment described above, you must make payments at least monthly. (a)Money Market Funds -- $2,000 (b)Money Market Funds -- $1,000 ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.19 These minimums may be waived for accounts that are managed by an investment professional, for accounts held in approved discretionary or non-discretionary wrap programs, for accounts that are a part of an employer-sponsored retirement plan, or for other account types if approved by the distributor. The fund reserves the right to modify its minimum account requirements at any time, with or without prior notice. Please contact your financial intermediary for information regarding wire or electronic funds transfer. IMPORTANT: Payments sent by electronic fund transfers (ACH), a bank authorization or check that are not guaranteed may take up to 14 days to clear. If you request a sale within 14 days of purchase, this may cause your sale request to fail to process if the requested amount includes unguaranteed funds. EXCHANGING OR SELLING SHARES You may exchange or sell shares by having your financial intermediary process your transaction. If you maintain your account directly with your financial intermediary, you must contact that financial intermediary to exchange or sell shares of the fund. If your account was established with the fund, there are a variety of methods you may use to exchange or sell shares of the fund. WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INTERMEDIARY ALL REQUESTS You can exchange or sell shares by having your financial intermediary process your transaction. The financial intermediary through which you purchased shares may have different policies not described in this prospectus, including different transaction limits, exchange policies and sale procedures. -------------------------------------------------------------------------------- ACCOUNT ESTABLISHED WITH THE FUND BY MAIL Mail your exchange or sale request to: REGULAR MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL P.O. BOX 8041 BOSTON, MA 02266-8041 EXPRESS MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL 30 DAN ROAD CANTON, MA 02021-2809 ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.20 WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) Include in your letter: - your name - the name of the fund(s) - your account number - the class of shares to be exchanged or sold - your Social Security number or Employer Identification number - the dollar amount or number of shares you want to exchange or sell - specific instructions regarding delivery or exchange destination - signature(s) of registered account owner(s) - any special documents the transfer agent may require in order to process your order Corporate, trust or partnership accounts may need to send additional documents. Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners. A Medallion Signature Guarantee is required if: - Amount is over $50,000. - You want your check made payable to someone other than the registered account owner(s). - Your address of record has changed within the last 30 days. - You want the check mailed to an address other than the address of record. - You want the proceeds sent to a bank account not on file. - You are the beneficiary of the account and the account owner is deceased (additional documents may be required). A Medallion Signature Guarantee assures that a signature is genuine and not a forgery. The financial intermediary providing the Guarantee is financially liable for the transaction if the signature is a forgery. Eligible guarantors include commercial banks, trust companies, savings associations, and credit unions as defined by the Federal Deposit Insurance Act. Note: A guarantee from a notary public is not acceptable. ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.21 WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) NOTE: Any express mail delivery charges you pay will vary depending on domestic or international delivery instructions. -------------------------------------------------------------------------------- BY TELEPHONE Call (800) 221-2450. Unless you elect not to have telephone exchange and sale privileges, they will automatically be available to you. Reasonable procedures will be used to confirm authenticity of telephone exchange or sale requests. Telephone privileges may be modified or discontinued at any time. Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate, qualified retirement accounts and trust accounts which the current trustee is not listed. You may request that these privileges NOT apply by writing to the address above. Payment will be mailed to the address of record and made payable to the names listed on the account. Telephone sale requests are limited to $50,000 per day. -------------------------------------------------------------------------------- BY WIRE OR ACH You can wire money from your fund account to your bank account. Make sure we have your bank account information on file. If we do not have this information, you will need to send written instructions with your bank's name and a voided check or savings account deposit slip. Call (800) 221-2450 or send a letter of instruction, with a Medallion Signature Guarantee if required, to the address above. A service fee may be charged against your account for each wire sent. Minimum amount: by ACH: $100 by wire: $500 Your bank or financial intermediary may charge additional fees for wire transactions. -------------------------------------------------------------------------------- BY SCHEDULED You may elect to receive regular periodic payments through an PAYOUT PLAN automatic sale of shares. See the SAI for more information. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.22 CHECK REDEMPTION SERVICE Class A shares of the money market funds offer check writing privileges. If you have $2000 in a money market fund, you may request checks which may be drawn against your account. You can elect this service on your initial application, or, thereafter. Call (800) 221-2450 for the appropriate forms to establish this service. If you own Class A shares that were both in another fund at NAV because of the size of the purchase, and then exchanged into a money market fund, check redemptions may be subject to a CDSC. EXCHANGES Generally, you may exchange your fund shares for shares of the same class of any other publicly offered fund in the RiverSource Family of Funds without a sales charge. For complete information on the fund you are exchanging into, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after your transaction request is received in good order. You may be subject to a sales charge if you exchange from a money market fund into an equity or fixed income fund. IF YOU HOLD YOUR FUND SHARES IN AN ACCOUNT WITH AMERIPRISE FINANCIAL SERVICES, YOU MAY HAVE LIMITED EXCHANGEABILITY WITHIN THE RIVERSOURCE FAMILY OF FUNDS. MARKET TIMING SHORT-TERM TRADING AND OTHER SO-CALLED MARKET TIMING PRACTICES ARE FREQUENT TRADING PRACTICES BY CERTAIN SHAREHOLDERS INTENDED TO PROFIT AT THE EXPENSE OF OTHER SHAREHOLDERS BY SELLING SHARES OF A FUND SHORTLY AFTER PURCHASE. MARKET TIMING MAY ADVERSELY IMPACT A FUND'S PERFORMANCE BY PREVENTING THE INVESTMENT MANAGER FROM FULLY INVESTING THE ASSETS OF THE FUND, DILUTING THE VALUE OF SHARES HELD BY LONG-TERM SHAREHOLDERS, OR INCREASING THE FUND'S TRANSACTION COSTS. -------------------------------------------------------------------------------- S.23 FOR A FUND ORGANIZED AS A FUND-OF-FUNDS, ITS ASSETS CONSIST PRIMARILY OF SHARES OF THE UNDERLYING FUNDS IN WHICH IT INVESTS. THE UNDERLYING FUNDS MAY BE MORE SUSCEPTIBLE TO THE RISKS OF MARKET TIMING. FUNDS THAT INVEST DIRECTLY IN SECURITIES THAT TRADE INFREQUENTLY MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF INEFFICIENCIES IN THE SECURITIES MARKETS. FUNDS AND THE UNDERLYING FUNDS THAT INVEST IN SECURITIES THAT TRADE ON OVERSEAS SECURITIES MARKETS MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF CHANGES IN THE VALUES OF SECURITIES BETWEEN THE CLOSE OF OVERSEAS MARKETS AND THE CLOSE OF U.S. MARKETS, WHICH IS GENERALLY THE TIME AT WHICH A FUND'S NAV IS CALCULATED. TO THE EXTENT THAT A FUND OR UNDERLYING FUND HAS SIGNIFICANT HOLDINGS OF SMALL CAP STOCKS, FLOATING RATE LOANS, HIGH YIELD BONDS, TAX-EXEMPT SECURITIES OR FOREIGN SECURITIES, THE RISKS OF MARKET TIMING MAY BE GREATER FOR THE FUND THAN FOR OTHER FUNDS. SEE "PRINCIPAL INVESTMENT STRATEGIES" FOR A DISCUSSION OF THE TYPES OF SECURITIES IN WHICH YOUR FUND INVESTS. SEE "PRICING AND VALUING OF FUND SHARES" FOR A DISCUSSION OF THE FUNDS' POLICY ON FAIR VALUE PRICING, WHICH IS INTENDED, IN PART, TO REDUCE THE FREQUENCY AND EFFECT OF MARKET TIMING. THE FUNDS' BOARD HAS ADOPTED A POLICY THAT IS DESIGNED TO DETECT AND DETER MARKET TIMING THAT MAY BE HARMFUL TO THE FUNDS. EACH FUND SEEKS TO ENFORCE THIS POLICY THROUGH ITS SERVICE PROVIDERS AS FOLLOWS: - The fund tries to distinguish market timing from trading that it believes is not harmful, such as periodic rebalancing for purposes of asset allocation or dollar cost averaging or other purchase and exchange transactions not believed to be inconsistent with the best interest of fund shareholders or the Board's policy. The fund uses a variety of techniques to monitor for and detect abusive trading practices. These techniques may vary depending on the type of fund, the class of shares and where the shares are maintained. Under the fund's procedures, there is no set number of transactions in the fund that constitutes market timing. Even one purchase and subsequent sale by related accounts may be market timing. Generally, the fund seeks to restrict the exchange privilege of an investor who makes more than three exchanges into or out of the fund in any 90-day period. Accounts held by a retirement plan or a financial intermediary for the benefit of its participants or clients, which typically engage in daily transactions, are not subject to this limit, although the fund may seek the assistance of financial intermediaries in applying similar restrictions on their participants or clients. The fund's ability to monitor and discourage abusive trading practices in omnibus accounts is more limited. - The fund may rely on the monitoring policy of a financial intermediary, for example, a retirement plan administrator or similar financial intermediary authorized to distribute the funds, if it determines the policy and procedures of such financial intermediaries are sufficient to protect the fund and its shareholders. -------------------------------------------------------------------------------- S.24 - If an investor's trading activity is determined to be market timing or otherwise harmful to existing shareholders, the fund reserves the right to modify or discontinue the investor's exchange privilege or reject the investor's purchases or exchanges, including purchases or exchanges accepted by a financial intermediary. The fund may treat accounts it believes to be under common control as a single account for these purposes, although it may not be able to identify all such accounts. - Although the fund does not knowingly permit market timing, it cannot guarantee that it will be able to identify and restrict all short-term trading activity. The fund receives purchase and sale orders through financial intermediaries where market timing activity may not always be successfully detected. Other exchange policies: - Exchanges must be made into the same class of shares of the share class being exchanged out of. - Exchanges into RiverSource Tax-Exempt Money Market Fund may be made only from Class A shares. - If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. - Once the fund receives your exchange request, you cannot cancel it after the market closes. - Shares of the purchased fund may not be used on the same day for another exchange or sale. - New investments in Class A shares of a money market fund may be exchanged for either Class A, Class B or Class C shares of any other publicly offered fund in the RiverSource Family of Funds. - If you exchange shares from Class A shares of a money market fund to another fund in the RiverSource Family of Funds, any further exchanges must be between shares of the same class. For example, if you exchange from Class A shares of a money market fund into Class B shares of another fund in the RiverSource Family of Funds, you may not exchange from Class B shares of that fund back to Class A shares of a money market fund. Exchange rules for money market funds are illustrated in the following tables. - Shares of Class W originally purchased, but no longer held in a discretionary managed account, may not be exchanged for Class W shares of another fund. You may continue to hold these shares in the fund. Changing your investment to a different fund will be treated as a sale and purchase, and you will be subject to applicable taxes on the sale and sales charges on the purchase of the new fund. -------------------------------------------------------------------------------- S.25 - If your shares are subject to a CDSC, you will not be charged a CDSC upon the exchange of those shares. Any CDSC will be deducted when you sell the shares you received from the exchange. The CDSC imposed at that time will be based on the period that begins when you bought shares of the original fund and ends when you sell the shares of the fund you exchanged to.
TO OTHER FUNDS FROM A MONEY MARKET FUND ----------------------------- CLASS A CLASS B CLASS C -------------------------------------------------------------------- Class A Yes Yes Yes Class B No Yes No Class C No No Yes
TO A MONEY MARKET FUND FROM OTHER FUNDS ----------------------------- CLASS A CLASS B CLASS C -------------------------------------------------------------------- Class A Yes No No Class B No Yes No Class C No No Yes
If your initial investment was in a money market fund and you exchange into an equity or fixed income fund, you will pay an initial sales charge if you exchange into Class A and be subject to a CDSC if you exchange into Class B or Class C. If your initial investment was in Class A shares of an equity or fixed income fund and you exchange shares into a money market fund, you may exchange that amount to another fund, including dividends earned on that amount, without paying a sales charge. SELLING SHARES You may sell your shares at any time. The payment will be sent within seven days after your request is received in good order. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order, minus any applicable CDSC. REPURCHASES. You can change your mind after requesting a sale of shares and use all or part of the sale proceeds to purchase new shares of a fund in the RiverSource Family of Funds. If your original purchase was in Class A or Class B, you may use all or part of the sale proceeds to purchase new Class A shares in any fund account linked together for ROA purposes. Your repurchase will be in Class A shares at NAV, up to the amount of the sale proceeds. For a Class A repurchase on shares that were originally charged a CDSC, the amount of the CDSC will be reinvested at the NAV on the date the repurchase is processed. Repurchases of Class B shares will also be in Class A shares at NAV. Any CDSC paid upon redemption of your Class B shares will not be reimbursed. If your original purchase was in Class C, you will be allowed to reinvest in the -------------------------------------------------------------------------------- S.26 same Class C account and fund you originally purchased. In a Class C repurchase, the CDSC you paid will be reinvested and the shares will be deemed to have the original cost and purchase date for purposes of applying the CDSC (if any) to subsequent redemptions. Systematic withdrawals and purchases will be excluded from this policy. In order for you to take advantage of this repurchase waiver, you must notify your financial intermediary or the fund's transfer agent if your account is held at the fund within 90 days of the date your sale request was processed. Contact your financial intermediary for information on required documentation. The repurchase privilege may be modified or discontinued at any time and use of this option may have tax consequences. If you sold shares of a Seligman fund on or before February 3, 2009 and wish to repurchase shares, you have the option of taking advantage of the current repurchase policy (described above) within 90 days of the date your sale request was processed, or you may use all or part of your sale proceeds to purchase shares of the fund you sold or any other fund in the RiverSource Family of Funds without paying an initial sales charge or, if you paid a CDSC when you sold your shares, receiving a credit for the applicable CDSC, within 120 days of the date your sale request was processed. Contact your financial intermediary or, if you opened an account directly with the fund, the transfer agent, for more information on the required documentation to complete a repurchase transaction. The fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. PRICING AND VALUING OF FUND SHARES For classes of shares sold with an initial sales charge, the public offering or purchase price is the net asset value plus the sales charge. For funds or classes of shares sold without an initial sales charge, the public offering price is the NAV. Orders in good form are priced at the NAV next determined after you place your order. Good form or good order means that your instructions have been received in the form required by the fund. This may include, for example, providing the fund name and account number, the amount of the transaction and all required signatures. The NAV is the value of a single share of the fund. The NAV is determined by dividing the value of the fund's assets, minus any liabilities, by the number of shares outstanding. The NAV is calculated as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. For a fund organized as a fund-of-funds, the assets will consist primarily of shares of the underlying funds, which are valued at their NAVs. Securities are valued primarily on the basis of market quotations and floating rate loans are valued primarily on the basis of indicative bids. Both market quotations -------------------------------------------------------------------------------- S.27 and indicative bids are obtained from outside pricing services approved and monitored under procedures adopted by the Board. Certain short-term securities with maturities of 60 days or less are valued at amortized cost. When reliable market quotations or indicative bids are not readily available, investments are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of an investment held by a fund or underlying fund is materially affected by events that occur after the close of a securities market but prior to the time as of which the fund's or underlying fund's NAV is determined. Valuing investments at fair value involves reliance on judgment. The fair value of an investment is likely to differ from any available quoted or published price. To the extent that a fund or an underlying fund has significant holdings of small cap stocks, high yield bonds, floating rate loans, tax-exempt securities or foreign securities that may trade infrequently, fair valuation may be used more frequently than for other funds. The funds use an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of a fund's or an underlying fund's securities may be listed on foreign exchanges that trade on weekends or other days when the fund does not price its shares. In that event, the NAV of the fund's or underlying fund's shares may change on days when shareholders will not be able to purchase or sell the fund's or underlying fund's shares. For money markets funds -- The fund's investments are valued at amortized cost, which approximates market value, as explained in the SAI. Although the fund cannot guarantee it will always be able to maintain a constant net asset value of $1 per share, it will use its best efforts to do so. DISTRIBUTIONS AND TAXES As a shareholder you are entitled to your share of your fund's net income and net gains. Each fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS Your fund's net investment income is distributed to you as dividends. Dividends may be composed of qualified dividend income, which is eligible for preferential tax rates under current tax law, as well as other ordinary dividend income, which may include dividends which are non-qualified dividends, interest income and short-term capital gains. Because of the types of income earned by fixed income funds, it is unlikely the funds will distribute qualified dividend income. Generally, capital gains are realized when a security is sold for a higher price than was paid for it. Generally, capital losses are realized when a security is sold for a lower price than was paid for it. Typically, each realized capital gain or loss is long-term or short-term depending on the length of time the fund held the -------------------------------------------------------------------------------- S.28 security. Realized capital gains and losses offset each other. The fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains, if any, are included in net investment income and are taxable as ordinary income when distributed to the shareholder. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. If the fund's distributions exceed its current and accumulated earnings and profits, that portion of the fund's distributions will be treated as a return of capital to the shareholders to the extent of their basis in their shares. A return of capital will generally not be taxable; however, any amounts received in excess of basis are treated as capital gain. Forms 1099 sent to shareholders report any return of capital. Certain derivative instruments subject the fund to special tax rules, the effect of which may be to accelerate income to the fund, defer fund losses, cause adjustments in the holding periods of fund securities, convert capital gains into ordinary income and convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders. For Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025, Seligman TargETF 2015 and Seligman TargETFund Core (the Seligman TargETFunds) -- The Funds may purchase or sell (write) options. In general, option premiums which may be received by the Funds are not immediately included in the income of the Funds. Instead, such premiums are taken into account when the option contract expires, the option is exercised by the holder, or the Funds transfer or otherwise terminate the option. If an option written by a Fund is exercised and such Fund sells or delivers the underlying security, such Fund generally will recognize capital gain or loss equal to (a) the sum of the exercise price and the option premium received by the Fund minus (b) the Fund's basis in the security. Such gain or loss generally will be short-term or long- term depending upon the holding period of the underlying security. Gain or loss with respect to any termination of a Fund's obligation under an option other than through the exercise of the option and the related sale or delivery of the underlying security generally will be short-term gain or loss. Thus, for example, if an option written by a Fund expires unexercised, such Fund generally will recognize short-term gain equal to the premium received. -------------------------------------------------------------------------------- S.29 The Seligman TargETFunds generally will pay any dividends from its net investment income and distributes any net capital gains realized on investments at least annually (Seligman TargETFund Core generally will pay dividends from its net investment income on a quarterly basis). Because each Seligman TargETFund may sell underlying ETFs, US government securities and short-term debt instruments: (a) to accommodate redemptions of its shares; (b) in respect of the Target Date Funds, to implement the process of migration; and (c) to adjust the percentages of its assets invested in each underlying ETF, US government securities, short-term debt instruments, cash and cash equivalents in response to economic, market or other conditions or events, and changes in Seligman Time Horizon Matrix (the asset allocation methodology utilized by the Seligman TargETFunds), each Seligman TargETFund may generate net capital gains (including short-term capital gains that are generally taxed to shareholders at ordinary income tax rates) for investors that may be higher than the net capital gains ordinarily incurred by an investor through an investment in another asset allocation fund that has broader investment ranges or an asset allocation strategy designed by the investor. In addition, due to federal income tax laws, each Seligman TargETFund may not fully utilize capital losses (to offset capital gains) from the sale of underlying ETFs at a loss. In addition, underlying ETFs may distribute capital gains to the Seligman TargETFunds. REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the fund unless you request distributions in cash. The financial intermediary through which you purchased shares may have different policies. Distributions are reinvested at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. Generally, if you sell shares for less than their cost, the difference is a capital loss or if you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). -------------------------------------------------------------------------------- S.30 You may not create a tax loss or reduce a tax gain, based on paying a sales charge, by exchanging shares before the 91st day after the day of purchase. If you buy Class A shares and exchange into another fund before the 91st day after the day of purchase, you may not be able to include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. For more information, see the SAI. REITs often do not provide complete tax information until after the calendar year-end; generally mid to late January and continuing through early February. Consequently, if your fund has significant investments in REITs, you may not receive your Form 1099-DIV until February. Other RiverSource funds tax statements are generally mailed in January. FOR SELIGMAN TARGETFUNDS. Each of the Target Date Funds will automatically be combined with Seligman TargETFund Core during their respective target years. The investment manager expects each of these combinations to be effected as an acquisition of the assets and liabilities of the applicable Target Date Fund in exchange for shares of Seligman TargETFund Core at net asset value, with the shares of Seligman TargETFund Core then distributed to shareholders of the applicable Target Date Fund. Based on current tax rules, the investment manager expects the combination to be effected in a non-taxable transaction. Changes in such tax rules or other applicable law could negatively impact the combination of a Target Date Fund with Seligman TargETFund Core. FOR TAXABLE FUNDS. Distributions related to shares not held in IRAs or other retirement accounts are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. Shares held in an IRA or qualified retirement account are generally subject to different tax rules. Taking a distribution from your IRA or qualified retirement plan may subject you to federal taxes, withholding, penalties and reporting requirements. Please consult your tax advisor. Income received by a fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes. FOR TAX-EXEMPT FUNDS. Dividends distributed from interest earned on tax-exempt securities (exempt-interest dividends) are exempt from federal income taxes but may be subject to state and local taxes and potentially the alternative minimum tax. Dividends distributed from net capital gains, if any, and other income earned are not exempt from federal income taxes. Any taxable distributions are taxable in the year the fund declares them regardless of whether you take them in cash or reinvest them. -------------------------------------------------------------------------------- S.31 Interest on certain private activity bonds is a preference item for purposes of the individual and corporate alternative minimum tax. To the extent the fund earns such income, it will flow through to its shareholders and may affect those shareholders who are subject to the alternative minimum tax. See the SAI for more information. Because interest on municipal bonds and notes is tax-exempt for federal income tax purposes, any interest on money you borrow that is used directly or indirectly to purchase fund shares is not deductible on your federal income tax return. You should consult a tax advisor regarding its deductibility for state and local income tax purposes. FOR A FUND ORGANIZED AS A FUND-OF-FUNDS. Because most of the fund's investments are shares of underlying funds, the tax treatment of the fund's gains, losses, and distributions may differ from the tax treatment that would apply if either the fund invested directly in the types of securities held by the underlying funds or the fund shareholders invested directly in the underlying funds. As a result, fund shareholders may recognize higher amounts of capital gain distributions or ordinary income dividends than they otherwise would. IMPORTANT: This information is a brief and selective summary of some of the tax rules that apply to an investment in a fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. GENERAL INFORMATION AVAILABILITY AND TRANSFERABILITY OF FUND SHARES Please consult with your financial intermediary to determine the availability of the funds. The funds may only be purchased or sold directly or through financial intermediaries authorized by the distributor to offer the funds. NOT ALL FINANCIAL INSTITUTIONS ARE AUTHORIZED TO SELL THE RIVERSOURCE FAMILY OF FUNDS AND CERTAIN FINANCIAL INTERMEDIARIES THAT OFFER THE RIVERSOURCE FAMILY OF FUNDS MAY NOT OFFER ALL FUNDS ON ALL INVESTMENT PLATFORMS. If you set up an account at a financial intermediary that does not have, and is unable to obtain, a selling agreement with the distributor, you will not be able to transfer fund holdings to that account. In that event, you must either maintain your fund holdings with your current financial intermediary, find another financial intermediary with a selling agreement, or sell your shares, paying any applicable CDSC. Please be aware that transactions in taxable accounts are taxable events and may result in income tax liability. ADDITIONAL SERVICES AND COMPENSATION In addition to acting as the fund's investment manager, RiverSource Investments and its affiliates also receive compensation for providing other services to the funds. -------------------------------------------------------------------------------- S.32 Administration Services. Ameriprise Financial, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides or compensates others to provide administrative services to the funds. These services include administrative, accounting, treasury, and other services. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." Distribution and Shareholder Services. RiverSource Fund Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474, (the distributor), provides underwriting and distribution services to the funds. Under the Distribution Agreement and related distribution and shareholder servicing plans, the distributor receives distribution and shareholder servicing fees. The distributor may retain a portion of these fees to support its distribution and shareholder servicing activity. The distributor reallows the remainder of these fees (or the full fee) to the financial intermediaries that sell fund shares and provide services to shareholders. Fees paid by a fund for these services are set forth under "Distribution and/or service (12b-1) fees" in the expense table under "Fees and Expenses." More information on how these fees are used is set forth under "Investment Options -- Classes of Shares" and in the SAI. The distributor also administers any sales charges paid by an investor at the time of purchase or at the time of sale. See "Shareholder Fees (fees paid directly from your investment)" under "Fees and Expenses" for the scheduled sales charge of each share class. See "Buying and Selling Shares, Sales Charges" for variations in the scheduled sales charges, and for how these sales charges are used by the distributor. See "Other Investment Strategies and Risks" for the funds' policy regarding directed brokerage. Transfer Agency Services. RiverSource Service Corporation, 734 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the transfer agent or RiverSource Service Corporation), provides or compensates others to provide transfer agency services to the funds. The funds pay the transfer agent a fee that varies by class, as set forth in the SAI, and reimburses the transfer agent for its out-of-pocket expenses incurred while providing these transfer agency services to the funds. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." RiverSource Service Corporation pays a portion of these fees to financial intermediaries that provide sub-recordkeeping and other services to fund shareholders. The SAI provides additional information about the services provided and the fee schedules for the transfer agent agreements. -------------------------------------------------------------------------------- S.33 Plan Administration Services. Under a Plan Administration Services Agreement, the fund pays for plan administration services, including services such as implementation and conversion services, account set-up and maintenance, reconciliation and account recordkeeping, education services and administration to various plan types, including 529 plans, retirement plans and Health Savings Accounts. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." PAYMENTS TO FINANCIAL INTERMEDIARIES The distributor and its affiliates make or support additional cash payments out of their own resources (including profits earned from providing services to the fund) to financial intermediaries, in connection with agreements between the distributor and financial intermediaries pursuant to which these financial intermediaries sell fund shares and provide services to their clients who are shareholders of the fund. These payments and intercompany allocations (collectively, "payments") do not change the price paid by investors in the fund or fund shareholders for the purchase or ownership of fund shares of the fund, and these payments are not reflected in the fees and expenses of the fund, as they are not paid by the fund. In exchange for these payments, a financial intermediary may elevate the prominence or profile of the fund within the financial intermediary's organization, and may provide the distributor and its affiliates with preferred access to the financial intermediary's registered representatives or preferred access to the financial intermediary's customers. These arrangements are sometimes referred to as marketing and/or sales support payments, program and/or shareholder servicing payments, or revenue sharing payments. These arrangements create potential conflicts of interest between a financial intermediary's pecuniary interest and its duties to its customers, for example, if the financial intermediary receives higher payments from the sale of a certain fund than it receives from the sale of other funds, the financial intermediary or its representatives may be incented to recommend or sell shares of the fund where it receives or anticipates receiving the higher payment instead of other investment options that may be more appropriate for the customer. Employees of Ameriprise Financial and its affiliates, including employees of affiliated broker-dealers, may be separately incented to recommend or sell shares of the fund, as employee compensation and business unit operating goals at all levels are tied to the company's success. Certain employees, directly or indirectly, may receive higher compensation and other benefits as investment in the fund increases. In addition, management, sales leaders and other employees may spend more of their time and resources promoting Ameriprise Financial and its subsidiary companies, including RiverSource Investments and the distributor, and the products they offer, including the fund. -------------------------------------------------------------------------------- S.34 These payments are typically negotiated based on various factors including, but not limited to, the scope and quality of the services provided by the financial intermediary, its reputation in the industry, its ability to attract and retain assets, its access to target markets, its customer relationships, the profile the fund may obtain within the financial intermediary, and the access the distributor or other representatives of the fund may have within the financial intermediary for advertisement, training or education, including opportunities to present at or sponsor conferences for the registered representatives of the financial intermediary and its customers. These payments are usually calculated based on a percentage of fund assets owned through the financial intermediary and/or as a percentage of fund sales attributable to the financial intermediary. Certain financial intermediaries require flat fees instead of, or in addition to, these asset-based fees as compensation for including or maintaining a fund on their platforms, and, in certain situations, may require the reimbursement of ticket or operational charges -- fees that a financial intermediary charges its registered representatives for effecting transactions in the fund. The amount of payment varies by financial intermediary (e.g., initial platform set-up fees, ongoing maintenance or service fees, or asset or sales based fees). The amount of payments also varies by the type of sale. For instance, purchases of one fund may warrant a greater or lesser amount of payments than purchases of another fund. Additionally, sale and maintenance of shares on a stand alone basis may result in a greater or lesser amount of payments than the sale and maintenance of shares made through a plan, wrap or other fee-based program. Payments to affiliates may include payments as compensation to employees of RiverSource Investments who are licensed by the distributor in respect of certain sales and solicitation activity on behalf of the fund. These payments may be and often are significant. Additional information concerning the amount and calculation of these payments is available in the fund's SAI. Payments to affiliated broker-dealers are within the range of the payments the distributor pays to similarly-situated third party financial intermediaries and the payments such affiliated broker-dealers receive from third party fund sponsors related to the sale of their sponsored funds. However, because of the large amount of fund assets (from the RiverSource Family of Funds, in aggregate) currently held in customer accounts of the affiliated broker-dealers, the distributor and its affiliates, in the aggregate, pay significantly more in absolute dollars than other third-party fund sponsors pay to the affiliated broker-dealers for the sale and servicing of their sponsored funds. This level of payment creates potential conflicts of interest which the affiliated broker- dealers seek to mitigate by disclosure and implementation of internal controls, as well as the rules and regulations of applicable regulators. -------------------------------------------------------------------------------- S.35 From time to time, to the extent permitted by SEC and FINRA rules and by other applicable laws and regulations, the distributor and its affiliates may make other reimbursements or payments to financial intermediaries or their registered representatives, including non-cash compensation, in the form of gifts of nominal value, occasional meals, tickets, or other entertainment, support for due diligence trips, training and educational meetings or conference sponsorships, support for recognition programs, and other forms of non-cash compensation permissible under regulations to which these financial intermediaries and their representatives are subject. To the extent these are made as payments instead of reimbursement, they may provide profit to the financial intermediary to the extent the cost of such services was less than the actual expense of the service. The financial intermediary through which you are purchasing or own shares of the fund has been authorized directly or indirectly by the distributor to sell the fund and/or to provide services to you as a shareholder of the fund. Investors and current shareholders may wish to take such payment arrangements into account when considering and evaluating any recommendations they receive relating to fund shares. If you have questions regarding the specific details regarding the payments your financial intermediary may receive from the distributor or its affiliates related to your purchase or ownership of the fund, please contact your financial intermediary. The SAI contains additional detail regarding payments made by the distributor to financial intermediaries. The payments described in this section are in addition to fees paid by the fund to the distributor under 12b-1 plans, which fees may be used to compensate financial intermediaries for the distribution of fund shares and the servicing of fund shareholders, or paid by the fund to the transfer agent under the transfer agent agreement or plan administration agreement, which fees may be used to support networking or servicing fees to compensate financial intermediaries for supporting shareholder account maintenance, sub-accounting, plan recordkeeping or other services provided directly by the financial intermediary to shareholders or plans and plan participants, including retirement plans, 529 plans, Health Savings Account plans, or other plans, where participants beneficially own shares of the fund. Financial institutions may separately charge you additional fees. See "Buying and Selling Shares." ADDITIONAL MANAGEMENT INFORMATION AFFILIATED PRODUCTS. RiverSource Investments serves as investment manager to all funds in the RiverSource Family of Funds, including those that are structured to provide asset-allocation services to shareholders of those funds by investing in shares of other funds (funds of funds) in the RiverSource Family of Funds (collectively referred to as underlying funds) and to discretionary managed accounts (collectively referred to as affiliated products) that invest exclusively in underlying funds. These affiliated products, individually or collectively, may own -------------------------------------------------------------------------------- S.36 a significant percentage of the outstanding shares of the underlying funds, and RiverSource Investments seeks to balance potential conflicts between the affiliated products and the underlying funds in which they invest. The affiliated products investment in the underlying funds may also have the effect of creating economies of scale (including lower expense ratios) because the affiliated products may own substantial portions of the shares of underlying funds and, comparatively, a redemption of underlying fund shares by one or more affiliated products could cause the expense ratio of an underlying fund to increase as its fixed costs would be spread over a smaller asset base. Because of these large positions of the affiliated products, the underlying funds may experience relatively large purchases or redemptions. Although RiverSource Investments may seek to minimize the impact of these transactions, for example, by structuring them over a reasonable period of time or through other measures, underlying funds may experience increased expenses as they buy and sell securities to manage these transactions. When RiverSource Investments structures transactions over a reasonable period of time in order to manage the potential impact of the buy and sell decisions for the affiliated products, these affiliated products, including funds of funds, may pay more or less for shares of the underlying funds than if the transactions were executed in one transaction. In addition, substantial redemptions by the affiliated products within a short period of time could require the underlying fund to liquidate positions more rapidly than would otherwise be desirable, which may have the effect of reducing or eliminating potential gain or causing the underlying fund to realize a loss. Substantial redemptions may also adversely affect the ability of the investment manager to implement the underlying fund's investment strategy. RiverSource Investments also has an economic conflict of interest in determining the allocation of the affiliated products' assets among the underlying funds as it earns different fees from the underlying funds. RiverSource Investments monitors expense levels of the funds and is committed to offering funds that are competitively priced. RiverSource Investments reports to the Board on the steps it has taken to manage any potential conflicts. See the SAI for information on the percent of the fund owned by affiliated products. CASH RESERVES. A fund may invest its daily cash balance in a money market fund selected by RiverSource Investments, including but not limited to RiverSource Short-Term Cash Fund (Short-Term Cash Fund), a money market fund established for the exclusive use of funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. While Short-Term Cash Fund does not pay an advisory fee to RiverSource Investments, it does incur other expenses, and is expected to operate at a very low expense ratio. A fund will invest in Short-Term Cash Fund or any other money market fund selected by RiverSource Investments only to the extent it is consistent with the fund's investment objectives and policies. Short-Term Cash Fund is not insured or guaranteed by the FDIC or any other government agency. -------------------------------------------------------------------------------- S.37 FUND HOLDINGS DISCLOSURE. The Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by a fund. A description of these policies and procedures is included in the SAI. LEGAL PROCEEDINGS. 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 fund is 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 fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the fund. Information regarding certain pending and settled legal proceedings may be found in the fund's shareholder reports and in the SAI. Additionally, 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. -------------------------------------------------------------------------------- S.38 Funds in the RiverSource Family of Funds -- which include funds offered under the RiverSource, Threadneedle and Seligman brands -- can be purchased from authorized financial intermediaries. Additional information about the fund and its investments is available in the fund's SAI, and annual and semiannual reports to shareholders. In the fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the fund's performance during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, or to request other information about the fund, contact RiverSource Family of Funds or your financial intermediary. To make a shareholder inquiry, contact the financial intermediary through whom you purchased the fund. RiverSource Family of Funds 734 Ameriprise Financial Center Minneapolis, MN 55474 (800) 221-2450 RiverSource Family of Funds information available: (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com You may review and copy information about the fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202- 551-8090). Reports and other information about the fund are available on the EDGAR Database on the Commission's Internet site at www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, 100 F Street, N.E., Washington, D.C. 20549-1520. Investment Company Act File #811-5696 TICKER SYMBOL Class A: RTNAX Class B: -- Class C: RTNEX Class I: -- Class R2: RGEOX Class R3: RGETX Class R4: RGEYX Class R5: RGEFX
(THREADNEEDLE INVESTMENTS LOGO) S-6525-99 AH (12/09) Prospectus (THREADNEEDLE LOGO) THREADNEEDLE GLOBAL EXTENDED ALPHA FUND PROSPECTUS DEC. 30, 2009 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. Classes A, B, C, I, R2, R3, R4 and R5 As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. You may qualify for sales charge discounts on purchases of Class A shares. Please notify your financial intermediary if you have other accounts holding shares of funds in the RiverSource Family of Funds to determine whether you qualify for a sales charge discount. See "Buying and Selling Shares" for more information. NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE TABLE OF CONTENTS THE FUND.......................................... 3P Objective......................................... 3p Principal Investment Strategies................... 3p Principal Risks................................... 5p Past Performance.................................. 9p Fees and Expenses................................. 10p Other Investment Strategies and Risks............. 13p Fund Management and Compensation.................. 14p FINANCIAL HIGHLIGHTS.............................. 16P BUYING AND SELLING SHARES......................... S.1 Description of Share Classes...................... S.2 Investment Options -- Classes of Shares......... S.2 Sales Charges................................... S.7 Opening an Account.............................. S.16 Exchanging or Selling Shares...................... S.20 Exchanges....................................... S.23 Selling Shares.................................. S.26 PRICING AND VALUING OF FUND SHARES................ S.27 DISTRIBUTIONS AND TAXES........................... S.28 GENERAL INFORMATION............................... S.32
RIVERSOURCE FAMILY OF FUNDS The RiverSource Family of Funds includes a comprehensive array of funds from RiverSource Investments. RiverSource Investments has also partnered with a number of professional investment managers, including its affiliate, Threadneedle Investments, to expand the array of funds offered in the RiverSource family. RiverSource funds, RiverSource Partners funds, Seligman funds and Threadneedle funds share the same Board of Directors/Trustees (the Board), and the same policies and procedures including those set forth in the service section of this prospectus. Please see the Statement of Additional Information (SAI) for a complete list of mutual funds included in the RiverSource Family of Funds. RiverSource Variable Portfolio Funds and Seligman (Variable) Portfolio Funds are sold exclusively as underlying investment options of variable insurance policies and annuity contracts offered by affiliated and unaffiliated insurance companies. -------------------------------------------------------------------------------- 2P THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 PROSPECTUS THE FUND OBJECTIVE Threadneedle Global Extended Alpha Fund (the Fund) seeks to provide shareholders with long-term capital growth. Because any investment involves risk, there is no assurance this objective can be achieved. Only shareholders can change the Fund's objective. PRINCIPAL INVESTMENT STRATEGIES Under normal market conditions, the Fund will invest 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 will hold both long and short positions. A long position is an ordinary purchase of a security. When the Fund takes a short position, it sells a security that it has borrowed in anticipation of a decline in the price of the security. The investment manager is able to invest the proceeds from its short positions in additional long positions, 'extending' the equity exposure of the Fund in an effort to achieve an enhanced level of 'alpha.' Alpha represents how much the Fund's return is attributable to the investment manager's ability to deliver above-average returns, adjusted for risk. To complete a short sale transaction, the Fund buys back the same security in the market and returns it to the lender. If the price of the security falls sufficiently, the Fund will make money. If it instead increases in price, the Fund will lose money. 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. The Fund expects to maintain an approximate net long asset exposure to the equity market (long market exposure minus short market exposure) between 90% and 105%, targeting 110% to 140% gross long exposure and 10% to 40% gross short exposure. Actual exposure will vary over time based on factors such as market movements and the portfolio management team's assessment of market conditions and may result in the Fund not taking short positions from time to time. In addition to individual stocks, the portfolio management team may use exchange traded funds (ETFs), and certain derivative instruments, including portfolio and equity swaps, futures, options and forward contracts. These instruments may be used by the Fund to obtain additional long or short exposure to a security (or basket of securities) or to hedge existing long or short positions. INVESTMENT PROCESS RiverSource Investments, LLC (RiverSource Investments) serves as the investment manager to the Fund and is responsible for oversight of the subadviser, Threadneedle International Limited (Threadneedle), an indirect wholly-owned subsidiary of Ameriprise Financial, Inc. (which is also the parent company of RiverSource Investments). In pursuit of the Fund's objective, -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 PROSPECTUS 3P Threadneedle seeks to identify securities that offer the greatest promise for out-performance (long positions) and securities with the greatest promise for underperformance (short positions). Threadneedle's approach to investing is based on bottom up research focusing mainly on business fundamentals and valuation of individual securities. Detailed research is carried out by Threadneedle's team of over 120 investment professionals through: - extensive interviews with company management teams, - use of publicly published information, and - use of research from independent sources and brokers. While bottom up research is the primary driver when evaluating securities, proprietary macro-economic and thematic in-house research is also produced which may influence bottom-up research as well as broader portfolio positioning. Threadneedle seeks multiple sources of enhancing alpha and is not rigidly driven by a focus on solely securities that may be described as 'growth' or 'value' which Threadneedle believes increases the chances of out-performance across the investment cycle and potentially maximizes the benefits of diversification. Based on this investment approach, Threadneedle constructs a Global Team Model List of stocks (the Model List) that is updated regularly. The majority of the Fund's long positions (including the additional long positions) will be invested in stocks on the Model List. In addition, discretionary holdings (long and short positions) are selected by the portfolio management team based on the same fundamental criteria (investment approach) used to generate the Model List. In addition to selling securities short that Threadneedle believes have the greatest promise for underperformance, Threadneedle may also establish short positions in an effort to mitigate potential additional risks introduced through the selection of the Fund's active long and short positions. A number of factors may prompt the portfolio management team to sell a long position or close out a short position. A sale is most likely to be prompted by factors specific to a stock, such as deterioration in the company's fundamentals or an increase in the company's valuation. A sale could also be triggered by a change in macro or thematic strategy by Threadneedle or for risk management purposes. The Fund will normally have exposure to foreign currencies. The portfolio management team closely monitors the Fund's exposure to foreign currency. From time to time the team may hold foreign currencies, or use forward currency transactions or other derivative instruments to hedge against currency fluctuations. -------------------------------------------------------------------------------- 4P THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 PROSPECTUS PRINCIPAL RISKS This Fund is designed for long-term investors with above-average risk tolerance. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. Because the Fund takes both long and short positions, there is the risk that the value of the securities held long might decrease and the value of the securities sold short might increase in response to activities of an individual company or in response to general market conditions. In this case, the Fund's potential losses could exceed those of other mutual funds that hold only long stock positions. There is no guarantee that the investment techniques and risk analyses employed by the investment manager will produce the desired results. DERIVATIVES RISK. Derivatives are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, options, futures, indexes or currencies. Losses involving derivative instruments may be substantial, because a relatively small price movement in the underlying security(ies), instrument, currency or index may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund. Derivative instruments in which the Fund invests will typically increase the Fund's exposure to Principal Risks to which it is otherwise exposed, and may expose the Fund to additional risks, including hedging risk, correlation risk and liquidity risk. Hedging risk is the risk that derivative instruments used to hedge against an opposite position may offset losses, but they may also offset gains. There is no guarantee that a hedging strategy will eliminate the risk which the hedging strategy is intended to offset, which may lead to losses within the Fund. Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses. Liquidity risk is the risk that the derivative instrument may be difficult or impossible to sell or terminate, which may cause the Fund to be in a position to do something the investment manager would not otherwise choose, including accepting a lower price for the derivative instrument, selling other investments or foregoing another, more appealing investment opportunity. Derivative instruments which are not traded on an exchange, including, but not limited to, forward contracts, swaps and over-the-counter options, may have increased liquidity risk. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 PROSPECTUS 5P Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. See the SAI for more information on derivative instruments and related risks. RISKS OF FOREIGN INVESTING. Foreign securities are securities of issuers based outside the United States. An issuer is deemed to be based outside the United States if it is organized under the laws of another country. Foreign securities are primarily denominated in foreign currencies. In addition to the risks normally associated with domestic securities of the same type, foreign securities are subject to the following foreign risks: Country risk includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add to or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. Emerging markets risk includes the dramatic pace of change (economic, social and political) in these countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. 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 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. -------------------------------------------------------------------------------- 6P THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 PROSPECTUS ISSUER RISK. An issuer may perform poorly, and therefore, the value of its stocks and bonds may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. COUNTERPARTY RISK. The risk that a counterparty to a financial instrument entered into by the Fund or held by a 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. LEVERAGE RISK. Leverage occurs when the Fund increases its assets available for investment using borrowings, short sales, derivatives, or similar instruments or techniques. Due to the fact that short sales involve borrowing securities and then selling them, the Fund's short sales effectively leverage the Fund's assets. The use of leverage may make any change in the Fund's net asset value (NAV) even greater and thus result in increased volatility of returns. The Fund's assets that are used as collateral to secure the short sales may decrease in value while the short positions are outstanding, which may force the Fund to use its other assets to increase the collateral. Leverage can also create an interest expense that may lower the Fund's overall returns. Lastly, there is no guarantee that a leveraging strategy will be successful. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 PROSPECTUS 7P 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 must borrow those securities to make delivery to the buyer. The Fund may not always be able to borrow a security it wants to sell short. The Fund will suffer a loss if it sells a security short and the value of the security rises rather than falls. It is possible that the Fund's long positions will decline in value at the same time that the value of its short positions increase, thereby increasing potential losses to the Fund. Short sales expose the Fund to the risk that it will be required to buy the security sold short (also known as "covering" the short position) at a time when the security has appreciated in value, thus resulting in a loss to the Fund. The Fund may also be required to close out a short position at a time when it might not otherwise choose, for example, if the lender of the security calls it back, which may have the effect of reducing or eliminating potential gain, or cause the Fund to realize a loss. Short positions introduce more risk to the Fund than long positions (purchases) because the maximum sustainable loss on a security purchased (held long) is limited to the amount paid for the security plus the transaction costs, whereas there is no maximum attainable price of the shorted security. Therefore, in theory, securities sold short have unlimited risk. Additionally, the Fund's use of short sales in effect "leverages" the Fund, as the Fund may use the cash proceeds from short sales to invest in additional long positions. This leverage effect potentially exposes the Fund to greater risks due to unanticipated market movements, which may magnify losses and increase the volatility of returns. See also Leverage Risk and Market Risk. In addition, the Fund will incur additional expenses by engaging in short sales in the form of transaction costs, and interest and dividend expenses paid to the lender of the security. ETF RISK. An ETF's share price may not track its specified market index and may trade below its net asset value, resulting in a loss. ETFs generally use a "passive" investment strategy and will not attempt to take defensive positions in volatile or declining markets. An active secondary market in an ETF's shares may not develop or be maintained and may be halted or interrupted due to actions by its listing exchange, unusual market conditions or other reasons. There can be no assurance an ETF's shares will continue to be listed on an active exchange. In addition, shareholders bear both their proportionate share of the Fund's expenses and similar expenses incurred through ownership of the ETF. -------------------------------------------------------------------------------- 8P THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 PROSPECTUS SMALL AND MID-SIZED COMPANY RISK. Investments in small and medium companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, experience and competitive strengths of larger companies. Additionally, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less and may be more volatile than is typical of larger companies. PAST PERFORMANCE The bar chart and past performance table are not presented because the Fund has not had a full calendar year of operations. The Fund's shares became available to the public on Aug. 1, 2008. When available, the Fund intends to compare its performance to the performance of the Morgan Stanley Capital International (MSCI) All Country World Index, an unmanaged index of equity securities that 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. See "Fund Management and Compensation" for more information. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 PROSPECTUS 9P FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund. Annual fund operating expenses are based on expenses incurred during the Fund's most recently completed fiscal year, and are expressed as a percentage (expense ratio) of the Fund's average net assets during the period. The expense ratios have been adjusted to reflect current fee schedules but have not been adjusted to reflect the Fund's assets as of a different period or point in time, as asset levels will fluctuate. As of the date of this prospectus, the Fund's net assets are higher than the Fund's average net assets during the most recently completed fiscal year. In general, a fund's annual operating expenses will increase as the fund's assets decrease. Accordingly, the Fund's annual operating expenses, if adjusted based on net assets as of the date of this prospectus, would be lower than are expressed in the fee and expense table below. The commitment by the investment manager and its affiliates to waive fees and/or cap (reimburse) expenses limits the impact that any decrease in the Fund's assets will have on its total annual (net) operating expenses in the current fiscal year. SHAREHOLDER FEES (fees paid directly from your investment)
CLASS I CLASS R2 CLASS R3 CLASS R4 CLASS A CLASS B CLASS C CLASS R5 Maximum sales charge (load) imposed on purchases (as a percentage of offering price) 5.75%(a) None None None Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) None(b) 5% 1% None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS: CLASS A CLASS B CLASS C Management fees(c) 1.05% 1.05% 1.05% Distribution and/or service (12b-1) fees 0.25% 1.00% 1.00% Other expenses(d) 2.48% 2.47% 2.53% Total annual fund operating expenses 3.78% 4.52% 4.58% Fee waiver/expense reimbursement 2.23% 2.21% 2.28% Total annual (net) fund operating expenses(e) 1.55% 2.31% 2.30%
-------------------------------------------------------------------------------- 10P THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 PROSPECTUS ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) cont.
CLASS I CLASS R2 CLASS R3 CLASS R4 CLASS R5 Management fees(c) 1.05% 1.05% 1.05% 1.05% 1.05% Distribution and/or service (12b-1) fees 0.00% 0.50% 0.25% 0.00% 0.00% Other expenses(d) 2.37% 2.67% 2.67% 2.87% 2.42% Total annual fund operating expenses 3.42% 4.22% 3.97% 3.92% 3.47% Fee waiver/expense reimbursement 2.21% 2.21% 2.21% 2.41% 2.21% Total annual (net) fund operating expenses(e) 1.21% 2.01% 1.76% 1.51% 1.26%
(a) This charge may be reduced depending on the total value of your investments in the RiverSource Family of Funds. See "Sales Charges." (b) A 1% CDSC may be assessed on Class A shares purchased without an initial sales charge and sold within 18 months after purchase. See "Sales Charges." (c) The Fund's management fee may be increased or decreased due to the effect of a performance incentive adjustment. The index against which the Fund's performance will be measured for purposes of determining the performance incentive adjustment is the MSCI All Country World Index. See "Fund Management and Compensation" for more information. (d) Other expenses include an administrative services fee, a transfer agency fee (for all classes except Class I), a custody fee, other nonadvisory expenses and a plan administration services fee (for Class R2, Class R3 and Class R4). Other expenses may also include fees and expenses of affiliated and unaffiliated funds (acquired funds) which the Fund indirectly bears when it invests in the acquired funds. The impact of these acquired funds' fees and expenses for the most recent fiscal period was less than 0.01%. Because acquired funds will 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 by the Fund with respect to such investments will vary. (e) The investment manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Dec. 31, 2010, 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, 1.21% for Class I, 2.01% for Class R2, 1.76% for Class R3, 1.51% for Class R4 and 1.26% for Class R5. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 PROSPECTUS 11P EXAMPLES These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. These examples assume that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. These examples also assume that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $724 $1,470 $2,235 $4,231 Class B $734(b) $1,467(b) $2,309(b) $4,353(c) Class C $333(b) $1,178 $2,131 $4,549 Class I $123 $ 845 $1,590 $3,558 Class R2 $204 $1,080 $1,971 $4,258 Class R3 $179 $1,007 $1,853 $4,046 Class R4 $154 $ 974 $1,813 $3,990 Class R5 $128 $ 860 $1,614 $3,604
(a) Includes a 5.75% sales charge. (b) Includes the applicable CDSC. (c) Based on conversion of Class B shares to Class A shares one month after the completion of the eighth year of ownership. You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $724 $1,470 $2,235 $4,231 Class B $234 $1,167 $2,109 $4,353(b) Class C $233 $1,178 $2,131 $4,549 Class I $123 $ 845 $1,590 $3,558 Class R2 $204 $1,080 $1,971 $4,258 Class R3 $179 $1,007 $1,853 $4,046 Class R4 $154 $ 974 $1,813 $3,990 Class R5 $128 $ 860 $1,614 $3,604
(a) Includes a 5.75% sales charge. (b) Based on conversion of Class B shares to Class A shares one month after the completion of the eighth year of ownership. -------------------------------------------------------------------------------- 12P THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 PROSPECTUS OTHER INVESTMENT STRATEGIES AND RISKS Other Investment Strategies. In addition to the principal investment strategies previously described, the Fund may utilize investment strategies that are not principal investment strategies, including investment in affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds (ETFs), also referred to as "acquired funds") ownership of which results in the Fund bearing its proportionate share of the acquired funds' fees and expenses and proportionate exposure to the risks associated with the acquired funds' underlying investments. Investment in ETFs is a part of the principal investment strategy for the Fund. For more information on strategies and holdings, and the risks of such strategies, including derivative instruments that the Fund may use, see the Fund's SAI and its annual and semiannual reports. Unusual Market Conditions. During unusual market conditions, the Fund may temporarily invest more of its assets in money market securities than during normal market conditions. Although investing in these securities would serve primarily to attempt to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the portfolio managers may make frequent securities trades that could result in increased fees, expenses and taxes, and decreased performance. Instead of investing in money market securities directly, the Fund may invest in shares of an affiliated or unaffiliated money market fund. See "Cash Reserves" under the section "General Information" for more information. Securities Transaction Commissions. Securities transactions involve the payment by the Fund of brokerage commissions to broker-dealers, on occasion as compensation for research or brokerage services (commonly referred to as "soft dollars"), as the portfolio managers buy and sell securities for the Fund in pursuit of its objective. A description of the policies governing the Fund's securities transactions and the dollar value of brokerage commissions paid by the Fund are set forth in the SAI. The brokerage commissions set forth in the SAI do not include implied commissions or mark-ups (implied commissions) paid by the Fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities (and certain other instruments, including derivatives). Brokerage commissions do not reflect other elements of transaction costs, including the extent to which the Fund's purchase and sale transactions may cause the market to move and change the market price for an investment. Although brokerage commissions and implied commissions are not reflected in the expense table under "Fees and Expenses," they are reflected in the total return of the Fund. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 PROSPECTUS 13P Portfolio Turnover. Trading of securities may produce capital gains, which are taxable to shareholders when distributed. Active trading may also increase the amount of brokerage commissions paid or mark-ups to broker-dealers that the Fund pays when it buys and sells securities. Capital gains and increased brokerage commissions or mark-ups paid to broker-dealers may adversely affect a fund's performance. The Fund's historical portfolio turnover rate, which measures how frequently the Fund buys and sells investments, is shown in the "Financial Highlights." Directed Brokerage. The Fund's Board has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Fund as a factor in the selection of broker-dealers through which to execute securities transactions. Additional information regarding securities transactions can be found in the SAI. FUND MANAGEMENT AND COMPENSATION INVESTMENT MANAGER RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource Family of Funds (including the RiverSource funds, RiverSource Partners funds, Seligman funds and Threadneedle funds), and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for the RiverSource Family of Funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the SAI for more information. The RiverSource Family of Funds has received an order from the Securities and Exchange Commission that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for a fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or change the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. RiverSource Investments and its affiliates may have other relationships, including significant financial relationships, with current or potential subadvisers or their affiliates, which may create a conflict of interest. In making recommendations to the Board to appoint or to change a subadviser, or to change the terms of a subadvisory -------------------------------------------------------------------------------- 14P THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 PROSPECTUS agreement, RiverSource Investments does not consider any other relationship it or its affiliates may have with a subadviser, and RiverSource Investments discloses the nature of any material relationships it has with a subadviser to the Board. The Fund pays RiverSource Investments a fee for managing its assets. Under the Investment Management Services Agreement (Agreement), the fee for the most recent fiscal year was 1.05% of the Fund's average daily net assets. Beginning Aug. 1, 2010, the management fee will include an adjustment under the terms of a performance incentive arrangement under the Agreement. The adjustment will be computed by comparing the Fund's performance to the performance of the MSCI All Country World Index. In certain circumstances, the Fund's Board may approve a change in the index without shareholder approval. The maximum adjustment (increase or decrease) is 0.50% of the Fund's average net assets on an annual basis. Under the Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. A discussion regarding the basis for the Board approving the Agreement is available in the Fund's annual or semiannual report to shareholders. RiverSource Investments contracts with and compensates Threadneedle International Limited (Subadviser or Threadneedle) to manage the investment of the Fund's assets. RiverSource Investments monitors the compliance of Threadneedle with the investment objective and related policies of the Fund, reviews the performance of Threadneedle, and reports periodically to the Board. THREADNEEDLE Threadneedle, located at 60 St. Mary Axe, London EC3A 8JQ, England, is an affiliate of RiverSource Investments, and an indirect wholly-owned subsidiary of Ameriprise Financial, Inc. The portfolio managers who lead the team responsible for the day-to-day management of the Fund are: Andrew Holliman, CFA, Portfolio Manager - Managed the Fund since 2008. - Joined Threadneedle in 2004 as a fund manager. - Began investment career in 1997 as an investment analyst and portfolio manager, Baillie Gifford & Co., 1997 to 2004. - BCom (Hons), University of Edinburgh; MSc, University of Stirling. Jeremy Podger, Deputy Portfolio Manager - Head of global equity team. - Deputy managed the Fund since 2008. - Joined Threadneedle in 2003 as a fund manager. - Began investment career in 1987. - BA, Cambridge University; MBA, London Business School. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 PROSPECTUS 15P FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). Total returns do not reflect payment of sales charges, if any, and are not annualized for periods of less than one year. The information has been derived from the financial statements audited by Ernst & Young LLP, whose report, along with the Fund's financial statements and financial highlights, is included in the annual report which, if not included with this prospectus, is available upon request.
YEAR ENDED OCT. 31, CLASS A ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $13.97 $20.00 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09 .00(b) Net gains (losses) (both realized and unrealized) 3.59 (6.03) ---------------------------------------------------------------------- Total from investment operations 3.68 (6.03) ---------------------------------------------------------------------- Net asset value, end of period $17.65 $13.97 ---------------------------------------------------------------------- TOTAL RETURN 26.34% (30.15%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 3.78% 5.55%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.55% 1.55%(d) ---------------------------------------------------------------------- Net investment income (loss) .59% (.07%)(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $3 $2 ---------------------------------------------------------------------- Portfolio turnover rate 133% 36% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 16P THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 PROSPECTUS
YEAR ENDED OCT. 31, CLASS B ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $13.94 $20.00 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01) (.02) Net gains (losses) (both realized and unrealized) 3.54 (6.04) ---------------------------------------------------------------------- Total from investment operations 3.53 (6.06) ---------------------------------------------------------------------- Net asset value, end of period $17.47 $13.94 ---------------------------------------------------------------------- TOTAL RETURN 25.32% (30.30%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 4.52% 6.33%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 2.31% 2.31%(d) ---------------------------------------------------------------------- Net investment income (loss) (.05%) (.55%)(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 133% 36% ----------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS C ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $13.94 $20.00 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.02) (.03) Net gains (losses) (both realized and unrealized) 3.56 (6.03) ---------------------------------------------------------------------- Total from investment operations 3.54 (6.06) ---------------------------------------------------------------------- Net asset value, end of period $17.48 $13.94 ---------------------------------------------------------------------- TOTAL RETURN 25.39% (30.30%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 4.58% 6.22%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 2.30% 2.30%(d) ---------------------------------------------------------------------- Net investment income (loss) (.12%) (.79%)(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 133% 36% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 PROSPECTUS 17P
YEAR ENDED OCT. 31, CLASS I ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $13.98 $20.00 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .14 .03 Net gains (losses) (both realized and unrealized) 3.60 (6.05) ---------------------------------------------------------------------- Total from investment operations 3.74 (6.02) ---------------------------------------------------------------------- Net asset value, end of period $17.72 $13.98 ---------------------------------------------------------------------- TOTAL RETURN 26.75% (30.10%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 3.42% 4.94%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.22% 1.21%(d) ---------------------------------------------------------------------- Net investment income (loss) .94% .63%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $4 $3 ---------------------------------------------------------------------- Portfolio turnover rate 133% 36% ----------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R2 ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $13.96 $20.00 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03 .00(b) Net gains (losses) (both realized and unrealized) 3.57 (6.04) ---------------------------------------------------------------------- Total from investment operations 3.60 (6.04) ---------------------------------------------------------------------- Net asset value, end of period $17.56 $13.96 ---------------------------------------------------------------------- TOTAL RETURN 25.79% (30.20%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 4.22% 5.74%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.96% 1.81%(d) ---------------------------------------------------------------------- Net investment income (loss) .19% .03%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 133% 36% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 18P THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 PROSPECTUS
YEAR ENDED OCT. 31, CLASS R3 ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $13.97 $20.00 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .06 .01 Net gains (losses) (both realized and unrealized) 3.59 (6.04) ---------------------------------------------------------------------- Total from investment operations 3.65 (6.03) ---------------------------------------------------------------------- Net asset value, end of period $17.62 $13.97 ---------------------------------------------------------------------- TOTAL RETURN 26.13% (30.15%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 3.97% 5.49%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.71% 1.56%(d) ---------------------------------------------------------------------- Net investment income (loss) .44% .28%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 133% 36% ----------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R4 ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $13.98 $20.00 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .08 .01 Net gains (losses) (both realized and unrealized) 3.61 (6.03) ---------------------------------------------------------------------- Total from investment operations 3.69 (6.02) ---------------------------------------------------------------------- Net asset value, end of period $17.67 $13.98 ---------------------------------------------------------------------- TOTAL RETURN 26.40% (30.10%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 3.92% 5.38%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.47% 1.36%(d) ---------------------------------------------------------------------- Net investment income (loss) .52% .30%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 133% 36% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 PROSPECTUS 19P
YEAR ENDED OCT. 31, CLASS R5 ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $13.98 $20.00 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .13 .02 Net gains (losses) (both realized and unrealized) 3.59 (6.04) ---------------------------------------------------------------------- Total from investment operations 3.72 (6.02) ---------------------------------------------------------------------- Net asset value, end of period $17.70 $13.98 ---------------------------------------------------------------------- TOTAL RETURN 26.61% (30.10%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 3.47% 4.99%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.27% 1.26%(d) ---------------------------------------------------------------------- Net investment income (loss) .88% .58%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 133% 36% ----------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (b) Rounds to zero. (c) Expense ratios include the impact of a performance incentive adjustment, if any. 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 reported expense ratios. (d) Annualized. (e) 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. -------------------------------------------------------------------------------- 20P THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 PROSPECTUS RIVERSOURCE FAMILY OF FUNDS THE RIVERSOURCE FAMILY OF FUNDS (EACH INDIVIDUALLY A "FUND" AND, COLLECTIVELY, THE "FUNDS") INCLUDES "RIVERSOURCE" FUNDS, "RIVERSOURCE PARTNERS" FUNDS, "SELIGMAN" FUNDS AND "THREADNEEDLE" FUNDS. (THE RIVERSOURCE FUNDS, RIVERSOURCE PARTNERS FUNDS AND THREADNEEDLE FUNDS MAY BE COLLECTIVELY REFERRED TO AS THE "RIVERSOURCE FUNDS".) THE FUNDS SHARE THE SAME BOARD OF DIRECTORS/TRUSTEES (THE "BOARD") AND THE SAME POLICIES AND PROCEDURES INCLUDING THOSE SET FORTH IN THE SERVICE SECTION OF THIS PROSPECTUS. FOR EXAMPLE, FOR PURPOSES OF CALCULATING THE INITIAL SALES CHARGE ON THE PURCHASE OF CLASS A SHARES OF A FUND, AN INVESTOR OR FINANCIAL ADVISOR SHOULD CONSIDER THE COMBINED MARKET VALUE OF ALL FUNDS IN THE RIVERSOURCE FAMILY OF FUNDS OWNED BY THE INVESTOR AS DEFINED UNDER "INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA)." BUYING AND SELLING SHARES The funds are available directly and through broker-dealers, banks and other financial intermediaries or institutions (financial intermediaries), and through certain qualified and non-qualified plans, wrap fee products or other investment products sponsored by financial intermediaries. NOT ALL FINANCIAL INTERMEDIARIES OFFER THE FUNDS. FINANCIAL INTERMEDIARIES THAT OFFER THE FUNDS MAY CHARGE YOU ADDITIONAL FEES FOR THE SERVICES THEY PROVIDE AND THEY MAY HAVE DIFFERENT POLICIES NOT DESCRIBED IN THIS PROSPECTUS. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. Additionally, recordkeeping, transaction processing and payments of distributions relating to your account may be performed by the financial intermediaries through which your shares of the fund are held. Since the fund (and its service providers) may not have a record of your account transactions, you should always contact the financial intermediary through which you purchased or at which you maintain your shares of the fund to make changes to your account or to give instructions concerning your account, or to obtain information about your account. The fund and its service providers, including the distributor and the transfer agent, are not responsible for the failure of one of these financial intermediaries to carry out its obligations to its customers. -------------------------------------------------------------------------------- S.1 S-6400-9 DESCRIPTION OF SHARE CLASSES INVESTMENT OPTIONS -- CLASSES OF SHARES The funds offer different classes of shares. There are differences among the fees and expenses for each share class. See the "Fees and Expenses" table for more information. Not everyone is eligible to buy every share class. After determining which share classes you are eligible to buy, decide which share class best suits your needs. Your financial advisor can help you with this decision. The following table shows the key features of each share class. Not all funds offer all classes of shares. INVESTMENT OPTIONS SUMMARY
CONTINGENT DISTRIBUTION PLAN INITIAL DEFERRED SALES AND/OR ADMINISTRATION AVAILABILITY(a) SALES CHARGE CHARGE (CDSC) SERVICE FEE(b) SERVICES FEE -------------------------------------------------------------------------------------------------------------------------------- Class A Available to Yes. Payable at No.(c) Yes. No. all investors. time of purchase. 0.25%(g) Lower or no sales charge for larger investments. -------------------------------------------------------------------------------------------------------------------------------- Class B(d)(e)(f) Available to No. Entire Maximum 5% CDSC Yes. No. all investors. purchase price is during the first 1.00%(g) invested in shares year decreasing to of the fund. 0% after six years. -------------------------------------------------------------------------------------------------------------------------------- Class C(f) Available to No. Entire 1% CDSC may apply Yes. No. all investors. purchase price is if you sell shares 1.00%(g) invested in shares within one year of the fund. after purchase. -------------------------------------------------------------------------------------------------------------------------------- Class I Limited to No. No. No. No. qualifying institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R2 Limited to No. No. Yes. Yes. qualifying 0.50% 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R3 Limited to No. No. Yes. Yes. qualifying 0.25% 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R4 Limited to No. No. No. Yes. qualifying 0.25% institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class R5 Limited to No. No. No. No. qualifying institutional investors. -------------------------------------------------------------------------------------------------------------------------------- Class W Limited to No. No. Yes. No. qualifying 0.25%(g) discretionary managed accounts. --------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- S.2 INVESTMENT OPTIONS SUMMARY (CONTINUED)
CONTINGENT DISTRIBUTION PLAN INITIAL DEFERRED SALES AND/OR ADMINISTRATION AVAILABILITY(a) SALES CHARGE CHARGE (CDSC) SERVICE FEE(b) SERVICES FEE -------------------------------------------------------------------------------------------------------------------------------- Class Y Limited to No. No. No. Yes. qualifying 0.15% institutional investors. --------------------------------------------------------------------------------------------------------------------------------
(a) See "Buying and Selling Shares, Determining which class of shares to purchase" for more information on availability of share classes and eligible investors. See "Buying and Selling Shares, Opening an Account" for information on minimum investment and account balance requirements. (b) For each of Class A, Class B, Class C, Class R2, Class R3 and Class W shares, as applicable, each fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940, as amended, that allows it to pay distribution and shareholder servicing-related expenses for the sale of shares and the servicing of shareholders. This plan has been reviewed and approved by the Board. Because these fees are paid out of fund assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of distribution (sales) or servicing charges. (c) A 1% CDSC may be assessed on Class A shares sold within 18 months after purchase. See "Buying and Selling Shares, Sales Charges, Class A -- contingent deferred sales charge" for more information. For all funds except money market funds. (d) Class B shares automatically convert to Class A shares. See "Buying and Selling Shares, Sales Charges, Class B and Class C -- CDSC alternative" for more information on the timing of conversion of Class B shares to Class A shares. Timing of conversion will vary depending on the date of your original purchase of the Class B shares. (e) Class B shares of RiverSource Absolute Return Currency and Income Fund are only available for exchanges from Class B shares of another fund in the RiverSource Family of Funds. Class B shares of each of RiverSource Floating Rate Fund, RiverSource Inflation Protected Securities Fund, RiverSource Intermediate Tax-Exempt Fund, RiverSource Limited Duration Bond Fund and RiverSource Short Duration U.S. Government Fund are closed to new investors and new purchases. (Existing shareholders in these funds may continue to own Class B shares and make exchanges into and out of existing accounts where Class B shares of these funds are maintained.) (f) The money market funds may offer Class B and Class C shares, but only to facilitate exchanges with other funds offering Class B and Class C shares, respectively. (g) For RiverSource Cash Management Fund and RiverSource Tax-Exempt Money Market Fund, Class A is 0.10%. For RiverSource Cash Management Fund, Class B is 0.85%, Class C is 0.75% and Class W is 0.10%. DISTRIBUTION AND SERVICE FEES The distribution and shareholder servicing fees for Class A, Class B, Class C, Class R2, Class R3 and Class W shares, as applicable, are subject to the requirements of Rule 12b-1 under the Investment Company Act of 1940, as amended, and are used to reimburse the distributor for certain expenses it incurs in connection with distributing the fund's shares and directly or indirectly providing services to fund shareholders. These expenses include payment of distribution and/or shareholder servicing fees to financial intermediaries that sell shares of the fund or provide services to fund shareholders, up to 0.50% of the average daily net assets of Class R2 shares sold and held through them and up to 0.25%* of the average daily net assets of Class A, Class B, Class C, Class R3 and Class W shares sold and held through them. For Class A, Class B, Class R2, Class R3 and Class W shares, the distributor begins to pay these fees immediately after purchase. For Class C shares, the distributor pays these fees in advance for the first 12 months. Financial intermediaries also receive distribution fees up to 0.75% of the average daily net assets of Class C shares sold and held -------------------------------------------------------------------------------- S.3 through them, which the distributor begins to pay 12 months after purchase. For Class B shares, and, for the first 12 months following the sale of Class C shares, the fund's distributor retains the distribution fee of up to 0.75% in order to finance the payment of sales commissions to financial intermediaries, and to pay for other distribution related expenses. Financial intermediaries may compensate their financial advisors with the shareholder servicing and distribution fees paid to them by the distributor. IF YOU MAINTAIN SHARES OF THE FUND DIRECTLY WITH THE FUND, WITHOUT WORKING DIRECTLY WITH A FINANCIAL INTERMEDIARY OR FINANCIAL ADVISOR, DISTRIBUTION AND SERVICE FEES MAY BE RETAINED BY THE DISTRIBUTOR AS REIMBURSEMENT FOR INCURRING CERTAIN DISTRIBUTION AND SHAREHOLDER SERVICING RELATED EXPENSES. * For RiverSource Cash Management Fund, financial intermediaries receive fees up to 0.10% of the average daily net assets of Class A, Class B and Class W shares sold and held through them. PLAN ADMINISTRATION FEE Class R2, Class R3, Class R4 and Class Y shares pay an annual plan administration services fee for the provision of various administrative, recordkeeping, communication and educational services. The fee for Class R2, Class R3 and Class R4 shares is equal on an annual basis to 0.25% of average daily net assets attributable to the respective class. The fee for Class Y shares is equal on an annual basis to 0.15% of average daily net assets attributable to the class. DETERMINING WHICH CLASS OF SHARES TO PURCHASE Each of the fund's classes represent an interest in the same portfolio of investments. However, as set forth above, each class has its own sales charge schedule, and its ongoing distribution and shareholder service fees may differ from other classes. When deciding which class of shares to buy, you should consider, among other things: - The amount you plan to invest. - How long you intend to remain invested in the fund or another fund in the RiverSource Family of Funds. - Whether you may be eligible for reduced or no sales charges when you buy or sell shares. Your authorized financial intermediary or financial advisor will be able to help you decide which class of shares best meets your needs. -------------------------------------------------------------------------------- S.4 CLASS A, CLASS B AND CLASS C SHARES* Class B shares of RiverSource Absolute Return Currency and Income Fund are not currently available for new purchases. However, if you own Class B shares of another fund in the RiverSource Family of Funds, you may exchange into Class B shares of RiverSource Absolute Return Currency and Income Fund, if you meet the minimum investment and account balance requirements set forth in "Opening an Account," subject to the limitations set forth in this section. New purchases of Class B shares will not be permitted if your rights of accumulation are $50,000 or higher, and new purchases of Class C shares will not be permitted if your rights of accumulation are $1,000,000 or higher. See "Sales Charges, Initial Sales Charge -- Rights of Accumulation" for information on rights of accumulation. Class B shares have a higher annual distribution fee than Class A shares and a contingent deferred sales charge (CDSC) for six years. Class B shares convert to Class A shares. Class B shares purchased through reinvested dividends and distributions will convert to Class A shares in the same proportion as the other Class B shares. See "Class B and Class C -- CDSC alternative" for information on timing of Class B share conversion to Class A shares. Class C shares have a higher annual distribution fee than Class A shares and a CDSC for one year. Class C shares have no sales charge if you hold the shares for longer than one year. Unlike Class B shares, Class C shares do not convert to Class A shares. As a result, you will pay a distribution fee for as long as you hold Class C shares. If you choose a share class with a CDSC (Class B or Class C), you should consider the length of time you intend to hold your shares. To help you determine which investment is best for you, consult your financial intermediary or financial advisor. * For money market funds, new investments must be made in Class A shares of the fund. The money market funds offer Class B and Class C shares only to facilitate exchanges between classes of these shares in other funds. CLASS I SHARES. The following eligible investors may purchase Class I shares: - Any fund distributed by the distributor, if the fund seeks to achieve its investment objective by investing primarily in shares of funds in the RiverSource Family of Funds. Class I shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. CLASS R AND CLASS Y SHARES. The following eligible institutional investors may purchase Class R2, Class R3, Class R4, Class R5 and Class Y shares: -------------------------------------------------------------------------------- S.5 - Qualified employee benefit plans. - Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code. - Non-qualified deferred compensation plans whose participants are included in a qualified employee benefit plan described above. - State sponsored college savings plans established under Section 529 of the Internal Revenue Code. - Health Savings Accounts created pursuant to public law 108-173. Additionally, if approved by the distributor, the following eligible institutional investors may purchase Class R5 shares: - Institutional or corporate accounts above a threshold established by the distributor (currently $1 million per fund or $10 million in all funds in the RiverSource Family of Funds). - Bank trust departments. Class R and Class Y shares generally are not available to retail non-retirement accounts, traditional and Roth IRAs, Coverdell Educational Savings Accounts, SEPs, SARSEPs, SIMPLE IRAs and individual 403(b) plans. Class R shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. CLASS W SHARES. The following eligible investors may purchase Class W shares: - Investors purchasing through authorized investment programs managed by investment professionals, including discretionary managed account programs. Class W shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. Shares originally purchased in a discretionary managed account may continue to be held in Class W outside of a discretionary managed account, but no additional Class W purchases may be made and no exchanges to Class W shares of another fund may be made outside of a discretionary managed account. IN ADDITION, FOR CLASS I, CLASS R AND CLASS Y SHARES, THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY ACCEPT OR AUTHORIZE FINANCIAL INTERMEDIARIES TO ACCEPT INVESTMENTS FROM OTHER INSTITUTIONAL INVESTORS NOT LISTED ABOVE. IN ADDITION, FOR CLASS W SHARES, THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY ACCEPT OR AUTHORIZE FINANCIAL INTERMEDIARIES TO ACCEPT INVESTMENTS FROM OTHER INVESTORS NOT LISTED ABOVE. Please consult your financial advisor for assistance in selecting the appropriate class of shares. For more information, see the SAI. -------------------------------------------------------------------------------- S.6 SALES CHARGES FOR FUNDS OTHER THAN MONEY MARKET FUNDS CLASS A -- INITIAL SALES CHARGE ALTERNATIVE: Your purchase price for Class A shares is generally the net asset value (NAV) plus a front-end sales charge. The distributor receives the sales charge and re- allows a portion of the sales charge to the financial intermediary through which you purchased the shares. The distributor retains the balance of the sales charge. The distributor retains the full sales charge you pay when you purchase shares of the fund directly from the fund (not through an authorized financial intermediary). Sales charges vary depending on the amount of your purchase. INITIAL SALES CHARGE(A) FOR CLASS A SHARES For equity funds and funds-of-funds (equity)*
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 5.75% 6.10% 5.00% $50,000--$99,999 4.75 4.99 4.00 $100,000--$249,999 3.50 3.63 3.00 $250,000--$499,999 2.50 2.56 2.15 $500,000--$999,999 2.00 2.04 1.75 $1,000,000 or more 0.00 0.00 0.00(c),(d)
For fixed income funds except those listed below and funds-of-funds (fixed income)*
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 4.75% 4.99% 4.00% $50,000--$99,999 4.25 4.44 3.50 $100,000--$249,999 3.50 3.63 3.00 $250,000--$499,999 2.50 2.56 2.15 $500,000--$999,999 2.00 2.04 1.75 $1,000,000 or more 0.00 0.00 0.00(c),(d)
-------------------------------------------------------------------------------- S.7 For RiverSource Absolute Return Currency and Income Fund, RiverSource Floating Rate Fund, RiverSource Inflation Protected Securities Fund, RiverSource Intermediate Tax-Exempt Fund, RiverSource Limited Duration Bond Fund and RiverSource Short Duration U.S. Government Fund
MAXIMUM REALLOWANCE AS A % OF AS A % OF AS A % OF TOTAL MARKET VALUE PURCHASE PRICE(b) NET AMOUNT INVESTED PURCHASE PRICE ----------------------------------------------------------------------------------- Up to $49,999 3.00% 3.09% 2.50% $50,000--$99,999 3.00 3.09 2.50 $100,000--$249,999 2.50 2.56 2.15 $250,000--$499,999 2.00 2.04 1.75 $500,000--$999,999 1.50 1.52 1.25 $1,000,000 or more 0.00 0.00 0.00(c),(d)
* "Funds-of-funds (equity)" includes -- RiverSource Portfolio Builder Aggressive Fund, RiverSource Portfolio Builder Moderate Aggressive Fund, RiverSource Portfolio Builder Moderate Fund, RiverSource Portfolio Builder Total Equity Fund, RiverSource Retirement Plus 2010 Fund, RiverSource Retirement Plus 2015 Fund, RiverSource Retirement Plus 2020 Fund, RiverSource Retirement Plus 2025 Fund, RiverSource Retirement Plus 2030 Fund, RiverSource Retirement Plus 2035 Fund, RiverSource Retirement Plus 2040 Fund, RiverSource Retirement Plus 2045 Fund, Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025, Seligman TargETFund 2015 and Seligman TargETFund Core. "Funds-of-funds (fixed income)" includes -- RiverSource Income Builder Basic Income Fund, RiverSource Income Builder Enhanced Income Fund, RiverSource Income Builder Moderate Income Fund, RiverSource Portfolio Builder Conservative Fund and RiverSource Portfolio Builder Moderate Conservative Fund. (a) Because of rounding in the calculation of the offering price, the portion of the sales charge retained by the distributor may vary and the actual sales charge you pay may be more or less than the sales charge calculated using these percentages. (b) Purchase price includes the sales charge. (c) Although there is no sales charge for purchases with a total market value over $1,000,000, and therefore no re-allowance, the distributor may pay a financial intermediary the following out of its own resources: a sales commission of up to 1.00% for a sale of $1,000,000 to $3,999,999; a sales commission up to 0.50% for a sale of $4,000,000 to $49,999,999; and a sales commission up to 0.25% for a sale of $50,000,000 or more. (d) For certain eligible employee benefit plans defined under section 401(a), 401(k), 457 and 403(b) which meet eligibility rules for the waiver of applicable sales charges, the distributor may pay the following out of its own resources: a sales commission of 1.00% for a sale of $1 to $3,999,999 received in eligible employee benefit plans; a sales commission up to 0.50% for a sale of $4,000,000 to $49,999,999; and a sales commission up to 0.25% for a sale of $50,000,000 or more. See "Initial Sales Charge -- Waivers of the sales charge for Class A shares" for employee benefit plan eligibility rules. There is no initial sales charge on reinvested dividends or capital gain distributions. INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA). You may be able to reduce the sales charge on Class A shares, based on the combined market value of accounts in your ROA group. Your ROA group includes the current market values of the following investments which are eligible to be added together for purposes of determining the sales charge on your next purchase: - Your current investment in a fund; and -------------------------------------------------------------------------------- S.8 - Previous investments you and members of your household have made in Class A, Class B or Class C shares in the fund and other funds in the RiverSource Family of Funds, provided your investment was subject to a sales charge. Your household consists of you, your spouse or domestic partner and your unmarried children under age 21, all of whom share a mailing address. The following accounts are eligible to be included in your ROA group in order to determine the sales charge on your purchase: - Individual or joint accounts; - Roth and traditional IRAs, SEPs, SIMPLEs and TSCAs, provided they are invested in Class A, Class B or Class C shares that were subject to a sales charge; - UGMA/UTMA accounts for which you, your spouse, or your domestic partner is parent or guardian of the minor child; - Revocable trust accounts for which you or a member of your household, individually, is the beneficial owner/grantor; - Accounts held in the name of your, your spouse's, or your domestic partner's sole proprietorship or single owner limited liability company or S corporation; and - Qualified retirement plan assets, provided that you are the sole owner of the business sponsoring the plan, are the sole participant (other than a spouse) in the plan, and have no intention of adding participants to the plan. The following accounts are NOT eligible to be included in your ROA group in order to determine the sales charge on your purchase: - Accounts of pension and retirement plans with multiple participants, such as 401(k) plans (which are combined to reduce the sales charge for the entire pension or retirement plan and therefore are not used to reduce the sales charge for your individual accounts); - Investments in Class A shares where the sales charge is waived, for example, purchases through wrap accounts; - Investments in Class I, Class R2, Class R3, Class R4, Class R5, Class W or Class Y shares; - Investments in 529 plans, donor advised funds, variable annuities, variable life insurance products, wrap accounts or managed separate accounts; and - Charitable and irrevocable trust accounts. If you purchase fund shares through different financial intermediaries, and you want to include those assets toward a reduced sales charge, you must inform your financial intermediary in writing about the other accounts when placing your purchase order. Contact your financial intermediary to determine what information is required. -------------------------------------------------------------------------------- S.9 Unless you provide your financial intermediary in writing with information about all of the accounts that may count toward a sales charge reduction, there can be no assurance that you will receive all of the reductions for which you may be eligible. You should request that your financial intermediary provide this information to the fund when placing your purchase order. For more information on ROA, please see the SAI. INITIAL SALES CHARGE -- LETTER OF INTENT (LOI). Generally, if you intend to invest $50,000 or more (including any existing ROA) over a period of up to 13 months, you may be able to reduce the front-end sales charge(s) for investments in Class A shares by completing and filing an LOI. The required form of LOI may vary by financial intermediary. Existing ROA can be included in your LOI. Each purchase of fund shares normally subject to an initial sales charge made during the 13-month period will be made at the public offering price applicable to a single transaction of the total dollar amount indicated by the LOI. Five percent of the commitment amount will be placed in escrow. At the end of the 13-month period, the LOI will end and the shares will be released from escrow. If you do not invest the commitment amount by the end of the 13 months, the remaining amount of the unpaid sales charge will be redeemed from the escrowed shares and the remaining balance released from escrow. Existing ROA Example. Shareholder currently has $60,000 ROA in the funds. Shareholder completes an LOI to invest $100,000 in the funds (ROA eligible accounts). Shareholder only needs to invest an additional $40,000 in the funds' Class A shares (any non-money market fund in the RiverSource Family of Funds) in order to fulfill the LOI commitment and receive reduced front-end sales charge(s) over the next 13 months. Notification Obligation. You must request the reduced sales charge when you buy shares. If you do not complete and file an LOI, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge. You should request that your financial intermediary provide this information to the fund when placing your purchase order. For more detail on LOIs, please contact your financial intermediary or see the SAI. INITIAL SALES CHARGE -- WAIVERS OF THE SALES CHARGE FOR CLASS A SHARES. Sales charges do not apply to: - current or retired Board members, officers or employees of the funds or RiverSource Investments or its affiliates, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - current or retired Ameriprise Financial Services, Inc. financial advisors, employees of financial advisors, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. -------------------------------------------------------------------------------- S.10 - registered representatives and other employees of affiliated or unaffiliated financial intermediaries having a selling agreement with the distributor, including their spouses, domestic partners, children, parents and their spouse's or domestic partner's parents. - portfolio managers employed by subadvisers of the funds, including their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - partners and employees of outside legal counsel to the funds or the funds' directors or trustees who regularly provide advice and services to the funds, or to their directors or trustees. - direct rollovers from qualified employee benefit plans, provided that the rollover involves a transfer to Class A shares in the same fund. - purchases made: - with dividend or capital gain distributions from a fund or from the same class of another fund in the RiverSource Family of Funds; - through or under a wrap fee product or other investment product sponsored by a financial intermediary that charges an account management fee that has, or that clear trades through a financial intermediary that has, a selling agreement with the distributor; - through state sponsored college savings plans established under Section 529 of the Internal Revenue Code; or - through bank trust departments. - separate accounts established and maintained by an insurance company which are exempt from registration under Section 3(c)(11). - purchases made through "employee benefit plans" created under section 401(a), 401(k), 457 and 403(b) which: - have at least $1 million in plan assets at the time of investment; and - have a plan level or omnibus account that is maintained with the fund or its transfer agent; and - transact directly with the fund or its transfer agent through a third party administrator or third party recordkeeper. For more information regarding waivers of sales charge for Class A purchases, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of sales charges for additional classes of investors. Policies related to reducing or waiving the sales charge may be modified or withdrawn at any time. -------------------------------------------------------------------------------- S.11 Unless you provide your financial intermediary with information in writing about all of the factors that may count toward a waiver of the sales charge, there can be no assurance that you will receive all of the waivers for which you may be eligible. You should request that your financial intermediary provide this information to the fund when placing your purchase order. Because the current prospectus is available on the funds' website (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com free of charge, information regarding breakpoint discounts is not separately disclosed on the website. CDSCS AND THE COMBINATION OF TARGET DATE FUNDS WITH SELIGMAN TARGETFUND CORE. Each of Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025 and Seligman TargETFund 2015 (the Target Date Funds) will automatically be combined with Seligman TargETFund Core during their respective target year. The investment manager expects each of these combinations to be effected as an acquisition of the assets and liabilities of the applicable Target Date Fund in exchange for shares of Seligman TargETFund Core at net asset value, with the shares of Seligman TargETFund Core then distributed to shareholders of the applicable Target Date Fund. For the purpose of calculating CDSCs, holding periods in respect of shares of a Target Date Fund will be carried over to shares of Seligman TargETFund Core acquired as a result of the combination of a Target Date Fund with Seligman TargETFund Core. CLASS A -- CONTINGENT DEFERRED SALES CHARGE For Class A shares purchased without a sales charge where a commission was separately paid by the distributor to an authorized financial intermediary effecting the purchase, a 1% CDSC may be charged if you sell your shares within 18 months after purchase. A CDSC will be based on the original purchase cost or the current market value of the shares being sold, whichever is less. CDSC -- WAIVERS OF THE CDSC FOR CLASS A SHARES. The CDSC will be waived on sales of shares: - to which no sales commission or transaction fee was paid to an authorized financial intermediary at the time of purchase. - purchased through reinvestment of dividends and capital gain distributions. - in the event of the shareholder's death. - from a monthly, quarterly or annual systematic redemption plan of up to an annual amount of 12% of the account value on a per fund basis. - in an account that has been closed because it falls below the minimum account balance. - that result from required minimum distributions taken from retirement accounts upon the shareholders attainment of age 70 1/2. -------------------------------------------------------------------------------- S.12 - that result from returns of excess contributions or excess deferral amounts made to a retirement plan participant. - of RiverSource funds purchased prior to Dec. 1, 2008. - initially purchased by an employee benefit plan that is not connected with a plan level termination. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. CLASS B AND CLASS C -- CDSC ALTERNATIVE The money market funds (except RiverSource Tax-Exempt Money Market Fund) offer Class B and Class C shares, but only to facilitate exchanges with other funds offering Class B and Class C shares, respectively. For example, if you own Class B or Class C shares of another fund, but want to hold your money in a money market fund, you may exchange into Class B or Class C shares of a money market fund. Funds that offer Class B and Class C shares have limitations on the amount you may invest in those share classes. If you are considering purchasing Class B or Class C shares of a fund, please see the prospectus for that fund for any effective purchase limitations. Although you may not purchase Class B and Class C shares of the money market funds directly, if you exchange into Class B or Class C shares of a money market fund from another fund, you will be subject to the rules governing CDSC set forth in this section. To minimize the amount of CDSC you may pay when you sell your shares, the fund assumes that shares acquired through reinvested dividends and capital gain distributions (which are not subject to CDSC) are sold first. Shares that have been in your account long enough so that they are not subject to a CDSC are sold next. After these shares are exhausted, shares will be sold in the order they were purchased (earliest to latest). -------------------------------------------------------------------------------- S.13 FOR CLASS B, the CDSC is based on the sale amount and the number of years between purchase and sale. The following table shows how CDSC percentages on sales decline over time:
IF THE SALE IS MADE DURING THE: THE CDSC PERCENTAGE RATE IS:* First year 5% Second year 4% Third year 3%** Fourth year 3% Fifth year 2% Sixth year 1% Seventh or eighth year 0%
* Because of rounding in the calculation, the portion of the CDSC retained by the distributor may vary and the actual CDSC you pay may be more or less than the CDSC calculated using these percentages. ** For shares purchased in a RiverSource fund on or prior to June 12, 2009, the CDSC percentage for the third year is 4%. Although there is no front-end sales charge when you buy Class B shares, the distributor pays a sales commission of 4% to financial intermediaries that sell Class B shares. A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class B shares. You may not make additional purchases of Class B shares if your ROA exceeds $49,999.99. Class B shares purchased in a RiverSource fund prior to May 21, 2005 age on a calendar year basis. Class B shares purchases made in a RiverSource fund beginning May 21, 2005 age on a daily basis. For example, a purchase made on Nov. 12, 2004 completed its first year on Dec. 31, 2004 under calendar year aging. However, a purchase made on Nov. 12, 2005 completed its first year on Nov. 11, 2006 under daily aging. Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund on or prior to June 12, 2009 will convert to Class A shares in the month prior to the ninth year of ownership. Class B shares purchased in a RiverSource fund beginning May 21, 2005 and Class B shares purchased in a Seligman fund beginning June 13, 2009 will convert to Class A shares one month after the completion of the eighth year of ownership. -------------------------------------------------------------------------------- S.14 FOR CLASS C, a 1% CDSC may be charged if you sell your shares within one year after purchase. Although there is no front-end sales charge when you buy Class C shares, the distributor pays a total amount up to 1% (including sales commission and advance of service fees) to financial intermediaries that sell Class C shares. See "Buying and Selling Shares -- Distribution and Service Fees." A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class C shares. You may not make additional purchases of Class C shares if your ROA exceeds $999,999.99. For both Class B and Class C shares, the amount of any CDSC you pay will be based on the lower of the original purchase price of those shares or current net asset value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you do not have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. EXAMPLE Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3 1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase. CDSC -- WAIVERS OF THE CDSC FOR CLASS B SHARES. The CDSC will be waived on sales of shares: - in the event of the shareholder's death. - that result from required minimum distributions taken from retirement accounts upon the shareholders' attainment of age 70 1/2. - sold under an approved substantially equal periodic payment arrangement. - by certain other investors, including certain institutions as set forth in more detail in the SAI. For more information regarding waivers of the CDSC for Class B shares, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. -------------------------------------------------------------------------------- S.15 CDSC -- WAIVERS OF THE CDSC FOR CLASS C SHARES. The CDSC will be waived on sales of shares: - in the event of the shareholder's death. - to which no sales commission or transaction fee was paid to an authorized financial intermediary at the time of purchase. - that result from required minimum distributions taken from retirement accounts upon the shareholders' attainment of age 70 1/2. - initially purchased by an eligible employee benefit plan that are not connected with a plan level termination. - by certain other investors, including certain institutions as set forth in more detail in the SAI. For more information regarding waivers of the CDSC for Class C shares, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. CLASS I, CLASS R2, CLASS R3, CLASS R4, CLASS R5, CLASS W AND CLASS Y -- NO SALES CHARGE. For each of Class I, Class R2, Class R3, Class R4, Class R5 and Class W there is no initial sales charge or CDSC. OPENING AN ACCOUNT Financial institutions are required by law to obtain certain personal information from each person who opens an account in order to verify the identity of the person. As a result, when you open an account you will be asked to provide your name, permanent street address, date of birth, and Social Security or Employer Identification number. You may also be asked for other identifying documents or information. If you do not provide this information, the fund or the financial intermediary through which you are investing in the fund may not be able to open an account for you. If the fund or the financial intermediary through which you are investing in the fund is unable to verify your identity, your account may be closed, or other steps may be taken, as deemed appropriate. When you buy shares, your order will be priced at the next NAV calculated after your order is accepted by the fund or an authorized financial intermediary. Any applicable sales charge will be added to the purchase price for Class A shares. You may establish and maintain your account with an authorized financial intermediary or directly with the fund. The fund may appoint servicing agents to accept purchase orders and to accept exchange (and sale) orders on its behalf. Accounts established with the fund will be supported by the fund's transfer agent. -------------------------------------------------------------------------------- S.16 METHODS OF PURCHASING SHARES These methods of purchasing shares generally apply to Class A, Class B, and Class C shares. CLASS B SHARES OF RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND IS CURRENTLY CLOSED TO INVESTORS FOR NEW PURCHASES. CLASS B SHARES FOR RIVERSOURCE FLOATING RATE FUND, RIVERSOURCE INFLATION PROTECTED SECURITIES FUND, RIVERSOURCE INTERMEDIATE TAX-EXEMPT FUND, RIVERSOURCE LIMITED DURATION BOND FUND AND RIVERSOURCE SHORT DURATION U.S. GOVERNMENT FUND ARE CLOSED TO NEW INVESTORS AND NEW PURCHASES. EXISTING SHAREHOLDERS IN THESE FUNDS MAY CONTINUE TO OWN CLASS B SHARES AND MAKE EXCHANGES INTO AND OUT OF EXISTING ACCOUNTS WHERE CLASS B SHARES OF THESE FUNDS ARE MAINTAINED. ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INTERMEDIARY ALL REQUESTS The financial intermediary through which you buy shares may have different policies not described in this prospectus, including different minimum investment amounts and minimum account balances. -------------------------------------------------------------------------------- ACCOUNT ESTABLISHED WITH THE FUND BY MAIL You or the financial intermediary through which you buy shares may establish an account with the fund. To establish an account in this fashion, complete a fund account application with your financial advisor or investment professional, and mail the account application to the address below. Account applications may be obtained (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com or may be requested by calling (800) 221-2450. Make your check payable to the fund. The fund does not accept cash, credit card convenience checks, money orders, traveler's checks, starter checks, third or fourth party checks, or other cash equivalents. ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.17 METHODS OF PURCHASING SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) Mail your check and completed application to: REGULAR MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL P.O. BOX 8041 BOSTON, MA 02266-8041 EXPRESS MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL 30 DAN ROAD CANTON, MA 02021-2809 If you already have an account, include your name, account number, and the name of the fund and class of shares you wish to purchase along with your check. You can make scheduled investments in the fund by moving money from your checking account or savings account. See the Minimum Investment and Account Balance chart below for more information regarding scheduled investment plans. -------------------------------------------------------------------------------- BY WIRE OR ACH Fund shares purchased in an account established and maintained with the fund may be paid for by federal funds wire. Before sending a wire, call (800) 221-2450 to notify the fund's transfer agent of the wire and to receive further instructions. If you are establishing an account with a wire purchase, you are required to send a signed account application to the address above. Please include the wire control number or your new account number on the application. Your bank or financial intermediary may charge additional fees for wire transactions. -------------------------------------------------------------------------------- BY EXCHANGE Call (800) 221-2450 or send signed written instructions to the address above. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.18 METHODS OF PURCHASING SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) MINIMUM INVESTMENT AND ACCOUNT BALANCE
RIVERSOURCE RIVERSOURCE 120/20 DISCIPLINED CONTRARIAN SMALL CAP EQUITY FUND VALUE FUND THREADNEEDLE RIVERSOURCE FOR ALL FUNDS, GLOBAL EXTENDED FLOATING RATE CLASSES AND ALPHA FUND FUND ACCOUNTS EXCEPT RIVERSOURCE RIVERSOURCE THOSE LISTED TO ABSOLUTE RETURN INFLATION THE RIGHT TAX QUALIFIED CURRENCY AND PROTECTED (NONQUALIFIED) ACCOUNTS INCOME FUND SECURITIES FUND CLASS W --------------------------------------------------------------------------------------------------------------- INITIAL INVESTMENT $2,000 $1,000 $10,000 $5,000 $500 --------------------------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $100 $100 $100 None --------------------------------------------------------------------------------------------------------------- ACCOUNT BALANCE* $1,000 None $5,000 $2,500 $500
*If your fund account balance falls below the minimum account balance for any reason, including a market decline, you may be asked to increase it to the minimum account balance or establish a scheduled investment plan. If you do not do so within 30 days, your shares may be automatically redeemed and the proceeds mailed to you. ------------------------------------------------------------------------------- MINIMUM INVESTMENT AND ACCOUNT BALANCE -- SCHEDULED INVESTMENT PLANS
RIVERSOURCE RIVERSOURCE 120/20 DISCIPLINED CONTRARIAN SMALL CAP EQUITY FUND VALUE FUND THREADNEEDLE RIVERSOURCE FOR ALL FUNDS, GLOBAL EXTENDED FLOATING RATE CLASSES AND ALPHA FUND FUND ACCOUNTS EXCEPT RIVERSOURCE RIVERSOURCE THOSE LISTED TO ABSOLUTE RETURN INFLATION THE RIGHT TAX QUALIFIED CURRENCY AND PROTECTED (NONQUALIFIED) ACCOUNTS INCOME FUND SECURITIES FUND CLASS W --------------------------------------------------------------------------------------------------------------- INITIAL INVESTMENT $100(a) $100(b) $10,000 $5,000 $500 --------------------------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $50 $100 $100 None --------------------------------------------------------------------------------------------------------------- ACCOUNT BALANCE** None(b) None $5,000 $2,500 $500
**If your fund account balance is below the minimum initial investment described above, you must make payments at least monthly. (a)Money Market Funds -- $2,000 (b)Money Market Funds -- $1,000 ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.19 These minimums may be waived for accounts that are managed by an investment professional, for accounts held in approved discretionary or non-discretionary wrap programs, for accounts that are a part of an employer-sponsored retirement plan, or for other account types if approved by the distributor. The fund reserves the right to modify its minimum account requirements at any time, with or without prior notice. Please contact your financial intermediary for information regarding wire or electronic funds transfer. IMPORTANT: Payments sent by electronic fund transfers (ACH), a bank authorization or check that are not guaranteed may take up to 14 days to clear. If you request a sale within 14 days of purchase, this may cause your sale request to fail to process if the requested amount includes unguaranteed funds. EXCHANGING OR SELLING SHARES You may exchange or sell shares by having your financial intermediary process your transaction. If you maintain your account directly with your financial intermediary, you must contact that financial intermediary to exchange or sell shares of the fund. If your account was established with the fund, there are a variety of methods you may use to exchange or sell shares of the fund. WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INTERMEDIARY ALL REQUESTS You can exchange or sell shares by having your financial intermediary process your transaction. The financial intermediary through which you purchased shares may have different policies not described in this prospectus, including different transaction limits, exchange policies and sale procedures. -------------------------------------------------------------------------------- ACCOUNT ESTABLISHED WITH THE FUND BY MAIL Mail your exchange or sale request to: REGULAR MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL P.O. BOX 8041 BOSTON, MA 02266-8041 EXPRESS MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL 30 DAN ROAD CANTON, MA 02021-2809 ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.20 WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) Include in your letter: - your name - the name of the fund(s) - your account number - the class of shares to be exchanged or sold - your Social Security number or Employer Identification number - the dollar amount or number of shares you want to exchange or sell - specific instructions regarding delivery or exchange destination - signature(s) of registered account owner(s) - any special documents the transfer agent may require in order to process your order Corporate, trust or partnership accounts may need to send additional documents. Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners. A Medallion Signature Guarantee is required if: - Amount is over $50,000. - You want your check made payable to someone other than the registered account owner(s). - Your address of record has changed within the last 30 days. - You want the check mailed to an address other than the address of record. - You want the proceeds sent to a bank account not on file. - You are the beneficiary of the account and the account owner is deceased (additional documents may be required). A Medallion Signature Guarantee assures that a signature is genuine and not a forgery. The financial intermediary providing the Guarantee is financially liable for the transaction if the signature is a forgery. Eligible guarantors include commercial banks, trust companies, savings associations, and credit unions as defined by the Federal Deposit Insurance Act. Note: A guarantee from a notary public is not acceptable. ------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.21 WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) NOTE: Any express mail delivery charges you pay will vary depending on domestic or international delivery instructions. -------------------------------------------------------------------------------- BY TELEPHONE Call (800) 221-2450. Unless you elect not to have telephone exchange and sale privileges, they will automatically be available to you. Reasonable procedures will be used to confirm authenticity of telephone exchange or sale requests. Telephone privileges may be modified or discontinued at any time. Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate, qualified retirement accounts and trust accounts which the current trustee is not listed. You may request that these privileges NOT apply by writing to the address above. Payment will be mailed to the address of record and made payable to the names listed on the account. Telephone sale requests are limited to $50,000 per day. -------------------------------------------------------------------------------- BY WIRE OR ACH You can wire money from your fund account to your bank account. Make sure we have your bank account information on file. If we do not have this information, you will need to send written instructions with your bank's name and a voided check or savings account deposit slip. Call (800) 221-2450 or send a letter of instruction, with a Medallion Signature Guarantee if required, to the address above. A service fee may be charged against your account for each wire sent. Minimum amount: by ACH: $100 by wire: $500 Your bank or financial intermediary may charge additional fees for wire transactions. -------------------------------------------------------------------------------- BY SCHEDULED You may elect to receive regular periodic payments through an PAYOUT PLAN automatic sale of shares. See the SAI for more information. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- S.22 CHECK REDEMPTION SERVICE Class A shares of the money market funds offer check writing privileges. If you have $2000 in a money market fund, you may request checks which may be drawn against your account. You can elect this service on your initial application, or, thereafter. Call (800) 221-2450 for the appropriate forms to establish this service. If you own Class A shares that were both in another fund at NAV because of the size of the purchase, and then exchanged into a money market fund, check redemptions may be subject to a CDSC. EXCHANGES Generally, you may exchange your fund shares for shares of the same class of any other publicly offered fund in the RiverSource Family of Funds without a sales charge. For complete information on the fund you are exchanging into, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after your transaction request is received in good order. You may be subject to a sales charge if you exchange from a money market fund into an equity or fixed income fund. IF YOU HOLD YOUR FUND SHARES IN AN ACCOUNT WITH AMERIPRISE FINANCIAL SERVICES, YOU MAY HAVE LIMITED EXCHANGEABILITY WITHIN THE RIVERSOURCE FAMILY OF FUNDS. MARKET TIMING SHORT-TERM TRADING AND OTHER SO-CALLED MARKET TIMING PRACTICES ARE FREQUENT TRADING PRACTICES BY CERTAIN SHAREHOLDERS INTENDED TO PROFIT AT THE EXPENSE OF OTHER SHAREHOLDERS BY SELLING SHARES OF A FUND SHORTLY AFTER PURCHASE. MARKET TIMING MAY ADVERSELY IMPACT A FUND'S PERFORMANCE BY PREVENTING THE INVESTMENT MANAGER FROM FULLY INVESTING THE ASSETS OF THE FUND, DILUTING THE VALUE OF SHARES HELD BY LONG-TERM SHAREHOLDERS, OR INCREASING THE FUND'S TRANSACTION COSTS. -------------------------------------------------------------------------------- S.23 FOR A FUND ORGANIZED AS A FUND-OF-FUNDS, ITS ASSETS CONSIST PRIMARILY OF SHARES OF THE UNDERLYING FUNDS IN WHICH IT INVESTS. THE UNDERLYING FUNDS MAY BE MORE SUSCEPTIBLE TO THE RISKS OF MARKET TIMING. FUNDS THAT INVEST DIRECTLY IN SECURITIES THAT TRADE INFREQUENTLY MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF INEFFICIENCIES IN THE SECURITIES MARKETS. FUNDS AND THE UNDERLYING FUNDS THAT INVEST IN SECURITIES THAT TRADE ON OVERSEAS SECURITIES MARKETS MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF CHANGES IN THE VALUES OF SECURITIES BETWEEN THE CLOSE OF OVERSEAS MARKETS AND THE CLOSE OF U.S. MARKETS, WHICH IS GENERALLY THE TIME AT WHICH A FUND'S NAV IS CALCULATED. TO THE EXTENT THAT A FUND OR UNDERLYING FUND HAS SIGNIFICANT HOLDINGS OF SMALL CAP STOCKS, FLOATING RATE LOANS, HIGH YIELD BONDS, TAX-EXEMPT SECURITIES OR FOREIGN SECURITIES, THE RISKS OF MARKET TIMING MAY BE GREATER FOR THE FUND THAN FOR OTHER FUNDS. SEE "PRINCIPAL INVESTMENT STRATEGIES" FOR A DISCUSSION OF THE TYPES OF SECURITIES IN WHICH YOUR FUND INVESTS. SEE "PRICING AND VALUING OF FUND SHARES" FOR A DISCUSSION OF THE FUNDS' POLICY ON FAIR VALUE PRICING, WHICH IS INTENDED, IN PART, TO REDUCE THE FREQUENCY AND EFFECT OF MARKET TIMING. THE FUNDS' BOARD HAS ADOPTED A POLICY THAT IS DESIGNED TO DETECT AND DETER MARKET TIMING THAT MAY BE HARMFUL TO THE FUNDS. EACH FUND SEEKS TO ENFORCE THIS POLICY THROUGH ITS SERVICE PROVIDERS AS FOLLOWS: - The fund tries to distinguish market timing from trading that it believes is not harmful, such as periodic rebalancing for purposes of asset allocation or dollar cost averaging or other purchase and exchange transactions not believed to be inconsistent with the best interest of fund shareholders or the Board's policy. The fund uses a variety of techniques to monitor for and detect abusive trading practices. These techniques may vary depending on the type of fund, the class of shares and where the shares are maintained. Under the fund's procedures, there is no set number of transactions in the fund that constitutes market timing. Even one purchase and subsequent sale by related accounts may be market timing. Generally, the fund seeks to restrict the exchange privilege of an investor who makes more than three exchanges into or out of the fund in any 90-day period. Accounts held by a retirement plan or a financial intermediary for the benefit of its participants or clients, which typically engage in daily transactions, are not subject to this limit, although the fund may seek the assistance of financial intermediaries in applying similar restrictions on their participants or clients. The fund's ability to monitor and discourage abusive trading practices in omnibus accounts is more limited. - The fund may rely on the monitoring policy of a financial intermediary, for example, a retirement plan administrator or similar financial intermediary authorized to distribute the funds, if it determines the policy and procedures of such financial intermediaries are sufficient to protect the fund and its shareholders. -------------------------------------------------------------------------------- S.24 - If an investor's trading activity is determined to be market timing or otherwise harmful to existing shareholders, the fund reserves the right to modify or discontinue the investor's exchange privilege or reject the investor's purchases or exchanges, including purchases or exchanges accepted by a financial intermediary. The fund may treat accounts it believes to be under common control as a single account for these purposes, although it may not be able to identify all such accounts. - Although the fund does not knowingly permit market timing, it cannot guarantee that it will be able to identify and restrict all short-term trading activity. The fund receives purchase and sale orders through financial intermediaries where market timing activity may not always be successfully detected. Other exchange policies: - Exchanges must be made into the same class of shares of the share class being exchanged out of. - Exchanges into RiverSource Tax-Exempt Money Market Fund may be made only from Class A shares. - If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. - Once the fund receives your exchange request, you cannot cancel it after the market closes. - Shares of the purchased fund may not be used on the same day for another exchange or sale. - New investments in Class A shares of a money market fund may be exchanged for either Class A, Class B or Class C shares of any other publicly offered fund in the RiverSource Family of Funds. - If you exchange shares from Class A shares of a money market fund to another fund in the RiverSource Family of Funds, any further exchanges must be between shares of the same class. For example, if you exchange from Class A shares of a money market fund into Class B shares of another fund in the RiverSource Family of Funds, you may not exchange from Class B shares of that fund back to Class A shares of a money market fund. Exchange rules for money market funds are illustrated in the following tables. - Shares of Class W originally purchased, but no longer held in a discretionary managed account, may not be exchanged for Class W shares of another fund. You may continue to hold these shares in the fund. Changing your investment to a different fund will be treated as a sale and purchase, and you will be subject to applicable taxes on the sale and sales charges on the purchase of the new fund. -------------------------------------------------------------------------------- S.25 - If your shares are subject to a CDSC, you will not be charged a CDSC upon the exchange of those shares. Any CDSC will be deducted when you sell the shares you received from the exchange. The CDSC imposed at that time will be based on the period that begins when you bought shares of the original fund and ends when you sell the shares of the fund you exchanged to.
TO OTHER FUNDS FROM A MONEY MARKET FUND ----------------------------- CLASS A CLASS B CLASS C -------------------------------------------------------------------- Class A Yes Yes Yes Class B No Yes No Class C No No Yes
TO A MONEY MARKET FUND FROM OTHER FUNDS ----------------------------- CLASS A CLASS B CLASS C -------------------------------------------------------------------- Class A Yes No No Class B No Yes No Class C No No Yes
If your initial investment was in a money market fund and you exchange into an equity or fixed income fund, you will pay an initial sales charge if you exchange into Class A and be subject to a CDSC if you exchange into Class B or Class C. If your initial investment was in Class A shares of an equity or fixed income fund and you exchange shares into a money market fund, you may exchange that amount to another fund, including dividends earned on that amount, without paying a sales charge. SELLING SHARES You may sell your shares at any time. The payment will be sent within seven days after your request is received in good order. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order, minus any applicable CDSC. REPURCHASES. You can change your mind after requesting a sale of shares and use all or part of the sale proceeds to purchase new shares of a fund in the RiverSource Family of Funds. If your original purchase was in Class A or Class B, you may use all or part of the sale proceeds to purchase new Class A shares in any fund account linked together for ROA purposes. Your repurchase will be in Class A shares at NAV, up to the amount of the sale proceeds. For a Class A repurchase on shares that were originally charged a CDSC, the amount of the CDSC will be reinvested at the NAV on the date the repurchase is processed. Repurchases of Class B shares will also be in Class A shares at NAV. Any CDSC paid upon redemption of your Class B shares will not be reimbursed. If your original purchase was in Class C, you will be allowed to reinvest in the -------------------------------------------------------------------------------- S.26 same Class C account and fund you originally purchased. In a Class C repurchase, the CDSC you paid will be reinvested and the shares will be deemed to have the original cost and purchase date for purposes of applying the CDSC (if any) to subsequent redemptions. Systematic withdrawals and purchases will be excluded from this policy. In order for you to take advantage of this repurchase waiver, you must notify your financial intermediary or the fund's transfer agent if your account is held at the fund within 90 days of the date your sale request was processed. Contact your financial intermediary for information on required documentation. The repurchase privilege may be modified or discontinued at any time and use of this option may have tax consequences. If you sold shares of a Seligman fund on or before February 3, 2009 and wish to repurchase shares, you have the option of taking advantage of the current repurchase policy (described above) within 90 days of the date your sale request was processed, or you may use all or part of your sale proceeds to purchase shares of the fund you sold or any other fund in the RiverSource Family of Funds without paying an initial sales charge or, if you paid a CDSC when you sold your shares, receiving a credit for the applicable CDSC, within 120 days of the date your sale request was processed. Contact your financial intermediary or, if you opened an account directly with the fund, the transfer agent, for more information on the required documentation to complete a repurchase transaction. The fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. PRICING AND VALUING OF FUND SHARES For classes of shares sold with an initial sales charge, the public offering or purchase price is the net asset value plus the sales charge. For funds or classes of shares sold without an initial sales charge, the public offering price is the NAV. Orders in good form are priced at the NAV next determined after you place your order. Good form or good order means that your instructions have been received in the form required by the fund. This may include, for example, providing the fund name and account number, the amount of the transaction and all required signatures. The NAV is the value of a single share of the fund. The NAV is determined by dividing the value of the fund's assets, minus any liabilities, by the number of shares outstanding. The NAV is calculated as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. For a fund organized as a fund-of-funds, the assets will consist primarily of shares of the underlying funds, which are valued at their NAVs. Securities are valued primarily on the basis of market quotations and floating rate loans are valued primarily on the basis of indicative bids. Both market quotations -------------------------------------------------------------------------------- S.27 and indicative bids are obtained from outside pricing services approved and monitored under procedures adopted by the Board. Certain short-term securities with maturities of 60 days or less are valued at amortized cost. When reliable market quotations or indicative bids are not readily available, investments are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of an investment held by a fund or underlying fund is materially affected by events that occur after the close of a securities market but prior to the time as of which the fund's or underlying fund's NAV is determined. Valuing investments at fair value involves reliance on judgment. The fair value of an investment is likely to differ from any available quoted or published price. To the extent that a fund or an underlying fund has significant holdings of small cap stocks, high yield bonds, floating rate loans, tax-exempt securities or foreign securities that may trade infrequently, fair valuation may be used more frequently than for other funds. The funds use an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of a fund's or an underlying fund's securities may be listed on foreign exchanges that trade on weekends or other days when the fund does not price its shares. In that event, the NAV of the fund's or underlying fund's shares may change on days when shareholders will not be able to purchase or sell the fund's or underlying fund's shares. For money markets funds -- The fund's investments are valued at amortized cost, which approximates market value, as explained in the SAI. Although the fund cannot guarantee it will always be able to maintain a constant net asset value of $1 per share, it will use its best efforts to do so. DISTRIBUTIONS AND TAXES As a shareholder you are entitled to your share of your fund's net income and net gains. Each fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS Your fund's net investment income is distributed to you as dividends. Dividends may be composed of qualified dividend income, which is eligible for preferential tax rates under current tax law, as well as other ordinary dividend income, which may include dividends which are non-qualified dividends, interest income and short-term capital gains. Because of the types of income earned by fixed income funds, it is unlikely the funds will distribute qualified dividend income. Generally, capital gains are realized when a security is sold for a higher price than was paid for it. Generally, capital losses are realized when a security is sold for a lower price than was paid for it. Typically, each realized capital gain or loss is long-term or short-term depending on the length of time the fund held the -------------------------------------------------------------------------------- S.28 security. Realized capital gains and losses offset each other. The fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains, if any, are included in net investment income and are taxable as ordinary income when distributed to the shareholder. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. If the fund's distributions exceed its current and accumulated earnings and profits, that portion of the fund's distributions will be treated as a return of capital to the shareholders to the extent of their basis in their shares. A return of capital will generally not be taxable; however, any amounts received in excess of basis are treated as capital gain. Forms 1099 sent to shareholders report any return of capital. Certain derivative instruments subject the fund to special tax rules, the effect of which may be to accelerate income to the fund, defer fund losses, cause adjustments in the holding periods of fund securities, convert capital gains into ordinary income and convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders. For Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025, Seligman TargETF 2015 and Seligman TargETFund Core (the Seligman TargETFunds) -- The Funds may purchase or sell (write) options. In general, option premiums which may be received by the Funds are not immediately included in the income of the Funds. Instead, such premiums are taken into account when the option contract expires, the option is exercised by the holder, or the Funds transfer or otherwise terminate the option. If an option written by a Fund is exercised and such Fund sells or delivers the underlying security, such Fund generally will recognize capital gain or loss equal to (a) the sum of the exercise price and the option premium received by the Fund minus (b) the Fund's basis in the security. Such gain or loss generally will be short-term or long- term depending upon the holding period of the underlying security. Gain or loss with respect to any termination of a Fund's obligation under an option other than through the exercise of the option and the related sale or delivery of the underlying security generally will be short-term gain or loss. Thus, for example, if an option written by a Fund expires unexercised, such Fund generally will recognize short-term gain equal to the premium received. -------------------------------------------------------------------------------- S.29 The Seligman TargETFunds generally will pay any dividends from its net investment income and distributes any net capital gains realized on investments at least annually (Seligman TargETFund Core generally will pay dividends from its net investment income on a quarterly basis). Because each Seligman TargETFund may sell underlying ETFs, US government securities and short-term debt instruments: (a) to accommodate redemptions of its shares; (b) in respect of the Target Date Funds, to implement the process of migration; and (c) to adjust the percentages of its assets invested in each underlying ETF, US government securities, short-term debt instruments, cash and cash equivalents in response to economic, market or other conditions or events, and changes in Seligman Time Horizon Matrix (the asset allocation methodology utilized by the Seligman TargETFunds), each Seligman TargETFund may generate net capital gains (including short-term capital gains that are generally taxed to shareholders at ordinary income tax rates) for investors that may be higher than the net capital gains ordinarily incurred by an investor through an investment in another asset allocation fund that has broader investment ranges or an asset allocation strategy designed by the investor. In addition, due to federal income tax laws, each Seligman TargETFund may not fully utilize capital losses (to offset capital gains) from the sale of underlying ETFs at a loss. In addition, underlying ETFs may distribute capital gains to the Seligman TargETFunds. REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the fund unless you request distributions in cash. The financial intermediary through which you purchased shares may have different policies. Distributions are reinvested at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. Generally, if you sell shares for less than their cost, the difference is a capital loss or if you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). -------------------------------------------------------------------------------- S.30 You may not create a tax loss or reduce a tax gain, based on paying a sales charge, by exchanging shares before the 91st day after the day of purchase. If you buy Class A shares and exchange into another fund before the 91st day after the day of purchase, you may not be able to include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. For more information, see the SAI. REITs often do not provide complete tax information until after the calendar year-end; generally mid to late January and continuing through early February. Consequently, if your fund has significant investments in REITs, you may not receive your Form 1099-DIV until February. Other RiverSource funds tax statements are generally mailed in January. FOR SELIGMAN TARGETFUNDS. Each of the Target Date Funds will automatically be combined with Seligman TargETFund Core during their respective target years. The investment manager expects each of these combinations to be effected as an acquisition of the assets and liabilities of the applicable Target Date Fund in exchange for shares of Seligman TargETFund Core at net asset value, with the shares of Seligman TargETFund Core then distributed to shareholders of the applicable Target Date Fund. Based on current tax rules, the investment manager expects the combination to be effected in a non-taxable transaction. Changes in such tax rules or other applicable law could negatively impact the combination of a Target Date Fund with Seligman TargETFund Core. FOR TAXABLE FUNDS. Distributions related to shares not held in IRAs or other retirement accounts are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. Shares held in an IRA or qualified retirement account are generally subject to different tax rules. Taking a distribution from your IRA or qualified retirement plan may subject you to federal taxes, withholding, penalties and reporting requirements. Please consult your tax advisor. Income received by a fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes. FOR TAX-EXEMPT FUNDS. Dividends distributed from interest earned on tax-exempt securities (exempt-interest dividends) are exempt from federal income taxes but may be subject to state and local taxes and potentially the alternative minimum tax. Dividends distributed from net capital gains, if any, and other income earned are not exempt from federal income taxes. Any taxable distributions are taxable in the year the fund declares them regardless of whether you take them in cash or reinvest them. -------------------------------------------------------------------------------- S.31 Interest on certain private activity bonds is a preference item for purposes of the individual and corporate alternative minimum tax. To the extent the fund earns such income, it will flow through to its shareholders and may affect those shareholders who are subject to the alternative minimum tax. See the SAI for more information. Because interest on municipal bonds and notes is tax-exempt for federal income tax purposes, any interest on money you borrow that is used directly or indirectly to purchase fund shares is not deductible on your federal income tax return. You should consult a tax advisor regarding its deductibility for state and local income tax purposes. FOR A FUND ORGANIZED AS A FUND-OF-FUNDS. Because most of the fund's investments are shares of underlying funds, the tax treatment of the fund's gains, losses, and distributions may differ from the tax treatment that would apply if either the fund invested directly in the types of securities held by the underlying funds or the fund shareholders invested directly in the underlying funds. As a result, fund shareholders may recognize higher amounts of capital gain distributions or ordinary income dividends than they otherwise would. IMPORTANT: This information is a brief and selective summary of some of the tax rules that apply to an investment in a fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. GENERAL INFORMATION AVAILABILITY AND TRANSFERABILITY OF FUND SHARES Please consult with your financial intermediary to determine the availability of the funds. The funds may only be purchased or sold directly or through financial intermediaries authorized by the distributor to offer the funds. NOT ALL FINANCIAL INSTITUTIONS ARE AUTHORIZED TO SELL THE RIVERSOURCE FAMILY OF FUNDS AND CERTAIN FINANCIAL INTERMEDIARIES THAT OFFER THE RIVERSOURCE FAMILY OF FUNDS MAY NOT OFFER ALL FUNDS ON ALL INVESTMENT PLATFORMS. If you set up an account at a financial intermediary that does not have, and is unable to obtain, a selling agreement with the distributor, you will not be able to transfer fund holdings to that account. In that event, you must either maintain your fund holdings with your current financial intermediary, find another financial intermediary with a selling agreement, or sell your shares, paying any applicable CDSC. Please be aware that transactions in taxable accounts are taxable events and may result in income tax liability. ADDITIONAL SERVICES AND COMPENSATION In addition to acting as the fund's investment manager, RiverSource Investments and its affiliates also receive compensation for providing other services to the funds. -------------------------------------------------------------------------------- S.32 Administration Services. Ameriprise Financial, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides or compensates others to provide administrative services to the funds. These services include administrative, accounting, treasury, and other services. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." Distribution and Shareholder Services. RiverSource Fund Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474, (the distributor), provides underwriting and distribution services to the funds. Under the Distribution Agreement and related distribution and shareholder servicing plans, the distributor receives distribution and shareholder servicing fees. The distributor may retain a portion of these fees to support its distribution and shareholder servicing activity. The distributor reallows the remainder of these fees (or the full fee) to the financial intermediaries that sell fund shares and provide services to shareholders. Fees paid by a fund for these services are set forth under "Distribution and/or service (12b-1) fees" in the expense table under "Fees and Expenses." More information on how these fees are used is set forth under "Investment Options -- Classes of Shares" and in the SAI. The distributor also administers any sales charges paid by an investor at the time of purchase or at the time of sale. See "Shareholder Fees (fees paid directly from your investment)" under "Fees and Expenses" for the scheduled sales charge of each share class. See "Buying and Selling Shares, Sales Charges" for variations in the scheduled sales charges, and for how these sales charges are used by the distributor. See "Other Investment Strategies and Risks" for the funds' policy regarding directed brokerage. Transfer Agency Services. RiverSource Service Corporation, 734 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the transfer agent or RiverSource Service Corporation), provides or compensates others to provide transfer agency services to the funds. The funds pay the transfer agent a fee that varies by class, as set forth in the SAI, and reimburses the transfer agent for its out-of-pocket expenses incurred while providing these transfer agency services to the funds. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." RiverSource Service Corporation pays a portion of these fees to financial intermediaries that provide sub-recordkeeping and other services to fund shareholders. The SAI provides additional information about the services provided and the fee schedules for the transfer agent agreements. -------------------------------------------------------------------------------- S.33 Plan Administration Services. Under a Plan Administration Services Agreement, the fund pays for plan administration services, including services such as implementation and conversion services, account set-up and maintenance, reconciliation and account recordkeeping, education services and administration to various plan types, including 529 plans, retirement plans and Health Savings Accounts. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." PAYMENTS TO FINANCIAL INTERMEDIARIES The distributor and its affiliates make or support additional cash payments out of their own resources (including profits earned from providing services to the fund) to financial intermediaries, in connection with agreements between the distributor and financial intermediaries pursuant to which these financial intermediaries sell fund shares and provide services to their clients who are shareholders of the fund. These payments and intercompany allocations (collectively, "payments") do not change the price paid by investors in the fund or fund shareholders for the purchase or ownership of fund shares of the fund, and these payments are not reflected in the fees and expenses of the fund, as they are not paid by the fund. In exchange for these payments, a financial intermediary may elevate the prominence or profile of the fund within the financial intermediary's organization, and may provide the distributor and its affiliates with preferred access to the financial intermediary's registered representatives or preferred access to the financial intermediary's customers. These arrangements are sometimes referred to as marketing and/or sales support payments, program and/or shareholder servicing payments, or revenue sharing payments. These arrangements create potential conflicts of interest between a financial intermediary's pecuniary interest and its duties to its customers, for example, if the financial intermediary receives higher payments from the sale of a certain fund than it receives from the sale of other funds, the financial intermediary or its representatives may be incented to recommend or sell shares of the fund where it receives or anticipates receiving the higher payment instead of other investment options that may be more appropriate for the customer. Employees of Ameriprise Financial and its affiliates, including employees of affiliated broker-dealers, may be separately incented to recommend or sell shares of the fund, as employee compensation and business unit operating goals at all levels are tied to the company's success. Certain employees, directly or indirectly, may receive higher compensation and other benefits as investment in the fund increases. In addition, management, sales leaders and other employees may spend more of their time and resources promoting Ameriprise Financial and its subsidiary companies, including RiverSource Investments and the distributor, and the products they offer, including the fund. -------------------------------------------------------------------------------- S.34 These payments are typically negotiated based on various factors including, but not limited to, the scope and quality of the services provided by the financial intermediary, its reputation in the industry, its ability to attract and retain assets, its access to target markets, its customer relationships, the profile the fund may obtain within the financial intermediary, and the access the distributor or other representatives of the fund may have within the financial intermediary for advertisement, training or education, including opportunities to present at or sponsor conferences for the registered representatives of the financial intermediary and its customers. These payments are usually calculated based on a percentage of fund assets owned through the financial intermediary and/or as a percentage of fund sales attributable to the financial intermediary. Certain financial intermediaries require flat fees instead of, or in addition to, these asset-based fees as compensation for including or maintaining a fund on their platforms, and, in certain situations, may require the reimbursement of ticket or operational charges -- fees that a financial intermediary charges its registered representatives for effecting transactions in the fund. The amount of payment varies by financial intermediary (e.g., initial platform set-up fees, ongoing maintenance or service fees, or asset or sales based fees). The amount of payments also varies by the type of sale. For instance, purchases of one fund may warrant a greater or lesser amount of payments than purchases of another fund. Additionally, sale and maintenance of shares on a stand alone basis may result in a greater or lesser amount of payments than the sale and maintenance of shares made through a plan, wrap or other fee-based program. Payments to affiliates may include payments as compensation to employees of RiverSource Investments who are licensed by the distributor in respect of certain sales and solicitation activity on behalf of the fund. These payments may be and often are significant. Additional information concerning the amount and calculation of these payments is available in the fund's SAI. Payments to affiliated broker-dealers are within the range of the payments the distributor pays to similarly-situated third party financial intermediaries and the payments such affiliated broker-dealers receive from third party fund sponsors related to the sale of their sponsored funds. However, because of the large amount of fund assets (from the RiverSource Family of Funds, in aggregate) currently held in customer accounts of the affiliated broker-dealers, the distributor and its affiliates, in the aggregate, pay significantly more in absolute dollars than other third-party fund sponsors pay to the affiliated broker-dealers for the sale and servicing of their sponsored funds. This level of payment creates potential conflicts of interest which the affiliated broker- dealers seek to mitigate by disclosure and implementation of internal controls, as well as the rules and regulations of applicable regulators. -------------------------------------------------------------------------------- S.35 From time to time, to the extent permitted by SEC and FINRA rules and by other applicable laws and regulations, the distributor and its affiliates may make other reimbursements or payments to financial intermediaries or their registered representatives, including non-cash compensation, in the form of gifts of nominal value, occasional meals, tickets, or other entertainment, support for due diligence trips, training and educational meetings or conference sponsorships, support for recognition programs, and other forms of non-cash compensation permissible under regulations to which these financial intermediaries and their representatives are subject. To the extent these are made as payments instead of reimbursement, they may provide profit to the financial intermediary to the extent the cost of such services was less than the actual expense of the service. The financial intermediary through which you are purchasing or own shares of the fund has been authorized directly or indirectly by the distributor to sell the fund and/or to provide services to you as a shareholder of the fund. Investors and current shareholders may wish to take such payment arrangements into account when considering and evaluating any recommendations they receive relating to fund shares. If you have questions regarding the specific details regarding the payments your financial intermediary may receive from the distributor or its affiliates related to your purchase or ownership of the fund, please contact your financial intermediary. The SAI contains additional detail regarding payments made by the distributor to financial intermediaries. The payments described in this section are in addition to fees paid by the fund to the distributor under 12b-1 plans, which fees may be used to compensate financial intermediaries for the distribution of fund shares and the servicing of fund shareholders, or paid by the fund to the transfer agent under the transfer agent agreement or plan administration agreement, which fees may be used to support networking or servicing fees to compensate financial intermediaries for supporting shareholder account maintenance, sub-accounting, plan recordkeeping or other services provided directly by the financial intermediary to shareholders or plans and plan participants, including retirement plans, 529 plans, Health Savings Account plans, or other plans, where participants beneficially own shares of the fund. Financial institutions may separately charge you additional fees. See "Buying and Selling Shares." ADDITIONAL MANAGEMENT INFORMATION AFFILIATED PRODUCTS. RiverSource Investments serves as investment manager to all funds in the RiverSource Family of Funds, including those that are structured to provide asset-allocation services to shareholders of those funds by investing in shares of other funds (funds of funds) in the RiverSource Family of Funds (collectively referred to as underlying funds) and to discretionary managed accounts (collectively referred to as affiliated products) that invest exclusively in underlying funds. These affiliated products, individually or collectively, may own -------------------------------------------------------------------------------- S.36 a significant percentage of the outstanding shares of the underlying funds, and RiverSource Investments seeks to balance potential conflicts between the affiliated products and the underlying funds in which they invest. The affiliated products investment in the underlying funds may also have the effect of creating economies of scale (including lower expense ratios) because the affiliated products may own substantial portions of the shares of underlying funds and, comparatively, a redemption of underlying fund shares by one or more affiliated products could cause the expense ratio of an underlying fund to increase as its fixed costs would be spread over a smaller asset base. Because of these large positions of the affiliated products, the underlying funds may experience relatively large purchases or redemptions. Although RiverSource Investments may seek to minimize the impact of these transactions, for example, by structuring them over a reasonable period of time or through other measures, underlying funds may experience increased expenses as they buy and sell securities to manage these transactions. When RiverSource Investments structures transactions over a reasonable period of time in order to manage the potential impact of the buy and sell decisions for the affiliated products, these affiliated products, including funds of funds, may pay more or less for shares of the underlying funds than if the transactions were executed in one transaction. In addition, substantial redemptions by the affiliated products within a short period of time could require the underlying fund to liquidate positions more rapidly than would otherwise be desirable, which may have the effect of reducing or eliminating potential gain or causing the underlying fund to realize a loss. Substantial redemptions may also adversely affect the ability of the investment manager to implement the underlying fund's investment strategy. RiverSource Investments also has an economic conflict of interest in determining the allocation of the affiliated products' assets among the underlying funds as it earns different fees from the underlying funds. RiverSource Investments monitors expense levels of the funds and is committed to offering funds that are competitively priced. RiverSource Investments reports to the Board on the steps it has taken to manage any potential conflicts. See the SAI for information on the percent of the fund owned by affiliated products. CASH RESERVES. A fund may invest its daily cash balance in a money market fund selected by RiverSource Investments, including but not limited to RiverSource Short-Term Cash Fund (Short-Term Cash Fund), a money market fund established for the exclusive use of funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. While Short-Term Cash Fund does not pay an advisory fee to RiverSource Investments, it does incur other expenses, and is expected to operate at a very low expense ratio. A fund will invest in Short-Term Cash Fund or any other money market fund selected by RiverSource Investments only to the extent it is consistent with the fund's investment objectives and policies. Short-Term Cash Fund is not insured or guaranteed by the FDIC or any other government agency. -------------------------------------------------------------------------------- S.37 FUND HOLDINGS DISCLOSURE. The Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by a fund. A description of these policies and procedures is included in the SAI. LEGAL PROCEEDINGS. 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 fund is 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 fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the fund. Information regarding certain pending and settled legal proceedings may be found in the fund's shareholder reports and in the SAI. Additionally, 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. -------------------------------------------------------------------------------- S.38 Funds in the RiverSource Family of Funds -- which include funds offered under the RiverSource, Threadneedle and Seligman brands -- can be purchased from authorized financial intermediaries. Additional information about the fund and its investments is available in the fund's SAI, and annual and semiannual reports to shareholders. In the fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the fund's performance during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, or to request other information about the fund, contact RiverSource Family of Funds or your financial intermediary. To make a shareholder inquiry, contact the financial intermediary through whom you purchased the fund. RiverSource Family of Funds 734 Ameriprise Financial Center Minneapolis, MN 55474 (800) 221-2450 RiverSource Family of Funds information available: (for RiverSource funds) at riversource.com/funds or (for Seligman funds) at seligman.com You may review and copy information about the fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202- 551-8090). Reports and other information about the fund are available on the EDGAR Database on the Commission's Internet site at www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, 100 F Street, N.E., Washington, D.C. 20549-1520. Investment Company Act File #811-5696 TICKER SYMBOL Class A: RTAAX Class B: -- Class C: RTACX Class I: -- Class R2: REAOX Class R3:RTNRX Class R4:REYRX Class R5:REAFX
(THREADNEEDLE LOGO) S-6527-99 AH (12/09) STATEMENT OF ADDITIONAL INFORMATION DEC. 30, 2009 RIVERSOURCE BOND SERIES, INC. RiverSource Floating Rate Fund RiverSource Income Opportunities Fund RiverSource Inflation Protected Securities Fund RiverSource Limited Duration Bond Fund RIVERSOURCE CALIFORNIA TAX-EXEMPT TRUST RiverSource California Tax-Exempt Fund RIVERSOURCE DIMENSIONS SERIES, INC. RiverSource Disciplined Small and Mid Cap Equity Fund RiverSource Disciplined Small Cap Value Fund RIVERSOURCE DIVERSIFIED INCOME SERIES, INC. RiverSource Diversified Bond Fund RIVERSOURCE EQUITY SERIES, INC. RiverSource Mid Cap Growth Fund RIVERSOURCE GLOBAL SERIES, INC. RiverSource Absolute Return Currency and Income Fund RiverSource Emerging Markets Bond Fund RiverSource Global Bond Fund Threadneedle Emerging Markets Fund Threadneedle Global Equity Fund Threadneedle Global Equity Income Fund Threadneedle Global Extended Alpha Fund RIVERSOURCE GOVERNMENT INCOME SERIES, INC. RiverSource Short Duration U.S. Government Fund RiverSource U.S. Government Mortgage Fund RIVERSOURCE HIGH YIELD INCOME SERIES, INC. RiverSource High Yield Bond Fund RIVERSOURCE INCOME SERIES, INC. RiverSource Income Builder Basic Income Fund RiverSource Income Builder Enhanced Income Fund RiverSource Income Builder Moderate Income Fund RIVERSOURCE INTERNATIONAL MANAGERS SERIES, INC. RiverSource Partners International Select Growth Fund RiverSource Partners International Select Value Fund RiverSource Partners International Small Cap Fund RIVERSOURCE INTERNATIONAL SERIES, INC. Threadneedle Asia Pacific Fund RiverSource Disciplined International Equity Fund Threadneedle European Equity Fund Threadneedle International Opportunity Fund RIVERSOURCE INVESTMENT SERIES, INC. RiverSource Balanced Fund RiverSource Disciplined Large Cap Growth Fund RiverSource Disciplined Large Cap Value Fund RiverSource Diversified Equity Income Fund RiverSource Mid Cap Value Fund RIVERSOURCE LARGE CAP SERIES, INC. RiverSource Disciplined Equity Fund RIVERSOURCE MANAGERS SERIES, INC. RiverSource Partners Aggressive Growth Fund RiverSource Partners Fundamental Value Fund RiverSource Partners Select Value Fund RiverSource Partners Small Cap Equity Fund RiverSource Partners Small Cap Value Fund RIVERSOURCE MARKET ADVANTAGE SERIES, INC. RiverSource Portfolio Builder Aggressive Fund RiverSource Portfolio Builder Conservative Fund RiverSource Portfolio Builder Moderate Aggressive Fund RiverSource Portfolio Builder Moderate Conservative Fund RiverSource Portfolio Builder Moderate Fund RiverSource Portfolio Builder Total Equity Fund RiverSource S&P 500 Index Fund RiverSource Small Company Index Fund RIVERSOURCE MONEY MARKET SERIES, INC. RiverSource Cash Management Fund RIVERSOURCE SECTOR SERIES, INC. RiverSource Dividend Opportunity Fund RiverSource Real Estate Fund RIVERSOURCE SELECTED SERIES, INC. RiverSource Precious Metals and Mining Fund RIVERSOURCE SERIES TRUST RiverSource 120/20 Contrarian Equity Fund RiverSource Recovery and Infrastructure Fund RiverSource Retirement Plus 2010 Fund RiverSource Retirement Plus 2015 Fund RiverSource Retirement Plus 2020 Fund RiverSource Retirement Plus 2025 Fund RiverSource Retirement Plus 2030 Fund RiverSource Retirement Plus 2035 Fund RiverSource Retirement Plus 2040 Fund RiverSource Retirement Plus 2045 Fund RIVERSOURCE SPECIAL TAX-EXEMPT SERIES TRUST RiverSource Minnesota Tax-Exempt Fund RiverSource New York Tax-Exempt Fund RIVERSOURCE STRATEGIC ALLOCATION SERIES, INC. RiverSource Strategic Allocation Fund RiverSource Strategic Income Allocation Fund RIVERSOURCE STRATEGY SERIES, INC. RiverSource Equity Value Fund RiverSource Partners Small Cap Growth Fund RIVERSOURCE TAX-EXEMPT INCOME SERIES, INC. RiverSource Tax-Exempt High Income Fund RIVERSOURCE TAX-EXEMPT MONEY MARKET SERIES, INC. RiverSource Tax-Exempt Money Market Fund RIVERSOURCE TAX-EXEMPT SERIES, INC. RiverSource Intermediate Tax-Exempt Fund RiverSource Tax-Exempt Bond Fund SELIGMAN FRONTIER FUND, INC. SELIGMAN GLOBAL FUND SERIES, INC. Seligman Global Technology Fund SELIGMAN MUNICIPAL FUND SERIES, INC. Seligman Minnesota Municipal Class Seligman National Municipal Class Seligman New York Municipal Class SELIGMAN MUNICIPAL SERIES TRUST Seligman California Municipal High-Yield Series Seligman California Municipal Quality Series SELIGMAN TARGETHORIZON ETF PORTFOLIOS, INC. Seligman TargETFund 2015 Seligman TargETFund 2025 Seligman TargETFund 2035 Seligman TargETFund 2045 Seligman TargETFund Core
This is the Statement of Additional Information ("SAI") for each of the funds listed on the previous page. This SAI is not a prospectus. It should be read together with the appropriate current fund prospectus, the date of which can be found in Table 1 of this SAI. Each fund's financial statements for its most recent fiscal period are contained in the fund's annual or semiannual report to shareholders. The Independent Registered Public Accounting Firm's Report and the Financial Statements, including Notes to the Financial Statements and the Schedule of Investments in Securities and any applicable Schedule of Affiliated Funds, contained in the Annual Report, are incorporated in this SAI by reference. No other portion of the Annual Report is incorporated by reference. For a free copy of a fund prospectus, annual or semiannual report, contact your financial intermediary or write to the RiverSource Family of Funds which includes RiverSource funds, Seligman funds and Threadneedle funds, 734 Ameriprise Financial Center, Minneapolis, MN 55474, call 1(800) 221-2450 or visit riversource.com/funds (for RiverSource and Threadneedle funds) or seligman.com (for Seligman funds). Each fund is governed by a Board of Directors/Trustees (the "Board") that meets regularly to review a wide variety of matters affecting the funds. Detailed information about fund governance, the funds' investment manager, RiverSource Investments, LLC (the "investment manager" or "RiverSource Investments"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), and other aspects of fund management can be found by referencing the Table of Contents below, or the List of Tables on the following page. TABLE OF CONTENTS Fundamental and Nonfundamental Investment Policies.............................. p. 6 Investment Strategies and Types of Investments.................................. p. 13 Information Regarding Risks and Investment Strategies........................... p. 15 Securities Transactions......................................................... p. 41 Brokerage Commissions Paid to Brokers Affiliated with the Investment Manager.... p. 56 Valuing Fund Shares............................................................. p. 61 Portfolio Holdings Disclosure................................................... p. 72 Proxy Voting.................................................................... p. 74 Investing in a Fund............................................................. p. 76 Selling Shares.................................................................. p. 83 Pay-out Plans................................................................... p. 83 Capital Loss Carryover.......................................................... p. 83 Taxes........................................................................... p. 89 Service Providers............................................................... p. 95 Investment Management Services................................................ p. 95 Administrative Services....................................................... p. 144 Transfer Agency Services...................................................... p. 148 Plan Administration Services.................................................. p. 149 Distribution Services......................................................... p. 149 Plan and Agreement of Distribution............................................ p. 152 Payments to Financial Intermediaries.......................................... p. 158 Custodian Services............................................................ p. 160 Board Services Corporation.................................................... p. 160 Organizational Information...................................................... p. 161 Board Members and Officers...................................................... p. 167 Control Persons and Principal Holders of Securities............................. p. 191 Information Regarding Pending and Settled Legal Proceedings..................... p. 211 Independent Registered Public Accounting Firm................................... p. 213 Appendix A: Description of Ratings.............................................. p. A-1 Appendix B: State Risk Factors.................................................. p. B-1 Appendix C: Additional Information about the S&P 500 Index...................... p. C-1
Statement of Additional Information - Dec. 30, 2009 Page 2 LIST OF TABLES 1. Fund Fiscal Year Ends, Prospectus Date and Investment Categories........... p. 4 2. Fundamental Policies....................................................... p. 6 3. Investment Strategies and Types of Investments............................. p. 13 4. Total Brokerage Commissions................................................ p. 44 5. Brokerage Directed for Research, and Turnover Rates........................ p. 47 6. Securities of Regular Brokers or Dealers................................... p. 50 7. Brokerage Commissions Paid to Investment Manager or Affiliates............. p. 56 8. Valuing Fund Shares........................................................ p. 61 9. Class A Initial Sales Charge............................................... p. 77 10. Public Offering Price...................................................... p. 78 11. Capital Loss Carryover..................................................... p. 84 12. Corporate Deduction and Qualified Dividend Income.......................... p. 91 13. Investment Management Services Agreement Fee Schedule...................... p. 95 14. PIA Indexes................................................................ p. 104 15A. Performance Incentive Adjustment Calculation............................... p. 106 15B. Performance Incentive Adjustment Calculation............................... p. 107 16. Management Fees and Nonadvisory Expenses................................... p. 108 17. Subadvisers and Subadvisory Agreement Fee Schedules........................ p. 112 18. Subadvisory Fees........................................................... p. 114 19. Portfolio Managers......................................................... p. 116 20. Administrative Services Agreement Fee Schedule............................. p. 144 21. Administrative Fees........................................................ p. 146 22. Sales Charges Paid to Distributor.......................................... p. 150 23. 12b-1 Fees................................................................. p. 154 24. Unreimbursed Distribution Expenses......................................... p. 157 25. RiverSource Family of Funds History Table.................................. p. 162 26. Board Members.............................................................. p. 167 27. Fund Officers.............................................................. p. 168 28. Committee Meetings......................................................... p. 171 29. Board Member Holdings...................................................... p. 172 29A. Board Member Holdings -- as of Quarter End................................. p. 178 30. Board Member Compensation -- All Funds..................................... p. 185 31. Board Member Compensation -- Individual Funds.............................. p. 186 32. Control Persons and Principal Holders of Securities........................ p. 191
RIVERSOURCE FAMILY OF FUNDS The RiverSource Family of Funds includes a comprehensive array of funds from RiverSource Investments. RiverSource Investments has also partnered with a number of professional investment managers, including its affiliate, Threadneedle Investments, to expand the array of funds offered in the RiverSource family. RiverSource funds, RiverSource Partners funds, Seligman funds and Threadneedle funds share the same Board, and the same policies and procedures including those set forth in the service section of each funds' prospectus. Statement of Additional Information - Dec. 30, 2009 Page 3 TABLE 1. FUND FISCAL YEAR ENDS, PROSPECTUS DATE AND INVESTMENT CATEGORIES
FUND FISCAL YEAR END PROSPECTUS DATE FUND INVESTMENT CATEGORY --------------------------------------------------------------------------------------------------------------- RiverSource 120/20 Contrarian Equity April 30 June 29, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Absolute Return Currency and Income October 31 Dec. 30, 2009 Taxable fixed income* --------------------------------------------------------------------------------------------------------------- RiverSource Balanced September 30 Nov. 27, 2009 Balanced --------------------------------------------------------------------------------------------------------------- RiverSource California Tax-Exempt August 31 Oct. 30, 2009 State tax-exempt fixed income --------------------------------------------------------------------------------------------------------------- RiverSource Cash Management July 31 Sept. 29, 2009 Taxable money market --------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Equity July 31 Sept. 29, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Disciplined International Equity October 31 Dec. 30, 2008 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Growth September 30 Nov. 27, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Value September 30 Nov. 27, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small and Mid Cap Equity July 31 Sept. 29, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value July 31 Sept. 29, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Diversified Bond August 31 Oct. 30, 2009 Taxable fixed income --------------------------------------------------------------------------------------------------------------- RiverSource Diversified Equity Income September 30 Nov. 27, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Dividend Opportunity June 30 Aug. 28, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Emerging Markets Bond October 31 Dec. 30, 2009 Taxable fixed income --------------------------------------------------------------------------------------------------------------- RiverSource Equity Value March 31 May 29, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Floating Rate July 31 Sept. 29, 2009 Taxable fixed income --------------------------------------------------------------------------------------------------------------- RiverSource Global Bond October 31 Dec. 30, 2009 Taxable fixed income --------------------------------------------------------------------------------------------------------------- RiverSource High Yield Bond May 31 July 30, 2009 Taxable fixed income --------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Basic Income January 31** April 1, 2009 Fund-of-funds - fixed income --------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Enhanced Income January 31** April 1, 2009 Fund-of-funds - fixed income --------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Moderate Income January 31** April 1, 2009 Fund-of-funds - fixed income --------------------------------------------------------------------------------------------------------------- RiverSource Income Opportunities July 31 Sept. 29, 2009 Taxable fixed income --------------------------------------------------------------------------------------------------------------- RiverSource Inflation Protected Securities July 31 Sept. 29, 2009 Taxable fixed income --------------------------------------------------------------------------------------------------------------- RiverSource Intermediate Tax-Exempt November 30 Jan. 29, 2009 Tax-exempt fixed income --------------------------------------------------------------------------------------------------------------- RiverSource Limited Duration Bond July 31 Sept. 29, 2009 Taxable fixed income --------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Growth November 30 Jan. 29, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Value September 30 Nov. 27, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Minnesota Tax-Exempt August 31 Oct. 30, 2009 State tax-exempt fixed income --------------------------------------------------------------------------------------------------------------- RiverSource New York Tax-Exempt August 31 Oct. 30, 2009 State tax-exempt fixed income --------------------------------------------------------------------------------------------------------------- RiverSource Partners Aggressive Growth May 31 July 30, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Partners Fundamental Value May 31 July 30, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Partners International Select Growth October 31 Dec. 30, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Partners International Select Value October 31 Dec. 30, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Partners International Small Cap October 31 Dec. 30, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Partners Select Value May 31 July 30, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Equity May 31 July 30, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Growth March 31 May 29, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Value May 31 July 30, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Aggressive January 31 April 1, 2009 Fund-of-funds - equity --------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Conservative January 31 April 1, 2009 Fund-of-funds - fixed income --------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate January 31 April 1, 2009 Fund-of-funds - equity --------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Aggressive January 31 April 1, 2009 Fund-of-funds - equity --------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Conservative January 31 April 1, 2009 Fund-of-funds - fixed income --------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Total Equity January 31 April 1, 2009 Fund-of-funds - equity --------------------------------------------------------------------------------------------------------------- RiverSource Precious Metals and Mining March 31 May 29, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Real Estate June 30 Aug. 28, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Recovery and Infrastructure April 30 June 29, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2010 April 30 June 29, 2009 Fund-of-funds - equity --------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2015 April 30 June 29, 2009 Fund-of-funds - equity --------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2020 April 30 June 29, 2009 Fund-of-funds - equity --------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2025 April 30 June 29, 2009 Fund-of-funds - equity ---------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 4
FUND FISCAL YEAR END PROSPECTUS DATE FUND INVESTMENT CATEGORY --------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2030 April 30 June 29, 2009 Fund-of-funds - equity --------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2035 April 30 June 29, 2009 Fund-of-funds - equity --------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2040 April 30 June 29, 2009 Fund-of-funds - equity --------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2045 April 30 June 29, 2009 Fund-of-funds - equity --------------------------------------------------------------------------------------------------------------- RiverSource S&P 500 Index January 31 April 1, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Short Duration U.S. Government May 31 July 30, 2009 Taxable fixed income --------------------------------------------------------------------------------------------------------------- RiverSource Small Company Index January 31 April 1, 2009 Equity --------------------------------------------------------------------------------------------------------------- RiverSource Strategic Allocation September 30 Nov. 27, 2009 Balanced --------------------------------------------------------------------------------------------------------------- RiverSource Strategic Income Allocation September 30 Nov. 27, 2009 Taxable fixed income* --------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Bond November 30 Jan. 29, 2009 Tax-exempt fixed income --------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt High Income November 30 Jan. 29, 2009 Tax-exempt fixed income --------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Money Market December 31 Feb. 27, 2009 Tax-exempt money market --------------------------------------------------------------------------------------------------------------- RiverSource U.S. Government Mortgage May 31 July 30, 2009 Taxable fixed income --------------------------------------------------------------------------------------------------------------- Seligman California Municipal High-Yield September 30 Nov. 27, 2009 State tax-exempt fixed income --------------------------------------------------------------------------------------------------------------- Seligman California Municipal Quality September 30 Nov. 27, 2009 State tax-exempt fixed income --------------------------------------------------------------------------------------------------------------- Seligman Frontier October 31 Dec. 30, 2009 Equity --------------------------------------------------------------------------------------------------------------- Seligman Global Technology October 31 Dec. 30, 2009 Equity --------------------------------------------------------------------------------------------------------------- Seligman Minnesota Municipal September 30 Nov. 27, 2009 State tax-exempt fixed income --------------------------------------------------------------------------------------------------------------- Seligman National Municipal September 30 Nov. 27, 2009 Tax-exempt fixed income --------------------------------------------------------------------------------------------------------------- Seligman New York Municipal September 30 Nov. 27, 2009 State tax-exempt fixed income --------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2015 September 30 Nov. 27, 2009 Fund-of-funds - equity --------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2025 September 30 Nov. 27, 2009 Fund-of-funds - equity --------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2035 September 30 Nov. 27, 2009 Fund-of-funds - equity --------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2045 September 30 Nov. 27, 2009 Fund-of-funds - equity --------------------------------------------------------------------------------------------------------------- Seligman TargETFund Core September 30 Nov. 27, 2009 Fund-of-funds - equity --------------------------------------------------------------------------------------------------------------- Threadneedle Asia Pacific October 31 Dec. 30, 2009 Equity --------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets October 31 Dec. 30, 2009 Equity --------------------------------------------------------------------------------------------------------------- Threadneedle European Equity October 31 Dec. 30, 2009 Equity --------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity October 31 Dec. 30, 2009 Equity --------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income Fund October 31 Dec. 30, 2009 Equity --------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha Fund October 31 Dec. 30, 2009 Equity --------------------------------------------------------------------------------------------------------------- Threadneedle International Opportunity October 31 Dec. 30, 2009 Equity ---------------------------------------------------------------------------------------------------------------
* The taxable fixed income fund investment category includes Absolute Return Currency and Income Fund, which is an alternative investment strategy. Although Strategic Income Allocation Fund is a taxable fixed income fund, it may invest up to 10% of its portfolio in equity securities. ** The fund changed its fiscal year end effective Jan. 31, 2008 from May 31 to Jan. 31. For 2008, the information shown is for the period from June 1, 2007 to Jan. 31, 2008. For years prior to 2008, the fiscal period ended May 31. Statement of Additional Information - Dec. 30, 2009 Page 5 FUNDAMENTAL AND NONFUNDAMENTAL INVESTMENT POLICIES Fundamental investment policies adopted by a fund cannot be changed without the approval of a majority of the outstanding voting securities of the fund (i.e., shareholders) as defined in the Investment Company Act of 1940, as amended (the "1940 Act"). Nonfundamental investment policies may be changed by the Board at any time. Notwithstanding any of a fund's other investment policies, each fund, subject to certain limitations, may invest its assets in an open-end management investment company having substantially the same investment objectives, policies, and restrictions as the fund for the purpose of having those assets managed as part of a combined pool. FUNDAMENTAL POLICIES Fundamental policies are policies that can be changed only with shareholder approval. The chart below shows fund-specific policies that may be changed only with shareholder approval. The chart indicates whether or not the fund has a policy on a particular topic. A dash indicates that the fund does not have a policy on a particular topic. Please see "Investment Strategies and Types of Investments" for more information regarding your fund's investment strategies. The specific policy is stated in the paragraphs that follow the table. TABLE 2. FUNDAMENTAL POLICIES
C D E A B Buy more Invest Concen- G J K Buy or Buy or than 10% more trate F Act as Issue Buy on sell sell of than in any Invest an I senior margin/ real commodi- an 5% in an one less under- H Borrow securi- sell FUND estate ties issuer issuer industry than 80% writer Lending money ties short ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B5 C1 D1 E8 -- G1 H1 I1 J1 -- 120/20 Contrarian Equity ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 -- -- E7 -- G1 H1 I1 J1 -- Absolute Return Currency and Income ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C1 D1 E1 -- G1 H1 I1 J1 -- Balanced ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 -- -- -- F1 G1 H1 I1 J1 -- California Tax-Exempt ----------------------------------------------------------------------------------------------------------------------------- RiverSource A3 A3 C1 D1 -- -- G1 H1 I1 J1 K1 Cash Management ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C1 D1 E1 -- G1 H1 I1 J1 -- Disciplined Equity ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B4 C1 D1 E1 -- G1 H1 I1 J1 -- Disciplined International Equity ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B3 C1 D1 E1 -- G1 H1 I1 J1 -- Disciplined Large Cap Growth ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B3 C2 C2 E1 -- G1 H1 I1 J1 -- Disciplined Large Cap Value ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B4 C1 D1 E1 -- G1 H1 I1 J1 -- Disciplined Small and Mid Cap Equity ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B4 C1 D1 E1 -- G1 H1 I1 J1 -- Disciplined Small Cap Value ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C1 D1 E1 -- G1 H1 I1 J1 -- Diversified Bond ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C1 D1 E1 -- G1 H1 I1 J1 -- Diversified Equity Income ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C1 D1 -- -- G1 H1 I1 J1 -- Dividend Opportunity ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B4 -- -- E5 -- G1 H1 I1 J1 -- Emerging Markets Bond ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C1 D1 E1 -- G1 H1 I1 J1 -- Equity Value ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B4 C1 D1 E6 -- G1 H1 I1 J1 -- Floating Rate ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C1 -- E1 -- G1 H1 I1 J1 -- Global Bond ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C1 D1 E1 -- G1 H1 I1 J1 -- High Yield Bond ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B4 C2 C2 E2 -- G1 H1 I1 J1 -- Income Builder Basic Income* ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B4 C2 C2 E2 -- G1 H1 I1 J1 -- Income Builder Enhanced Income* ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B4 C2 C2 E2 -- G1 H1 I1 J1 -- Income Builder Moderate Income* ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C1 D1 E1 -- G1 H1 I1 J1 -- Income Opportunities ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 -- -- E1 -- G1 H1 I1 J1 -- Inflation Protected Securities ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C1 D1 -- F3(a) G1 H1 I1 J1 -- Intermediate Tax-Exempt ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C1 D1 E1 -- G1 H1 I1 J1 -- Limited Duration Bond ----------------------------------------------------------------------------------------------------------------------------- RiverSource Mid A1 B1 C1 D1 E1 -- G1 H1 I1 J1 -- Cap Growth ----------------------------------------------------------------------------------------------------------------------------- RiverSource Mid A1 B1 C1 D1 E1 -- G1 H1 I1 J1 -- Cap Value -----------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 6
C D E A B Buy more Invest Concen- G J K Buy or Buy or than 10% more trate F Act as Issue Buy on sell sell of than in any Invest an I senior margin/ real commodi- an 5% in an one less under- H Borrow securi- sell FUND estate ties issuer issuer industry than 80% writer Lending money ties short ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 -- -- -- F1 G1 H1 I1 J1 -- Minnesota Tax-Exempt ----------------------------------------------------------------------------------------------------------------------------- RiverSource New A1 B1 -- -- -- F1 G1 H1 I1 J1 -- York Tax- Exempt ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C1 D1 E1 -- G1 H1 I1 J1 -- Partners Aggressive Growth ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B3 C1 D1 E1 -- G1 H1 I1 J1 -- Partners Fundamental Value ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B3 C1 D1 E1 -- G1 H1 I1 J1 -- Partners International Select Growth ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B3 C1 D1 E1 -- G1 H1 I1 J1 -- Partners International Select Value ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B3 C1 D1 E1 -- G1 H1 I1 J1 -- Partners International Small Cap ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B3 C1 D1 E1 -- G1 H1 I1 J1 -- Partners Select Value ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B3 C1 D1 E1 -- G1 H1 I1 J1 -- Partners Small Cap Equity ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C1 D1 E1 -- G1 H1 I1 J1 -- Partners Small Cap Growth ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B3 -- -- E1 -- G1 H1 I1 J1 -- Partners Small Cap Value ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C2 C2 E2 -- G1 H1 I1 J1 -- Portfolio Builder Aggressive* ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C2 C2 E2 -- G1 H1 I1 J1 -- Portfolio Builder Conservative* ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C2 C2 E2 -- G1 H1 I1 J1 -- Portfolio Builder Moderate* ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C2 C2 E2 -- G1 H1 I1 J1 -- Portfolio Builder Moderate Aggressive* ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C2 C2 E2 -- G1 H1 I1 J1 -- Portfolio Builder Moderate Conservative* ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C2 C2 E2 -- G1 H1 I1 J1 -- Portfolio Builder Total Equity* ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1(b) -- -- E3 -- G1 H1 I1 J1 -- Precious Metals and Mining ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 -- -- -- -- G1 H1 I1 J1 -- Real Estate ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B4 -- -- E1 -- G1 H1 I1 J1 -- Recovery and Infrastruc- ture ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B4 C2 C2 E2 -- G1 H1 I1 J1 -- Retirement Plus 2010* ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B4 C2 C2 E2 -- G1 H1 I1 J1 -- Retirement Plus 2015* ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B4 C2 C2 E2 -- G1 H1 I1 J1 -- Retirement Plus 2020* ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B4 C2 C2 E2 -- G1 H1 I1 J1 -- Retirement Plus 2025* ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B4 C2 C2 E2 -- G1 H1 I1 J1 -- Retirement Plus 2030* ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B4 C2 C2 E2 -- G1 H1 I1 J1 -- Retirement Plus 2035* ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B4 C2 C2 E2 -- G1 H1 I1 J1 -- Retirement Plus 2040* ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B4 C2 C2 E2 -- G1 H1 I1 J1 -- Retirement Plus 2045* ----------------------------------------------------------------------------------------------------------------------------- RiverSource S&P A1 B1 -- -- E4 -- G1 H1 I1 J1 -- 500 Index ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C1 D1 E1 -- G1 H1 I1 J1 -- Short Duration U.S. Government ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C1 D1 E1 -- G1 H1 I1 J1 -- Small Company Index ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C1 D1 E1 -- G1 H1 I1 J1 -- Strategic Allocation ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B3 C1 D1 E1 -- G1 H1 I1 J1 -- Strategic Income Allocation ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C1 D1 -- F3(c) G1 H1 I1 J1 -- Tax-Exempt Bond ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C1 D1 -- F2 G1 H1 I1 J1 -- Tax-Exempt High Income ----------------------------------------------------------------------------------------------------------------------------- RiverSource A2 B2 C1 D1 -- F3 G1 H1 I1 J1 K2 Tax-Exempt Money Market ----------------------------------------------------------------------------------------------------------------------------- RiverSource A1 B1 C1 D1 E1 -- G1 H1 I1 J1 -- U.S. Government Mortgage ----------------------------------------------------------------------------------------------------------------------------- Seligman A4 B6(d) D2 D2 E9 F4 G1 H2 I2 -- K3(e) California Municipal High-Yield ----------------------------------------------------------------------------------------------------------------------------- Seligman A4 B6(d) D2 D2 E9 F4 G1 H2 I2 -- K3(e) California Municipal Quality ----------------------------------------------------------------------------------------------------------------------------- Seligman A4 B7 C3 C3 E10 -- G2 H4 J2 J2 K4 Frontier ----------------------------------------------------------------------------------------------------------------------------- Seligman Global A4 B7 C3 C3 E10 -- G2 H4 J2 J2 K4 Technology ----------------------------------------------------------------------------------------------------------------------------- Seligman A5 B6 D2 D2 E9 F4 G1 H3 I2 -- K3 Minnesota Municipal ----------------------------------------------------------------------------------------------------------------------------- Seligman A5 B6 D2 D2 E9 F4 G1 H3 I2 -- K3 National Municipal -----------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 7
C D E A B Buy more Invest Concen- G J K Buy or Buy or than 10% more trate F Act as Issue Buy on sell sell of than in any Invest an I senior margin/ real commodi- an 5% in an one less under- H Borrow securi- sell FUND estate ties issuer issuer industry than 80% writer Lending money ties short ----------------------------------------------------------------------------------------------------------------------------- Seligman New A5 B6 D2 D2 E9 F4 G1 H3 I2 -- K3 York Municipal ----------------------------------------------------------------------------------------------------------------------------- Seligman A6 B7 C3 C3 E10 -- G2 H4 J2 J2 K4 TargETFund 2015* ----------------------------------------------------------------------------------------------------------------------------- Seligman A6 B7 C3 C3 E10 -- G2 H4 J2 J2 K4 TargETFund 2025* ----------------------------------------------------------------------------------------------------------------------------- Seligman A6 B7 C3 C3 E10 -- G2 H4 J2 J2 K4 TargETFund 2035* ----------------------------------------------------------------------------------------------------------------------------- Seligman A6 B7 C3 C3 E10 -- G2 H4 J2 J2 K4 TargETFund 2045* ----------------------------------------------------------------------------------------------------------------------------- Seligman A6 B7 C3 C3 E10 -- G2 H4 J2 J2 K4 TargETFund Core* ----------------------------------------------------------------------------------------------------------------------------- Threadneedle A1 B3 C2 C2 E1 -- G1 H1 I1 J1 -- Asia Pacific ----------------------------------------------------------------------------------------------------------------------------- Threadneedle A1 B1 C1 D1 E1 -- G1 H1 I1 J1 -- Emerging Markets ----------------------------------------------------------------------------------------------------------------------------- Threadneedle A1 B1 -- -- E1 -- G1 H1 I1 J1 -- European Equity ----------------------------------------------------------------------------------------------------------------------------- Threadneedle A1 B1 C1 D1 E1 -- G1 H1 I1 J1 -- Global Equity ----------------------------------------------------------------------------------------------------------------------------- Threadneedle A1 B3 C2 C2 E1 -- G1 H1 I1 J1 -- Global Equity Income ----------------------------------------------------------------------------------------------------------------------------- Threadneedle A1 B3 C2 C2 E1 -- G1 H1 I1 J1 -- Global Extended Alpha ----------------------------------------------------------------------------------------------------------------------------- Threadneedle A1 B1 C1 D1 E1 -- G1 H1 I1 J1 -- International Opportunity -----------------------------------------------------------------------------------------------------------------------------
* The fund-of-funds invests in a combination of underlying funds. These underlying funds have adopted their own investment policies that may be more or less restrictive than those of the fund-of-funds. The policies of the underlying funds may permit a fund to engage in investment strategies indirectly that would otherwise be prohibited under the fund's investment restrictions. (a) For purposes of this policy, the fund will not include any investments subject to the alternative minimum tax. (b) Additionally, the fund may purchase gold, silver, or other precious metals, strategic metals or other metals occurring naturally with such metals. (c) The fund does not intend to purchase bonds or other debt securities the interest from which is subject to the alternative minimum tax. (d) The policy includes futures contracts. (e) A fund may be deemed an underwriter in connection with the purchase and sale of portfolio securities. A. BUY OR SELL REAL ESTATE A1 - The fund will not buy or sell real estate, unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business or real estate investment trusts. For purposes of this policy, real estate includes real estate limited partnerships. A2 - The fund will not invest in real estate, but the fund can invest in municipal bonds and notes secured by real estate or interest therein. For purposes of this policy, real estate includes real estate limited partnerships. A3 - The fund will not buy or sell real estate, commodities or commodity contracts. For purposes of this policy, real estate includes real estate limited partnerships. A4 - The fund will not purchase or hold any real estate, except that a fund may invest in securities secured by real estate or interests therein or issued by persons (other than real estate investment trusts) which deal in real estate or interests therein. A5 - The fund will not purchase or hold any real estate, including limited partnership interests on real property, except that the fund may invest in securities secured by real estate or interests therein or issued by persons (other than real estate investment trusts) which deal in real estate or interests therein. A6 - The fund will not purchase or hold any real estate, except a fund may invest (through investments in Underlying exchange-traded funds) in securities secured by real estate or interests therein or issued by persons (including real estate investment trusts) which deal in real estate or interests therein. B. BUY OR SELL PHYSICAL COMMODITIES B1 - The fund will not buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the fund from buying or selling options and futures contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. B2 - The fund will not invest in commodities or commodity contracts. B3 - The fund will not buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the fund from buying or selling options, futures contracts and foreign currency or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. Statement of Additional Information - Dec. 30, 2009 Page 8 B4 - The fund will not buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the fund from buying or selling options, futures contracts and foreign currency or from entering into forward currency contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. B5 - The fund will not buy or sell commodities, except that the fund may to the extent consistent with its investment objective(s), invest in securities of companies that purchase or sell commodities or which invest in such programs, and purchase and sell options, forward contracts, futures contracts, and options on futures contracts and enter into swap contracts and other financial transactions relating to commodities. This restriction does not apply to foreign currency transactions including without limitation forward currency contracts. B6 - The fund will not purchase or sell commodities or commodity contracts. B7 - The fund will not purchase or sell commodities or commodity contracts, except to the extent permissible under applicable law and interpretations, as they may be amended from time to time. C. BUY MORE THAN 10% OF AN ISSUER C1 - The fund will not purchase more than 10% of the outstanding voting securities of an issuer, except that up to 25% of the fund's assets may be invested without regard to this 10% limitation. For tax-exempt funds, for purposes of this policy, the terms of a municipal security determine the issuer. C2 - The fund will not purchase securities (except securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities) of any one issuer if, as a result, more than 5% of its total assets will be invested in the securities of such issuer or it would own more than 10% of the voting securities of such issuer, except that: (a) up to 25% of its total assets may be invested without regard to these limitations; and (b) a fund's assets may be invested in the securities of one or more management investment companies to the extent permitted by the 1940 Act, the rules and regulations thereunder, or any applicable exemptive relief. C3 - The fund will not make any investment inconsistent with its classification as a diversified company under the 1940 Act. D. INVEST MORE THAN 5% IN AN ISSUER D1 - The fund will not invest more than 5% of its total assets in securities of any company, government, or political subdivision thereof, except the limitation will not apply to investments in securities issued or guaranteed by the U.S. government, its agencies, or instrumentalities, or other investment companies, and except that up to 25% of the fund's total assets may be invested without regard to this 5% limitation. For tax-exempt funds, for purposes of this policy, the terms of a municipal security determine the issuer. D2 - The fund will not, as to 50% of the value of its total assets, purchase securities of any issuer if immediately thereafter more than 5% of total assets at market value would be invested in the securities of any issuer (except that this limitation does not apply to obligations issued or guaranteed as to principal and interest by the U.S. Government or its agencies or instrumentalities). E. CONCENTRATE E1 - The fund will not concentrate in any one industry. According to the present interpretation by the Securities and Exchange Commission (SEC), this means that up to 25% of the fund's total assets, based on current market value at time of purchase, can be invested in any one industry. E2 - The fund will not concentrate in any one industry. According to the present interpretation by the SEC, this means that up to 25% of the fund's total assets, based on current market value at time of purchase, can be invested in any one industry. The fund itself does not intend to concentrate, however, the aggregation of holdings of the underlying funds may result in the fund indirectly investing more than 25% of its assets in a particular industry. The fund does not control the investments of the underlying funds and any indirect concentration will occur only as a result of the fund following its investment objectives by investing in the underlying funds. E3 - The fund will not invest less than 25% of its total assets in the precious metals industry, based on current market value at the time of purchase, unless market conditions temporarily require a defensive investment strategy. E4 - The fund will not concentrate in any one industry unless that industry represents more than 25% of the index tracked by the fund. For all other industries, in accordance with the current interpretation by the SEC, this means that up to 25% of the fund's total assets, based on current market value at time of purchase, can be invested in any one industry. Statement of Additional Information - Dec. 30, 2009 Page 9 E5 - While the fund may invest 25% or more of its total assets in the securities of foreign governmental and corporate entities located in the same country, it will not invest 25% or more of its total assets in any single foreign governmental issuer. E6 - The fund will not concentrate in any one industry. According to the present interpretation by the SEC, this means that up to 25% of the fund's total assets, based on current market value at time of purchase, can be invested in any one industry. For purposes of this restriction, loans will be considered investments in the industry of the underlying borrower, rather than that of the seller of the loan. E7 - The fund will not concentrate in any one industry, provided however, that this restriction shall not apply to securities or obligations issued or guaranteed by the U.S. Government, banks or bank holding companies or finance companies. For all other industries, this means that up to 25% of the fund's total assets, based on current market value at the time of purchase, can be invested in any one industry. E8 - The fund will not purchase any securities which would cause 25% or more of the value of its total assets at the time of purchase to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that: a) there is no limitation with respect to obligations issued or guaranteed by the U.S. Government, any state or territory of the United States, or any of their agencies, instrumentalities or political subdivisions; and b) notwithstanding this limitation or any other fundamental investment limitation, assets may be invested in the securities of one or more management investment companies to the extent permitted by the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief. E9 - The fund will not invest more than 25% of total assets, at market value, in any one industry; except that municipal securities and securities of the U.S. Government, its agencies and instrumentalities are not considered an industry for purposes of this limitation. E10 - The fund will not invest 25% or more of its total assets, at market value, in the securities of issuers in any particular industry, provided that this limitation shall exclude securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities (which may include mortgage related securities). For purposes of applying the limitation set forth in the concentration policy, above, the funds will generally use the industry classifications provided by the Global Industry Classification System. F. INVEST LESS THAN 80% F1 - The fund will not under normal market conditions, invest less than 80% of its net assets in municipal obligations that are generally exempt from federal income tax as well as respective state and local income tax. F2 - The fund will not under normal market conditions, invest less than 80% of its net assets in bonds and notes issued by or on behalf of state and local governmental units whose interest, in the opinion of counsel for the issuer, is exempt from federal income tax and is not subject to the alternative minimum tax. F3 - The fund will not under normal market conditions, invest less than 80% of its net assets in bonds and other debt securities issued by or on behalf of state or local governmental units whose interest, in the opinion of counsel for the issuer, is exempt from federal income tax. F4 - The fund will not, under normal market conditions, invest less than 80% of its net assets in securities the interest on which is exempt from regular federal income tax and (except for Seligman National Municipal) regular, personal income tax of its designated state, and temporary investments in taxable securities will be limited to 20% of the value of the fund's net assets. G. ACT AS AN UNDERWRITER G1 - The fund will not act as an underwriter (sell securities for others). However, under the securities laws, the fund may be deemed to be an underwriter when it purchases securities directly from the issuer and later resells them. G2 - The fund will not underwrite the securities of other issuers, except insofar as the fund may be deemed an underwriter under the Securities Act of 1933 (the 1933 Act) in disposing of a portfolio security or in connection with investments in other investment companies. H. LENDING H1 - The fund will not lend securities or participate in an interfund lending program if the total of all such loans would exceed 33 1/3% of the fund's total assets except this fundamental investment policy shall not prohibit the fund from purchasing money market securities, loans, loan participation or other debt securities, or from entering into repurchase agreements. For RiverSource funds-of-funds - equity, under current Board policy, the fund has no current intention to borrow to a material extent. Statement of Additional Information - Dec. 30, 2009 Page 10 H2 - The fund will not make loans, except to the extent that the purchase of notes, bonds or other evidences of indebtedness or deposits with banks may be considered loans. H3 - The fund will not make loans except to the extent that the purchase of notes, bonds or other evidences of indebtedness or the entry into repurchase agreements or deposits with banks may be considered loans. The fund does not have a present intention of entering into repurchase agreements. H4 - The fund will not make loans, except as permitted by the 1940 Act or any rule thereunder, any SEC or SEC staff interpretations thereof or any exemptions therefrom which may be granted by the SEC. I. BORROWING I1 - The fund will not borrow money, except for temporary purposes (not for leveraging or investment) in an amount not exceeding 33 1/3% of its total assets (including the amount borrowed) less liabilities (other than borrowings) immediately after the borrowings. For RiverSource funds-of-funds - equity, under current Board policy, the fund has no current intention to borrow to a material extent. I2 - The fund will not borrow money, except from banks for temporary purposes (such as meeting redemption requests or for extraordinary or emergency purposes) in an amount not to exceed 10% of the value of its total assets at the time the borrowing is made (not including the amount borrowed). The fund will not purchase additional portfolio securities if the fund has outstanding borrowings in excess of 5% of the value of its total assets. J. ISSUE SENIOR SECURITIES J1 - The fund will not issue senior securities, except as permitted under the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief. J2 - The fund will not issue senior securities or borrow money, except as permitted by the 1940 Act or any rule thereunder, any SEC or SEC staff interpretations thereof or any exemptions therefrom which may be granted by the SEC. K. BUY ON MARGIN/SELL SHORT K1 - The fund will not buy on margin or sell short or deal in options to buy or sell securities. K2 - The fund will not buy on margin or sell short. K3 - The fund will not write or purchase put, call, straddle or spread options; purchase securities on margin or sell "short"; or underwrite the securities of other issuers. K4 - The fund will not purchase securities on margin except as permitted by the 1940 Act or any rule thereunder, any SEC or SEC staff interpretations thereof or any exemptions therefrom which may be granted by the SEC. IN ADDITION TO THE POLICIES DESCRIBED ABOVE AND ANY FUNDAMENTAL POLICY DESCRIBED IN THE PROSPECTUS: FOR RIVERSOURCE CASH MANAGEMENT, THE FUND WILL NOT: - Purchase common stocks, preferred stocks, warrants, other equity securities, corporate bonds or debentures, state bonds, municipal bonds, or industrial revenue bonds. FOR SELIGMAN CALIFORNIA MUNICIPAL HIGH YIELD, SELIGMAN CALIFORNIA MUNICIPAL QUALITY, SELIGMAN MINNESOTA MUNICIPAL, SELIGMAN NATIONAL MUNICIPAL AND SELIGMAN NEW YORK MUNICIPAL, THE FUND WILL NOT: - Invest in securities issued by other investment companies, except in connection with a merger, consolidation, acquisition or reorganization, or for the purpose of hedging a fund's obligations under its deferred compensation plan for directors/trustees. - Purchase or hold the securities of any issuer, if to its knowledge, directors/trustees or officers of a fund individually owning beneficially more than 0.5% of the securities of that issuer own in the aggregate more than 5% of such securities. - Mortgage or pledge any of its assets, except to secure permitted borrowings noted above. FOR SELIGMAN FRONTIER AND SELIGMAN GLOBAL TECHNOLOGY, THE FUND WILL NOT: - Purchase or hold the securities of any issuer, if to its knowledge, directors or officers of the fund and, only in the case of Seligman Global Technology, the directors and officers of the fund's investment manager, individually owning beneficially more than 0.5% of the outstanding securities of that issuer own in the aggregate more than 5% of such securities. - Enter into repurchase agreements of more than one week's duration if more than 10% of the fund's net assets would be so invested. Statement of Additional Information - Dec. 30, 2009 Page 11 NONFUNDAMENTAL POLICIES Nonfundamental policies are policies that can be changed by the Board without shareholder approval. The following nonfundamental policies are in addition to those described in the prospectus. FOR FUNDS OTHER THAN MONEY MARKET FUNDS: - No more than 15% of the fund's net assets will be held in securities and other instruments that are illiquid. FOR MONEY MARKET FUNDS: - No more than 10% of the fund's net assets will be held in securities and other instruments that are illiquid. ADDITIONALLY, REGARDING LIMITING INVESTMENTS IN FOREIGN SECURITIES: FOR RIVERSOURCE 120/20 CONTRARIAN EQUITY, RIVERSOURCE BALANCED, RIVERSOURCE DISCIPLINED EQUITY, RIVERSOURCE DISCIPLINED LARGE CAP GROWTH, RIVERSOURCE DISCIPLINED LARGE CAP VALUE, RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY, RIVERSOURCE DISCIPLINED SMALL CAP VALUE, RIVERSOURCE DIVERSIFIED BOND, RIVERSOURCE DIVERSIFIED EQUITY INCOME, RIVERSOURCE DIVIDEND OPPORTUNITY, RIVERSOURCE EQUITY VALUE, RIVERSOURCE FLOATING RATE, RIVERSOURCE HIGH YIELD BOND, RIVERSOURCE INCOME OPPORTUNITIES, RIVERSOURCE INFLATION PROTECTED SECURITIES, RIVERSOURCE LIMITED DURATION BOND, RIVERSOURCE MID CAP GROWTH, RIVERSOURCE MID CAP VALUE, RIVERSOURCE PARTNERS AGGRESSIVE GROWTH, RIVERSOURCE PARTNERS FUNDAMENTAL VALUE, RIVERSOURCE PARTNERS SELECT VALUE, RIVERSOURCE PARTNERS SMALL CAP EQUITY, RIVERSOURCE PARTNERS SMALL CAP GROWTH, RIVERSOURCE PARTNERS SMALL CAP VALUE, RIVERSOURCE REAL ESTATE AND RIVERSOURCE RECOVERY AND INFRASTRUCTURE: - Up to 25% of the fund's net assets may be invested in foreign investments. FOR RIVERSOURCE PRECIOUS METALS AND MINING: - Under normal market conditions, the fund intends to invest at least 50% of its total assets in foreign investments. FOR RIVERSOURCE SHORT DURATION U.S. GOVERNMENT AND RIVERSOURCE U.S. GOVERNMENT MORTGAGE: - Up to 20% of the fund's net assets may be invested in foreign investments. FOR RIVERSOURCE STRATEGIC ALLOCATION: - The fund may invest its total assets, up to 50%, in foreign investments. Statement of Additional Information - Dec. 30, 2009 Page 12 INVESTMENT STRATEGIES AND TYPES OF INVESTMENTS This table shows many of the various investment strategies and investments the funds are allowed to engage in and purchase. It is intended to show the breadth of investments that the investment manager or subadviser (individually and collectively, the "investment manager") may make on behalf of a fund. For a description of principal risks for an individual fund, please see the applicable prospectus for that fund. Notwithstanding a fund's ability to utilize these strategies and investments, the investment manager is not obligated to use them at any particular time. For example, even though the investment manager is authorized to adopt temporary defensive positions and is authorized to attempt to hedge against certain types of risk, these practices are left to the investment manager's sole discretion. Fund-of-funds invest in a combination of underlying funds, although they may invest directly in stocks, bonds and other securities. These underlying funds have their own investment strategies and types of investments they are allowed to engage in and purchase. Fund-of-funds currently only invest in underlying funds, which may invest directly in securities and engage in investment strategies, indicated in the table below. INVESTMENT STRATEGIES AND TYPES OF INVESTMENTS: A black circle indicates that the investment strategy or type of investment generally is authorized for a category of funds. Exceptions are noted in the footnotes to the table. See Table 1 for fund categories. TABLE 3. INVESTMENT STRATEGIES AND TYPES OF INVESTMENTS
FUNDS-OF-FUNDS - TAXABLE TAXABLE TAX-EXEMPT TAX-EXEMPT STATE EQUITY AND FIXED MONEY MONEY FIXED TAX-EXEMPT INVESTMENT STRATEGY BALANCED EQUITY FIXED INCOME INCOME MARKET MARKET INCOME FIXED INCOME --------------------------------------------------------------------------------------------------------------------------------- Agency and government securities o o o o o o o o --------------------------------------------------------------------------------------------------------------------------------- Borrowing o o o o o -- o o --------------------------------------------------------------------------------------------------------------------------------- Cash/money market instruments o o o o o o o o --------------------------------------------------------------------------------------------------------------------------------- Collateralized bond obligations o o A o o -- -- o o --------------------------------------------------------------------------------------------------------------------------------- Commercial paper o o o o o o o o --------------------------------------------------------------------------------------------------------------------------------- Common stock o o o o B -- -- -- -- --------------------------------------------------------------------------------------------------------------------------------- Convertible securities o o o o C -- -- o o --------------------------------------------------------------------------------------------------------------------------------- Corporate bonds o o o o D -- o o --------------------------------------------------------------------------------------------------------------------------------- Debt obligations o o o o o o o o --------------------------------------------------------------------------------------------------------------------------------- Depositary receipts o o o o -- -- -- -- --------------------------------------------------------------------------------------------------------------------------------- Derivative instruments (including options and futures) o o o o -- -- o o --------------------------------------------------------------------------------------------------------------------------------- Exchange-traded funds o o o o -- -- o o --------------------------------------------------------------------------------------------------------------------------------- Floating rate loans o -- o o -- -- -- -- --------------------------------------------------------------------------------------------------------------------------------- Foreign currency transactions o o o o -- -- o -- --------------------------------------------------------------------------------------------------------------------------------- Foreign securities o o o o o -- o o --------------------------------------------------------------------------------------------------------------------------------- Funding agreements o o o o o o o o --------------------------------------------------------------------------------------------------------------------------------- High yield debt securities (junk bonds) o o o o -- -- o o J --------------------------------------------------------------------------------------------------------------------------------- Illiquid and restricted securities o o o o o o o o --------------------------------------------------------------------------------------------------------------------------------- Indexed securities o o o o -- -- o o --------------------------------------------------------------------------------------------------------------------------------- Inflation protected securities o o o o -- -- o o --------------------------------------------------------------------------------------------------------------------------------- Initial Public Offerings (IPOs) o o o o o o o o --------------------------------------------------------------------------------------------------------------------------------- Inverse floaters o E o o -- -- o o --------------------------------------------------------------------------------------------------------------------------------- Investment companies o o o o o o o o --------------------------------------------------------------------------------------------------------------------------------- Lending of portfolio securities o o o o o o o o --------------------------------------------------------------------------------------------------------------------------------- Loan participations o o o o -- -- o o --------------------------------------------------------------------------------------------------------------------------------- Mortgage- and asset-backed securities o o F o o o o o o --------------------------------------------------------------------------------------------------------------------------------- Mortgage dollar rolls o G o o -- -- o o ---------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 13
FUNDS-OF-FUNDS - TAXABLE TAXABLE TAX-EXEMPT TAX-EXEMPT STATE EQUITY AND FIXED MONEY MONEY FIXED TAX-EXEMPT INVESTMENT STRATEGY BALANCED EQUITY FIXED INCOME INCOME MARKET MARKET INCOME FIXED INCOME --------------------------------------------------------------------------------------------------------------------------------- Municipal obligations o o o o -- o o o --------------------------------------------------------------------------------------------------------------------------------- Pay-in-kind securities o o o o -- -- o o --------------------------------------------------------------------------------------------------------------------------------- Preferred stock o o o o H -- -- o H -- --------------------------------------------------------------------------------------------------------------------------------- Real estate investment trusts o o o o -- -- o o --------------------------------------------------------------------------------------------------------------------------------- Repurchase agreements o o o o o o o o --------------------------------------------------------------------------------------------------------------------------------- Reverse repurchase agreements o o o o o -- o o --------------------------------------------------------------------------------------------------------------------------------- Short sales I I o I -- -- I I --------------------------------------------------------------------------------------------------------------------------------- Sovereign debt o o o o o -- o o --------------------------------------------------------------------------------------------------------------------------------- Structured investments o o o o -- -- o o --------------------------------------------------------------------------------------------------------------------------------- Swap agreements o o o o -- -- o o --------------------------------------------------------------------------------------------------------------------------------- Variable- or floating-rate securities o o o o o o o o --------------------------------------------------------------------------------------------------------------------------------- Warrants o o o o -- -- o -- --------------------------------------------------------------------------------------------------------------------------------- When-issued securities and forward commitments o o o o -- -- o o --------------------------------------------------------------------------------------------------------------------------------- Zero-coupon and step-coupon securities o o o o o o o o ---------------------------------------------------------------------------------------------------------------------------------
A. The following funds are not authorized to invest in collateralized bond obligations: RiverSource Partners International Select Growth, RiverSource Partners International Select Value, RiverSource Partners International Small Cap, RiverSource Partners Select Value, RiverSource Partners Small Cap Equity, RiverSource Partners Small Cap Growth and RiverSource Partners Small Cap Value. B. The following funds are not authorized to invest in common stock: RiverSource Short Duration U.S. Government, RiverSource U.S. Government Mortgage. C. The following funds are not authorized to invest in convertible securities: RiverSource Short Duration U.S. Government, RiverSource U.S. Government Mortgage. D. While the fund is prohibited from investing in corporate bonds, it may invest in securities classified as corporate bonds if they meet the requirements of Rule 2a-7 of the 1940 Act. E. The following fund is authorized to invest in inverse floaters: RiverSource Real Estate. F. The following funds are not authorized to invest in mortgage- and asset- backed securities: RiverSource Partners Small Cap Growth, RiverSource S&P 500 Index and RiverSource Small Company Index. G. The following funds are authorized to invest in mortgage dollar rolls: RiverSource Real Estate. H. The following funds are not authorized to invest in preferred stock: RiverSource Tax-Exempt High Income, RiverSource Intermediate Tax-Exempt, RiverSource Tax-Exempt Bond, RiverSource Short Duration U.S. Government, RiverSource U.S. Government Mortgage. I. Except for Seligman California Municipal High-Yield, Seligman California Municipal Quality, Seligman Minnesota Municipal and Seligman New York Municipal, which are prohibited from selling short, the funds are not prohibited from engaging in short sales, however, each fund will seek Board approval prior to utilizing short sales as an active part of its investment strategy. J. The following funds are not authorized to invest in high yield debt securities: Seligman California Municipal Quality, Seligman Minnesota, Seligman National and Seligman New York. Statement of Additional Information - Dec. 30, 2009 Page 14 INFORMATION REGARDING RISKS AND INVESTMENT STRATEGIES RISKS The following is a summary of risk characteristics. Following this summary is a description of certain investments and investment strategies and the risks most commonly associated with them (including certain risks not described below and, in some cases, a more comprehensive discussion of how the risks apply to a particular investment or investment strategy). A mutual fund's risk profile is largely defined by the fund's primary portfolio holdings and investment strategies. However, most mutual funds are allowed to use certain other strategies and investments that may have different risk characteristics. Accordingly, one or more of the following types of risk may be associated with a fund at any time (for a description of principal risks and other for an individual fund, please see that fund's prospectus): ACTIVE MANAGEMENT RISK. For a fund that is actively managed, its performance will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the fund's investment objectives. Due to its active management, a fund could underperform other mutual funds with similar investment objectives and strategies. AFFILIATED FUND RISK. For funds-of-funds, the risk that the investment manager may have potential conflicts of interest in selecting underlying funds because the fees paid to it by some underlying funds are higher than the fees paid by other underlying funds. However, the investment manager is a fiduciary to the funds and is legally obligated to act in their best interests when selecting underlying funds. ALLOCATION RISK. For funds-of-funds, the risk that the investment manager's evaluations regarding asset classes or underlying funds may be incorrect. There is no guarantee that the underlying funds will achieve their investment objectives. There is also a risk that the selected underlying funds' performance may be lower than the performance of the asset class they were selected to represent or may be lower than the performance of alternative underlying funds that could have been selected to represent the asset class. BORROWING RISK. To the extent the fund borrows money for investment purposes, which is commonly referred to as "leveraging," the fund's exposure to fluctuations in the prices of its assets will be increased as compared to the fund's exposure if the fund did not borrow. The fund's borrowing activities will exaggerate any increase or decrease in the net asset value of the fund. In addition, the interest which the fund pays on borrowed money, together with any additional costs of maintaining a borrowing facility, are additional costs borne by the fund and could reduce or eliminate any net investment profits. Unless profits on assets acquired with borrowed funds exceed the costs of borrowing, the use of borrowing will diminish the investment performance of the fund compared with what it would have been without borrowing. When the fund borrows money it must comply with certain asset coverage requirements, which at times may require the fund to dispose of some of its holdings, even though it may be disadvantageous to do so at the time. COMMON STOCK RISK. An adverse event, such as an unfavorable earnings report, may depress the value of a particular common stock held by the fund. Also, the prices of common stocks are sensitive to general movements in the stock market and a drop in the stock market may depress the price of common stocks to which the fund has exposure. Common stock prices fluctuate for several reasons, including changes to investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, or when political or economic events affecting an issuer occurs. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. CREDIT RISK. Credit risk is the risk that one or more fixed income securities in the fund's portfolio will decline in price or fail to pay interest or repay principal when due because the issuer of the security experiences a decline in its financial status and is unable or unwilling to honor its obligations, including the payment of interest or the repayment of principal. Adverse conditions in the credit markets can adversely affect the broader global economy, including the credit quality of issuers of fixed income securities in which the fund may invest. Changes by nationally recognized statistical rating organizations in its rating of securities and in the ability of an issuer to make scheduled payments may also affect the value of the fund's investments. To the extent the fund invests in below-investment grade securities, it will be exposed to a greater amount of credit risk than a fund which invests solely in investment grade securities. The prices of lower grade securities are more sensitive to negative developments, such as a decline in the issuer's revenues or a general economic downturn, than are the prices of higher grade securities. Fixed income securities of below investment grade quality are predominantly speculative with respect to the issuer's capacity to pay interest and repay principal when due and therefore involve a greater risk of default. If the fund purchases unrated securities, or if the rating of a security is reduced after purchase, the fund will depend on the investment manager's analysis of credit risk more heavily than usual. Statement of Additional Information - Dec. 30, 2009 Page 15 CONFIDENTIAL INFORMATION ACCESS RISK. For funds investing in floating rate loans, the investment manager normally will seek to avoid the receipt of material, non-public information (Confidential Information) about the issuers of floating rate loans being considered for acquisition by the fund, or held in the fund. In many instances, issuers of floating rate loans offer to furnish Confidential Information to prospective purchasers or holders of the issuer's floating rate loans to help potential investors assess the value of the loan. The investment manager's decision not to receive Confidential Information from these issuers may disadvantage the fund as compared to other floating rate loan investors, and may adversely affect the price the fund pays for the loans it purchases, or the price at which the fund sells the loans. Further, in situations when holders of floating rate loans are asked, for example, to grant consents, waivers or amendments, the investment manager's ability to assess the desirability of such consents, waivers or amendments may be compromised. For these and other reasons, it is possible that the investment manager's decision under normal circumstances not to receive Confidential Information could adversely affect the fund's performance. COUNTERPARTY RISK. Counterparty risk is the risk that a counterparty to a financial instrument entered into by the fund or held by a 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. DERIVATIVES RISK. Derivatives are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, options, futures, indexes or currencies. Losses involving derivative instruments may be substantial, because a relatively small price movement in the underlying security(ies), instrument, currency or index may result in a substantial loss for the fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within a fund. Derivative instruments in which the fund invests will typically increase the fund's exposure to its principal risks (as described in the fund's prospectus) to which it is otherwise exposed, and may expose the fund to additional risks, including correlation risk, counterparty credit risk, hedging risk, leverage risk, and liquidity risk. Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses. Counterparty credit risk is the risk that a counterparty to the derivative instrument becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, and the fund may obtain no recovery of its investment or may only obtain a limited recovery, and any recovery may be delayed. Hedging risk is the risk that derivative instruments used to hedge against an opposite position may offset losses, but they may also offset gains. There is no guarantee that a hedging strategy will eliminate the risk which the hedging strategy is intended to offset, which may lead to losses within a fund. Leverage risk is the risk that losses from the derivative instrument may be greater than the amount invested in the derivative instrument. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. Liquidity risk is the risk that the derivative instrument may be difficult or impossible to sell or terminate, which may cause the fund to be in a position to do something the investment manager would not otherwise choose, including accepting a lower price for the derivative instrument, selling other investments or foregoing another, more appealing investment opportunity. Derivative instruments which are not traded on an exchange, including, but not limited to, forward contracts, swaps, and over-the-counter options may have liquidity risk. Certain derivatives have the potential for unlimited losses regardless of the size of the initial investment. DIVERSIFICATION RISK. A non-diversified fund may invest more of its assets in fewer companies than if it were a diversified fund. Because each investment has a greater effect on the fund's performance, the fund may be more exposed to the risks of loss and volatility than a fund that invests more broadly. EXCHANGE-TRADED FUND (ETF) RISK. An ETF's share price may not track its specified market index and may trade below its net asset value. ETFs generally use a "passive" investment strategy and will not attempt to take defensive positions in volatile or declining markets. An active secondary market in an ETF's shares may not develop or be maintained and may be halted or interrupted due to actions by its listing exchange, unusual market conditions or other reasons. There can be no assurance an ETF's shares will continue to be listed on an active exchange. In addition, shareholders bear both their proportionate share of the fund's expenses and similar expenses incurred through ownership of the ETF. The funds generally expect to purchase shares of ETFs through broker-dealers in transactions on a securities exchange, and in such cases the funds will pay customary brokerage commissions for each purchase and sale. Shares of an ETF may also Statement of Additional Information - Dec. 30, 2009 Page 16 be acquired by depositing a specified portfolio of the ETF's underlying securities, as well as a cash payment generally equal to accumulated dividends of the securities (net of expenses) up to the time of deposit, with the ETF's custodian, in exchange for which the ETF will issue a quantity of new shares sometimes referred to as a "creation unit". Similarly, shares of an ETF purchased on an exchange may be accumulated until they represent a creation unit, and the creation unit may redeemed in kind for a portfolio of the underlying securities (based on the ETF's net asset value) together with a cash payment generally equal to accumulated dividends as of the date of redemption. The funds may redeem creation units for the underlying securities (and any applicable cash), and may assemble a portfolio of the underlying securities (and any required cash) to purchase creation units. The funds' ability to redeem creation units may be limited by the 1940 Act, which provides that ETFs will not be obligated to redeem shares held by the funds in an amount exceeding one percent of their total outstanding securities during any period of less than 30 days. There is a risk that ETFs in which a fund invests may terminate due to extraordinary events. For example, any of the service providers to ETFs, such as the trustee or sponsor, may close or otherwise fail to perform their obligations to the ETF, and the ETF may not be able to find a substitute service provider. Also, ETFs may be dependent upon licenses to use the various indices as a basis for determining their compositions and/or otherwise to use certain trade names. If these licenses are terminated, the ETFs may also terminate. In addition, an ETF may terminate if its net assets fall below a certain amount. 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. As a result, the Fund's exposure to foreign currencies may reduce the returns of the Fund. Trading of foreign currencies also includes the risk of clearing and settling trades which, if prices are volatile, may be difficult. FOREIGN/EMERGING MARKETS RISK. Foreign securities are securities of issuers based outside the United States. An issuer is deemed to be based outside the United States if it is organized under the laws of another country. Foreign securities are primarily denominated in foreign currencies. In addition to the risks normally associated with domestic securities of the same type, foreign securities are subject to the following risks: Country risk includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight and regulation of business and industry practices of stock exchanges, brokers and listed companies than in the U.S. (including lack of uniform accounting, auditing, and financial reporting standards comparable to those applicable to domestic companies). In addition, with certain foreign countries, there is the possibility of nationalization, expropriation, the imposition of additional withholding or confiscatory taxes, political, social, or economic instability, diplomatic developments that could affect investments in those countries, or other unforeseen actions by regulatory bodies (such as changes to settlement or custody procedures). It may be more difficult for an investor's agents to keep currently informed about corporate actions such as stock dividends or other matters that may affect the prices of portfolio securities. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices. Payment for securities without delivery may be required in certain foreign markets and, when participating in new issues, some foreign countries require payment to be made in advance of issuance (at the time of issuance, the market value of the security may be more or less than the purchase price). Fixed commissions on some foreign stock exchanges are generally higher than negotiated commissions on U.S. exchanges. Further, the Fund may encounter difficulties or be unable to pursue legal remedies and obtain judgments in foreign courts. The introduction of a single currency, the euro, on Jan. 1, 1999 for participating European nations in the Economic and Monetary Union (EU) presents unique risks. The most important is the exposure to the economic, political and social development of the member countries in the EU. Currency risk results from the constantly changing exchange rates between local currency and the U.S. dollar. Whenever the fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add to or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. Emerging markets risk includes the dramatic pace of change (economic, social, and political) in these countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be Statement of Additional Information - Dec. 30, 2009 Page 17 marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. 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 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. For state-specific funds. Because state-specific tax-exempt funds invest primarily in the municipal securities issued by the state and political sub- divisions of the state, each fund will be particularly affected by political and economic changes, adverse conditions to an industry significant to the area and other developments in the state in which it invests. This vulnerability to factors affecting the state's tax-exempt investments will be significantly greater than that of a more geographically diversified fund, which may result in greater losses and volatility. See Appendix B for details. The value of municipal securities owned by a fund also may be adversely affected by future changes in federal or state income tax laws. In addition, because of the relatively small number of issuers of tax-exempt securities and because the state-specific funds may concentrate in a segment of the tax-exempt debt market, such as revenue bonds for health care facilities, housing or airports, the fund may invest a higher percentage of its assets in a single issuer and, therefore, be more exposed to the risk of loss by investing in a few issuers than a fund that invests more broadly. At times, the fund and other accounts managed by the investment manager may own all or most of the debt of a particular issuer. These investments may cause the value of a fund's shares to change more than the values of other funds' shares that invest in more diversified investments. This concentration of ownership may make it more difficult to sell, or to determine the fair value of, these investments. The yields on the securities in which the fund invests generally are dependent on a variety of factors, including the financial condition of the issuer or other obligor, the revenue source from which the debt service is payable, general economic and monetary conditions, conditions in the relevant market, the size of a particular issue, the maturity of the obligation, and the rating of the issue. Because many tax-exempt bonds may be revenue or general obligations of local governments or authorities, ratings on tax-exempt bonds may be different from the ratings given to the general obligation bonds of a particular state. More information about state specific risks may be available from official state resources. HIGHLY LEVERAGED TRANSACTIONS RISK. Certain corporate loans and corporate debt securities involve refinancings, recapitalizations, mergers and acquisitions, and other financings for general corporate purposes. These investments also may include senior obligations of a borrower issued in connection with a restructuring pursuant to Chapter 11 of the U.S. Bankruptcy Code (commonly known as "debtor-in-possession" financings), provided that such senior obligations are determined by the fund's investment manager upon its credit analysis to be a suitable investment by the fund. In such highly leveraged transactions, the borrower assumes large amounts of debt in order to have the financial resources to attempt to achieve its business objectives. Such business objectives may include but are not limited to: management's taking over control of a company (leveraged buy-out); reorganizing the assets and liabilities of a company (leveraged recapitalization); or acquiring another company. Loans or securities that are part of highly leveraged transactions involve a greater risk (including default and bankruptcy) than other investments. IMPAIRMENT OF COLLATERAL RISK. The value of collateral, if any, securing a floating rate loan can decline, and may be insufficient to meet the borrower's obligations or difficult to liquidate. In addition, the fund's access to collateral may be limited by bankruptcy or other insolvency laws. Further, certain floating rate loans may not be fully collateralized and may decline in value. INDEXING RISK. For funds that are managed to an index, the fund's performance will rise and fall, subject to any tracking error, as the performance of the index rises and falls. INFLATION-PROTECTED SECURITIES RISK. Inflation-protected debt securities tend to react to change in real interest rates. Real interest rates can be described as nominal interest rates minus the expected impact of inflation. In general, the price of an inflation-protected debt security falls when real interest rates rise, and rises when real interest rates fall. Interest payments on inflation- protected debt securities will vary as the principal and/or interest is adjusted for inflation and may be more volatile than interest paid on ordinary bonds. In periods of deflation, the fund may have no income at all. Income earned by a shareholder depends on the amount of principal invested and that principal cannot seek to grow with inflation unless the investor reinvests the portion of fund distributions that comes from inflation adjustments. INITIAL PUBLIC OFFERING (IPO) RISK. IPOs are subject to many of the same risks as investing in companies with smaller market capitalizations. To the extent a fund determines to invest in IPOs it may not be able to invest to the extent desired, because, for example, only a small portion (if any) of the securities being offered in an IPO may be made available. The investment performance of a fund during periods when it is unable to invest significantly or at all in IPOs may be lower than Statement of Additional Information - Dec. 30, 2009 Page 18 during periods when the fund is able to do so. In addition, as a fund increases in size, the impact of IPOs on the fund's performance will generally decrease. IPOs sold within 12 months of purchase will result in increased short-term capital gains, which will be taxable to shareholders as ordinary income. INTEREST RATE RISK. The securities in the portfolio are subject to the risk of losses attributable to changes in interest rates. Interest rate risk is generally associated with bond prices: when interest rates rise, bond prices fall. In general, the longer the maturity or duration of a bond, the greater its sensitivity to changes in interest rates. ISSUER RISK. An issuer, or the value of its stocks or bonds, may perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. LEVERAGE RISK. Leverage occurs when the fund increases its assets available for investment using borrowings, short sales, derivatives, or similar instruments or techniques. Due to the fact that short sales involve borrowing securities and then selling them, the fund's short sales effectively leverage the fund's assets. The use of leverage may make any change in the fund's net asset value ("NAV") even greater and thus result in increased volatility of returns. The fund's assets that are used as collateral to secure the short sales may decrease in value while the short positions are outstanding, which may force the fund to use its other assets to increase the collateral. Leverage can also create an interest expense that may lower the fund's overall returns. Lastly, there is no guarantee that a leveraging strategy will be successful. LIQUIDITY RISK. The risk associated from a lack of marketability of securities which may make it difficult or impossible to sell at desirable prices in order to minimize loss. The Fund may have to lower the selling price, sell other investments, or forego another, more appealing investment opportunity. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. PORTFOLIO TRADING AND TURNOVER RISKS. Portfolio trading may be undertaken to accomplish the investment objectives of the funds in relation to actual and anticipated movements in interest rates, securities markets and for other reasons. In addition, a security may be sold and another of comparable quality purchased at approximately the same time to take advantage of what the investment manager believes to be a temporary price disparity between the two securities. Temporary price disparities between two comparable securities may result from supply and demand imbalances where, for example, a temporary oversupply of certain securities may cause a temporarily low price for such security, as compared with other securities of like quality and characteristics. A fund may also engage in short-term trading consistent with its investment objectives. Securities may be sold in anticipation of a market decline or purchased in anticipation of a market rise and later sold, or to recognize a gain. A change in the securities held by a fund is known as "portfolio turnover." The use of certain derivative instruments with relatively short maturities may tend to exaggerate the portfolio turnover rate for a fund. High portfolio turnover may involve correspondingly greater expenses to the fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestments in other securities. Trading in debt obligations does not generally involve the payment of brokerage commissions, but does involve indirect transaction costs. The use of futures contracts may involve the payment of commissions to futures commission merchants. The higher the rate of portfolio turnover of the fund, the higher the transaction costs borne by the fund generally will be. Transactions in the fund's portfolio securities may result in realization of taxable capital gains (including short-term capital gains which are generally taxed to stockholders at ordinary income tax rates). The trading costs and tax effects associated with portfolio turnover may adversely affect the fund's performance. PREPAYMENT AND EXTENSION RISK. The risk that a bond or other security might be called, or otherwise converted, prepaid, or redeemed, before maturity. This risk is primarily associated with asset-backed securities, including mortgage backed securities. If a security is converted, prepaid, or redeemed, before maturity, particularly during a time of declining interest rates, the portfolio managers may not be able to reinvest in securities providing as high a level of income, resulting in a reduced yield to the fund. Conversely, as interest rates rise, the likelihood of prepayment decreases. The portfolio managers may be unable to capitalize on securities with higher interest rates because the Fund's investments are locked in at a lower rate for a longer period of time. QUANTITATIVE MODEL RISK. Securities selected using quantitative methods may perform differently from the market as a whole as a result of the factors used in the quantitative method, the weight placed on each factor, and changes in the factors' historical trends. The quantitative methodology employed by the investment manager has been extensively tested using Statement of Additional Information - Dec. 30, 2009 Page 19 historical securities market data, but has only recently begun to be used to manage the funds. There can be no assurance that the methodology will enable the fund to achieve its objective. REINVESTMENT RISK. The risk that an investor will not be able to reinvest income or principal at the same rate it currently is earning. SECTOR RISK. Investments that are concentrated in a particular issuer, geographic region, or sector will be more susceptible to changes in price. The more a fund diversifies, the more it spreads risk and potentially reduces the risks of loss and volatility. SHORT SALES 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 must borrow those securities to make delivery to the buyer. The fund may not always be able to borrow a security it wants to sell short. The fund will suffer a loss if it sells a security short and the value of the security rises rather than falls. It is possible that the fund's long positions will decline in value at the same time that the value of its short positions increase, thereby increasing potential losses to the fund. Short sales expose the fund to the risk that it will be required to buy the security sold short (also known as "covering" the short position) at a time when the security has appreciated in value, thus resulting in a loss to the fund. The fund may also be required to close out a short position at a time when it might not otherwise choose, for example, if the lender of the security calls it back, which may have the effect of reducing or eliminating potential gain, or cause the fund to realize a loss. Short positions introduce more risk to the fund than long positions (purchases) because the maximum sustainable loss on a security purchased (held long) is limited to the amount paid for the security plus the transaction costs, whereas there is no maximum attainable price of the shorted security. Therefore, in theory, securities sold short have unlimited risk. Additionally, the fund's use of short sales in effect "leverages" the fund, as the fund intends to use the cash proceeds from short sales to invest in additional long positions. This leverage effect potentially exposes the fund to greater risks due to unanticipated market movements, which may magnify losses and increase the volatility of returns. See Leverage Risk and Market Risk. SMALL AND MID-SIZED COMPANY RISK. Investments in small and medium companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, experience, and competitive strengths of larger companies. Additionally, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less and may be more volatile than is typical of larger companies. TAX RISK. As a regulated investment company, a fund must derive at least 90% of its gross income for each taxable year from sources treated as "qualifying income" under the Internal Revenue Code of 1986, as amended. The fund currently intends to take positions in forward currency contracts with notional value up to the fund's total net assets. Although foreign currency gains currently constitute "qualifying income" the Treasury Department has the authority to issue regulations excluding from the definition of "qualifying incomes" a fund's foreign currency gains not "directly related" to its "principal business" of investing in stocks or securities (or options and futures with respect thereto). Such regulations might treat gains from some of the fund's foreign currency- denominated positions as not "qualifying income" and there is a remote possibility that such regulations might be applied retroactively, in which case, the fund might not qualify as a regulated investment company for one or more years. In the event the Treasury Department issues such regulations, the fund's Board of Directors may authorize a significant change in investment strategy or fund liquidation. TECHNOLOGY AND TECHNOLOGY-RELATED INVESTMENT RISKS. The market prices of technology and technology-related stocks tend to exhibit a greater degree of market risk and price volatility than other types of investments. These stocks may fall in and out of favor with investors rapidly, which may cause sudden selling and dramatically lower market prices. These stocks also may be affected adversely by changes in technology, consumer and business purchasing patterns, government regulation and/or obsolete products or services. In addition, a rising interest rate environment tends to negatively affect technology and technology-related companies. In such an environment, those companies with high market valuations may appear less attractive to investors, which may cause sharp decreases in the companies' market prices. Further, those technology or technology-related companies seeking to finance their expansion would have increased borrowing costs, which may negatively impact their earnings. As a result, these factors may negatively affect the performance of the fund. Finally, the fund may be susceptible to factors affecting the technology and technology-related industries. Technology and technology-related companies are often smaller and less experienced companies and may be subject to greater risks than larger companies, such as limited product lines, markets and financial and managerial resources. These risks may be heightened for technology companies in foreign markets. TRACKING ERROR RISK. For funds that are managed to an index, the fund may not track the index perfectly because differences between the index and the fund's portfolio can cause differences in performance. The investment manager purchases securities and other instruments in an attempt to replicate the performance of the index. However, the tools that the investment manager uses to replicate the index are not perfect and the fund's performance is affected by factors such as the Statement of Additional Information - Dec. 30, 2009 Page 20 size of the fund's portfolio, transaction costs, management fees and expenses, brokerage commissions and fees, the extent and timing of cash flows in and out of the fund and changes in the index. In addition, the returns from a specific type of security (for example, mid-cap stocks) may trail returns from other asset classes or the overall market. Each type of security will go through cycles of doing better or worse than stocks or bonds in general. These periods may last for several years. UNDERLYING FUND SELECTION RISK. For funds-of-funds, the risk that the selected underlying funds' performance may be lower than the performance of the asset class they were selected to represent or may be lower than the performance of alternative underlying funds that could have been selected to represent the investment category. INVESTMENT STRATEGIES The following information supplements the discussion of each fund's investment objectives, policies, and strategies that are described in the prospectus and in this SAI. The following describes strategies that many mutual funds use and types of securities that they purchase. Please refer to the table titled Investment Strategies and Types of Investments to see which are applicable to various categories of funds. AGENCY AND GOVERNMENT SECURITIES The U.S. government, its agencies and instrumentalities, and government- sponsored enterprises issue many different types of securities. U.S. Treasury bonds, notes, and bills and securities, including mortgage pass through certificates of the Government National Mortgage Association (GNMA), are guaranteed by the U.S. government. Other U.S. government securities are issued or guaranteed by federal agencies or instrumentalities or government-sponsored enterprises but are not guaranteed by the U.S. government. This may increase the credit risk associated with these investments. Government-sponsored entities issuing securities include privately owned, publicly chartered entities created to reduce borrowing costs for certain sectors of the economy, such as farmers, homeowners, and students. They include the Federal Farm Credit Bank System, Farm Credit Financial Assistance Corporation, Federal Home Loan Bank, Federal Home Loan Mortgage Corporation(*) (FHLMC), Federal National Mortgage Association(*) (FNMA), Student Loan Marketing Association (SLMA), and Resolution Trust Corporation (RTC). Government-sponsored entities may issue discount notes (with maturities ranging from overnight to 360 days) and bonds. Agency and government securities are subject to the same concerns as other debt obligations. (See also Debt Obligations and Mortgage- and Asset-Backed Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with agency and government securities include: Inflation Risk, Interest Rate Risk, Prepayment and Extension Risk, and Reinvestment Risk. * On Sept. 7, 2008, the Federal Housing Finance Agency (FHFA), an agency of the U.S. government, placed the FHLMC and FNMA into conservatorship, a statutory process with the objective of returning the entities to normal business operations. FHFA will act as the conservator to operate the enterprises until they are stabilized. BORROWING If the fund borrows money, its share price may be subject to greater fluctuation until the borrowing is paid off. If the fund makes additional investments while borrowings are outstanding, this may be considered a form of leverage. Under the 1940 Act, the fund is required to maintain continuous asset coverage of 300% with respect to such borrowings and to sell (within three days) sufficient portfolio holdings to restore such coverage if it should decline to less than 300% due to market fluctuations or otherwise, even if such liquidations of the fund's holdings may be disadvantageous from an investment standpoint. Leveraging by means of borrowing may exaggerate the effect of any increase or decrease in the value of portfolio securities or the fund's NAV, and money borrowed will be subject to interest and other costs (which may include commitment fees and/or the cost of maintaining minimum average balances) which may or may not exceed the income received from the securities purchased with borrowed funds. Although one or more of the other risks described in this SAI may apply, the largest risks associated with borrowing include: Inflation Risk. CASH/MONEY MARKET INSTRUMENTS Cash-equivalent investments include short-term U.S. and Canadian government securities and negotiable certificates of deposit, non-negotiable fixed-time deposits, bankers' acceptances, and letters of credit of banks or savings and loan associations having capital, surplus, and undivided profits (as of the date of its most recently published annual financial statements) in excess of $100 million (or the equivalent in the instance of a foreign branch of a U.S. bank) at the date of investment. A fund also may purchase short-term notes and obligations of U.S. and foreign banks and corporations and may use repurchase agreements with broker-dealers registered under the Securities Exchange Act of 1934 and with commercial banks. (See also Commercial Paper, Debt Obligations, Repurchase Agreements, and Variable- or Floating-Rate Securities.) Statement of Additional Information - Dec. 30, 2009 Page 21 These types of instruments generally offer low rates of return and subject a fund to certain costs and expenses. See Appendix A for a discussion of securities ratings. Bankers' acceptances are marketable short-term credit instruments used to finance the import, export, transfer or storage of goods. They are termed "accepted" when a bank guarantees their payment at maturity. Bank certificates of deposit are certificates issued against funds deposited in a bank (including eligible foreign branches of U.S. banks), are for a definite period of time, earn a specified rate of return and are normally negotiable. A 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 Family of Funds and other institutional clients of RiverSource Investments. Although one or more of the other risks described in this SAI may apply, the largest risks associated with cash/money market instruments include: Credit Risk and Inflation Risk. COLLATERALIZED BOND OBLIGATIONS Collateralized bond obligations (CBOs) are investment grade bonds backed by a pool of bonds, which may include junk bonds. CBOs are similar in concept to collateralized mortgage obligations (CMOs), but differ in that CBOs represent different degrees of credit quality rather than different maturities. (See also Mortgage- and Asset-Backed Securities.) Underwriters of CBOs package a large and diversified pool of high-risk, high-yield junk bonds, which is then separated into "tiers." Typically, the first tier represents the higher quality collateral and pays the lowest interest rate; the second tier is backed by riskier bonds and pays a higher rate; the third tier represents the lowest credit quality and instead of receiving a fixed interest rate receives the residual interest payments -- money that is left over after the higher tiers have been paid. CBOs, like CMOs, are substantially overcollateralized and this, plus the diversification of the pool backing them, may earn certain of the tiers investment-grade bond ratings. Holders of third-tier CBOs stand to earn high yields or less money depending on the rate of defaults in the collateral pool. (See also High-Yield Debt Securities (Junk Bonds).) Although one or more of the other risks described in this SAI may apply, the largest risks associated with CBOs include: Credit Risk, Interest Rate Risk and Prepayment and Extension Risk. COMMERCIAL PAPER Commercial paper is a short-term debt obligation with a maturity ranging from 2 to 270 days issued by banks, corporations, and other borrowers. It is sold to investors with temporary idle cash as a way to increase returns on a short-term basis. These instruments are generally unsecured, which increases the credit risk associated with this type of investment. (See also Debt Obligations and Illiquid and Restricted Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with commercial paper include: Credit Risk and Liquidity Risk. COMMON STOCK Common stock represents units of ownership in a corporation. Owners typically are entitled to vote on the selection of directors and other important matters as well as to receive dividends on their holdings. In the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock. The price of common stock is generally determined by corporate earnings, type of products or services offered, projected growth rates, experience of management, liquidity, and general market conditions for the markets on which the stock trades. Although one or more of the other risks described in this SAI may apply, the largest risks associated with common stock include: Issuer Risk, Market Risk, and Small and Mid-Sized Company Risk. CONVERTIBLE SECURITIES Convertible securities are bonds, debentures, notes, preferred stocks, or other securities that may be converted into common, preferred or other securities of the same or a different issuer within a particular period of time at a specified price. Some convertible securities, such as preferred equity-redemption cumulative stock (PERCs), have mandatory conversion features. Others are voluntary. A convertible security entitles the holder to receive interest normally paid or accrued on debt or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted, or exchanged. Convertible securities have unique investment characteristics in that they generally (i) have higher yields than common stocks but lower yields than comparable non-convertible securities, (ii) are less subject to fluctuation in value than the underlying stock since they have fixed income characteristics, and (iii) provide the potential for capital appreciation if the market price of the underlying common stock increases. Statement of Additional Information - Dec. 30, 2009 Page 22 The value of a convertible security is a function of its "investment value" (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege) and its "conversion value" (the security's worth, at market value, if converted into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on the convertible security's investment value. The conversion value of a convertible security is determined by the market price of the underlying common stock. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. Generally, the conversion value decreases as the convertible security approaches maturity. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed income security. Although one or more of the other risks described in this SAI may apply, the largest risks associated with convertible securities include: Interest Rate Risk, Issuer Risk, Market Risk, Prepayment and Extension Risk, and Reinvestment Risk. CORPORATE BONDS Corporate bonds are debt obligations issued by private corporations, as distinct from bonds issued by a government or its agencies or a municipality. Corporate bonds typically have four distinguishing features: (1) they are taxable; (2) they have a par value of $1,000; (3) they have a term maturity, which means they come due all at once; and (4) many are traded on major exchanges. Corporate bonds are subject to the same concerns as other debt obligations. (See also Debt Obligations and High-Yield Debt Securities (Junk Bonds).) Corporate bonds may be either secured or unsecured. Unsecured corporate bonds are generally referred to as "debentures." See Appendix A for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with corporate bonds include: Credit Risk, Interest Rate Risk, Issuer Risk, Prepayment and Extension Risk, and Reinvestment Risk. DEBT OBLIGATIONS Many different types of debt obligations exist (for example, bills, bonds, or notes). Issuers of debt obligations have a contractual obligation to pay interest at a fixed, variable or floating rate on specified dates and to repay principal on a specified maturity date. Certain debt obligations (usually intermediate- and long-term bonds) have provisions that allow the issuer to redeem or "call" a bond before its maturity. Issuers are most likely to call these securities during periods of falling interest rates. When this happens, an investor may have to replace these securities with lower yielding securities, which could result in a lower return. The market value of debt obligations is affected primarily by changes in prevailing interest rates and the issuers perceived ability to repay the debt. The market value of a debt obligation generally reacts inversely to interest rate changes. When prevailing interest rates decline, the price usually rises, and when prevailing interest rates rise, the price usually declines. In general, the longer the maturity of a debt obligation, the higher its yield and the greater the sensitivity to changes in interest rates. Conversely, the shorter the maturity, the lower the yield but the greater the price stability. As noted, the values of debt obligations also may be affected by changes in the credit rating or financial condition of their issuers. Generally, the lower the quality rating of a security, the higher the degree of risk as to the payment of interest and return of principal. To compensate investors for taking on such increased risk, those issuers deemed to be less creditworthy generally must offer their investors higher interest rates than do issuers with better credit ratings. (See also Agency and Government Securities, Corporate Bonds, and High- Yield Debt Securities (Junk Bonds).) Generally, debt obligations that are investment grade are those that have been rated in one of the top four credit quality categories by two out of the three independent rating agencies. In the event that a debt obligation has been rated by only two agencies, the most conservative, or lower, rating must be in one of the top four credit quality categories in order for the security to be considered investment grade. If only one agency has rated the debt obligation, that rating must be in one of the top four credit quality categories for the security to be considered investment grade. See Appendix A for a discussion of securities ratings. All ratings limitations are applied at the time of purchase. Subsequent to purchase, a debt security may cease to be rated or its rating may be reduced below the minimum required for purchase by a fund. Neither event will require the sale of such a security, but it will be a factor in considering whether to continue to hold the security. To the extent that ratings change as a result of changes in a rating agency or its rating system, a fund will attempt to use comparable ratings as standards for selecting investments. Statement of Additional Information - Dec. 30, 2009 Page 23 Although one or more of the other risks described in this SAI may apply, the largest risks associated with debt obligations include: Credit Risk, Interest Rate Risk, Issuer Risk, Prepayment and Extension Risk, and Reinvestment Risk. DEPOSITARY RECEIPTS Some foreign securities are traded in the form of American Depositary Receipts (ADRs). ADRs are receipts typically issued by a U.S. bank or trust company evidencing ownership of the underlying securities of foreign issuers. European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs) are receipts typically issued by foreign banks or trust companies, evidencing ownership of underlying securities issued by either a foreign or U.S. issuer. Generally, depositary receipts in registered form are designed for use in the U.S. and depositary receipts in bearer form are designed for use in securities markets outside the U.S. Depositary receipts may not necessarily be denominated in the same currency as the underlying securities into which they may be converted. Depositary receipts involve the risks of other investments in foreign securities. In addition, ADR holders may not have all the legal rights of shareholders and may experience difficulty in receiving shareholder communications. (See also Common Stock and Foreign Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with depositary receipts include: Foreign/Emerging Markets Risk, Issuer Risk, and Market Risk. DERIVATIVE INSTRUMENTS Derivative instruments are commonly defined to include securities or contracts whose values depend, in whole or in part, on (or "derive" from) the value of one or more other assets, such as securities, currencies, or commodities. A derivative instrument generally consists of, is based upon, or exhibits characteristics similar to options or forward contracts. Such instruments may be used to maintain cash reserves while remaining fully invested, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, or to pursue higher investment returns. Derivative instruments are characterized by requiring little or no initial payment. Their value changes daily based on a security, a currency, a group of securities or currencies, or an index. A small change in the value of the underlying security, currency, or index can cause a sizable percentage gain or loss in the price of the derivative instrument. Options and forward contracts are considered to be the basic "building blocks" of derivatives. For example, forward- based derivatives include forward contracts, swap contracts, and exchange-traded futures. Forward-based derivatives are sometimes referred to generically as "futures contracts." Option-based derivatives include privately negotiated, over-the-counter (OTC) options (including caps, floors, collars, and options on futures) and exchange- traded options on futures. Diverse types of derivatives may be created by combining options or futures in different ways, and by applying these structures to a wide range of underlying assets. Options. An option is a contract. A person who buys a call option for a security has the right to buy the security at a set price for the length of the contract. A person who sells a call option is called a writer. The writer of a call option agrees for the length of the contract to sell the security at the set price when the buyer wants to exercise the option, no matter what the market price of the security is at that time. A person who buys a put option has the right to sell a security at a set price for the length of the contract. A person who writes a put option agrees to buy the security at the set price if the purchaser wants to exercise the option during the length of the contract, no matter what the market price of the security is at that time. An option is covered if the writer owns the security (in the case of a call) or sets aside the cash or securities of equivalent value (in the case of a put) that would be required upon exercise. The price paid by the buyer for an option is called a premium. In addition to the premium, the buyer generally pays a broker a commission. The writer receives a premium, less another commission, at the time the option is written. The premium received by the writer is retained whether or not the option is exercised. A writer of a call option may have to sell the security for a below- market price if the market price rises above the exercise price. A writer of a put option may have to pay an above-market price for the security if its market price decreases below the exercise price. When an option is purchased, the buyer pays a premium and a commission. It then pays a second commission on the purchase or sale of the underlying security if the option is exercised. For record keeping and tax purposes, the price obtained on the sale of the underlying security is the combination of the exercise price, the premium, and both commissions. One of the risks an investor assumes when it buys an option is the loss of the premium. To be beneficial to the investor, the price of the underlying security must change within the time set by the option contract. Furthermore, the change must be sufficient to cover the premium paid, the commissions paid both in the acquisition of the option and in a closing transaction or in the exercise of the option and sale (in the case of a call) or purchase (in the case of a put) of the underlying security. Even then, the price change in the underlying security does not ensure a profit since prices in the option market may not reflect such a change. Statement of Additional Information - Dec. 30, 2009 Page 24 Options on many securities are listed on options exchanges. If a fund writes listed options, it will follow the rules of the options exchange. Options are valued at the close of the New York Stock Exchange. An option listed on a national exchange, Chicago Board Options Exchange, or NASDAQ will be valued at the mean of the last bid and ask prices. Options on certain securities are not actively traded on any exchange, but may be entered into directly with a dealer. These options may be more difficult to close. If an investor is unable to effect a closing purchase transaction, it will not be able to sell the underlying security until the call written by the investor expires or is exercised. Futures Contracts. A futures contract is a sales contract between a buyer (holding the "long" position) and a seller (holding the "short" position) for an asset with delivery deferred until a future date. The buyer agrees to pay a fixed price at the agreed future date and the seller agrees to deliver the asset. The seller hopes that the market price on the delivery date is less than the agreed upon price, while the buyer hopes for the contrary. Many futures contracts trade in a manner similar to the way a stock trades on a stock exchange and the commodity exchanges. Generally, a futures contract is terminated by entering into an offsetting transaction. An offsetting transaction is effected by an investor taking an opposite position. At the time a futures contract is made, a good faith deposit called initial margin is set up. Daily thereafter, the futures contract is valued and the payment of variation margin is required so that each day a buyer would pay out cash in an amount equal to any decline in the contract's value or receive cash equal to any increase. At the time a futures contract is closed out, a nominal commission is paid, which is generally lower than the commission on a comparable transaction in the cash market. Futures contracts may be based on various securities, securities indexes (such as the S&P 500 Index), foreign currencies and other financial instruments and indexes. A fund may engage in futures and related options transactions to produce incremental earnings, to hedge existing positions, and to increase flexibility. The fund intends to comply with Rule 4.5 of the Commodity Futures Trading Commission (CFTC), under which a mutual fund is exempt from the definition of a "commodity pool operator." The fund, therefore, is not subject to registration or regulation as a commodity pool operator, meaning that the fund may invest in futures contracts without registering with the CFTC. Options on Futures Contracts. Options on futures contracts give the holder a right to buy or sell futures contracts in the future. Unlike a futures contract, which requires the parties to the contract to buy and sell a security on a set date (some futures are settled in cash), an option on a futures contract merely entitles its holder to decide on or before a future date (within nine months of the date of issue) whether to enter into a contract. If the holder decides not to enter into the contract, all that is lost is the amount (premium) paid for the option. Further, because the value of the option is fixed at the point of sale, there are no daily payments of cash to reflect the change in the value of the underlying contract. However, since an option gives the buyer the right to enter into a contract at a set price for a fixed period of time, its value does change daily. One of the risks in buying an option on a futures contract is the loss of the premium paid for the option. The risk involved in writing options on futures contracts an investor owns, or on securities held in its portfolio, is that there could be an increase in the market value of these contracts or securities. If that occurred, the option would be exercised and the asset sold at a lower price than the cash market price. To some extent, the risk of not realizing a gain could be reduced by entering into a closing transaction. An investor could enter into a closing transaction by purchasing an option with the same terms as the one previously sold. The cost to close the option and terminate the investor's obligation, however, might still result in a loss. Further, the investor might not be able to close the option because of insufficient activity in the options market. Purchasing options also limits the use of monies that might otherwise be available for long-term investments. Options on Indexes. Options on indexes are securities traded on national securities exchanges. An option on an index is similar to an option on a futures contract except all settlements are in cash. A fund exercising a put, for example, would receive the difference between the exercise price and the current index level. Options may also be traded with respect to other types of indexes, such as options on indexes of commodities futures. Currency Options. Options on currencies are contracts that give the buyer the right, but not the obligation, to buy (call options) or sell (put options) a specified amount of a currency at a predetermined price (strike price) on or before the option matures (expiry date). Conversely, the seller has the obligation to buy or sell a currency option upon exercise of the option by the purchaser. Currency options are traded either on a national securities exchange or over-the-counter. Tax and Accounting Treatment. As permitted under federal income tax laws and to the extent a fund is allowed to invest in futures contracts, a fund would intend to identify futures contracts as part of a mixed straddle and not mark them to market, that is, not treat them as having been sold at the end of the year at market value. If a fund is using short futures contracts for hedging purposes, the fund may be required to defer recognizing losses incurred on short futures contracts and on underlying securities. Any losses incurred on securities that are part of a straddle may be deferred to the extent there is unrealized appreciation on the offsetting position until the offsetting position is sold. Federal income tax treatment of gains or losses Statement of Additional Information - Dec. 30, 2009 Page 25 from transactions in options, options on futures contracts and indexes will depend on whether the option is a section 1256 contract. If the option is a non- equity option, a fund would either make a 1256(d) election and treat the option as a mixed straddle or mark to market the option at fiscal year end and treat the gain/loss as 40% short-term and 60% long-term. The Internal Revenue Service (IRS) has ruled publicly that an exchange-traded call option is a security for purposes of the 50%-of-assets test and that its issuer is the issuer of the underlying security, not the writer of the option, for purposes of the diversification requirements. Accounting for futures contracts will be according to generally accepted accounting principles. Initial margin deposits will be recognized as assets due from a broker (a fund's agent in acquiring the futures position). During the period the futures contract is open, changes in value of the contract will be recognized as unrealized gains or losses by marking to market on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments will be made or received depending upon whether gains or losses are incurred. All contracts and options will be valued at the last- quoted sales price on their primary exchange. Other Risks of Derivatives. The primary risk of derivatives is the same as the risk of the underlying asset, namely that the value of the underlying asset may go up or down. Adverse movements in the value of an underlying asset can expose an investor to losses. Derivative instruments may include elements of leverage and, accordingly, the fluctuation of the value of the derivative instrument in relation to the underlying asset may be magnified. The successful use of derivative instruments depends upon a variety of factors, particularly the investment manager's ability to predict movements of the securities, currencies, and commodity markets, which requires different skills than predicting changes in the prices of individual securities. There can be no assurance that any particular strategy will succeed. Another risk is the risk that a loss may be sustained as a result of the failure of a counterparty to comply with the terms of a derivative instrument. The counterparty risk for exchange-traded derivative instruments is generally less than for privately-negotiated or OTC derivative instruments, since generally a clearing agency, which is the issuer or counterparty to each exchange-traded instrument, provides a guarantee of performance. For privately-negotiated instruments, there is no similar clearing agency guarantee. In all transactions, an investor will bear the risk that the counterparty will default, and this could result in a loss of the expected benefit of the derivative transaction and possibly other losses. When a derivative transaction is used to completely hedge another position, changes in the market value of the combined position (the derivative instrument plus the position being hedged) result from an imperfect correlation between the price movements of the two instruments. With a perfect hedge, the value of the combined position remains unchanged for any change in the price of the underlying asset. With an imperfect hedge, the values of the derivative instrument and its hedge are not perfectly correlated. For example, if the value of a derivative instrument used in a short hedge (such as writing a call option, buying a put option, or selling a futures contract) increased by less than the decline in value of the hedged investment, the hedge would not be perfectly correlated. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as speculative or other pressures on the markets in which these instruments are traded. Derivatives also are subject to the risk that they cannot be sold, closed out, or replaced quickly at or very close to their fundamental value. Generally, exchange contracts are very liquid because the exchange clearinghouse is the counterparty of every contract. OTC transactions are less liquid than exchange- traded derivatives since they often can only be closed out with the other party to the transaction. Another risk is caused by the legal unenforcibility of a party's obligations under the derivative. A counterparty that has lost money in a derivative transaction may try to avoid payment by exploiting various legal uncertainties about certain derivative products. (See also Foreign Currency Transactions.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with derivative instruments include: Derivatives Risk and Liquidity Risk. EXCHANGE-TRADED FUNDS Exchange-traded funds (ETFs) represent shares of ownership in funds, unit investment trusts or depositary receipts. ETFs hold portfolios of securities that are designed to replicate, as closely as possible before expenses, the price and yield of a specified market index. The performance results of ETFs will not replicate exactly the performance of the pertinent index due to transaction and other expenses, including fees to service providers, borne by ETFs. ETF shares are sold and redeemed at net asset value only in large blocks called creation units and redemption units, respectively. The Funds' ability to redeem redemption units may be limited by the 1940 Act, which provides that ETFs will not be obligated to redeem shares held by the funds in an amount exceeding one percent of their total outstanding securities during any period of less than 30 days. There is a risk that Underlying ETFs in which a Fund invests may terminate due to extraordinary events. ETF shares also Statement of Additional Information - Dec. 30, 2009 Page 26 may be purchased and sold in secondary market trading on national securities exchanges, which allows investors to purchase and sell ETF shares at their market price throughout the day. Although one or more of the other risks described in this SAI may apply, investments in ETFs involve the same risks associated with a direct investment in the types of securities included in the indices the ETFs are designed to replicate, including Market Risk. ETFs generally use a "passive" investment strategy and will not attempt to take defensive positions in volatile or declining markets. Shares of an ETF may trade at a market price that is less than their net asset value and an active trading market in such shares may not develop or continue and may be halted or interrupted due to actions by its listing exchange, unusual market conditions or other reasons. For example, any of the service providers to ETFs, such as the trustee or sponsor, may close or otherwise fail to perform their obligations to the ETF, and the ETF may not be able to find a substitute service provider. Also, ETFs may be dependent upon licenses to use the various indices as a basis for determining their compositions and/or otherwise to use certain trade names. If these licenses are terminated, the ETFs may also terminate. In addition, an ETF may terminate if its net assets fall below a certain amount. Although the funds believe that, in the event of the termination of an ETF, they will be able to invest instead in shares of an alternate ETF tracking the same market index or another index covering the same general market, there can be no assurance that shares of an alternate ETF would be available for investment at that time. There can be no assurance an ETF's shares will continue to be listed on an active exchange. Finally, there can be no assurance that the portfolio of securities purchased by an ETF to replicate a particular index will replicate such index. Generally, under the 1940 Act, a fund may not acquire shares of another investment company (including ETFs) if, immediately after such acquisition, (i) such fund would hold more than 3% of the other investment company's total outstanding shares, (ii) if such fund's investment in securities of the other investment company would be more than 5% of the value of the total assets of the Fund, or (iii) if more than 10% of such fund's total assets would be invested in investment companies. The SEC has granted orders for exemptive relief to certain ETFs that permit investments in those ETFs by other investment companies (such as the Seligman TargETFunds) in excess of these limits. The Seligman TargETFunds' ability to invest in ETFs will be severely constrained unless ETFs have received such an order from the SEC, and the ETF and the Seligman TargETFunds take appropriate steps to comply with the relevant terms and conditions of such orders. The Seligman TargETFunds will invest in an ETF only if the SEC has issued an exemptive order to the ETF which permits investment companies, including the Seligman TargETFFunds, to invest in ETFs beyond the limitations in the 1940 Act, subject to certain terms and conditions, including that such investment companies enter into an agreement with the ETF before investing in them in excess of the 3% limitation in the 1940 Act. To the extent other ETFs obtain similar exemptive relief from the SEC, the Seligman TargETFunds may seek to qualify to invest in such other ETFs in excess of the 1940 Act limitations. Each Seligman TargETFund may invest greater than 25% of its assets in any one ETF, although no Seligman TargETFFund intends to invest greater than 40% of its assets in any one ETF. To the extent the 1940 Act limitations apply to an ETF, such limitations may prevent Seligman TargETFund from allocating its investments in the manner that the investment manager considers optimal, or cause the investment manager to select a similar index or sector-based mutual fund or other investment company (each, an "Other Investment Company"), or a basket of stocks (a group of securities related by index or sector that are pre-selected by, and made available through, certain brokers) ("Stock Baskets") providing similar exposure as an alternative. The Seligman TargETFunds may also invest in Other Investment Companies or Stock Baskets when the investment manager believes they represent more attractive opportunities than similar ETFs held in the portfolio. ETFs, because they invest in other securities (e.g., common stocks of small-, mid- and large capitalization companies (U.S. and foreign, including, for example, real estate investment trusts and emerging markets securities) and fixed income securities), are subject to the risks of investment associated with these and other types of investments, as described in this SAI. FLOATING RATE LOANS Most floating rate loans are acquired directly from the agent bank or from another holder of the loan by assignment. Most such loans are secured, and most impose restrictive covenants which must be met by the borrower. These loans are typically made by a syndicate of banks and institutional investors, represented by an agent bank which has negotiated and structured the loan and which is responsible generally for collecting interest, principal, and other amounts from the borrower on its own behalf and on behalf of the other lending institutions in the syndicate, and for enforcing its and their other rights against the borrower. Each of the lending institutions, including the agent bank, lends to the borrower a portion of the total amount of the loan, and retains the corresponding interest in the loan. Floating rate loans may include delayed draw term loans and prefunded or synthetic letters of credit. A fund's ability to receive payments of principal and interest and other amounts in connection with loans held by it will depend primarily on the financial condition of the borrower. The failure by the fund to receive scheduled interest or principal payments Statement of Additional Information - Dec. 30, 2009 Page 27 on a loan would adversely affect the income of the fund and would likely reduce the value of its assets, which would be reflected in a reduction in the fund's net asset value. Banks and other lending institutions generally perform a credit analysis of the borrower before originating a loan or purchasing an assignment in a loan. In selecting the loans in which the fund will invest, however, the investment manager will not rely on that credit analysis of the agent bank, but will perform its own investment analysis of the borrowers. The investment manager's analysis may include consideration of the borrower's financial strength and managerial experience, debt coverage, additional borrowing requirements or debt maturity schedules, changing financial conditions, and responsiveness to changes in business conditions and interest rates. The majority of loans the fund will invest in will be rated by one or more of the nationally recognized rating agencies. Investments in loans may be of any quality, including "distressed" loans, and will be subject to the fund's credit quality policy. Loans may be structured in different forms, including assignments and participations. In an assignment, a fund purchases an assignment of a portion of a lender's interest in a loan. In this case, the fund may be required generally to rely upon the assigning bank to demand payment and enforce its rights against the borrower, but would otherwise be entitled to all of such bank's rights in the loan. The borrower of a loan may, either at its own election or pursuant to terms of the loan documentation, prepay amounts of the loan from time to time. There is no assurance that a fund will be able to reinvest the proceeds of any loan prepayment at the same interest rate or on the same terms as those of the original loan. Corporate loans in which a fund may purchase a loan assignment are made generally to finance internal growth, mergers, acquisitions, recapitalizations, stock repurchases, leveraged buy-outs, dividend payments to sponsors and other corporate activities. The highly leveraged capital structure of certain borrowers may make such loans especially vulnerable to adverse changes in economic or market conditions. The fund may hold investments in loans for a very short period of time when opportunities to resell the investments that the investment manager believes are attractive arise. Certain of the loans acquired by a fund may involve revolving credit facilities under which a borrower may from time to time borrow and repay amounts up to the maximum amount of the facility. In such cases, the fund would have an obligation to advance its portion of such additional borrowings upon the terms specified in the loan assignment. To the extent that the fund is committed to make additional loans under such an assignment, it will at all times designate cash or securities in an amount sufficient to meet such commitments. Notwithstanding its intention in certain situations to not receive material, non-public information with respect to its management of investments in floating rate loans, the investment manager may from time to time come into possession of material, non-public information about the issuers of loans that may be held in a fund's portfolio. Possession of such information may in some instances occur despite the investment manager's efforts to avoid such possession, but in other instances the investment manager may choose to receive such information (for example, in connection with participation in a creditors' committee with respect to a financially distressed issuer). As, and to the extent, required by applicable law, the investment manager's ability to trade in these loans for the account of the fund could potentially be limited by its possession of such information. Such limitations on the investment manager's ability to trade could have an adverse effect on the fund by, for example, preventing the fund from selling a loan that is experiencing a material decline in value. In some instances, these trading restrictions could continue in effect for a substantial period of time. In some instances, other accounts managed by the investment manager may hold other securities issued by borrowers whose floating rate loans may be held in a fund's portfolio. These other securities may include, for example, debt securities that are subordinate to the floating rate loans held in the fund's portfolio, convertible debt or common or preferred equity securities. In certain circumstances, such as if the credit quality of the issuer deteriorates, the interests of holders of these other securities may conflict with the interests of the holders of the issuer's floating rate loans. In such cases, the investment manager may owe conflicting fiduciary duties to the fund and other client accounts. The investment manager will endeavor to carry out its obligations to all of its clients to the fullest extent possible, recognizing that in some cases certain clients may achieve a lower economic return, as a result of these conflicting client interests, than if the investment manager's client accounts collectively held only a single category of the issuer's securities. Although one or more of the other risks described in this SAI may apply, the largest risks associated with floating rate loans include: Credit Risk and Prepayment and Extension Risk. FOREIGN CURRENCY TRANSACTIONS Investments in foreign securities usually involve currencies of foreign countries. In addition, a fund may hold cash and cash equivalent investments in foreign currencies. As a result, the value of a fund's assets as measured in U.S. dollars may be affected favorably or unfavorably by changes in currency exchange rates and exchange control regulations. Also, a fund may incur costs in connection with conversions between various currencies. Currency exchange rates may fluctuate significantly over short periods of time causing a fund's NAV (Net Asset Value) to fluctuate. Currency exchange rates are generally Statement of Additional Information - Dec. 30, 2009 Page 28 determined by the forces of supply and demand in the foreign exchange markets, actual or anticipated changes in interest rates, and other complex factors. Currency exchange rates also can be affected by the intervention of U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments. Spot Rates and Derivative Instruments. A fund may conduct its foreign currency exchange transactions either at the spot (cash) rate prevailing in the foreign currency exchange market or by entering into forward currency exchange contracts (forward contracts). (See also Derivative Instruments.) These contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. Because foreign currency transactions occurring in the interbank market might involve substantially larger amounts than those involved in the use of such derivative instruments, a fund could be disadvantaged by having to deal in the odd lot market for the underlying foreign currencies at prices that are less favorable than for round lots. A fund may enter into forward contracts for a variety of reasons, but primarily it will enter into such contracts for risk management (hedging) or for investment purposes. A fund may enter into forward contracts to settle a security transaction or handle dividend and interest collection. When a fund enters into a contract for the purchase or sale of a security denominated in a foreign currency or has been notified of a dividend or interest payment, it may desire to lock in the price of the security or the amount of the payment, usually in U.S. dollars, although it could desire to lock in the price of the security in another currency. By entering into a forward contract, a fund would be able to protect itself against a possible loss resulting from an adverse change in the relationship between different currencies from the date the security is purchased or sold to the date on which payment is made or received or when the dividend or interest is actually received. A fund may enter into forward contracts when management of the fund believes the currency of a particular foreign country may decline in value relative to another currency. When selling currencies forward in this fashion, a fund may seek to hedge the value of foreign securities it holds against an adverse move in exchange rates. The precise matching of forward contract amounts and the value of securities involved generally will not be possible since the future value of securities in foreign currencies more than likely will change between the date the forward contract is entered into and the date it matures. The projection of short-term currency market movements is extremely difficult and successful execution of a short-term hedging strategy is highly uncertain. Unless specifically permitted, a fund would not enter into such forward contracts or maintain a net exposure to such contracts when consummating the contracts would obligate it to deliver an amount of foreign currency in excess of the value of its securities or other assets denominated in that currency. This method of protecting the value of the fund's securities against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange that can be achieved at some point in time. Although forward contracts tend to minimize the risk of loss due to a decline in value of hedged currency, they tend to limit any potential gain that might result should the value of such currency increase. A fund may also enter into forward contracts when its management believes the currency of a particular country will increase in value relative to another currency. A fund may buy currencies forward to gain exposure to a currency without incurring the additional costs of purchasing securities denominated in that currency. Absolute Return Currency and Income Fund is designed to invest in a combination of forward currency contracts and U.S. dollar-denominated market instruments in an attempt to obtain an investment result that is substantially the same as a direct investment in a foreign currency-denominated instrument. For example, the combination of U.S. dollar-denominated instruments with long forward currency exchange contracts creates a position economically equivalent to a position in the foreign currency, in anticipation of an increase in the value of the foreign currency against the U.S. dollar. Conversely, the combination of U.S. dollar- denominated instruments with short forward currency exchange contracts is economically equivalent to borrowing the foreign currency for delivery at a specified date in the future, in anticipation of a decrease in the value of the foreign currency against the U.S. dollar. This strategy may also be employed by other funds. Unanticipated changes in the currency exchange results could result in poorer performance for funds that enter into these types of transactions. A fund may designate cash or securities in an amount equal to the value of the fund's total assets committed to consummating forward contracts entered into under the circumstance set forth above. If the value of the securities declines, additional cash or securities will be designated on a daily basis so that the value of the cash or securities will equal the amount of the fund's commitments on such contracts. At maturity of a forward contract, a fund may either deliver (if a contract to sell) or take delivery of (if a contract to buy) the foreign currency or terminate its contractual obligation by entering into an offsetting contract with the same currency trader, the same maturity date, and covering the same amount of foreign currency. Statement of Additional Information - Dec. 30, 2009 Page 29 If a fund engages in an offsetting transaction, it would incur a gain or loss to the extent there has been movement in forward contract prices. If a fund engages in an offsetting transaction, it may subsequently enter into a new forward contract to buy or sell the foreign currency. Although a fund values its assets each business day in terms of U.S. dollars, it may not intend to convert its foreign currencies into U.S. dollars on a daily basis. It would do so from time to time, and shareholders should be aware of currency conversion costs. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference (spread) between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to a fund at one rate, while offering a lesser rate of exchange should a fund desire to resell that currency to the dealer. For Absolute Return Currency and Income Fund, it is possible, under certain circumstances, including entering into forward currency contracts for investment purposes, that the fund may have to limit or restructure its forward contract currency transactions to qualify as a "regulated investment company" under the Internal Revenue Code. Options on Foreign Currencies. A fund may buy put and call options and write covered call and cash-secured put options on foreign currencies for hedging purposes and to gain exposure to foreign currencies. For example, a decline in the dollar value of a foreign currency in which securities are denominated will reduce the dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against the diminutions in the value of securities, a fund may buy put options on the foreign currency. If the value of the currency does decline, a fund would have the right to sell the currency for a fixed amount in dollars and would offset, in whole or in part, the adverse effect on its portfolio that otherwise would have resulted. Conversely, where a change in the dollar value of a currency would increase the cost of securities a fund plans to buy, or where a fund would benefit from increased exposure to the currency, a fund may buy call options on the foreign currency. The purchase of the options could offset, at least partially, the changes in exchange rates. As in the case of other types of options, however, the benefit to a fund derived from purchases of foreign currency options would be reduced by the amount of the premium and related transaction costs. In addition, where currency exchange rates do not move in the direction or to the extent anticipated, a fund could sustain losses on transactions in foreign currency options that would require it to forego a portion or all of the benefits of advantageous changes in rates. A fund may write options on foreign currencies for the same types of purposes. For example, when a fund anticipates a decline in the dollar value of foreign- denominated securities due to adverse fluctuations in exchange rates it could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the option would most likely not be exercised and the diminution in value of securities would be fully or partially offset by the amount of the premium received. Similarly, instead of purchasing a call option when a foreign currency is expected to appreciate, a fund could write a put option on the relevant currency. If rates move in the manner projected, the put option would expire unexercised and allow the fund to hedge increased cost up to the amount of the premium. As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium, and only if rates move in the expected direction. If this does not occur, the option may be exercised and the fund would be required to buy or sell the underlying currency at a loss that may not be offset by the amount of the premium. Through the writing of options on foreign currencies, the fund also may be required to forego all or a portion of the benefits that might otherwise have been obtained from favorable movements on exchange rates. All options written on foreign currencies will be covered. An option written on foreign currencies is covered if a fund holds currency sufficient to cover the option or has an absolute and immediate right to acquire that currency without additional cash consideration upon conversion of assets denominated in that currency or exchange of other currency held in its portfolio. An option writer could lose amounts substantially in excess of its initial investments, due to the margin and collateral requirements associated with such positions. Options on foreign currencies are traded through financial institutions acting as market-makers, although foreign currency options also are traded on certain national securities exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to SEC regulation. In an over-the- counter trading environment, many of the protections afforded to exchange participants will not be available. For example, there are no daily price fluctuation limits, and adverse market movements could therefore continue to an unlimited extent over a period of time. Although the purchaser of an option cannot lose more than the amount of the premium plus related transaction costs, this entire amount could be lost. Foreign currency option positions entered into on a national securities exchange are cleared and guaranteed by the Options Clearing Corporation (OCC), thereby reducing the risk of counterparty default. Further, a liquid secondary market in options Statement of Additional Information - Dec. 30, 2009 Page 30 traded on a national securities exchange may be more readily available than in the over-the-counter market, potentially permitting a fund to liquidate open positions at a profit prior to exercise or expiration, or to limit losses in the event of adverse market movements. The purchase and sale of exchange-traded foreign currency options, however, is subject to the risks of availability of a liquid secondary market described above, as well as the risks regarding adverse market movements, margining of options written, the nature of the foreign currency market, possible intervention by governmental authorities and the effects of other political and economic events. In addition, exchange-traded options on foreign currencies involve certain risks not presented by the over-the-counter market. For example, exercise and settlement of such options must be made exclusively through the OCC, which has established banking relationships in certain foreign countries for that purpose. As a result, the OCC may, if it determines that foreign governmental restrictions or taxes would prevent the orderly settlement of foreign currency option exercises, or would result in undue burdens on OCC or its clearing member, impose special procedures on exercise and settlement, such as technical changes in the mechanics of delivery of currency, the fixing of dollar settlement prices or prohibitions on exercise. Foreign Currency Futures and Related Options. A fund may enter into currency futures contracts to buy or sell currencies. It also may buy put and call options and write covered call and cash-secured put options on currency futures. Currency futures contracts are similar to currency forward contracts, except that they are traded on exchanges (and have margin requirements) and are standardized as to contract size and delivery date. Most currency futures call for payment of delivery in U.S. dollars. A fund may use currency futures for the same purposes as currency forward contracts, subject to CFTC limitations. Currency futures and options on futures values can be expected to correlate with exchange rates, but will not reflect other factors that may affect the value of the fund's investments. A currency hedge, for example, should protect a Yen- denominated bond against a decline in the Yen, but will not protect a fund against price decline if the issuer's creditworthiness deteriorates. Because the value of a fund's investments denominated in foreign currency will change in response to many factors other than exchange rates, it may not be possible to match the amount of a forward contract to the value of a fund's investments denominated in that currency over time. A fund will hold securities or other options or futures positions whose values are expected to offset its obligations. The fund would not enter into an option or futures position that exposes the fund to an obligation to another party unless it owns either (i) an offsetting position in securities or (ii) cash, receivables and short-term debt securities with a value sufficient to cover its potential obligations. (See also Derivative Instruments and Foreign Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with foreign currency transactions include: Derivatives Risk, Interest Rate Risk, and Liquidity Risk. FOREIGN SECURITIES Foreign securities, foreign currencies, and securities issued by U.S. entities with substantial foreign operations involve special risks, including those set forth below, which are not typically associated with investing in U.S. securities. Foreign companies are not generally subject to uniform accounting, auditing, and financial reporting standards comparable to those applicable to domestic companies. Additionally, many foreign stock markets, while growing in volume of trading activity, have substantially less volume than the New York Stock Exchange, and securities of some foreign companies are less liquid and more volatile than securities of domestic companies. Similarly, volume and liquidity in most foreign bond markets are less than the volume and liquidity in the U.S. and, at times, volatility of price can be greater than in the U.S. Further, foreign markets have different clearance, settlement, registration, and communication procedures and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions making it difficult to conduct such transactions. Delays in such procedures could result in temporary periods when assets are uninvested and no return is earned on them. The inability of an investor to make intended security purchases due to such problems could cause the investor to miss attractive investment opportunities. Payment for securities without delivery may be required in certain foreign markets and, when participating in new issues, some foreign countries require payment to be made in advance of issuance (at the time of issuance, the market value of the security may be more or less than the purchase price). Some foreign markets also have compulsory depositories (i.e., an investor does not have a choice as to where the securities are held). Fixed commissions on some foreign stock exchanges are generally higher than negotiated commissions on U.S. exchanges. Further, an investor may encounter difficulties or be unable to pursue legal remedies and obtain judgments in foreign courts. There is generally less government supervision and regulation of business and industry practices, stock exchanges, brokers, and listed companies than in the U.S. It may be more difficult for an investor's agents to keep currently informed about corporate actions such as stock dividends or other matters that may affect the prices of portfolio securities. Communications between the U.S. and foreign countries may be less reliable than within the U.S., thus increasing the risk of delays or loss of certificates for portfolio securities. In addition, with respect to certain foreign countries, there is the possibility of nationalization, expropriation, the imposition of additional Statement of Additional Information - Dec. 30, 2009 Page 31 withholding or confiscatory taxes, political, social, or economic instability, diplomatic developments that could affect investments in those countries, or other unforeseen actions by regulatory bodies (such as changes to settlement or custody procedures). The risks of foreign investing may be magnified for investments in emerging markets, which may have relatively unstable governments, economies based on only a few industries, and securities markets that trade a small number of securities. The introduction of a single currency, the euro, on Jan. 1, 1999 for participating European nations in the Economic and Monetary Union (EU) presents unique uncertainties, including the legal treatment of certain outstanding financial contracts after Jan. 1, 1999 that refer to existing currencies rather than the euro; the establishment and maintenance of exchange rates; the fluctuation of the euro relative to non-euro currencies; whether the interest rate, tax or labor regimes of European countries participating in the euro will converge over time; and whether the admission of other countries such as Poland, Latvia, and Lithuania as members of the EU may have an impact on the euro. Although one or more of the other risks described in this SAI may apply, the largest risks associated with foreign securities include: Foreign/Emerging Markets Risk and Issuer Risk. FUNDING AGREEMENTS A fund may invest in funding agreements issued by domestic insurance companies. Funding agreements are short-term, privately placed, debt obligations of insurance companies that offer a fixed- or floating-rate of interest. These investments are not readily marketable and therefore are considered to be illiquid securities. (See also Illiquid and Restricted Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with funding agreements include: Credit Risk and Liquidity Risk. HIGH-YIELD DEBT SECURITIES (JUNK BONDS) High yield (high-risk) debt securities are sometimes referred to as junk bonds. They are non-investment grade (lower quality) securities that have speculative characteristics. Lower quality securities, while generally offering higher yields than investment grade securities with similar maturities, involve greater risks, including the possibility of default or bankruptcy. They are regarded as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal. The special risk considerations in connection with investments in these securities are discussed below. See Appendix A for a discussion of securities ratings. (See also Debt Obligations.) All fixed rate interest-bearing securities typically experience appreciation when interest rates decline and depreciation when interest rates rise. The market values of lower-quality and comparable unrated securities tend to reflect individual corporate developments to a greater extent than do higher rated securities, which react primarily to fluctuations in the general level of interest rates. Lower-quality and comparable unrated securities also tend to be more sensitive to economic conditions than are higher-rated securities. As a result, they generally involve more credit risks than securities in the higher- rated categories. During an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of lower-quality securities may experience financial stress and may not have sufficient revenues to meet their payment obligations. The issuer's ability to service its debt obligations also may be adversely affected by specific corporate developments, the issuer's inability to meet specific projected business forecasts, or the unavailability of additional financing. The risk of loss due to default by an issuer of these securities is significantly greater than a default by issuers of higher-rated securities because such securities are generally unsecured and are often subordinated to other creditors. Further, if the issuer of a lower quality security defaulted, an investor might incur additional expenses to seek recovery. Credit ratings issued by credit rating agencies are designed to evaluate the safety of principal and interest payments of rated securities. They do not, however, evaluate the market value risk of lower-quality securities and, therefore, may not fully reflect the true risks of an investment. In addition, credit rating agencies may or may not make timely changes in a rating to reflect changes in the economy or in the condition of the issuer that affect the market value of the securities. Consequently, credit ratings are used only as a preliminary indicator of investment quality. An investor may have difficulty disposing of certain lower-quality and comparable unrated securities because there may be a thin trading market for such securities. Because not all dealers maintain markets in all lower quality and comparable unrated securities, there is no established retail secondary market for many of these securities. To the extent a secondary trading market does exist, it is generally not as liquid as the secondary market for higher- rated securities. The lack of a liquid secondary market may have an adverse impact on the market price of the security. The lack of a liquid secondary market for certain securities also may make it more difficult for an investor to obtain accurate market quotations. Market quotations are generally available on many lower-quality and comparable unrated issues only from a limited number of dealers and may not necessarily represent firm bids of such dealers or prices for actual sales. Statement of Additional Information - Dec. 30, 2009 Page 32 Although one or more of the other risks described in this SAI may apply, the largest risks associated with high-yield debt securities include: Credit Risk, Interest Rate Risk, and Prepayment and Extension Risk. ILLIQUID AND RESTRICTED SECURITIES Illiquid securities are securities that are not readily marketable. These securities may include, but are not limited to, certain securities that are subject to legal or contractual restrictions on resale, certain repurchase agreements, and derivative instruments. To the extent a fund invests in illiquid or restricted securities, it may encounter difficulty in determining a market value for the securities. Disposing of illiquid or restricted securities may involve time-consuming negotiations and legal expense, and it may be difficult or impossible for a fund to sell the investment promptly and at an acceptable price. In determining the liquidity of all securities and derivatives, such as Rule 144A securities, which are unregistered securities offered to qualified institutional buyers, and interest-only and principal-only fixed mortgage-backed securities (IOs and POs) issued by the U.S. government or its agencies and instrumentalities the investment manager, under guidelines established by the Board, will consider any relevant factors including the frequency of trades, the number of dealers willing to purchase or sell the security and the nature of marketplace trades. Although one or more of the other risks described in this SAI may apply, the largest risks associated with illiquid and restricted securities include: Liquidity Risk. INDEXED SECURITIES The value of indexed securities is linked to currencies, interest rates, commodities, indexes, or other financial indicators. Most indexed securities are short- to intermediate-term fixed income securities whose values at maturity or interest rates rise or fall according to the change in one or more specified underlying instruments. Indexed securities may be more volatile than the underlying instrument itself and they may be less liquid than the securities represented by the index. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with indexed securities include: Liquidity Risk and Market Risk. INFLATION PROTECTED SECURITIES Inflation is a general rise in prices of goods and services. Inflation erodes the purchasing power of an investor's assets. For example, if an investment provides a total return of 7% in a given year and inflation is 3% during that period, the inflation-adjusted, or real, return is 4%. Inflation-protected securities are debt securities whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. One type of inflation-protected debt security is issued by the U.S. Treasury. The principal of these securities is adjusted for inflation as indicated by the Consumer Price Index for Urban Consumers (CPI) and interest is paid on the adjusted amount. The CPI is a measurement of changes in the cost of living, made up of components such as housing, food, transportation and energy. If the CPI falls, the principal value of inflation-protected securities will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Conversely, if the CPI rises, the principal value of inflation-protected securities will be adjusted upward, and consequently the interest payable on these securities will be increased. Repayment of the original bond principal upon maturity is guaranteed in the case of U.S. Treasury inflation-protected securities, even during a period of deflation. However, the current market value of the inflation-protected securities is not guaranteed and will fluctuate. Other inflation-indexed securities include inflation-related bonds, which may or may not provide a similar guarantee. If a guarantee of principal is not provided, the adjusted principal value of the bond repaid at maturity may be less than the original principal. Other issuers of inflation-protected debt securities include other U.S. government agencies or instrumentalities, corporations and foreign governments. There can be no assurance that the CPI or any foreign inflation index will accurately measure the real rate of inflation in the prices of goods and services. Moreover, there can be no assurance that the rate of inflation in a foreign country will be correlated to the rate of inflation in the United States. If interest rates rise due to reasons other than inflation (for example, due to changes in currency exchange rates), investors in these securities may not be protected to the extent that the increase is not reflected in the bond's inflation measure. Any increase in principal for an inflation-protected security resulting from inflation adjustments is considered by IRS regulations to be taxable income in the year it occurs. For direct holders of an inflation-protected security, this means that taxes must be paid on principal adjustments even though these amounts are not received until the bond matures. By contrast, a fund holding these securities distributes both interest income and the income attributable to principal adjustments in the form of cash or reinvested shares, which are taxable to shareholders. Statement of Additional Information - Dec. 30, 2009 Page 33 Although one or more of the other risks described in this SAI may apply, the largest risks associated with inflation- protected securities include: Interest Rate Risk and Market Risk. INITIAL PUBLIC OFFERINGS (IPOS) Companies issuing IPOs generally have limited operating histories, and their prospects for future profitability are uncertain. These companies often are engaged in new and evolving businesses and are particularly vulnerable to competition and to changes in technology, markets and economic conditions. They may be dependent on certain key managers and third parties, need more personnel and other resources to manage growth and require significant additional capital. They may also be dependent on limited product lines and uncertain property rights and need regulatory approvals. Funds that invest in IPOs can be affected by sales of additional shares and by concentration of control in existing management and principal shareholders. Stock prices of IPOs can also be highly unstable, due to the absence of a prior public market, the small number of shares available for trading and limited investor information. Most IPOs involve a high degree of risk not normally associated with offerings of more seasoned companies. Although one or more risks described in this SAI may apply, the largest risks associated with IPOs include: Small and Mid-Sized Company Risk and Initial Public Offering (IPO) Risk. INVERSE FLOATERS Inverse floaters or inverse floating rate securities are a type of derivative long-term fixed income obligation with a floating or variable interest rate that moves in the opposite direction of short-term interest rates. As short-term interest rates go down, the holders of the inverse floaters receive more income and, as short-term interest rates go up, the holders of the inverse floaters receive less income. As with all long-term fixed income securities, the price of the inverse floater moves inversely with long-term interest rates; as long-term interest rates go down, the price of the inverse floater moves up and, when long-term interest rates go up, the price of the inverse floater moves down. While inverse floater securities tend to provide more income than similar term and credit quality fixed-rate bonds, they also exhibit greater volatility in price movement (both up and down). In the municipal market an inverse floater is typically created when the owner of a municipal fixed rate bond transfers that bond to a trust in exchange for cash and a residual interest in the trust's assets and cash flows (inverse floater certificates). The trust funds the purchase of the bond by issuing two classes of certificates: short-term floating rate notes (typically sold to third parties) and the inverse floaters (also known as residual certificates). No additional income beyond that provided by the trust's underlying bond is created; rather, that income is merely divided-up between the two classes of certificates. The holder of the inverse floating rate securities typically has the right to (1) cause the holders of the short-term floating rate notes to tender their notes at par ($100) and (2) to return the inverse floaters and withdraw the underlying bonds, thereby collapsing the trust. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with transactions in inverse floaters include: Interest Rate Risk, Credit Risk, Liquidity Risk and Market Risk. INVESTMENT COMPANIES Investing in securities issued by registered and unregistered investment companies may involve the duplication of advisory fees and certain other expenses. Although one or more of the other risks described in this SAI may apply, the largest risks associated with the securities of other investment companies include: Market Risk. LENDING OF PORTFOLIO SECURITIES To generate additional income, a fund may lend up to one-third of the value of its total assets to broker-dealers, banks or other institutional borrowers of securities. JPMorgan Chase Bank, N.A. serves as lending agent (the Lending Agent) to the funds pursuant to a securities lending agreement (the Securities Lending Agreement) approved by the Board. Under the Securities Lending Agreement, the Lending Agent loans securities to approved borrowers pursuant to borrower agreements in exchange for collateral equal to at least 100% of the market value of the loaned securities. Collateral may consist of cash, securities issued by the U.S. government or its agencies or instrumentalities (collectively, "U.S. government securities") or such other collateral as may be approved by the Board. For loans secured by cash, the fund retains the interest earned on cash collateral investments, but is required to pay the borrower a rebate for the use of the cash collateral. For loans secured by U.S. government securities, the borrower pays a borrower fee to the Lending Agent on behalf of the fund. If the market value of the loaned securities goes up, the Lending Agent will request additional collateral from the borrower. If the market value of the loaned securities goes down, the borrower may request that some collateral be returned. During the Statement of Additional Information - Dec. 30, 2009 Page 34 existence of the loan, the lender will receive from the borrower amounts equivalent to any dividends, interest or other distributions on the loaned securities, as well as interest on such amounts. Loans are subject to termination by a fund or a borrower at any time. A fund may choose to terminate a loan in order to vote in a proxy solicitation if the fund has knowledge of a material event to be voted on that would affect the fund's investment in the loaned security. Securities lending involves counterparty risk, including the risk that a borrower may not provide additional collateral when required or return the loaned securities in a timely manner. Counterparty risk also includes a potential loss of rights in the collateral if the borrower or the Lending Agent defaults or fails financially. This risk is increased if a fund's loans are concentrated with a single or limited number of borrowers. There are no limits on the number of borrowers a fund may use and a fund may lend securities to only one or a small group of borrowers. Funds participating in securities lending also bear the risk of loss in connection with investments of cash collateral received from the borrowers. Cash collateral is invested in accordance with investment guidelines contained in the Securities Lending Agreement and approved by the Board. To the extent that the value or return of a fund's investments of the cash collateral declines below the amount owed to a borrower, a fund may incur losses that exceed the amount it earned on lending the security. The Lending Agent will indemnify a fund from losses resulting from a borrower's failure to return a loaned security when due, but such indemnification does not extend to losses associated with declines in the value of cash collateral investments. LOAN PARTICIPATIONS Loans, loan participations, and interests in securitized loan pools are interests in amounts owed by a corporate, governmental, or other borrower to a lender or consortium of lenders (typically banks, insurance companies, investment banks, government agencies, or international agencies). Loans involve a risk of loss in case of default or insolvency of the borrower and may offer less legal protection to an investor in the event of fraud or misrepresentation. Although one or more of the other risks described in this SAI may apply, the largest risks associated with loan participations include: Credit Risk. MORTGAGE- AND ASSET-BACKED SECURITIES 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 (CMOs). These securities may be issued or guaranteed by U.S. government agencies or instrumentalities (see also Agency and Government Securities), or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers, and special purpose entities. Mortgage-backed securities issued by private lenders may be supported by pools of mortgage loans or other mortgage-backed securities that are guaranteed, directly or indirectly, by the U.S. government or one of its agencies or instrumentalities, or they may be issued without any governmental guarantee of the underlying mortgage assets but with some form of non-governmental credit enhancement. Commercial mortgage- backed securities (CMBS) are a specific type of mortgage-backed security collateralized by a pool of mortgages on commercial real estate. Stripped mortgage-backed securities are a type of mortgage-backed security that receive differing proportions of the interest and principal payments from the underlying assets. Generally, there are two classes of stripped mortgage-backed securities: Interest Only (IO) and Principal Only (PO). IOs entitle the holder to receive distributions consisting of all or a portion of the interest on the underlying pool of mortgage loans or mortgage-backed securities. POs entitle the holder to receive distributions consisting of all or a portion of the principal of the underlying pool of mortgage loans or mortgage-backed securities. The cash flows and yields on IOs and POs are extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage loans or mortgage- backed securities. A rapid rate of principal payments may adversely affect the yield to maturity of IOs. A slow rate of principal payments may adversely affect the yield to maturity of POs. If prepayments of principal are greater than anticipated, an investor in IOs may incur substantial losses. If prepayments of principal are slower than anticipated, the yield on a PO will be affected more severely than would be the case with a traditional mortgage-backed security. CMOs are hybrid mortgage-related instruments secured by pools of mortgage loans or other mortgage-related securities, such as mortgage pass through securities or stripped mortgage-backed securities. CMOs may be structured into multiple classes, often referred to as "tranches," with each class bearing a different stated maturity and entitled to a different schedule for payments of principal and interest, including prepayments. Principal prepayments on collateral underlying a CMO may cause it to be retired substantially earlier than its stated maturity. The yield characteristics of mortgage-backed securities differ from those of other debt securities. Among the differences are that interest and principal payments are made more frequently on mortgage-backed securities, usually monthly, and principal may be repaid at any time. These factors may reduce the expected yield. Statement of Additional Information - Dec. 30, 2009 Page 35 Asset-backed securities have structural characteristics similar to mortgage- backed securities. Asset-backed debt obligations represent direct or indirect participation in, or secured by and payable from, assets such as motor vehicle installment sales contracts, other installment loan contracts, home equity loans, leases of various types of property, and receivables from credit card or other revolving credit arrangements. The credit quality of most asset-backed securities depends primarily on the credit quality of the assets underlying such securities, how well the entity issuing the security is insulated from the credit risk of the originator or any other affiliated entities, and the amount and quality of any credit enhancement of the securities. Payments or distributions of principal and interest on asset- backed debt obligations may be supported by non-governmental credit enhancements including letters of credit, reserve funds, overcollateralization, and guarantees by third parties. The market for privately issued asset-backed debt obligations is smaller and less liquid than the market for government sponsored mortgage-backed securities. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with mortgage and asset-backed securities include: Credit Risk, Interest Rate Risk, Liquidity Risk, and Prepayment and Extension Risk. MORTGAGE DOLLAR ROLLS Mortgage dollar rolls are investments in which an investor sells mortgage-backed securities for delivery in the current month and simultaneously contracts to purchase substantially similar securities on a specified future date. While an investor foregoes principal and interest paid on the mortgage-backed securities during the roll period, the investor is compensated by the difference between the current sales price and the lower price for the future purchase as well as by any interest earned on the proceeds of the initial sale. The investor also could be compensated through the receipt of fee income equivalent to a lower forward price. Although one or more of the other risks described in this SAI may apply, the largest risks associated with mortgage dollar rolls include: Credit Risk and Interest Rate Risk. MUNICIPAL OBLIGATIONS Municipal obligations include debt obligations issued by or on behalf of states, territories, possessions, or sovereign nations within the territorial boundaries of the United States (including the District of Columbia, Guam and Puerto Rico). The interest on these obligations is generally exempt from federal income tax. Municipal obligations are generally classified as either "general obligations" or "revenue obligations." General obligation bonds are secured by the issuer's pledge of its full faith, credit, and taxing power for the payment of interest and principal. Revenue bonds are payable only from the revenues derived from a project or facility or from the proceeds of a specified revenue source. Industrial development bonds are generally revenue bonds secured by payments from and the credit of private users. Municipal notes are issued to meet the short-term funding requirements of state, regional, and local governments. Municipal notes include tax anticipation notes, bond anticipation notes, revenue anticipation notes, tax and revenue anticipation notes, construction loan notes, short-term discount notes, tax- exempt commercial paper, demand notes, and similar instruments. Municipal lease obligations may take the form of a lease, an installment purchase, or a conditional sales contract. They are issued by state and local governments and authorities to acquire land, equipment, and facilities. An investor may purchase these obligations directly, or it may purchase participation interests in such obligations. Municipal leases may be subject to greater risks than general obligation or revenue bonds. State constitutions and statutes set forth requirements that states or municipalities must meet in order to issue municipal obligations. Municipal leases may contain a covenant by the state or municipality to budget for and make payments due under the obligation. Certain municipal leases may, however, provide that the issuer is not obligated to make payments on the obligation in future years unless funds have been appropriated for this purpose each year. Yields on municipal bonds and notes depend on a variety of factors, including money market conditions, municipal bond market conditions, the size of a particular offering, the maturity of the obligation, and the rating of the issue. The municipal bond market has a large number of different issuers, many having smaller sized bond issues, and a wide choice of different maturities within each issue. For these reasons, most municipal bonds do not trade on a daily basis and many trade only rarely. Because many of these bonds trade infrequently, the spread between the bid and offer may be wider and the time needed to develop a bid or an offer may be longer than other security markets. See Appendix A for a discussion of securities ratings. (See also Debt Obligations.) Taxable Municipal Obligations. There is another type of municipal obligation that is subject to federal income tax for a variety of reasons. These municipal obligations do not qualify for the federal income exemption because (a) they did not receive necessary authorization for tax-exempt treatment from state or local government authorities, (b) they exceed certain regulatory limitations on the cost of issuance for tax-exempt financing or (c) they finance public or private activities that do not qualify for the federal income tax exemption. These non- qualifying activities might include, for example, certain types of Statement of Additional Information - Dec. 30, 2009 Page 36 multi-family housing, certain professional and local sports facilities, refinancing of certain municipal debt, and borrowing to replenish a municipality's underfunded pension plan. Although one or more of the other risks described in this SAI may apply, the largest risks associated with municipal obligations include: Credit Risk, Inflation Risk, Interest Rate Risk, and Market Risk. PREFERRED STOCK Preferred stock is a type of stock that pays dividends at a specified rate and that has preference over common stock in the payment of dividends and the liquidation of assets. Preferred stock does not ordinarily carry voting rights. The price of a preferred stock is generally determined by earnings, type of products or services, projected growth rates, experience of management, liquidity, and general market conditions of the markets on which the stock trades. Although one or more of the other risks described in this SAI may apply, the largest risks associated with preferred stock include: Issuer Risk and Market Risk. REAL ESTATE INVESTMENT TRUSTS Real estate investment trusts (REITs) are pooled investment vehicles that manage a portfolio of real estate or real estate related loans to earn profits for their shareholders. REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property, such as shopping centers, nursing homes, office buildings, apartment complexes, and hotels, and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. REITs can be subject to extreme volatility due to fluctuations in the demand for real estate, changes in interest rates, and adverse economic conditions. Similar to investment companies, REITs are not taxed on income distributed to shareholders provided they comply with certain requirements under the tax law. The failure of a REIT to continue to qualify as a REIT for tax purposes can materially affect its value. A fund will indirectly bear its proportionate share of any expenses paid by a REIT in which it invests. REITs often do not provide complete tax information until after the calendar year-end. Consequently, because of the delay, it may be necessary for a fund investing in REITs to request permission to extend the deadline for issuance of Forms 1099-DIV beyond January 31. In the alternative, amended Forms 1099-DIV may be sent. Although one or more of the other risks described in this SAI may apply, the largest risks associated with REITs include: Interest Rate Risk, Issuer Risk and Market Risk. REPURCHASE AGREEMENTS Repurchase agreements may be entered into with certain banks or non-bank dealers. In a repurchase agreement, the purchaser buys a security at one price, and at the time of sale, the seller agrees to repurchase the obligation at a mutually agreed upon time and price (usually within seven days). The repurchase agreement determines the yield during the purchaser's holding period, while the seller's obligation to repurchase is secured by the value of the underlying security. Repurchase agreements could involve certain risks in the event of a default or insolvency of the other party to the agreement, including possible delays or restrictions upon the purchaser's ability to dispose of the underlying securities. Although one or more of the other risks described in this SAI may apply, the largest risks associated with repurchase agreements include: Credit Risk. REVERSE REPURCHASE AGREEMENTS In a reverse repurchase agreement, an investor sells a security and enters into an agreement to repurchase the security at a specified future date and price. The investor generally retains the right to interest and principal payments on the security. Since the investor receives cash upon entering into a reverse repurchase agreement, it may be considered a borrowing. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with reverse repurchase agreements include: Credit Risk and Interest Rate Risk. SHORT SALES In short-selling transactions, a fund sells a security it does not own in anticipation of a decline in the market value of the security. To complete the transaction, a fund must borrow the security to make delivery to the buyer. A fund is obligated to replace the security borrowed by purchasing it at the market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by a fund, which may result in a loss or gain, respectively. Unlike Statement of Additional Information - Dec. 30, 2009 Page 37 taking a long position in a security by purchasing the security, where potential losses are limited to the purchase price, short sales have no cap on maximum losses, and gains are limited to the price of the security at the time of the short sale. Short sales of forward commitments and derivatives do not involve borrowing a security. These types of short sales may include futures, options, contracts for differences, forward contracts on financial instruments and options such as contracts, credit-linked instruments, and swap contracts. A fund may not always be able to borrow a security it wants to sell short. A fund also may be unable to close out an established short position at an acceptable price and may have to sell long positions at disadvantageous times to cover its short positions. The value of your investment in a fund will fluctuate in response to the movements in the market. Fund performance also will depend on the effectiveness of the investment manager's research and the management team's investment decisions. Short sales also involve other costs. A fund must repay to the lender an amount equal to any dividends or interest that accrues while the loan is outstanding. To borrow the security, a fund may be required to pay a premium. A fund also will incur truncation costs in effecting short sales. The amount of any ultimate gain for a fund resulting from a short sale will be decreased and the amount of any ultimate loss will be increased, by the amount of premiums, interest or expenses a fund may be required to pay in connection with the short sale. Until a fund closes the short position, it will earmark and reserve fund assets, in cash or liquid securities to offset a portion of the leverage risk. Realized gains from short sales are typically treated as short-term gains/losses. Although one or more of the other risks described in this SAI may apply, the largest risks associated with short sales include: Market Risk and Short Sales Risk. SOVEREIGN DEBT A sovereign debtor's willingness or ability to repay principal and pay interest in a timely manner may be affected by a variety of factors, including its cash flow situation, the extent of its reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor's policy toward international lenders, and the political constraints to which a sovereign debtor may be subject. (See also Foreign Securities.) With respect to sovereign debt of emerging market issuers, investors should be aware that certain emerging market countries are among the largest debtors to commercial banks and foreign governments. At times, certain emerging market countries have declared moratoria on the payment of principal and interest on external debt. Certain emerging market countries have experienced difficulty in servicing their sovereign debt on a timely basis that led to defaults and the restructuring of certain indebtedness. Sovereign debt includes Brady Bonds, which are securities issued under the framework of the Brady Plan, an initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their outstanding external commercial bank indebtedness. Although one or more of the other risks described in this SAI may apply, the largest risks associated with sovereign debt include: Credit Risk and Foreign/Emerging Markets Risk. STRUCTURED INVESTMENTS A structured investment is a security whose return is tied to an underlying index or to some other security or pool of assets. Structured investments generally are individually negotiated agreements and may be traded over-the- counter. Structured investments are created and operated to restructure the investment characteristics of the underlying security. This restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, of specified instruments, such as commercial bank loans, and the issuance by that entity of one or more classes of debt obligations ("structured securities") backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued structured securities to create securities with different investment characteristics, such as varying maturities, payment priorities, and interest rate provisions. The extent of the payments made with respect to structured securities is dependent on the extent of the cash flow on the underlying instruments. Because structured securities typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments. Structured securities are often offered in different classes. As a result a given class of a structured security may be either subordinated or unsubordinated to the right of payment of another class. Subordinated structured securities typically have higher yields and present greater risks than unsubordinated structured securities. Structured securities are typically sold in private placement transactions, and at any given time there may be no active trading market for a particular structured security. Statement of Additional Information - Dec. 30, 2009 Page 38 Although one or more of the other risks described in this SAI may apply, the largest risks associated with structured investments include: Credit Risk and Liquidity Risk. SWAP AGREEMENTS Swap agreements are typically individually negotiated agreements that obligate two parties to exchange payments based on a reference to a specified asset, reference rate or index. Swap agreements will tend to shift a party's investment exposure from one type of investment to another. A swap agreement can increase or decrease the volatility of a fund's investments and its net asset value. Swap agreements are traded in the over-the-counter market and may be considered to be illiquid. Swap agreements entail the risk that a party will default on its payment obligations. A fund will enter into a swap agreement only if the claims- paying ability of the other party or its guarantor is considered to be investment grade by the investment manager. Generally, the unsecured senior debt or the claims-paying ability of the other party or its guarantor must be rated in one of the three highest rating categories of at least one Nationally Recognized Statistical Rating Organization (NRSRO) at the time of entering into the transaction. If there is a default by the other party to such a transaction, a fund will have to rely on its contractual remedies (which may be limited by bankruptcy, insolvency or similar laws) pursuant to the agreements related to the transaction. In certain circumstances, a fund may seek to minimize counterparty risk by requiring the counterparty to post collateral. Swap agreements are usually entered into without an upfront payment because the value of each party's position is the same. The market values of the underlying commitments will change over time resulting in one of the commitments being worth more than the other and the net market value creating a risk exposure for one counterparty or the other. Interest Rate Swaps. Interest rate swap agreements are often used to obtain or preserve a desired return or spread at a lower cost than through a direct investment in an instrument that yields the desired return or spread. They are financial instruments that involve the exchange of one type of interest rate cash flow for another type of interest rate cash flow on specified dates in the future. In a standard interest rate swap transaction, two parties agree to exchange their respective commitments to pay fixed or floating rates on a predetermined specified (notional) amount. The swap agreement notional amount is the predetermined basis for calculating the obligations that the swap counterparties have agreed to exchange. Under most swap agreements, the obligations of the parties are exchanged on a net basis. The two payment streams are netted out, with each party receiving or paying, as the case may be, only the net amount of the two payments. Interest rate swaps can be based on various measures of interest rates, including LIBOR, swap rates, treasury rates and other foreign interest rates. Cross Currency Swaps. Cross currency swaps are similar to interest rate swaps, except that they involve multiple currencies. A fund may enter into a currency swap when it has exposure to one currency and desires exposure to a different currency. Typically the interest rates that determine the currency swap payments are fixed, although occasionally one or both parties may pay a floating rate of interest. Unlike an interest rate swap, however, the principal amounts are exchanged at the beginning of the contract and returned at the end of the contract. In addition to paying and receiving amounts at the beginning and termination of the agreements, both sides will also have to pay in full periodically based upon the currency they have borrowed. Change in foreign exchange rates and changes in interest rates, as described above, may negatively affect currency swaps. Total Return Swaps. Total return swaps are contracts in which one party agrees to make periodic payments based on the change in market value of the underlying assets, which may include a specified security, basket of securities or security indexes during the specified period, in return for periodic payments based on a fixed or variable interest rate of the total return from other underlying assets. Total return swap agreements may be used to obtain exposure to a security or market without owning or taking physical custody of such security or market. For example, CMBS total return swaps are bilateral financial contracts designed to replicate synthetically the total returns of commercial mortgage- backed securities. In a typical total return equity swap, payments made by the fund or the counterparty are based on the total return of a particular reference asset or assets (such as an equity security, a combination of such securities, or an index). That is, one party agrees to pay another party the return on a stock, basket of stocks, or stock index in return for a specified interest rate. By entering into an equity index swap, for example, the index receiver can gain exposure to stocks making up the index of securities without actually purchasing those stocks. Total return swaps involve not only the risk associated with the investment in the underlying securities, but also the risk of the counterparty not fulfilling its obligations under the agreement. Swaption Transaction. A swaption is an option on a swap agreement and a contract that gives a counterparty the right (but not the obligation) to enter into a new swap agreement or to shorten, extend, cancel or otherwise modify an existing swap agreement, at some designated future time on specified terms, in return for payment of the purchase price (the "premium") of the option. The fund may write (sell) and purchase put and call swaptions to the same extent it may make use of standard options on securities or other instruments. The writer of the contract receives the premium and bears the risk of unfavorable changes in the market value on the underlying swap agreement. Statement of Additional Information - Dec. 30, 2009 Page 39 Swaptions can be bundled and sold as a package. These are commonly called interest rate caps, floors and collars. In interest rate cap transactions, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or cap. Interest rate floor transactions require one party, in exchange for a premium to agree to make payments to the other to the extent that interest rates fall below a specified level, or floor. In interest rate collar transactions, one party sells a cap and purchases a floor, or vice versa, in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels or collar amounts. Credit Default Swaps. Credit default swaps are contracts in which third party credit risk is transferred from one party to another party by one party, the protection buyer, making payments to the other party, the protection seller, in return for the ability of the protection buyer to deliver a reference obligation, or portfolio of reference obligations, to the protection seller upon the occurrence of certain credit events relating to the issuer of the reference obligation and receive the notional amount of the reference obligation from the protection seller. A fund may use credit default swaps for various purposes including to increase or decrease its credit exposure to various issuers. For example, as a seller in a transaction, a fund could use credit default swaps as a way of increasing investment exposure to a particular issuer's bonds in lieu of purchasing such bonds directly. Similarly, as a buyer in a transaction, a fund may use credit default swaps to hedge its exposure on bonds that it owns or in lieu of selling such bonds. A credit default swap agreement may have as reference obligations one or more securities that are not currently held by the fund. The fund may be either the buyer or seller in the transaction. Credit default swaps may also be structured based on the debt of a basket of issuers, rather than a single issuer, and may be customized with respect to the default event that triggers purchase or other factors. As a seller, the fund generally receives an up front payment or a fixed rate of income throughout the term of the swap, which typically is between six months and three years, provided that there is no credit event. If a credit event occurs, generally the seller must pay the buyer the full face amount of deliverable obligations of the reference obligations that may have little or no value. If the fund is a buyer and no credit event occurs, the fund recovers nothing if the swap is held through its termination date. However, if a credit event occurs, the buyer may elect to receive the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference obligation that may have little or no value. Credit default swap agreements can involve greater risks than if a fund had invested in the reference 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. A fund will enter into credit default swap agreements only with counterparties that meet certain standards of creditworthiness. A buyer generally also will lose its investment and recover nothing should no credit event occur and the swap is held to its termination date. If a credit event were to occur, the value of any deliverable obligation received by the seller, coupled with the upfront or periodic payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of value to the seller. A fund's obligations under a credit default swap agreement will be accrued daily (offset against any amounts owing to the fund). In connection with credit default swaps in which a fund is the buyer, the fund will segregate or "earmark" cash or other liquid assets, or enter into certain offsetting positions, with a value at least equal to the fund's exposure (any accrued but unpaid net amounts owed by the fund to any counterparty), on a marked-to-market basis. In connection with credit default swaps in which a fund is the seller, the fund will segregate or "earmark" cash or other liquid assets, or enter into offsetting positions, with a value at least equal to the full notional amount of the swap (minus any amounts owed to the fund). Such segregation or "earmarking" will ensure that the fund has assets available to satisfy its obligations with respect to the transaction. Such segregation or "earmarking" will not limit the fund's exposure to loss. The use of swap agreements by a fund entails certain risks, which may be different from, or possibly greater than, the risks associated with investing directly in the securities and other investments that are the referenced asset for the swap agreement. Swaps are highly specialized instruments that require investment techniques, risk analyses, and tax planning different from those associated with stocks, bonds, and other traditional investments. The use of a swap requires an understanding not only of the referenced asset, reference rate, or index, but also of the swap itself, without the benefit of observing the performance of the swap under all the possible market conditions. Because some swap agreements have a leverage component, adverse changes in the value or level of the underlying asset, reference rate, or index can result in a loss substantially greater than the amount invested in the swap itself. Certain swaps have the potential for unlimited loss, regardless of the size of the initial investment. Although one or more of the other risks described in this SAI may apply, the largest risks associated with swaps include: Credit Risk, Liquidity Risk and Market Risk. VARIABLE- OR FLOATING-RATE SECURITIES Variable-rate securities provide for automatic establishment of a new interest rate at fixed intervals (daily, monthly, semiannually, etc.). Floating-rate securities generally provide for automatic adjustment of the interest rate whenever some specified interest rate index changes. Variable- or floating-rate securities frequently include a demand feature enabling the holder to sell the securities to the issuer at par. In many cases, the demand feature can be exercised at any time. Some Statement of Additional Information - Dec. 30, 2009 Page 40 securities that do not have variable or floating interest rates may be accompanied by puts producing similar results and price characteristics. Variable-rate demand notes include master demand notes that are obligations that permit the investor to invest fluctuating amounts, which may change daily without penalty, pursuant to direct arrangements between the investor as lender, and the borrower. The interest rates on these notes fluctuate from time to time. The issuer of such obligations normally has a corresponding right, after a given period, to prepay in its discretion the outstanding principal amount of the obligations plus accrued interest upon a specified number of days' notice to the holders of such obligations. Because these obligations are direct lending arrangements between the lender and borrower, it is not contemplated that such instruments generally will be traded. There generally is not an established secondary market for these obligations. Accordingly, where these obligations are not secured by letters of credit or other credit support arrangements, the lender's right to redeem is dependent on the ability of the borrower to pay principal and interest on demand. Such obligations frequently are not rated by credit rating agencies and may involve heightened risk of default by the issuer. Although one or more of the other risks described in this SAI may apply, the largest risks associated with variable- or floating-rate securities include: Credit Risk. WARRANTS Warrants are securities giving the holder the right, but not the obligation, to buy the stock of an issuer at a given price (generally higher than the value of the stock at the time of issuance) during a specified period or perpetually. Warrants may be acquired separately or in connection with the acquisition of securities. Warrants do not carry with them the right to dividends or voting rights and they do not represent any rights in the assets of the issuer. Warrants may be considered to have more speculative characteristics than certain other types of investments. In addition, the value of a warrant does not necessarily change with the value of the underlying securities, and a warrant ceases to have value if it is not exercised prior to its expiration date. Although one or more of the other risks described in this SAI may apply, the largest risks associated with warrants include: Market Risk. WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS When-issued securities and forward commitments involve a commitment to purchase or sell specific securities at a predetermined price or yield in which payment and delivery take place after the customary settlement period for that type of security. Normally, the settlement date occurs within 45 days of the purchase although in some cases settlement may take longer. The investor does not pay for the securities or receive dividends or interest on them until the contractual settlement date. Such instruments involve the risk of loss if the value of the security to be purchased declines prior to the settlement date and the risk that the security will not be issued as anticipated. If the security is not issued as anticipated, a fund may lose the opportunity to obtain a price and yield considered to be advantageous. Although one or more of the other risks described in this SAI may apply, the largest risks associated with when-issued securities and forward commitments include: Credit Risk. ZERO-COUPON, STEP-COUPON, AND PAY-IN-KIND SECURITIES These securities are debt obligations that do not make regular cash interest payments (see also Debt Obligations). Zero-coupon and step-coupon securities are sold at a deep discount to their face value because they do not pay interest until maturity. Pay-in-kind securities pay interest through the issuance of additional securities. Because these securities do not pay current cash income, the price of these securities can be extremely volatile when interest rates fluctuate. See Appendix A for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with zero- coupon, step-coupon, and pay-in-kind securities include: Credit Risk and Interest Rate Risk. A fund cannot issue senior securities but this does not prohibit certain investment activities for which assets of the fund are set aside, or margin, collateral or escrow arrangements are established, to cover the related obligations. Examples of those activities include borrowing money, delayed- delivery and when-issued securities transactions, and contracts to buy or sell options, derivatives, and hedging instruments. SECURITIES TRANSACTIONS Except as otherwise noted, the description of policies and procedures in this section also applies to any fund subadviser. Subject to policies set by the Board, as well as the terms of the investment management services agreements, and subadviser agreements, as applicable, the investment manager or subadviser is authorized to determine, consistent with a fund's Statement of Additional Information - Dec. 30, 2009 Page 41 investment objective and policies, which securities will be purchased, held, or sold. In determining where the buy and sell orders are to be placed, the investment manager has been directed to use its best efforts to obtain the best available price and the most favorable execution except where otherwise authorized by the Board. Each fund, the investment manager, any subadviser and RiverSource Fund Distributors, Inc. (principal underwriter and distributor of the funds) has a strict Code of Ethics that prohibits affiliated personnel from engaging in personal investment activities that compete with or attempt to take advantage of planned portfolio transactions for the fund. A fund's securities may be traded on an agency basis with brokers or dealers or on a principal basis with dealers. In an agency trade, the broker-dealer generally is paid a commission. In a principal trade, the investment manager will trade directly with the issuer or with a dealer who buys or sells for its own account, rather than acting on behalf of another client. The investment manager may pay the dealer a commission or instead, the dealer's profit, if any, is the difference, or spread, between the dealer's purchase and sale price for the security. BROKER-DEALER SELECTION In selecting broker-dealers to execute transactions, the investment manager and each subadviser will consider from among such factors as the ability to minimize trading costs, trading expertise, infrastructure, ability to provide information or services, financial condition, confidentiality, competitiveness of commission rates, evaluations of execution quality, promptness of execution, past history, ability to prospect for and find liquidity, difficulty of trade, security's trading characteristics, size of order, liquidity of market, block trading capabilities, quality of settlement, specialized expertise, overall responsiveness, willingness to commit capital and research services provided. The Board has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the funds as a factor in the selection of broker-dealers through which to execute securities transactions. On a periodic basis, the investment manager makes a comprehensive review of the broker-dealers and the overall reasonableness of their commissions, including review by an independent third-party evaluator. The review evaluates execution, operational efficiency, and research services. COMMISSION DOLLARS Broker-dealers typically provide a bundle of services including research and execution of transactions. The research provided can be either proprietary (created and provided by the broker-dealer) or third party (created by a third party but provided by the broker-dealer). Consistent with the interests of the fund, the investment manager and each subadviser may use broker-dealers who provide both types of research products and services in exchange for commissions, known as "soft dollars," generated by transactions in fund accounts. The receipt of research and brokerage products and services is used by the investment manager, and by each subadviser, to the extent it engages in such transactions, to supplement its own research and analysis activities, by receiving the views and information of individuals and research staffs of other securities firms, and by gaining access to specialized expertise on individual companies, industries, areas of the economy and market factors. Research and brokerage products and services may include reports on the economy, industries, sectors and individual companies or issuers; statistical information; accounting and tax law interpretations; political analyses; reports on legal developments affecting portfolio securities; information on technical market actions; credit analyses; on-line quotation systems; risk measurement; analyses of corporate responsibility issues; on-line news services; and financial and market database services. Research services may be used by the investment manager in providing advice to multiple RiverSource accounts, including the funds (or by any subadviser to any other client of the subadviser) even though it is not possible to relate the benefits to any particular account or fund. On occasion, it may be desirable to compensate a broker for research services or for brokerage services by paying a commission that might not otherwise be charged or a commission in excess of the amount another broker might charge. The Board has adopted a policy authorizing the investment manager to do so, to the extent authorized by law, if the investment manager or subadviser determines, in good faith, that such commission is reasonable in relation to the value of the brokerage or research services provided by a broker or dealer, viewed either in the light of that transaction or the investment manager's or subadviser's overall responsibilities with respect to a fund and the other funds or accounts for which it acts as investment manager (or by any subadviser to any other client of that subadviser). As a result of these arrangements, some portfolio transactions may not be effected at the lowest commission, but overall execution may be better. The investment manager and each subadviser have represented that under its procedures the amount of commission paid will be reasonable and competitive in relation to the value of the brokerage services and research products and services provided. The investment manager or a subadviser may use step-out transactions. A "step- out" is an arrangement in which the investment manager or subadviser executes a trade through one broker-dealer but instructs that broker-dealer to step-out all Statement of Additional Information - Dec. 30, 2009 Page 42 or a part of the trade to another broker-dealer. The second broker-dealer will clear and settle, and receive commissions for, the stepped-out portion. The investment manager or subadviser may receive research products and services in connection with step-out transactions. Use of fund commissions may create potential conflicts of interest between the investment manager or subadviser and a fund. However, the investment manager and each subadviser has policies and procedures in place intended to mitigate these conflicts and ensure that the use of fund commissions falls within the "safe harbor" of Section 28(e) of the Securities Exchange Act of 1934. Some products and services may be used for both investment decision-making and non-investment decision-making purposes ("mixed use" items). The investment manager and each subadviser, to the extent it has mixed use items, has procedures in place to assure that fund commissions pay only for the investment decision-making portion of a mixed-use item. TRADE AGGREGATION AND ALLOCATION Generally, orders are processed and executed in the order received. When a fund buys or sells the same security as another portfolio, fund, or account, the investment manager or subadviser carries out the purchase or sale pursuant to policies and procedures designed in such a way believed to be fair to the fund. Purchase and sale orders may be combined or aggregated for more than one account if it is believed it would be consistent with best execution. Aggregation may reduce commission costs or market impact on a per-share and per-dollar basis, although aggregation may have the opposite effect. There may be times when not enough securities are received to fill an aggregated order, including in an initial public offering, involving multiple accounts. In that event, the investment manager and each subadviser has policies and procedures designed in such a way believed to result in a fair allocation among accounts, including the fund. From time to time, different portfolio managers with the investment manager may make differing investment decisions related to the same security. However, with certain exceptions for funds managed using strictly quantitative methods, a portfolio manager or portfolio management team may not sell a security short if the security is owned in another portfolio managed by that portfolio manager or portfolio management team. On occasion, a fund may purchase and sell a security simultaneously in order to profit from short-term price disparities. The investment manager has portfolio management teams in its Minneapolis, New York and Los Angeles offices that may share research information regarding leveraged loans. The investment manager operates separate and independent trading desks in these locations for the purpose of purchasing and selling leveraged loans. As a result, the investment manager does not aggregate orders in leveraged loans across portfolio management teams. For example, funds and other client accounts being managed by these portfolio management teams may purchase and sell the same leveraged loan in the secondary market on the same day at different times and at different prices. There is also the potential for a particular account or group of accounts, including a fund, to forego an opportunity or to receive a different allocation (either larger or smaller) than might otherwise be obtained if the investment manager were to aggregate trades in leveraged loans across the portfolio management teams. Although the investment manager does not aggregate orders in leveraged loans across its portfolio management teams in Minneapolis, New York and Los Angeles, it operates in this structure subject to its duty to seek best execution. The following table shows total brokerage commissions paid in the last three fiscal periods. Substantially all firms through whom transactions were executed provide research services. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. Statement of Additional Information - Dec. 30, 2009 Page 43 TABLE 4. TOTAL BROKERAGE COMMISSIONS
TOTAL BROKERAGE COMMISSIONS ---------------------------------------------------------------------------------------------------- FUND 2009 2008 2007 ---------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 ---------------------------------------------------------------------------------------------------- RiverSource Income Builder Basic Income $ 0 $ 0(a)$ 0 ---------------------------------------------------------------------------------------------------- RiverSource Income Builder Enhanced Income 0 0(a) 0 ---------------------------------------------------------------------------------------------------- RiverSource Income Builder Moderate Income 0 0(a) 0 ---------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Aggressive 0 0 0 ---------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Conservative 0 0 0 ---------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate 0 0 0 ---------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Aggressive 0 0 0 ---------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Conservative 0 0 0 ---------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Total Equity 0 0 0 ---------------------------------------------------------------------------------------------------- RiverSource S&P 500 Index 16,486 40,706 21,050 ---------------------------------------------------------------------------------------------------- RiverSource Small Company Index 123,243 108,360 56,843 ---------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 ---------------------------------------------------------------------------------------------------- RiverSource Equity Value 525,309 591,525 773,828 ---------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Growth 554,351 581,945 850,077 ---------------------------------------------------------------------------------------------------- RiverSource Precious Metals and Mining 1,067,960 960,159 494,184 ---------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 ---------------------------------------------------------------------------------------------------- RiverSource 120/20 Contrarian Equity 38,789 38,557(b) N/A ---------------------------------------------------------------------------------------------------- RiverSource Recovery and Infrastructure 128,097(c) N/A N/A ---------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2010 0 0 0(d) ---------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2015 0 0 0(d) ---------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2020 0 0 0(d) ---------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2025 0 0 0(d) ---------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2030 0 0 0(d) ---------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2035 0 0 0(d) ---------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2040 0 0 0(d) ---------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2045 0 0 0(d) ---------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 ---------------------------------------------------------------------------------------------------- RiverSource High Yield Bond 0 0 0 ---------------------------------------------------------------------------------------------------- RiverSource Partners Aggressive Growth 923,343 859,002 1,160,632 ---------------------------------------------------------------------------------------------------- RiverSource Partners Fundamental Value 298,507 292,900 217,139 ---------------------------------------------------------------------------------------------------- RiverSource Partners Select Value 846,306 838,472 1,757,678 ---------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Equity 221,516 519,535 455,170 ---------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Value 1,484,768 1,179,158 1,422,160 ---------------------------------------------------------------------------------------------------- RiverSource Short Duration U.S. Government 35,642 43,210 42,504 ---------------------------------------------------------------------------------------------------- RiverSource U.S. Government Mortgage 14,329 17,640 10,386 ---------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 ---------------------------------------------------------------------------------------------------- RiverSource Dividend Opportunity 673,569 412,022 576,524 ---------------------------------------------------------------------------------------------------- RiverSource Real Estate 205,118 173,705 187,309 ----------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 44
TOTAL BROKERAGE COMMISSIONS ---------------------------------------------------------------------------------------------------- FUND 2009 2008 2007 ---------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 ---------------------------------------------------------------------------------------------------- RiverSource Cash Management $ 0 $ 0 $ 0 ---------------------------------------------------------------------------------------------------- RiverSource Disciplined Equity 2,084,675 1,951,255 1,577,337 ---------------------------------------------------------------------------------------------------- RiverSource Disciplined Small and Mid Cap Equity 541,939 124,754 156,759 ---------------------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value 178,570 75,041 64,928 ---------------------------------------------------------------------------------------------------- RiverSource Floating Rate 12,760 861 0 ---------------------------------------------------------------------------------------------------- RiverSource Income Opportunities 0 0 0 ---------------------------------------------------------------------------------------------------- RiverSource Inflation Protected Securities 17,762 11,586 0 ---------------------------------------------------------------------------------------------------- RiverSource Limited Duration Bond 4,188 4,138 5,172 ---------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 ---------------------------------------------------------------------------------------------------- RiverSource California Tax-Exempt 0 1,938 4,143 ---------------------------------------------------------------------------------------------------- RiverSource Diversified Bond 95,997 111,876 91,815 ---------------------------------------------------------------------------------------------------- RiverSource Minnesota Tax-Exempt 0 3,418 7,293 ---------------------------------------------------------------------------------------------------- RiverSource New York Tax-Exempt 0 724 1,524 ---------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 ---------------------------------------------------------------------------------------------------- RiverSource Balanced 688,814 493,156 567,773 ---------------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Growth 649,261 150,374 45,978(e) ---------------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Value 378,324 6,631(f) N/A ---------------------------------------------------------------------------------------------------- RiverSource Diversified Equity Income 4,728,940 4,085,552 3,790,954 ---------------------------------------------------------------------------------------------------- RiverSource Mid Cap Value 2,601,029 1,672,775 1,219,474 ---------------------------------------------------------------------------------------------------- RiverSource Strategic Allocation 1,248,108 1,049,954 1,425,483 ---------------------------------------------------------------------------------------------------- RiverSource Strategic Income Allocation 22,351 17,707 6,639(e) ---------------------------------------------------------------------------------------------------- Seligman California Municipal High-Yield 0 0 0 ---------------------------------------------------------------------------------------------------- Seligman California Municipal Quality 0 0 0 ---------------------------------------------------------------------------------------------------- Seligman Minnesota Municipal 0 0 0 ---------------------------------------------------------------------------------------------------- Seligman National Municipal 0 0 0 ---------------------------------------------------------------------------------------------------- Seligman New York Municipal 0 0 0 ---------------------------------------------------------------------------------------------------- Seligman TargETFund 2015 12,772 7,434 3,559 ---------------------------------------------------------------------------------------------------- Seligman TargETFund 2025 1,327 7,302 2,743 ---------------------------------------------------------------------------------------------------- Seligman TargETFund 2035 1,215 1,206 461 ---------------------------------------------------------------------------------------------------- Seligman TargETFund 2045 1,173 948 308 ---------------------------------------------------------------------------------------------------- Seligman TargETFund Core 26,992 10,913 10,770 ----------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 45
TOTAL BROKERAGE COMMISSIONS ---------------------------------------------------------------------------------------------------- FUND 2009 2008 2007 ---------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 $ ---------------------------------------------------------------------------------------------------- RiverSource Absolute Return Currency and Income 0 $ 0 $ 0 ---------------------------------------------------------------------------------------------------- RiverSource Disciplined International Equity 500,331 514,960 547,910 ---------------------------------------------------------------------------------------------------- RiverSource Emerging Markets Bond 0 0 0 ---------------------------------------------------------------------------------------------------- RiverSource Global Bond 7,292 18,925 17,268 ---------------------------------------------------------------------------------------------------- RiverSource Partners International Select Growth 901,265 1,690,066 1,932,330 ---------------------------------------------------------------------------------------------------- RiverSource Partners International Select Value 959,077 1,558,333 1,426,926 ---------------------------------------------------------------------------------------------------- RiverSource Partners International Small Cap 265,317 270,663 353,096 ---------------------------------------------------------------------------------------------------- Seligman Frontier 157,476 250,561 388,531 ---------------------------------------------------------------------------------------------------- Seligman Global Technology 1,319,806 1,747,855 2,082,502 ---------------------------------------------------------------------------------------------------- Threadneedle Asia Pacific 41,731(g) N/A N/A ---------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets 2,108,103 3,346,690 3,361,865 ---------------------------------------------------------------------------------------------------- Threadneedle European Equity 189,286 396,474 282,104 ---------------------------------------------------------------------------------------------------- Threadneedle Global Equity 581,962 1,185,084 1,474,583 ---------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income 18,370 5,030(h) N/A ---------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha 11,397 6,647(h) N/A ---------------------------------------------------------------------------------------------------- Threadneedle International Opportunity 793,899 1,020,584 1,150,182 ---------------------------------------------------------------------------------------------------- 2008 2007 2006 ---------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 ---------------------------------------------------------------------------------------------------- RiverSource Intermediate Tax-Exempt 684 2,175 438 ---------------------------------------------------------------------------------------------------- RiverSource Mid Cap Growth 2,165,273 2,813,784 1,867,241 ---------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Bond 6,431 19,450 4,257 ---------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt High Income 24,531 74,062 17,679 ---------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 ---------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Money Market 0 0 0 ----------------------------------------------------------------------------------------------------
(a) The fund changed its fiscal year end effective Jan. 31, 2008 from May 31 to Jan. 31. For 2008, the information shown is for the period from June 1, 2007 through Jan. 31, 2008. For years prior to 2008, the fiscal period ended on May 31. (b) For the period from Oct. 18, 2007 (when shares became publicly available) to April 30, 2008. (c) For the period from Feb. 19, 2009 (when shares become publicly available) to April 30, 2009. (d) For the period from May 18, 2006 (when shares became publicly available) to April 30, 2007. (e) For the period from May 17, 2007 (when shares became publicly available) to Sept. 30, 2007. (f) For the period from Aug. 1, 2008 (when shares became publicly available) to Sept. 30, 2008. (g) For the period from July 15, 2009 (when shares became publicly available) to Oct. 31, 2009. (h) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. Statement of Additional Information - Dec. 30, 2009 Page 46 For the last fiscal period, transactions were specifically directed to firms in exchange for research services as shown in the following table. The table also shows portfolio turnover rates for the last two fiscal periods. Higher turnover rates may result in higher brokerage expenses and taxes. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 5. BROKERAGE DIRECTED FOR RESEARCH AND TURNOVER RATES
---------------------------------------------------------------------------------------------------------------------- BROKERAGE DIRECTED FOR RESEARCH* ------------------------------------- AMOUNT OF TURNOVER RATES AMOUNT OF COMMISSIONS ------------------------------------- FUND TRANSACTIONS IMPUTED OR PAID 2009 2008 ---------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 ---------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Basic Income(a) $ 0(b) $ 0(b) 39% 19% ---------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Enhanced Income(a) 0(b) 0(b) 36 24 ---------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Moderate Income(a) 0(b) 0(b) 40 19 ---------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Aggressive 0(b) 0(b) 35 40 ---------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Conservative 0(b) 0(b) 27 29 ---------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate 0(b) 0(b) 34 27 ---------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Aggressive 0(b) 0(b) 33 33 ---------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Conservative 0(b) 0(b) 29 31 ---------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Total Equity 0(b) 0(b) 28 31 ---------------------------------------------------------------------------------------------------------------------- RiverSource S&P 500 Index 0 0 5 4 ---------------------------------------------------------------------------------------------------------------------- RiverSource Small Company Index 0 0 23 14 ---------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 ---------------------------------------------------------------------------------------------------------------------- RiverSource Equity Value 19,822,056 98,022 21 25 ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Growth 72,126,889 69,150 133 122 ---------------------------------------------------------------------------------------------------------------------- RiverSource Precious Metals and Mining 210,782,120 235,261 340(c) 241(c) ---------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 ---------------------------------------------------------------------------------------------------------------------- RiverSource 120/20 Contrarian Equity 2,803,890 4,443 36 23(d) ---------------------------------------------------------------------------------------------------------------------- RiverSource Recovery and Infrastructure 4,731,215(e) 9,214(e) 4(e) N/A ---------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2010 0(b) 0(b) 55 92 ---------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2015 0(b) 0(b) 53 47 ---------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2020 0(b) 0(b) 52 50 ---------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2025 0(b) 0(b) 47 41 ---------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2030 0(b) 0(b) 47 50 ---------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2035 0(b) 0(b) 48 44 ---------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2040 0(b) 0(b) 50 52 ---------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2045 0(b) 0(b) 51 50 ---------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 ---------------------------------------------------------------------------------------------------------------------- RiverSource High Yield Bond 0 0 83 64 ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners Aggressive Growth 128,933,735 90,607 179 141 ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners Fundamental Value 0 0 19 14 ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners Select Value 305,069,938 82,345 118 88 ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Equity 11,173,721 11,606 67 106 ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Value 110,871,407 37,132 120 45 ---------------------------------------------------------------------------------------------------------------------- RiverSource Short Duration U.S. Government 0 0 271(g) 209 ---------------------------------------------------------------------------------------------------------------------- RiverSource U.S. Government Mortgage 0 0 431(g) 354(f) ----------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 47
---------------------------------------------------------------------------------------------------------------------- BROKERAGE DIRECTED FOR RESEARCH* ------------------------------------- AMOUNT OF TURNOVER RATES AMOUNT OF COMMISSIONS ------------------------------------- FUND TRANSACTIONS IMPUTED OR PAID 2009 2008 ---------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 ---------------------------------------------------------------------------------------------------------------------- RiverSource Dividend Opportunity $ 69,622,230 $ 140,358 21% 20% ---------------------------------------------------------------------------------------------------------------------- RiverSource Real Estate 22,122,335 33,883 51 52 ---------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 ---------------------------------------------------------------------------------------------------------------------- RiverSource Cash Management 0 0 N/A N/A ---------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Equity 174,490,339 148,743 61 58 ---------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small and Mid Cap Equity 694,423 757 104 56 ---------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value 1,538,636 1,766 98 87 ---------------------------------------------------------------------------------------------------------------------- RiverSource Floating Rate 0 0 84 43 ---------------------------------------------------------------------------------------------------------------------- RiverSource Income Opportunities 0 0 81 75 ---------------------------------------------------------------------------------------------------------------------- RiverSource Inflation Protected Securities 0 0 160(h) 59 ---------------------------------------------------------------------------------------------------------------------- RiverSource Limited Duration Bond 0 0 335(i) 218(g) ---------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 ---------------------------------------------------------------------------------------------------------------------- RiverSource California Tax-Exempt 0 0 49 49 ---------------------------------------------------------------------------------------------------------------------- RiverSource Diversified Bond 0 0 371(g) 226(g) ---------------------------------------------------------------------------------------------------------------------- RiverSource Minnesota Tax-Exempt 0 0 33 23 ---------------------------------------------------------------------------------------------------------------------- RiverSource New York Tax-Exempt 0 0 34 31 ---------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 ---------------------------------------------------------------------------------------------------------------------- RiverSource Balanced 134,013,627 160,642 189(g) 105(g) ---------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Growth 115,848,221 85,590 58 70 ---------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Value 38,146,821 31,490 63 6(j) ---------------------------------------------------------------------------------------------------------------------- RiverSource Diversified Equity Income 1,100,570,862 1,494,280 38 31 ---------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Value 85,198,971 545,756 42 34 ---------------------------------------------------------------------------------------------------------------------- RiverSource Strategic Allocation 92,052,055 81,422 136(g) 123(g) ---------------------------------------------------------------------------------------------------------------------- RiverSource Strategic Income Allocation 0 0 143 137 ---------------------------------------------------------------------------------------------------------------------- Seligman California Municipal High- Yield 0 0 63(k) 4 ---------------------------------------------------------------------------------------------------------------------- Seligman California Municipal Quality 0 0 46(k) 13 ---------------------------------------------------------------------------------------------------------------------- Seligman Minnesota Municipal 0 0 29(k) 16 ---------------------------------------------------------------------------------------------------------------------- Seligman National Municipal 0 0 107(k) 16 ---------------------------------------------------------------------------------------------------------------------- Seligman New York Municipal 0 0 53(k) 0 ---------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2015 0 0 58 70 ---------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2025 0 0 13 61 ---------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2035 0 0 16 38 ---------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2045 0 0 36 48 ---------------------------------------------------------------------------------------------------------------------- Seligman TargETFund Core 0 0 45 46 ----------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 48
---------------------------------------------------------------------------------------------------------------------- BROKERAGE DIRECTED FOR RESEARCH* ------------------------------------- AMOUNT OF TURNOVER RATES AMOUNT OF COMMISSIONS ------------------------------------- FUND TRANSACTIONS IMPUTED OR PAID 2009 2008 ---------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 ---------------------------------------------------------------------------------------------------------------------- RiverSource Absolute Return Currency and Income $ 0 $ 0 16% 39% ---------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined International Equity 8,041,109 2,162 85 61 ---------------------------------------------------------------------------------------------------------------------- RiverSource Emerging Markets Bond 0 0 62 82 ---------------------------------------------------------------------------------------------------------------------- RiverSource Global Bond 0 0 69 75 ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners International Select Growth 83,531,533 99,348 90 85 ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners International Select Value 33,502,807 17,102 63 40 ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners International Small Cap 95,857 63 174 87 ---------------------------------------------------------------------------------------------------------------------- Seligman Frontier 142,448,732 47,004 162 156 ---------------------------------------------------------------------------------------------------------------------- Seligman Global Technology 2,739,223,355 460,483 150 171 ---------------------------------------------------------------------------------------------------------------------- Threadneedle Asia Pacific(l) 8,232,647 23,202 4 N/A ---------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets 794,301,729 1,895,074 149 133 ---------------------------------------------------------------------------------------------------------------------- Threadneedle European Equity 113,984,459 144,742 154 180 ---------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 300,110,709 477,223 81 97 ---------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income 6,599,033 11,416 45 10(m) ---------------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha 4,801,721 7,937 133 36(m) ---------------------------------------------------------------------------------------------------------------------- Threadneedle International Opportunity 536,939,110 737,307 97 78 ---------------------------------------------------------------------------------------------------------------------- 2008 2007 ---------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 ---------------------------------------------------------------------------------------------------------------------- RiverSource Intermediate Tax-Exempt 0 0 36 53 ---------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Growth 54,423,999 96,049 76 87 ---------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Bond 0 0 37 51 ---------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt High Income 0 0 37 47 ---------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 ---------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Money Market 0 0 N/A N/A ----------------------------------------------------------------------------------------------------------------------
* Reported numbers include third party soft dollar commissions and portfolio manager directed commissions directed for research. RiverSource also receives proprietary research from brokers, but these amounts have not been included in the table. (a) The fund changed its fiscal year end effective Jan. 31, 2008 from May 31 to Jan. 31. For 2008, the information shown is for the period from June 1, 2007 through Jan. 31, 2008. For years prior to 2008, the fiscal period ended on May 31. (b) The underlying funds may have directed transactions to firms in exchange for research services. (c) Higher turnover rates may result in higher brokerage expenses and taxes. The higher turnover rate can be primarily attributed to repositioning the fund to a smaller number of holdings as it worked through risk management and secondarily, market volatility made up the balance of the turnover rate. (d) For the period from Oct. 18, 2007 (when shares became publicly available) to April 30, 2008. (e) For the period from Feb. 19, 2009 (when shares became publicly available) to April 30, 2009. (f) A significant portion of the turnover was the result of "roll" transactions in liquid derivatives and Treasury securities. In the derivative transactions, positions in expiring contracts are liquidated and simultaneously replaced with positions in new contracts with equivalent characteristics. In the Treasury transactions, existing holdings are sold to purchase newly issued securities with slightly longer maturity dates. Although these transactions affect the turnover rate of the portfolio, they do not change the risk exposure or result in material transaction costs. The remaining turnover resulted from strategic reallocations and relative value trading. After transaction costs, this activity is expected to enhance the returns on the fund. (g) Includes mortgage dollar rolls. If mortgage dollar roll transactions were excluded, the portfolio turnover would have been: 184% for RiverSource Diversified Bond for the fiscal period ended Aug. 31, 2009; 124% for RiverSource Limited Duration Bond Fund for the fiscal period ended July 31, 2008; 122% for RiverSource Diversified Bond Fund for the fiscal period ended Aug. 31, 2008; 110% and 86% for RiverSource Balanced Fund and 116% and 89% for RiverSource Strategic Allocation Fund for the fiscal periods ended Sept. 30, 2009 and 2008, respectively; 199% for RiverSource Short Duration U.S. Government Fund and 162% for RiverSource U.S. Government Mortgage Fund for the fiscal period ended May 31, 2009. (h) The fund's turnover rate has historically been low. The increase in turnover rate is primarily a result of repositioning holdings after management changes in the first quarter of 2009 and following a more active management style. Statement of Additional Information - Dec. 30, 2009 Page 49 (i) The turnover was a result of a combination of a change in the investment strategy and the growth of the fund. The fund experienced high net inflows in the second quarter of 2009, increasing the NAV. (j) For the period from Aug. 1, 2008 (when shares became publicly available) to Sept. 30, 2008. (k) The fund's turnover rate has historically been low. The increase in turnover rate is primarily a result of repositioning holdings after management changes in the second quarter of 2009, and additionally for Seligman National Municipal, mergers of 14 state-specific Seligman Municipal Funds during the period into the Fund. (l) For the period from July 15, 2009 (when the Fund became publicly available) to Oct. 31, 2009. (m) For the period from Aug. 1, 2008 (when the Fund became available) to Oct. 31, 2008. As of the end of the most recent fiscal period, the fund held securities of its regular brokers or dealers or of the parent of those brokers or dealers that derived more than 15% of gross revenue from securities-related activities as presented below. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 6. SECURITIES OF REGULAR BROKERS OR DEALERS
VALUE OF SECURITIES OWNED AT FUND ISSUER END OF FISCAL PERIOD ----------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 ----------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Basic Income None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Moderate Income None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Enhanced Income None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Aggressive None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Conservative None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Aggressive None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Conservative None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Total Equity None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource S&P 500 Index Ameriprise Financial $ 65,185 ------------------------------------------------------------------ Charles Schwab 190,015 ------------------------------------------------------------------ Citigroup 289,179 ------------------------------------------------------------------ E*Trade Financial 9,587 ------------------------------------------------------------------ Franklin Resources 109,671 ------------------------------------------------------------------ Goldman Sachs Group 533,707 ------------------------------------------------------------------ JPMorgan Chase & Co. 1,423,202 ------------------------------------------------------------------ Legg Mason 34,047 ------------------------------------------------------------------ Morgan Stanley 321,071 ------------------------------------------------------------------ PNC Financial Services Group 207,965 ----------------------------------------------------------------------------------------------------------------------- RiverSource Small Company Index Investment Technology Group 1,062,970 ------------------------------------------------------------------ LaBranche & Co. 408,547 ------------------------------------------------------------------ optionsXpress 525,824 ------------------------------------------------------------------ Piper Jaffray Companies 490,510 ------------------------------------------------------------------ Stifel Financial 1,019,664 ----------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 ----------------------------------------------------------------------------------------------------------------------- RiverSource Equity Value Goldman Sachs Group 2,832,324 ------------------------------------------------------------------ JPMorgan Chase & Co. 7,599,674 ------------------------------------------------------------------ Morgan Stanley 1,446,897 ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Growth Eaton Vance 187,370 ------------------------------------------------------------------ Knight Capital Group Cl A 294,755 ------------------------------------------------------------------ Stifel Financial 185,800 ----------------------------------------------------------------------------------------------------------------------- RiverSource Precious Metals and Mining None N/A -----------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 50
VALUE OF SECURITIES OWNED AT FUND ISSUER END OF FISCAL PERIOD ----------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 ----------------------------------------------------------------------------------------------------------------------- RiverSource 120/20 Contrarian Equity None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Recovery and Infrastructure None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2010 None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2015 None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2020 None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2025 None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2030 None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2035 None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2040 None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2045 None N/A ----------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 ----------------------------------------------------------------------------------------------------------------------- RiverSource High Yield Bond Lehman Brothers Holdings* $ 1,014,750 ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Aggressive Growth TD Ameritrade Holding 1,797,004 ------------------------------------------------------------------ Jefferies Group 1,273,510 ------------------------------------------------------------------ Morgan Stanley 2,445,642 ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Fundamental Value Goldman Sachs Group 3,132,832 ------------------------------------------------------------------ JPMorgan Chase & Co. 16,047,411 ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Select Value Stifel Financial 1,563,086 ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Equity Eaton Vance 235,769 ------------------------------------------------------------------ Investment Technology Group 114,109 ------------------------------------------------------------------ Knight Capital Group Cl A 70,957 ------------------------------------------------------------------ LaBranche & Co. 5,500 ------------------------------------------------------------------ optionsXpress Holdings 1,315,143 ------------------------------------------------------------------ Stifel Financial 33,526 ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Value Legg Mason 2,039,824 ----------------------------------------------------------------------------------------------------------------------- RiverSource Short Duration U.S. Government Goldman Sachs Group 7,801,414 ------------------------------------------------------------------ JPMorgan Chase Commercial Mtge Securities 7,081,672 ------------------------------------------------------------------ JPMorgan Chase & Co. 2,680,716 ------------------------------------------------------------------ Morgan Stanley 8,340,454 ------------------------------------------------------------------ Morgan Stanley Mtge Loan Trust 1,136,508 ----------------------------------------------------------------------------------------------------------------------- RiverSource U.S. Government Mortgage Citigroup/Deutsche Bank Commercial Mtge Trust 2,782,149 ------------------------------------------------------------------ Credit Suisse Mortgage Capital Ctfs 1,650,000 ------------------------------------------------------------------ GS Mortgage Securities II 640,382 ------------------------------------------------------------------ LB-UBS Commercial Mtge Trust 1,713,264 ----------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 ----------------------------------------------------------------------------------------------------------------------- RiverSource Dividend Opportunity Goldman Sachs Group 11,150,932 ------------------------------------------------------------------ JPMorgan Chase & Co. 16,627,373 ----------------------------------------------------------------------------------------------------------------------- RiverSource Real Estate None N/A ----------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 ----------------------------------------------------------------------------------------------------------------------- RiverSource Cash Management Citigroup Funding 878,596,585 ------------------------------------------------------------------ JPMorgan Chase Funding 91,787,016 ----------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Equity Citigroup 13,013,528 ------------------------------------------------------------------ E*TRADE Financial 384,006 ------------------------------------------------------------------ Goldman Sachs Group 7,150,254 ------------------------------------------------------------------ JPMorgan Chase & Co. 29,286,767 ------------------------------------------------------------------ Morgan Stanley 27,556,906 ------------------------------------------------------------------ PNC Financial Services Group 12,166,793 -----------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 51
VALUE OF SECURITIES OWNED AT FUND ISSUER END OF FISCAL PERIOD ----------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small and Mid Cap Equity optionsXpress Holdings $ 131,893 ------------------------------------------------------------------ Stifel Financial 356,750 ----------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value Knight Capital Group Cl A 226,201 ------------------------------------------------------------------ Stifel Financial 448,672 ----------------------------------------------------------------------------------------------------------------------- RiverSource Floating Rate Ameritrade Holding Corp. 745,140 ------------------------------------------------------------------ Nuveen Investments 754,491 ----------------------------------------------------------------------------------------------------------------------- RiverSource Income Opportunities None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Inflation Protected Securities None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Limited Duration Bond Citigroup 1,451,559 ------------------------------------------------------------------ Goldman Sachs Group 1,710,667 ------------------------------------------------------------------ JPMorgan Chase & Co. 1,666,579 ------------------------------------------------------------------ Lehman Brothers Holdings* 78,100 ------------------------------------------------------------------ Merrill Lynch & Co. 824,070 ------------------------------------------------------------------ Morgan Stanley 1,705,223 ----------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 ----------------------------------------------------------------------------------------------------------------------- RiverSource California Tax-Exempt None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Diversified Bond Bear Stearns Adjustable Rate Mortgage Trust 5,130,924 ------------------------------------------------------------------ Bear Stearns Alternative Trust 14,970 ------------------------------------------------------------------ Bear Stearns Commercial Mortgage Securities 3,546,017 ------------------------------------------------------------------ ChaseFlex Trust 1,409,767 ------------------------------------------------------------------ Citigroup 25,350,618 ------------------------------------------------------------------ Citigroup Commercial Mortgage Trust 2,837,338 ------------------------------------------------------------------ Citigroup/Deutsche Bank Commercial Mortgage Trust 9,615,239 ------------------------------------------------------------------ Citigroup Funding 11,998,570 ------------------------------------------------------------------ CS First Boston Mtge Securities 12,910,140 ------------------------------------------------------------------ Goldman Sachs Group 14,411,592 ------------------------------------------------------------------ GS Mortgage Securities II 20,476,757 ------------------------------------------------------------------ Jefferies & Co. 15,527,394 ------------------------------------------------------------------ JPMorgan Chase Commercial Mortgage Securities 53,453,994 ------------------------------------------------------------------ JPMorgan Chase & Co. 14,640,885 ------------------------------------------------------------------ LB-UBS Commercial Mortgage Trust 16,071,271 ------------------------------------------------------------------ Lehman Brothers Holdings* 1,862,306 ------------------------------------------------------------------ Merrill Lynch Mortgage Trust 2,665,078 ------------------------------------------------------------------ Morgan Stanley 13,240,853 ------------------------------------------------------------------ Morgan Stanley Capital I 10,028,848 ----------------------------------------------------------------------------------------------------------------------- RiverSource Minnesota Tax-Exempt None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource New York Tax-Exempt None N/A -----------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 52
VALUE OF SECURITIES OWNED AT FUND ISSUER END OF FISCAL PERIOD ----------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 ----------------------------------------------------------------------------------------------------------------------- RiverSource Balanced Bear Stearns Adjustable Rate Mortgage Trust $ 713,060 ------------------------------------------------------------------ Bear Stearns Commercial Mortgage Securities 899,869 ------------------------------------------------------------------ ChaseFlex Trust 849,320 ------------------------------------------------------------------ Citigroup 1,082,219 ------------------------------------------------------------------ Citigroup Commercial Mortgage Trust 316,302 ------------------------------------------------------------------ Citigroup/Deutsche Bank Commercial Mortgage Trust 393,676 ------------------------------------------------------------------ Goldman Sachs Group 18,865,931 ------------------------------------------------------------------ GS Mortgage Securities II 1,030,324 ------------------------------------------------------------------ JPMorgan Chase & Co. 8,998,091 ------------------------------------------------------------------ JPMorgan Chase Commercial Mortgage Securities 2,697,566 ------------------------------------------------------------------ LB-UBS Commercial Mortgage Trust 1,354,451 ------------------------------------------------------------------ Lehman Brothers Holdings* 236,004 ------------------------------------------------------------------ Merrill Lynch Mortgage Trust 188,000 ------------------------------------------------------------------ Morgan Stanley 3,258,404 ------------------------------------------------------------------ Morgan Stanley Capital 1 1,291,191 ----------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Growth Franklin Resources 1,934,035 ------------------------------------------------------------------ Goldman Sachs Group 20,863,258 ------------------------------------------------------------------ Morgan Stanley 9,177,567 ----------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Value Citigroup 6,796,957 ------------------------------------------------------------------ Goldman Sachs Group 6,574,659 ------------------------------------------------------------------ JPMorgan Chase & Co. 1,293,917 ------------------------------------------------------------------ Morgan Stanley 6,536,678 ------------------------------------------------------------------ PNC Financial Services Group 1,943,649 ----------------------------------------------------------------------------------------------------------------------- RiverSource Diversified Equity Income Goldman Sachs Group 178,337,738 ------------------------------------------------------------------ JPMorgan Chase & Co. 85,834,923 ------------------------------------------------------------------ Morgan Stanley 52,518,110 ----------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Value Goldman Sachs & Co. 47,226,353 ----------------------------------------------------------------------------------------------------------------------- RiverSource Strategic Allocation Bear Stearns Commercial Mortgage Securities 699,898 ------------------------------------------------------------------ Citigroup 6,504,737 ------------------------------------------------------------------ Citigroup Commercial Mortgage Trust 316,302 ------------------------------------------------------------------ Citigroup/Deutsche Bank Commercial Mortgage Trust 183,715 ------------------------------------------------------------------ Credit Suisse Group 457,330 ------------------------------------------------------------------ CS First Boston Mortgage Securities 155,406 ------------------------------------------------------------------ Goldman Sachs Group 9,642,282 ------------------------------------------------------------------ GS Mortgage Securities II 788,719 ------------------------------------------------------------------ JPMorgan Chase & Co. 10,872,093 ------------------------------------------------------------------ JPMorgan Chase Commercial Mortgage Securities 2,234,879 ------------------------------------------------------------------ Knight Capital Group Cl A 96,200 ------------------------------------------------------------------ LB-UBS Commercial Mortgage Trust 559,502 ------------------------------------------------------------------ Morgan Stanley 9,436,155 ------------------------------------------------------------------ Morgan Stanley Capital 1 709,666 ------------------------------------------------------------------ optionsXpress Holdings 82,339 ------------------------------------------------------------------ PNC Financial Services Group 6,225,544 -----------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 53
VALUE OF SECURITIES OWNED AT FUND ISSUER END OF FISCAL PERIOD ----------------------------------------------------------------------------------------------------------------------- RiverSource Strategic Income Allocation Ameritrade Holding Corp. -- subsidiary $ 624,828 ------------------------------------------------------------------ Bear Stearns Commercial Mortgage Securities 868,876 ------------------------------------------------------------------ Citigroup 118,157 ------------------------------------------------------------------ Citigroup/Deutsche Bank Commercial Mortgage Trust 985,508 ------------------------------------------------------------------ CS First Boston Mortgage Securities 1,069,849 ------------------------------------------------------------------ Goldman Sachs Group 171,602 ------------------------------------------------------------------ JPMorgan Chase & Co. 268,331 ------------------------------------------------------------------ JPMorgan Chase Commercial Mortgage Securities 889,173 ------------------------------------------------------------------ Lehman Brothers Holdings* 15,975 ------------------------------------------------------------------ Merrill Lynch Mortgage Trust 178,336 ------------------------------------------------------------------ Morgan Stanley 801,038 ------------------------------------------------------------------ Morgan Stanley Capital 1 69,125 ------------------------------------------------------------------ Nuveen Investments 97,091 ----------------------------------------------------------------------------------------------------------------------- Seligman California Municipal High-Yield None N/A ----------------------------------------------------------------------------------------------------------------------- Seligman California Municipal Quality None N/A ----------------------------------------------------------------------------------------------------------------------- Seligman Minnesota Municipal None N/A ----------------------------------------------------------------------------------------------------------------------- Seligman National Municipal None N/A ----------------------------------------------------------------------------------------------------------------------- Seligman New York Municipal None N/A ----------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2015 None N/A ----------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2025 None N/A ----------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2035 None N/A ----------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2045 None N/A ----------------------------------------------------------------------------------------------------------------------- Seligman TargETFund Core None N/A ----------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 ----------------------------------------------------------------------------------------------------------------------- RiverSource Absolute Return Currency and Income GS Mortgage Securities II 2,719,948 ------------------------------------------------------------------ Lehman Brothers Holdings* 100,800 ------------------------------------------------------------------ Morgan Stanley, Dean Witter Capital 1 428,016 ----------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined International Equity Credit Suisse Mortgage Capital Ctfs 3,138,369 ----------------------------------------------------------------------------------------------------------------------- RiverSource Emerging Markets Bond Morgan Stanley 2,351,866 ----------------------------------------------------------------------------------------------------------------------- RiverSource Global Bond Bear Stearns Commercial Mortgage Securities 237,337 ------------------------------------------------------------------ Citigroup 1,003,392 ------------------------------------------------------------------ Citigroup Commercial Mortgage Trust 1,581,548 ------------------------------------------------------------------ CS First Boston Mortgage Securities 595,440 ------------------------------------------------------------------ Goldman Sachs Group 1,188,323 ------------------------------------------------------------------ GS Mortgage Securities II 1,102,326 ------------------------------------------------------------------ JPMorgan Chase Commercial Mortgage Securities 1,702,095 ------------------------------------------------------------------ JPMorgan Chase & Co. 770,873 ------------------------------------------------------------------ LB-UBS Commercial Mortgage Trust 1,501,910 ------------------------------------------------------------------ Lehman Brothers Holdings* 212,850 ------------------------------------------------------------------ Merrill Lynch & Co. 366,682 ------------------------------------------------------------------ Morgan Stanley 11,964,651 ------------------------------------------------------------------ Morgan Stanley Capital 1 1,334,954 ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners International Select Growth Credit Suisse Group 4,008,753 ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners International Select Value Citigroup Funding 6,997,755 ------------------------------------------------------------------ Morgan Stanley 20,000,000 ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners International Small Cap None N/A ----------------------------------------------------------------------------------------------------------------------- Seligman Frontier Affiliated Managers Group 380,940 ------------------------------------------------------------------ Piper Jaffray Companies 171,643 ------------------------------------------------------------------ Stifel Financial 244,212 -----------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 54
VALUE OF SECURITIES OWNED AT FUND ISSUER END OF FISCAL PERIOD ----------------------------------------------------------------------------------------------------------------------- Seligman Global Technology None N/A ----------------------------------------------------------------------------------------------------------------------- Threadneedle Asia Pacific None N/A ----------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets None N/A ----------------------------------------------------------------------------------------------------------------------- Threadneedle European Equity Credit Suisse Group $ 2,058,583 ----------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Citigroup Commercial Mortgage Trust 6,721,641 ------------------------------------------------------------------ Credit Suisse Mortgage Capital Ctfs 2,352,116 ------------------------------------------------------------------ Goldman Sachs Group 5,039,414 ------------------------------------------------------------------ JPMorgan Chase & Co. 9,925,220 ----------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income None N/A ----------------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha Citigroup 64,732 ------------------------------------------------------------------ Goldman Sachs Group 119,119 ----------------------------------------------------------------------------------------------------------------------- Threadneedle International Opportunity Credit Suisse Group 7,751,291 ----------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 ----------------------------------------------------------------------------------------------------------------------- RiverSource Intermediate Tax-Exempt None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Growth TD Ameritrade Holding 5,944,887 ----------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Bond None N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt High Income None N/A ----------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 ----------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Money Market None N/A -----------------------------------------------------------------------------------------------------------------------
* Subsequent to Aug. 31, 2008. Lehman Brothers Holdings filed a Chapter 11 bankruptcy petition. Statement of Additional Information - Dec. 30, 2009 Page 55 BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH THE INVESTMENT MANAGER Affiliates of the investment manager may engage in brokerage and other securities transactions on behalf of a fund according to procedures adopted by the Board and to the extent consistent with applicable provisions of the federal securities laws. Subject to approval by the Board, the same conditions apply to transactions with broker-dealer affiliates of any subadviser. The investment manager will use an affiliate only if (i) the investment manager determines that the fund will receive prices and executions at least as favorable as those offered by qualified independent brokers performing similar brokerage and other services for the fund and (ii) the affiliate charges the fund commission rates consistent with those the affiliate charges comparable unaffiliated customers in similar transactions and if such use is consistent with terms of the Investment Management Services Agreement. Information about any brokerage commissions paid by a fund in the last three fiscal periods to brokers affiliated with the fund's investment manager is contained in the following table. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 7. BROKERAGE COMMISSIONS PAID TO INVESTMENT MANAGER OR AFFILIATES
PERCENT OF AGGREGATE AGGREGATE DOLLAR AGGREGATE AGGREGATE DOLLAR AMOUNT OF DOLLAR DOLLAR AMOUNT OF PERCENT OF TRANSACTIONS AMOUNT OF AMOUNT OF COMMISSIONS AGGREGATE INVOLVING COMMISSIONS COMMISSIONS NATURE OF PAID TO BROKERAGE PAYMENT OF PAID TO PAID TO BROKER AFFILIATION BROKER COMMISSIONS COMMISSIONS BROKER BROKER FUND ---------------------------------------------------------------------------------------------- 2009 2008 2007 -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 -------------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder None -- -- -- -- $ 0(a) $ 0 Basic Income -------------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder None -- -- -- -- 0(a) 0 Enhanced Income -------------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder None -- -- -- -- 0(a) 0 Moderate Income -------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio None -- -- -- -- 0 0 Builder Aggressive -------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio None -- -- -- -- 0 0 Builder Conservative -------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio None -- -- -- -- 0 0 Builder Moderate -------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio None -- -- -- -- 0 0 Builder Moderate Aggressive -------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio None -- -- -- -- 0 0 Builder Moderate Conservative -------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio None -- -- -- -- 0 0 Builder Total Equity -------------------------------------------------------------------------------------------------------------------------- RiverSource S&P 500 Index None -- -- -- -- 0 0 -------------------------------------------------------------------------------------------------------------------------- RiverSource Small Company None -- -- -- -- 0 0 Index --------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 56
PERCENT OF AGGREGATE AGGREGATE DOLLAR AGGREGATE AGGREGATE DOLLAR AMOUNT OF DOLLAR DOLLAR AMOUNT OF PERCENT OF TRANSACTIONS AMOUNT OF AMOUNT OF COMMISSIONS AGGREGATE INVOLVING COMMISSIONS COMMISSIONS NATURE OF PAID TO BROKERAGE PAYMENT OF PAID TO PAID TO BROKER AFFILIATION BROKER COMMISSIONS COMMISSIONS BROKER BROKER FUND ---------------------------------------------------------------------------------------------- 2009 2008 2007 -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 -------------------------- RiverSource Equity Value None -- -- -- -- 0 0 -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small UBS 1 $ 2,243 0.40% 0.97% $3,919 0 Cap Growth Securities -------------------------------------------------------------------------------------------------------------------------- RiverSource Precious None -- -- -- -- 0 0 Metals and Mining -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 -------------------------------------------------------------------------------------------------------------------------- RiverSource 120/20 None -- -- -- -- 0(b) N/A Contrarian Equity -------------------------------------------------------------------------------------------------------------------------- RiverSource Recovery and None(c) -- -- -- -- N/A N/A Infrastructure -------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement None -- -- -- -- 0 0(d) Plus 2010 -------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement None -- -- -- -- 0 0(d) Plus 2015 -------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement None -- -- -- -- 0 0(d) Plus 2020 -------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement None -- -- -- -- 0 0(d) Plus 2025 -------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement None -- -- -- -- 0 0(d) Plus 2030 -------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement None -- -- -- -- 0 0(d) Plus 2035 -------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement None -- -- -- -- 0 0(d) Plus 2040 -------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement None -- -- -- -- 0 0(d) Plus 2045 --------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 57
PERCENT OF AGGREGATE AGGREGATE DOLLAR AGGREGATE AGGREGATE DOLLAR AMOUNT OF DOLLAR DOLLAR AMOUNT OF PERCENT OF TRANSACTIONS AMOUNT OF AMOUNT OF COMMISSIONS AGGREGATE INVOLVING COMMISSIONS COMMISSIONS NATURE OF PAID TO BROKERAGE PAYMENT OF PAID TO PAID TO BROKER AFFILIATION BROKER COMMISSIONS COMMISSIONS BROKER BROKER FUND ---------------------------------------------------------------------------------------------- 2009 2008 2007 -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 -------------------------------------------------------------------------------------------------------------------------- RiverSource High Yield None -- -- -- -- 0 0 Bond -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners JPMorgan 2 $62,224 14.93% 6.60% $3,532 $ 23 Aggressive Growth Securities, Inc. -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners None -- -- -- -- 0 0 Fundamental Value -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Gabelli & 3 -- -- 0 7,352 Select Value Co. -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Wachovia 4 141 0.13 0.12 0 568 Cap Equity Capital Markets -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small None -- -- -- -- 0 0 Cap Value -------------------------------------------------------------------------------------------------------------------------- RiverSource Short Duration None -- -- -- -- 0 0 U.S. Government -------------------------------------------------------------------------------------------------------------------------- RiverSource U.S. None -- -- -- -- 0 0 Government Mortgage -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 -------------------------------------------------------------------------------------------------------------------------- RiverSource Dividend -- -- -- -- 0 0 Opportunity None -------------------------------------------------------------------------------------------------------------------------- RiverSource Real Estate None -- -- -- -- 0 0 -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 -------------------------------------------------------------------------------------------------------------------------- RiverSource Cash None -- -- -- -- $ 0 $ 0 Management -------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined None 0 0 Equity -------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined None -- -- -- -- 0 0 Small and Mid Cap Equity -------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined None -- -- -- -- 0 0 Small Cap Value -------------------------------------------------------------------------------------------------------------------------- RiverSource Floating Rate None -- -- -- -- 0 0 -------------------------------------------------------------------------------------------------------------------------- RiverSource Income None -- -- -- -- 0 0 Opportunities -------------------------------------------------------------------------------------------------------------------------- RiverSource Inflation None -- -- -- -- 0 0 Protected Securities -------------------------------------------------------------------------------------------------------------------------- RiverSource Limited None -- -- -- -- 0 0 Duration Bond --------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 58
PERCENT OF AGGREGATE AGGREGATE DOLLAR AGGREGATE AGGREGATE DOLLAR AMOUNT OF DOLLAR DOLLAR AMOUNT OF PERCENT OF TRANSACTIONS AMOUNT OF AMOUNT OF COMMISSIONS AGGREGATE INVOLVING COMMISSIONS COMMISSIONS NATURE OF PAID TO BROKERAGE PAYMENT OF PAID TO PAID TO BROKER AFFILIATION BROKER COMMISSIONS COMMISSIONS BROKER BROKER FUND ---------------------------------------------------------------------------------------------- 2009 2008 2007 -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 -------------------------------------------------------------------------------------------------------------------------- RiverSource California None -- -- -- -- 0 0 Tax-Exempt -------------------------------------------------------------------------------------------------------------------------- RiverSource Diversified None -- -- -- -- 0 0 Bond -------------------------------------------------------------------------------------------------------------------------- RiverSource Minnesota Tax- None -- -- -- -- 0 0 Exempt -------------------------------------------------------------------------------------------------------------------------- RiverSource New York Tax- None -- -- -- -- 0 0 Exempt -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 -------------------------------------------------------------------------------------------------------------------------- RiverSource Balanced None -- -- -- -- 0 0 -------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined None -- -- -- -- 0 0(e) Large Cap Growth -------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined None -- -- -- -- 0(f) N/A Large Cap Value -------------------------------------------------------------------------------------------------------------------------- RiverSource Diversified None -- -- -- -- 0 0 Equity Income -------------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Value None -- -- -- -- 0 0 -------------------------------------------------------------------------------------------------------------------------- RiverSource Strategic None -- -- -- -- 0 0 Allocation -------------------------------------------------------------------------------------------------------------------------- RiverSource Strategic None -- -- -- -- 0 0(e) Income Allocation -------------------------------------------------------------------------------------------------------------------------- Seligman California None -- -- -- -- 0 0 Municipal High-Yield -------------------------------------------------------------------------------------------------------------------------- Seligman California None -- -- -- -- 0 0 Municipal Quality -------------------------------------------------------------------------------------------------------------------------- Seligman Minnesota None -- -- -- -- 0 0 Municipal -------------------------------------------------------------------------------------------------------------------------- Seligman National None -- -- -- -- 0 0 Municipal -------------------------------------------------------------------------------------------------------------------------- Seligman New York None -- -- -- -- 0 0 Municipal -------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2015 None -- -- -- -- 0 0 -------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2025 None -- -- -- -- 0 0 -------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2035 None -- -- -- -- 0 0 -------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2045 None -- -- -- -- 0 0 -------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund Core None -- -- -- -- 0 0 -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 -------------------------------------------------------------------------------------------------------------------------- RiverSource Absolute None -- -- -- -- 0 0 Return Currency and Income -------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined None -- -- -- -- 0 0 International Equity -------------------------------------------------------------------------------------------------------------------------- RiverSource Emerging None -- -- -- -- 0 0 Markets Bond -------------------------------------------------------------------------------------------------------------------------- RiverSource Global Bond None -- -- -- -- 0 0 --------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 59
PERCENT OF AGGREGATE AGGREGATE DOLLAR AGGREGATE AGGREGATE DOLLAR AMOUNT OF DOLLAR DOLLAR AMOUNT OF PERCENT OF TRANSACTIONS AMOUNT OF AMOUNT OF COMMISSIONS AGGREGATE INVOLVING COMMISSIONS COMMISSIONS NATURE OF PAID TO BROKERAGE PAYMENT OF PAID TO PAID TO BROKER AFFILIATION BROKER COMMISSIONS COMMISSIONS BROKER BROKER FUND ---------------------------------------------------------------------------------------------- 2009 2008 2007 -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Merrill 5 $ 585 0.27% 0.42% 0 0 International Select Lynch Growth Capital Markets -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Sanford 6 0 -- -- 1,677 0 International Select Value Bernstein -------------------------------------------------------------------------------------------------------------------------- RiverSource Partners None -- -- -- -- $ 0 $ 0 International Small Cap -------------------------------------------------------------------------------------------------------------------------- Seligman Frontier None -- -- -- -- 0 0 -------------------------------------------------------------------------------------------------------------------------- Seligman Global Technology None -- -- -- -- 0 0 -------------------------------------------------------------------------------------------------------------------------- Threadneedle Asia Pacific None(j) -- -- -- -- N/A N/A -------------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging None -- -- -- -- 0 0 Markets -------------------------------------------------------------------------------------------------------------------------- Threadneedle European None -- -- -- -- 0 0 Equity -------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity None -- -- -- -- 0 0 -------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity None -- -- -- -- 0(k) N/A Income -------------------------------------------------------------------------------------------------------------------------- Threadneedle Global None -- -- -- -- 0(k) N/A Extended Alpha -------------------------------------------------------------------------------------------------------------------------- Threadneedle International None -- -- -- -- 0 0 Opportunity -------------------------------------------------------------------------------------------------------------------------- 2008 2007 2006 -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 -------------------------------------------------------------------------------------------------------------------------- RiverSource Intermediate None -- -- -- -- 0 0 Tax-Exempt -------------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Growth -- -- -- -- 0 0 None -------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt None -- -- -- -- 0 0 Bond -------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt None -- -- -- -- 0 0 High Income -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 -------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt None -- -- -- -- 0 0 Money Market --------------------------------------------------------------------------------------------------------------------------
(1) Affiliate of UBS Global Asset Management, a subadviser. (2) Affiliate of American Century, a subadviser. (3) Affiliate of GAMCO Investors, Inc. a former subadviser, terminated Sept. 29, 2006. (4) Affiliate of Jennison Associates, LLC, a subadviser. (5) Affiliate of Columbia Wanger, a subadviser. (6) Affiliate of AllianceBernstein, a subadviser. (a) The fund changed its fiscal year end effective Jan. 31, 2008 from May 31 to Jan. 31. For 2008, the information shown is for the period from June 1, 2007 through Jan. 31, 2008. For years prior to 2008, the fiscal period ended on May 31. (b) For the period from Oct. 18, 2007 (when shares became publicly available) to April 30, 2008. (c) For the period from Feb. 19, 2009 (when shares became publicly available) to April 30, 2009. (d) For the period from May 18, 2006 (when shares became publicly available) to April 30, 2007. (e) For the period from May 17, 2007 (when shares became publicly available) to Sept. 30, 2007. (f) For the period from Aug. 1, 2008 (when shares became publicly available) to Sept. 30, 2008. Statement of Additional Information - Dec. 30, 2009 Page 60 (g) For the period from June 15, 2006 (when the Fund became available) to Oct. 31, 2006. (h) For the period from May 18, 2006 (when shares became publicly available) to Oct. 31, 2006. (i) For the period from Feb. 16, 2006 (when shares became publicly available) to Oct. 31, 2006. (j) For the period from July 15, 2009 (when shares became publicly available) to Oct. 31, 2009. (k) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. VALUING FUND SHARES As of the end of the most recent fiscal period, the computation of net asset value per share of a class of a fund was based on net assets of that class divided by the number of class shares outstanding as shown in the following table. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. All expenses of a fund, including the management fee and administrative services fee and, as applicable, distribution and plan administration fees, are accrued daily and taken into account for the purpose of determining NAV. TABLE 8. VALUING FUND SHARES
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 ----------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Basic Income Class A $ 186,970,729 22,677,468 $ 8.24 Class B 27,939,305 3,394,885 8.23 Class C 9,281,940 1,126,721 8.24 Class R4 8,257 1,000 8.26 ----------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Enhanced Income Class A 164,090,568 21,598,784 7.60 Class B 18,998,046 2,503,256 7.59 Class C 7,980,635 1,051,482 7.59 Class R4 103,837 13,670 7.60 ----------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Moderate Income Class A 338,875,864 43,137,952 7.86 Class B 40,992,857 5,230,164 7.84 Class C 14,003,542 1,784,927 7.85 Class R4 14,829 1,885 7.87 ----------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Aggressive Class A 294,773,096 45,416,245 6.49 Class B 56,863,918 8,803,125 6.46 Class C 11,330,376 1,765,176 6.42 Class R4 141,064 21,713 6.50 ----------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Conservative Class A 145,919,328 17,150,019 8.51 Class B 41,589,703 4,905,272 8.48 Class C 10,602,340 1,249,604 8.48 Class R4 20,746 2,461 8.43 ----------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Class A 664,054,374 87,640,367 7.58 Class B 144,798,038 19,199,873 7.54 Class C 33,449,418 4,433,154 7.55 Class R4 78,368 10,348 7.57 ----------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Aggressive Class A 644,510,105 91,887,421 7.01 Class B 130,075,493 18,628,806 6.98 Class C 26,360,644 3,778,666 6.98 Class R4 558,316 79,497 7.02 -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 61
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE ----------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Conservative Class A $ 257,155,177 32,046,209 $ 8.02 Class B 60,844,849 7,606,644 8.00 Class C 15,772,351 1,971,183 8.00 Class R4 25,381 3,177 7.99 ----------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Total Equity Class A 245,908,353 40,787,041 6.03 Class B 45,514,660 7,624,879 5.97 Class C 9,263,309 1,558,801 5.94 Class R4 74,311 12,287 6.05 ----------------------------------------------------------------------------------------------------------------- RiverSource S&P 500 Index Class D 21,470,665 7,875,153 2.73 Class E 87,567,351 32,008,961 2.74 ----------------------------------------------------------------------------------------------------------------- RiverSource Small Company Index Class A 280,601,738 99,425,503 2.82 Class B 50,844,680 22,379,419 2.27 Class R4 4,364,248 1,490,973 2.93 ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 ----------------------------------------------------------------------------------------------------------------- RiverSource Equity Value Class A 450,712,507 68,890,198 6.54 Class B 50,134,973 7,632,829 6.57 Class C 3,102,757 477,818 6.49 Class I 3,591 548 6.55 Class R2 2,447 374 6.54 Class R3 107,204 16,368 6.55 Class R4 4,173,423 636,556 6.56 Class R5 2,447 374 6.54 Class W 2,484 380 6.54 ----------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Growth Class A 38,606,437 17,175,057 2.25 Class B 11,644,484 5,603,218 2.08 Class C 1,632,974 785,175 2.08 Class I 30,343,515 13,031,926 2.33 Class R2 2,156 951 2.27 Class R3 2,169 951 2.28 Class R4 53,805 23,512 2.29 Class R5 2,183 951 2.30 ----------------------------------------------------------------------------------------------------------------- RiverSource Precious Metals and Mining Class A 94,319,611 10,433,590 9.04 Class B 12,722,723 1,541,104 8.26 Class C 2,257,212 278,920 8.09 Class I 9,068 989 9.17 Class R4 73,212 7,985 9.17 ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 ----------------------------------------------------------------------------------------------------------------- RiverSource 120/20 Contrarian Equity Class A 27,439,148 2,402,528 11.42 Class B 1,599,194 141,516 11.30 Class C 1,341,742 118,740 11.30 Class I 3,232,961 281,691 11.48 Class R5 5,735 500 11.47 ----------------------------------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 62
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE ----------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------- RiverSource Recovery and Infrastructure Class A $ 50,777,415 4,371,521 $11.62 Class B 4,017,674 346,389 11.60 Class C 2,722,636 234,730 11.60 Class I 12,377,893 1,064,623 11.63 Class R2 11,607 1,000 11.61 Class R3 11,614 1,000 11.61 Class R4 22,600 1,945 11.62 Class R5 11,626 1,000 11.63 ----------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2010 Class A 3,095,956 447,244 6.92 Class R2 3,240 468 6.92 Class R3 3,240 468 6.92 Class R4 3,242 468 6.93 Class R5 3,243 468 6.93 Class Y 4,703,534 678,609 6.93 ----------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2015 Class A 4,840,029 712,731 6.79 Class R2 3,164 465 6.80 Class R3 3,163 465 6.80 Class R4 3,164 465 6.80 Class R5 3,167 465 6.81 Class Y 13,012,797 1,910,356 6.81 ----------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2020 Class A 3,732,214 589,755 6.33 Class R2 8,994 1,416 6.35 Class R3 2,948 464 6.35 Class R4 2,948 464 6.35 Class R5 2,952 464 6.36 Class Y 14,824,867 2,331,930 6.36 ----------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2025 Class A 2,261,901 361,260 6.26 Class R2 15,488 2,472 6.27 Class R3 2,929 466 6.29 Class R4 2,936 465 6.31 Class R5 2,936 465 6.31 Class Y 18,489,701 2,936,299 6.30 ----------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2030 Class A 4,733,464 752,794 6.29 Class R2 7,048 1,118 6.30 Class R3 2,927 464 6.31 Class R4 2,923 464 6.30 Class R5 2,926 464 6.31 Class Y 18,044,906 2,860,073 6.31 ----------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2035 Class A 1,296,313 208,303 6.22 Class R2 2,910 467 6.23 Class R3 2,912 467 6.24 Class R4 2,912 467 6.24 Class R5 2,915 467 6.24 Class Y 13,096,274 2,097,551 6.24 ----------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2040 Class A 1,247,058 206,572 6.04 Class R2 8,314 1,373 6.06 Class R3 19,225 3,175 6.06 Class R4 2,811 464 6.06 Class R5 2,814 464 6.06 Class Y 8,534,956 1,407,503 6.06 ----------------------------------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 63
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE ----------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2045 Class A $ 1,182,765 191,544 $ 6.17 Class R2 2,883 466 6.19 Class R3 2,883 466 6.19 Class R4 2,883 466 6.19 Class R5 2,885 466 6.19 Class Y 7,820,301 1,262,765 6.19 ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 ----------------------------------------------------------------------------------------------------------------- RiverSource High Yield Bond Class A 1,003,575,895 436,811,958 2.30 Class B 109,559,138 47,713,625 2.30 Class C 21,579,358 9,454,650 2.28 Class I 74,332,691 32,399,309 2.29 Class R2 14,121 6,128 2.30 Class R3 1,242,890 538,148 2.31 Class R4 2,390,655 1,040,477 2.30 Class R5 3,897 1,695 2.30 Class W 6,434,725 2,824,309 2.28 ----------------------------------------------------------------------------------------------------------------- RiverSource Partners Aggressive Growth Class A 207,169,730 33,798,503 6.13 Class B 30,452,015 5,204,722 5.85 Class C 1,762,044 301,006 5.85 Class I 71,268,211 11,379,715 6.26 Class R2 75,006 12,246 6.12 Class R3 16,916 2,736 6.18 Class R4 90,922 14,618 6.22 Class R5 3,564 572 6.23 ----------------------------------------------------------------------------------------------------------------- RiverSource Partners Fundamental Value Class A 319,303,984 86,102,190 3.71 Class B 68,807,426 19,386,443 3.55 Class C 8,381,816 2,350,575 3.57 Class I 147,813,699 39,425,906 3.75 Class R4 161,351 43,267 3.73 ----------------------------------------------------------------------------------------------------------------- RiverSource Partners Select Value Class A 171,586,494 54,027,990 3.18 Class B 33,999,040 11,190,973 3.04 Class C 3,664,376 1,209,841 3.03 Class I 52,038,069 16,131,939 3.23 Class R4 58,363 18,230 3.20 ----------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Equity Class A 106,851,808 31,129,071 3.43 Class B 11,759,149 3,675,291 3.20 Class C 1,271,635 397,882 3.20 Class I 6,010 1,724 3.49 Class R4 2,148,452 615,294 3.49 ----------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Value Class A 194,255,683 58,055,466 3.35 Class B 61,304,340 19,668,144 3.12 Class C 5,806,654 1,858,261 3.12 Class I 40,476,472 11,699,997 3.46 Class R2 341,874 102,053 3.35 Class R3 26,984 7,954 3.39 Class R4 153,671 45,029 3.41 Class R5 7,086,719 2,072,383 3.42 ----------------------------------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 64
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE ----------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------- RiverSource Short Duration U.S. Government Class A $ 529,368,837 114,236,678 $ 4.63 Class B 113,216,242 24,431,558 4.63 Class C 12,866,781 2,776,585 4.63 Class I 41,851,347 9,022,598 4.64 Class R4 4,331,129 934,061 4.64 Class W 4,876 1,053 4.63 ----------------------------------------------------------------------------------------------------------------- RiverSource U.S. Government Mortgage Class A 78,939,541 16,543,068 4.77 Class B 24,176,629 5,064,728 4.77 Class C 4,090,259 856,738 4.77 Class I 221,584,142 46,475,255 4.77 Class R4 63,991 13,427 4.77 ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 ----------------------------------------------------------------------------------------------------------------- RiverSource Dividend Opportunity Class A 793,420,879 142,297,299 5.58 Class B 91,922,474 16,598,559 5.54 Class C 14,770,403 2,672,956 5.53 Class I 158,905,085 28,437,503 5.59 Class R2 3,648 653 5.59 Class R3 3,648 653 5.59 Class R4 490,289 87,730 5.59 Class R5 3,648 653 5.59 Class W 3,174 568 5.59 ----------------------------------------------------------------------------------------------------------------- RiverSource Real Estate Class A 39,604,801 6,343,058 6.24 Class B 5,963,230 962,244 6.20 Class C 786,769 127,106 6.19 Class I 88,405,029 14,132,093 6.26 Class R4 58,277 9,376 6.22 Class W 1,710 275 6.22 ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 ----------------------------------------------------------------------------------------------------------------- RiverSource Cash Management Class A 3,278,885,669 3,293,890,320 1.00 Class B 76,369,716 76,708,061 1.00 Class C 7,073,282 7,106,706 1.00 Class I 74,516,509 74,791,575 1.00 Class R5 4,979 5,000 1.00 Class W 31,351,087 31,471,737 1.00 Class Y 31,088,681 31,174,679 1.00 ----------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Equity Class A 692,099,784 160,878,551 4.30 Class B 15,588,211 3,653,826 4.27 Class C 2,105,003 496,767 4.24 Class I 331,846,856 76,648,563 4.33 Class R2 2,840 661 4.30 Class R3 2,842 661 4.30 Class R4 89,590,579 20,740,477 4.32 Class R5 2,848 661 4.31 Class W 725,762,099 169,124,201 4.29 ----------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small and Mid Cap Equity Class A 10,111,472 1,619,203 6.24 Class B 930,139 152,289 6.11 Class C 286,217 46,841 6.11 Class I 20,778,847 3,315,675 6.27 Class R4 7,534 1,205 6.25 Class W 127,931,961 20,599,400 6.21 ----------------------------------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 65
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE ----------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value Class A $ 10,761,916 1,602,931 $ 6.71 Class B 260,921 39,508 6.60 Class C 77,078 11,670 6.60 Class I 42,272,925 6,285,223 6.73 Class R2 3,052 455 6.71 Class R3 3,906 582 6.71 Class R4 6,715 1,000 6.72 Class R5 3,058 455 6.72 ----------------------------------------------------------------------------------------------------------------- RiverSource Floating Rate Class A 267,669,492 33,743,042 7.93 Class B 13,753,092 1,732,968 7.94 Class C 15,721,401 1,981,722 7.93 Class I 112,680,741 14,208,955 7.93 Class R4 112,619 14,159 7.95 Class R5 4,420 556 7.95 Class W 3,943 497 7.93 ----------------------------------------------------------------------------------------------------------------- RiverSource Income Opportunities Class A 402,063,679 44,650,530 9.00 Class B 34,051,872 3,782,976 9.00 Class C 35,122,534 3,902,941 9.00 Class I 158,288,141 17,558,605 9.01 Class R4 252,589 27,960 9.03 ----------------------------------------------------------------------------------------------------------------- RiverSource Inflation Protected Securities Class A 243,639,793 24,991,361 9.75 Class B 24,639,182 2,528,696 9.74 Class C 11,238,772 1,153,520 9.74 Class I 186,201,393 19,104,355 9.75 Class R4 81,087 8,322 9.74 Class W 189,822,155 19,475,564 9.75 ----------------------------------------------------------------------------------------------------------------- RiverSource Limited Duration Bond Class A 114,937,002 12,147,905 9.46 Class B 7,256,740 767,195 9.46 Class C 9,493,745 1,004,100 9.45 Class I 123,650,521 13,064,289 9.46 Class R4 98,684 10,402 9.49 Class W 4,851 512 9.47 ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 ----------------------------------------------------------------------------------------------------------------- RiverSource California Tax-Exempt Class A 156,529,091 32,281,411 4.85 Class B 2,746,317 566,512 4.85 Class C 2,638,601 543,497 4.85 ----------------------------------------------------------------------------------------------------------------- RiverSource Diversified Bond Class A 2,402,834,582 505,515,125 4.75 Class B 191,468,923 40,286,990 4.75 Class C 52,650,113 11,074,642 4.75 Class I 787,166,241 165,384,786 4.76 Class R2 287,638 60,428 4.76 Class R3 9,829 2,067 4.76 Class R4 72,569,590 15,286,568 4.75 Class R5 296,257 62,408 4.75 Class W 578,424,162 121,658,362 4.75 ----------------------------------------------------------------------------------------------------------------- RiverSource Minnesota Tax-Exempt Class A 301,420,555 58,435,558 5.16 Class B 9,061,802 1,755,984 5.16 Class C 12,604,907 2,443,475 5.16 ----------------------------------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 66
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE ----------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------- RiverSource New York Tax-Exempt Class A $ 52,995,844 10,905,515 $ 4.86 Class B 2,051,875 422,258 4.86 Class C 931,186 191,649 4.86 ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 ----------------------------------------------------------------------------------------------------------------- RiverSource Balanced Class A 567,386,530 64,566,373 8.79 Class B 17,661,853 2,021,254 8.74 Class C 9,454,482 1,084,116 8.72 Class R2 119,765 13,638 8.78 Class R4 45,391,810 5,164,844 8.79 Class R5 10,692 1,217 8.79 ----------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Growth Class A 274,023,730 36,524,683 7.50 Class B 3,579,138 481,472 7.43 Class C 1,561,360 210,004 7.43 Class I 206,056,085 27,238,022 7.57 Class R2 7,533 1,000 7.53 Class R3 7,539 1,000 7.54 Class R4 7,730 1,025 7.54 Class R5 7,561 1,000 7.56 Class W 188,126,122 25,003,227 7.52 ----------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Value Class A 1,434,098 184,422 7.78 Class B 57,553 7,464 7.71 Class C 27,275 3,524 7.74 Class I 60,019,450 7,688,355 7.81 Class R2 7,766 1,000 7.77 Class R3 7,779 1,000 7.78 Class R4 13,843 1,776 7.79 Class R5 7,804 1,000 7.80 Class W 237,104,669 30,469,778 7.78 ----------------------------------------------------------------------------------------------------------------- RiverSource Diversified Equity Income Class A 3,516,947,647 423,238,665 8.31 Class B 377,652,270 45,345,973 8.33 Class C 72,371,930 8,719,127 8.30 Class I 212,064,386 25,537,767 8.30 Class R2 8,271,071 998,943 8.28 Class R3 110,247,680 13,285,646 8.30 Class R4 197,976,509 23,806,751 8.32 Class R5 53,334,196 6,415,412 8.31 Class W 3,002 361 8.32 ----------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Value Class A 1,351,336,081 219,846,167 6.15 Class B 104,322,229 17,668,539 5.90 Class C 41,952,034 7,101,337 5.91 Class I 44,213,966 7,069,592 6.25 Class R2 15,826,707 2,592,379 6.11 Class R3 46,598,913 7,595,392 6.14 Class R4 337,592,770 54,533,230 6.19 Class R5 133,143,010 21,466,665 6.20 Class W 3,138 506 6.20 ----------------------------------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 67
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE ----------------------------------------------------------------------------------------------------------------- RiverSource Strategic Allocation Class A $1,122,673,319 133,009,047 $ 8.44 Class B 115,318,212 13,795,868 8.36 Class C 46,514,897 5,592,862 8.32 Class I 3,660 434 8.43 Class R2 3,660 434 8.43 Class R3 3,660 434 8.43 Class R4 1,219,103 144,213 8.45 Class R5 3,660 434 8.43 ----------------------------------------------------------------------------------------------------------------- RiverSource Strategic Income Allocation Class A 255,190,331 26,582,876 9.60 Class B 25,702,531 2,676,844 9.60 Class C 13,328,854 1,389,310 9.59 Class R2 5,157 537 9.60 Class R3 5,157 537 9.60 Class R4 68,365 7,124 9.60 Class R5 5,157 537 9.60 ----------------------------------------------------------------------------------------------------------------- Seligman California Municipal High-Yield Class A 31,142,713 4,653,633 6.69 Class C 6,162,106 919,720 6.70 ----------------------------------------------------------------------------------------------------------------- Seligman California Municipal Quality Class A 40,319,393 6,023,523 6.69 Class C 3,514,624 527,353 6.66 ----------------------------------------------------------------------------------------------------------------- Seligman Minnesota Municipal Class A 71,247,393 9,145,572 7.79 Class C 1,407,064 180,200 7.81 ----------------------------------------------------------------------------------------------------------------- Seligman National Municipal Class A 665,767,573 82,031,969 8.12 Class C 36,644,916 4,493,860 8.15 ----------------------------------------------------------------------------------------------------------------- Seligman New York Municipal Class A 76,943,770 9,243,243 8.32 Class C 8,196,244 982,659 8.34 ----------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2015 Class A 12,869,269 1,940,646 6.63 Class C 12,264,632 1,882,061 6.52 Class R2 1,495,666 226,740 6.60 Class R5 25,221 3,765 6.70 ----------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2025 Class A 17,518,203 2,562,329 6.84 Class C 13,402,662 2,002,910 6.69 Class R2 3,182,793 469,091 6.79 Class R5 245,363 35,571 6.90 ----------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2035 Class A 5,955,957 840,606 7.09 Class C 2,414,707 346,244 6.97 Class R2 1,481,321 209,743 7.06 Class R5 7,946 1,115 7.13 ----------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2045 Class A 3,216,301 455,251 7.06 Class C 882,294 126,804 6.96 Class R2 523,492 74,309 7.04 Class R5 17,878 2,516 7.11 ----------------------------------------------------------------------------------------------------------------- Seligman TargETFund Core Class A 20,084,624 3,119,620 6.44 Class C 28,956,029 4,495,509 6.44 Class R2 9,547,700 1,483,888 6.43 Class R5 105,101 16,332 6.44 -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 68
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 ----------------------------------------------------------------------------------------------------------------- RiverSource Absolute Return Currency and Income Class A $ 114,237,775 11,504,415 $ 9.93 Class B 2,026,053 205,708 9.85 Class C 7,609,307 773,530 9.84 Class I 28,925,560 2,899,043 9.98 Class R4 9,944 1,000 9.94 Class R5 9,397 942 9.98 Class W 86,999,758 8,768,011 9.92 ----------------------------------------------------------------------------------------------------------------- RiverSource Disciplined International Equity Class A 49,044,997 7,030,588 6.98 Class B 7,031,214 1,021,394 6.88 Class C 1,094,910 159,170 6.88 Class I 126,948,273 18,085,070 7.02 Class R2 3,525 509 6.93 Class R3 3,530 509 6.94 Class R4 69,728 9,972 6.99 Class R5 3,546 509 6.97 Class W 282,912,809 40,530,503 6.98 ----------------------------------------------------------------------------------------------------------------- RiverSource Emerging Markets Bond Class A 32,726,471 3,161,305 10.35 Class B 2,419,853 234,037 10.34 Class C 722,068 69,939 10.32 Class I 106,358,547 10,273,954 10.35 Class R4 23,156 2,238 10.35 Class W 117,037,431 11,319,382 10.34 ----------------------------------------------------------------------------------------------------------------- RiverSource Global Bond Class A 252,772,959 35,605,039 7.10 Class B 29,976,819 4,198,213 7.14 Class C 5,556,941 784,634 7.08 Class I 169,716,515 23,886,385 7.11 Class R4 168,713 23,740 7.11 Class W 60,278,436 8,500,017 7.09 ----------------------------------------------------------------------------------------------------------------- RiverSource Partners International Select Growth Class A 181,148,068 31,216,716 5.80 Class B 24,733,743 4,433,114 5.58 Class C 9,527,501 1,710,456 5.57 Class I 191,323,369 32,651,792 5.86 Class R2 122,389 21,139 5.79 Class R4 489,252 84,049 5.82 Class R5 938,080 159,892 5.87 ----------------------------------------------------------------------------------------------------------------- RiverSource Partners International Select Value Class A 710,323,385 125,309,364 5.67 Class B 80,458,495 15,117,302 5.32 Class C 10,917,260 2,057,531 5.31 Class I 182,888,529 31,357,443 5.83 Class R4 493,430 85,118 5.80 ----------------------------------------------------------------------------------------------------------------- RiverSource Partners International Small Cap Class A 25,159,619 4,951,093 5.08 Class B 4,125,636 846,784 4.87 Class C 486,947 100,059 4.87 Class I 31,466,684 6,079,010 5.18 Class R4 401,664 78,176 5.14 ----------------------------------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 69
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE ----------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------- Seligman Frontier Class A $ 23,379,805 2,848,890 $ 8.21 Class B 1,118,495 169,585 6.60 Class C 8,899,070 1,342,806 6.63 Class I 999,800 114,806 8.71 Class R2 81,518 10,109 8.06 Class R3 5,027 623 8.07 Class R4 9,819 1,128 8.70 Class R5 625,564 71,840 8.71 ----------------------------------------------------------------------------------------------------------------- Seligman Global Technology Class A 325,789,863 19,750,519 16.50 Class B 21,966,464 1,541,875 14.25 Class C 69,848,512 4,900,053 14.25 Class I 23,827,145 1,442,107 16.52 Class R2 5,131,007 315,762 16.25 Class R3 5,301 326 16.26 Class R4 289,226 17,518 16.51 Class R5 5,304 321 16.52 ----------------------------------------------------------------------------------------------------------------- Threadneedle Asia Pacific Class R5 53,643,171 4,698,479 11.42 ----------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets Class A 416,296,725 53,776,169 7.74 Class B 38,489,191 5,601,155 6.87 Class C 32,757,231 4,756,330 6.89 Class I 68,977,761 8,575,621 8.04 Class R2 12,235,711 1,580,451 7.74 Class R4 1,186,515 147,397 8.05 Class R5 538,197 66,743 8.06 ----------------------------------------------------------------------------------------------------------------- Threadneedle European Equity Class A 64,717,075 13,311,370 4.86 Class B 6,123,682 1,268,930 4.83 Class C 1,156,669 240,707 4.81 Class I 6,487 1,336 4.86 Class R4 18,019 3,711 4.86 ----------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Class A 394,510,625 64,353,725 6.13 Class B 33,008,877 5,717,899 5.77 Class C 10,570,042 1,851,492 5.71 Class I 32,596,470 5,289,556 6.16 Class R2 46,070 7,498 6.14 Class R3 3,897 634 6.15 Class R4 6,058,555 980,165 6.18 Class R5 17,622 2,861 6.16 Class W 3,934 639 6.16 ----------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income Class A 21,078,520 2,483,415 8.49 Class B 2,067,434 244,105 8.47 Class C 449,282 53,062 8.47 Class I 4,190,596 493,000 8.50 Class R2 8,493 1,000 8.49 Class R3 8,495 1,000 8.50 Class R4 10,456 1,230 8.50 Class R5 8,499 1,000 8.50 ----------------------------------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 70
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE ----------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha Class A $ 2,647,582 150,018 $17.65 Class B 258,403 14,788 17.47 Class C 125,035 7,154 17.48 Class I 4,366,888 246,500 17.72 Class R2 8,780 500 17.56 Class R3 8,808 500 17.62 Class R4 59,122 3,345 17.67 Class R5 8,852 500 17.70 ----------------------------------------------------------------------------------------------------------------- Threadneedle International Opportunity Class A 257,909,909 33,503,026 7.70 Class B 20,431,810 2,710,581 7.54 Class C 6,942,369 936,735 7.41 Class I 116,826,749 15,026,177 7.77 Class R2 1,110,150 142,157 7.81 Class R3 3,876 496 7.81 Class R4 226,706 28,868 7.85 Class R5 3,890 496 7.84 ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 ----------------------------------------------------------------------------------------------------------------- RiverSource Intermediate Tax-Exempt Class A 67,541,537 13,860,690 4.87 Class B 4,766,940 979,243 4.87 Class C 2,312,311 475,008 4.87 ----------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Growth Class A 348,889,713 66,587,189 5.24 Class B 44,292,642 10,090,767 4.39 Class C 2,596,534 591,200 4.39 Class I 53,382,926 9,727,776 5.49 Class R4 2,610,805 484,792 5.39 ----------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Bond Class A 583,790,472 173,452,947 3.37 Class B 19,621,893 5,829,378 3.37 Class C 5,593,015 1,661,152 3.37 ----------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt High Income Class A 2,135,093,331 574,689,338 3.72 Class B 53,720,142 14,466,113 3.71 Class C 12,329,720 3,317,475 3.72 ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 ----------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Money Market 138,915,998 138,948,951 1.00 -----------------------------------------------------------------------------------------------------------------
FOR FUNDS OTHER THAN MONEY MARKET FUNDS. A fund's securities are valued as follows as of the close of business of the New York Stock Exchange (the Exchange): - Securities traded on a securities exchange for which a last-quoted sales price is readily available are valued at the last-quoted sales price on the exchange where such security is primarily traded. - Securities traded on a securities exchange for which a last-quoted sales price is not readily available are valued at the mean of the closing bid and asked prices, looking first to the bid and asked prices on the exchange where the security is primarily traded and, if none exist, to the over-the-counter market. - Securities included in the NASDAQ National Market System are valued at the last-quoted sales price in this market. - Securities included in the NASDAQ National Market System for which a last- quoted sales price is not readily available, and other securities traded over-the-counter but not included in the NASDAQ National Market System are valued at the mean of the closing bid and asked prices. - Futures and options traded on major exchanges are valued at the last- quoted sales price on their primary exchange. Statement of Additional Information - Dec. 30, 2009 Page 71 - Foreign securities traded outside the United States are generally valued as of the time their trading is complete, which is usually different from the close of the Exchange. Foreign securities quoted in foreign currencies are translated into U.S. dollars utilizing spot exchange rates at the close of regular trading on the Exchange. - Occasionally, events affecting the value of securities occur between the time the primary market on which the securities are traded closes and the close of the Exchange. If events materially affect the value of securities, the securities will be valued at their fair value according to procedures decided upon in good faith by the Board. This occurs most commonly with foreign securities, but may occur in other cases. The fair value of a security is likely to be different from the quoted or published price. - Short-term securities maturing more than 60 days from the valuation date are valued at the readily available market price or approximate market value based on current interest rates. Typically, short-term securities maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value determined by systematically increasing the carrying value of a security if acquired at a discount, or reducing the carrying value if acquired at a premium, so that the carrying value is equal to maturity value on the maturity date. - Securities without a readily available market price and securities for which the price quotations or valuations received from other sources are deemed unreliable or not reflective of market value are valued at fair value as determined in good faith by the Board. The Board is responsible for selecting methods it believes provide fair value. - When possible, bonds are valued at an evaluated bid by a pricing service independent from the funds. If a valuation of a bond is not available from a pricing service, the bond will be valued by a dealer knowledgeable about the bond if such a dealer is available. The assets of funds-of-funds consist primarily of shares of the underlying funds, which are valued at their NAVs. Other securities held by funds-of-funds are valued as described above. FOR MONEY MARKET FUNDS. In accordance with Rule 2a-7 of the 1940 Act, all of the securities in the fund's portfolio are valued at amortized cost. The amortized cost method of valuation is an approximation of market value determined by systematically increasing the carrying value of a security if acquired at a discount, or reducing the carrying value if acquired at a premium, so that the carrying value is equal to maturity value on the maturity date. Amortized cost does not take into consideration unrealized capital gains or losses. The Board has established procedures designed to stabilize the fund's price per share for purposes of sales and redemptions at $1, to the extent that it is reasonably possible to do so. These procedures include review of the fund's securities by the Board, at intervals deemed appropriate by it, to determine whether the fund's net asset value per share computed by using available market quotations deviates from a share value of $1 as computed using the amortized cost method. The Board must consider any deviation that appears and, if it exceeds 0.5%, it must determine what action, if any, needs to be taken. If the Board determines a deviation exists that may result in a material dilution of the holdings of current shareholders or investors, or in any other unfair consequences for shareholders, it must undertake remedial action that it deems necessary and appropriate. Such action may include withholding dividends, calculating net asset value per share for purposes of sales and redemptions using available market quotations, making redemptions in kind, and selling securities before maturity in order to realize capital gains or losses or to shorten average portfolio maturity. While the amortized cost method provides certainty and consistency in portfolio valuation, it may result in valuations of securities that are either somewhat higher or lower than the prices at which the securities could be sold. This means that during times of declining interest rates the yield on the fund's shares may be higher than if valuations of securities were made based on actual market prices and estimates of market prices. Accordingly, if using the amortized cost method were to result in a lower portfolio value, a prospective investor in the fund would be able to obtain a somewhat higher yield than the investor would get if portfolio valuations were based on actual market values. Existing shareholders, on the other hand, would receive a somewhat lower yield than they would otherwise receive. The opposite would happen during a period of rising interest rates. PORTFOLIO HOLDINGS DISCLOSURE Each fund's Board and the investment manager believe that the investment ideas of the investment manager and any subadviser with respect to portfolio management of a fund should benefit the fund and its shareholders, and do not want to afford speculators an opportunity to profit by anticipating fund trading strategies or by using fund portfolio holdings information for stock picking. However, each fund's Board also believes that knowledge of the fund's portfolio holdings can Statement of Additional Information - Dec. 30, 2009 Page 72 assist shareholders in monitoring their investments, making asset allocation decisions, and evaluating portfolio management techniques. Each fund's Board has therefore adopted the investment manager's policies and approved the investment manager's procedures, including the investment manager's oversight of subadviser practices, relating to disclosure of the fund's portfolio securities. These policies and procedures are intended to protect the confidentiality of fund portfolio holdings information and generally prohibit the release of such information until such information is made public, unless such persons have been authorized to receive such information on a selective basis, as described below. It is the policy of the fund not to provide or permit others to provide portfolio holdings on a selective basis, and the investment manager does not intend to selectively disclose portfolio holdings or expect that such holdings information will be selectively disclosed, except where necessary for the fund's operation or where there are legitimate business purposes for doing so and, in any case, where conditions are met that are designed to protect the interests of the fund and its shareholders. Although the investment manager seeks to limit the selective disclosure of portfolio holdings information and such selective disclosure is monitored under the fund's compliance program for conformity with the policies and procedures, there can be no assurance that these policies will protect the fund from the potential misuse of holdings information by individuals or firms in possession of that information. Under no circumstances may the investment manager, its affiliates or any employee thereof receive any consideration or compensation for disclosing such holdings information. A complete schedule of each fund's portfolio holdings is available semi-annually and annually in shareholder reports filed on Form N-CSR and, after the first and third fiscal quarters, in regulatory filings on Form N-Q. These shareholder reports and regulatory filings are filed with the SEC in accordance with federal securities laws and are generally available within sixty (60) days of the end of a fund's fiscal quarter, on the SEC's website. In addition, the investment manager makes publicly available information regarding a fund's top ten holdings (including name and percentage of a fund's assets invested in each such holding) and the percentage breakdown of a fund's investments by country, sector and industry, as applicable. This holdings information is made publicly available through the websites (riversource.com/funds for RiverSource and Threadneedle funds and seligman.com for Seligman funds) as of month-end, approximately ten (10) days following the month-end. In addition to the monthly top ten holdings and the portfolio holdings information made available on the SEC website as part of a fund's annual, semi-annual and fiscal quarter filings, the investment manager also publishes on websites each fund's full portfolio holdings (including name and percentage of a fund's assets invested in each such holding) as of the end of each calendar quarter. This full list of portfolio holdings is made available approximately thirty (30) days following the end of each calendar quarter. From time to time, the investment manager may make partial or complete fund holdings information that is not publicly available on the websites or otherwise available in advance of the time restrictions noted above (1) to its affiliated and unaffiliated service providers that require the information in the normal course of business in order to provide services to the fund (including, without limitation entities identified by name in the fund's prospectus or this SAI, such as custodians, auditors, subadvisers, financial printers (Cenveo, Inc., Bowne, Vestek, Data Communique, Inc.), pricing services (including Reuters Pricing Service, FT Interactive Data Corporation, Bear Stearns Pricing Service, and Kenny S&P), proxy voting services (such as Risk Metrics), and companies that deliver or support systems that provide analytical or statistical information (including Factset Research Systems, Bloomberg, L.P.), (2) to facilitate the review and/or rating of the fund by ratings and rankings agencies (including Morningstar, Inc., Thomson Financial and Lipper Inc.), (3) entities that provide trading, research or other investment related services (including Citigroup, Merrill Lynch & Co., and Morgan Stanley), and (4) fund intermediaries that include the funds in discretionary wrap or other investment programs that request such information in order to support the services provided to investors in the programs. In such situations, the information is released subject to confidentiality agreements, duties imposed under applicable policies and procedures (for example, applicable codes of ethics) designed to prevent the misuse of confidential information, general duties under applicable laws and regulations, or other such duties of confidentiality. In addition, the fund discloses holdings information as required by federal, state or international securities laws, and may disclose holdings information in response to requests by governmental authorities, or in connection with litigation or potential litigation, a restructuring of a holding, where such disclosure is necessary to participate or explore participation in a restructuring of the holding (e.g., as part of a bondholder group), or to the issuer of a holding, pursuant to a request of the issuer or any other party who is duly authorized by the issuer. Each fund's Board has adopted the policies of the investment manager and approved the procedures Ameriprise Financial has established to ensure that the fund's holdings information is only disclosed in accordance with these policies. Before any selective disclosure of holdings information is permitted, the person seeking to disclose such holdings information must submit a written request to the Portfolio Holdings Committee ("PHC"). The PHC is comprised of members from the investment manager's General Counsel's Office, Compliance, and Communications. The PHC has been authorized by the fund's Board to perform an initial review of requests for disclosure of holdings information to evaluate whether there is a legitimate business purpose for selective disclosure, whether selective disclosure is in the best interests of a fund and its Statement of Additional Information - Dec. 30, 2009 Page 73 shareholders, to consider any potential conflicts of interest between the fund, the investment manager, and its affiliates, and to safeguard against improper use of holdings information. Factors considered in this analysis are whether the recipient has agreed to or has a duty to keep the holdings information confidential and whether risks have been mitigated such that the recipient has agreed or has a duty to use the holdings information only as necessary to effectuate the purpose for which selective disclosure was authorized, including a duty not to trade on such information. Before portfolio holdings may be selectively disclosed, requests approved by the PHC must also be authorized by a fund's Chief Compliance Officer or the fund's General Counsel. On at least an annual basis the PHC reviews the approved recipients of selective disclosure and, where appropriate, requires a resubmission of the request, in order to re- authorize any ongoing arrangements. These procedures are intended to be reasonably designed to protect the confidentiality of fund holdings information and to prohibit their release to individual investors, institutional investors, intermediaries that distribute the fund's shares, and other parties, until such holdings information is made public or unless such persons have been authorized to receive such holdings information on a selective basis, as set forth above. In connection with a proposed acquisition by RiverSource Investments' parent company, Ameriprise Financial, of certain asset management-related businesses operated by subsidiary companies of the Bank of America Corporation (BAC), RiverSource Investments may share certain of the Funds' portfolio holdings information with select personnel of these BAC subsidiary companies as part of the overall integration efforts with RiverSource Investments. Disclosures are subject to confidentiality obligations and were approved by the PHC and the funds' Chief Compliance Officer. Although the investment manager has set up these procedures to monitor and control selective disclosure of holdings information, there can be no assurance that these procedures will protect a fund from the potential misuse of holdings information by individuals or firms in possession of that information. PROXY VOTING GENERAL GUIDELINES, POLICIES AND PROCEDURES The funds uphold a long tradition of supporting sound and principled corporate governance. For over 30 years, the Board, which consists of a majority of independent Board members, has determined policies and voted proxies. The funds' investment manager, RiverSource Investments, and the funds' administrator, Ameriprise Financial, provide support to the Board in connection with the proxy voting process. GENERAL GUIDELINES CORPORATE GOVERNANCE MATTERS -- The Board supports proxy proposals that it believes are tied to the interests of shareholders and votes against proxy proposals that appear to entrench management. For example: - The Board generally votes in favor of proposals for an independent chairman or, if the chairman is not independent, in favor of a lead independent director. - The Board supports annual election of all directors and proposals to eliminate classes of directors. - In a routine election of directors, the Board will generally vote with management's recommendations because the Board believes that management and nominating committees of independent directors are in the best position to know what qualifications are required of directors to form an effective board. However, the Board will generally vote against a nominee who has been assigned to the audit, compensation, or nominating committee if the nominee is not independent of management based on established criteria. The Board will also withhold support for any director who fails to attend 75% of meetings or has other activities that appear to interfere with his or her ability to commit sufficient attention to the company and, in general, will vote against nominees who are determined to have been involved in options backdating. - The Board generally supports proposals requiring director nominees to receive a majority of affirmative votes cast in order to be elected to the board, and opposes cumulative voting based on the view that each director elected should represent the interests of all shareholders. - Votes in a contested election of directors are evaluated on a case-by-case basis. In general, the Board believes that incumbent management and nominating committees, with access to more and better information, are in the best position to make strategic business decisions. However, the Board will consider an opposing slate if it makes a compelling business case for leading the company in a new direction. Statement of Additional Information - Dec. 30, 2009 Page 74 SHAREHOLDER RIGHTS PLANS -- The Board generally supports shareholder rights plans based on a belief that such plans force uninvited bidders to negotiate with a company's board. The Board believes these negotiations allow time for the company to maximize value for shareholders by forcing a higher premium from a bidder, attracting a better bid from a competing bidder or allowing the company to pursue its own strategy for enhancing shareholder value. The Board supports proposals to submit shareholder rights plans to shareholders and supports limiting the vote required for approval of such plans to a majority of the votes cast. AUDITORS -- The Board values the independence of auditors based on established criteria. The Board supports a reasonable review of matters that may raise concerns regarding an auditor's service that may cause the Board to vote against a management recommendation, including, for example, auditor involvement in significant financial restatements, options backdating, material weaknesses in control, attempts to limit auditor liability or situations where independence has been compromised. STOCK OPTION PLANS AND OTHER MANAGEMENT COMPENSATION ISSUES -- The Board expects company management to give thoughtful consideration to providing competitive long-term employee incentives directly tied to the interest of shareholders. The Board votes against proxy proposals that it believes dilute shareholder value excessively. The Board believes that equity compensation awards can be a useful tool, when not abused, for retaining employees and giving them incentives to engage in conduct that will improve the performance of the company. In this regard, the Board generally favors minimum holding periods of stock obtained by senior management pursuant to an option plan and will vote against compensation plans for executives that it deems excessive. SOCIAL AND CORPORATE POLICY ISSUES -- The Board believes proxy proposals should address the business interests of the corporation. Shareholder proposals sometime seek to have the company disclose or amend certain business practices based purely on social or environmental issues rather than compelling business arguments. In general, the Board recognizes our fund shareholders are likely to have differing views of social and environmental issues and believes that these matters are primarily the responsibility of a company's management and its board of directors. POLICIES AND PROCEDURES The policy of the Board is to vote all proxies of the companies in which a fund holds investments. Because of the volume and complexity of the proxy voting process, including inherent inefficiencies in the process that are outside the control of the Board or the Proxy Team (as defined below), not all proxies may be voted. The Board has implemented policies and procedures that have been reasonably designed to vote proxies and to ensure that there are no conflicts between interests of a fund's shareholders and those of the funds' principal underwriters, RiverSource Investments, or other affiliated persons. In exercising its proxy voting responsibilities, the Board may rely upon the research or recommendations of one or more third party service providers. The administration of the proxy voting process is handled by the RiverSource Proxy Administration Team ("Proxy Team"). In exercising its responsibilities, the Proxy Team may rely upon one or more third party service providers. The Proxy Team assists the Board in identifying situations where its guidelines do not clearly require a vote in a particular manner and assists in researching matters and making voting recommendations. RiverSource Investments may recommend that a proxy be voted in a manner contrary to the Board's guidelines. In making recommendations to the Board about voting on a proposal, the investment manager relies on its own investment personnel (or the investment personnel of a fund's subadviser(s)) and information obtained from an independent research firm. The investment manager makes the recommendation in writing. The process requires that Board members who are independent from the investment manager consider the recommendation and decide how to vote the proxy proposal or establish a protocol for voting the proposal. On an annual basis, or more frequently as determined necessary, the Board reviews recommendations to revise the existing guidelines or add new guidelines. Recommendations are based on, among other things, industry trends and the frequency that similar proposals appear on company ballots. The Board considers management's recommendations as set out in the company's proxy statement. In each instance in which a fund votes against management's recommendation (except when withholding votes from a nominated director), the Board sends a letter to senior management of the company explaining the basis for its vote. This permits both the company's management and the Board to have an opportunity to gain better insight into issues presented by the proxy proposal(s). VOTING IN COUNTRIES OUTSIDE THE UNITED STATES (NON-U.S. COUNTRIES) -- Voting proxies for companies not domiciled in the United States may involve greater effort and cost due to the variety of regulatory schemes and corporate practices. For example, certain non-U.S. countries require securities to be blocked prior to a vote, which means that the securities to be voted may not be traded within a specified number of days before the shareholder meeting. The Board typically will not vote securities in non-U.S. countries that require securities to be blocked as the need for liquidity of the securities in the funds Statement of Additional Information - Dec. 30, 2009 Page 75 will typically outweigh the benefit of voting. There may be additional costs associated with voting in non-U.S. countries such that the Board may determine that the cost of voting outweighs the potential benefit. SECURITIES ON LOAN -- The Board will generally refrain from recalling securities on loan based upon its determination that the costs and lost revenue to the funds, combined with the administrative effects of recalling the securities, generally outweigh the benefit of voting the proxy. While neither the Board nor the funds' administrator assesses the economic impact and benefits of voting loaned securities on a case-by-case basis, situations may arise where the Board requests that loaned securities be recalled in order to vote a proxy. In this regard, if a proxy relates to matters that may impact the nature of a company, such as a proposed merger or acquisition, and the funds' ownership position is more significant, the Board has established a guideline to direct the funds' administrator to use its best efforts to recall such securities based upon its determination that, in these situations, the benefits of voting such proxies generally outweigh the costs or lost revenue to the funds, or any potential adverse administrative effects to the funds, of not recalling such securities. INVESTMENT IN AFFILIATED FUNDS -- Certain funds may invest in shares of other funds in the RiverSource Family of Funds (referred to in this context as "underlying funds") and may own substantial portions of these underlying funds. The proxy policy of the funds is to ensure that direct public shareholders of underlying funds control the outcome of any shareholder vote. To help manage this potential conflict of interest, recognizing that the direct public shareholders of these underlying funds may represent only a minority interest, the policy of the funds is to vote proxies of the underlying funds in the same proportion as the vote of the direct public shareholders. If there are no direct public shareholders of an underlying fund, the policy is to cast votes in accordance with instructions from the independent members of the Board. OBTAIN A PROXY VOTING RECORD Each year the funds file their proxy voting records with the SEC and make them available by August 31 for the 12-month period ending June 30 of that year. The records can be obtained without charge through riversource.com/funds or searching the website of the SEC at www.sec.gov. INVESTING IN A FUND SALES CHARGE FOR FUNDS OTHER THAN MONEY MARKET FUNDS: Investors should understand that the purpose and function of the initial sales charge and distribution fee for Class A shares is the same as the purpose and function of the contingent deferred sales charge ("CDSC") and distribution fee for Class B and Class C shares. The sales charges and distribution fees applicable to each class pay for the distribution of shares of a fund. Shares of a fund are sold at the class' public offering price. The public offering price is the NAV of one share adjusted for the sales charge for Class A. For Class B, Class C, Class D, Class E, Class I, Class R2, Class R3, Class R4, Class R5, Class W and Class Y there is no initial sales charge so the public offering price is the same as the NAV. Statement of Additional Information - Dec. 30, 2009 Page 76 CLASS A - CALCULATION OF THE SALES CHARGE Sales charges are determined as shown in the following tables. The first table is organized by investment category. You can find your fund's investment category in Table 1. TABLE 9. CLASS A INITIAL SALES CHARGE For all funds EXCEPT RiverSource Absolute Return Currency and Income, RiverSource Floating Rate, RiverSource Inflation Protected Securities, RiverSource Intermediate Tax-Exempt, RiverSource Limited Duration Bond and RiverSource Short Duration U.S. Government:
--------------------------------------------------------------------------------- Fund-of-funds - fixed income, State tax-exempt fixed income, Taxable fixed Balanced, Equity, Fund-of- income, Tax-exempt fixed funds - equity income ---------------------------------------------------------- Fund category Sales charge(a) as a percentage of: --------------------------------------------------------------------------------- PUBLIC Public OFFERING Net amount offering Net amount TOTAL MARKET VALUE PRICE(b) invested price(b) invested --------------------------------------------------------------------------------- Up to $49,999 5.75% 6.10% 4.75% 4.99% --------------------------------------------------------------------------------- $50,000 - $99,999 4.75% 4.99% 4.25% 4.44% --------------------------------------------------------------------------------- $100,000 - $249,999 3.50% 3.63% 3.50% 3.63% --------------------------------------------------------------------------------- $250,000 - $499,999 2.50% 2.56% 2.50% 2.56% --------------------------------------------------------------------------------- $500,000 - $999,999 2.00% 2.04% 2.00% 2.04% --------------------------------------------------------------------------------- $1,000,000 or more(c),(d) 0.00% 0.00% 0.00% 0.00% ---------------------------------------------------------------------------------
For RiverSource Absolute Return Currency and Income, RiverSource Floating Rate, RiverSource Inflation Protected Securities, RiverSource Intermediate Tax-Exempt, RiverSource Limited Duration Bond and RiverSource Short Duration U.S. Government:
----------------------------------------------------------------------------------------- SALES CHARGE(a) as a Percentage of Sales Charge(a) as a Public Offering Percentage of TOTAL MARKET VALUE Price(b) Net Amount Invested ----------------------------------------------------------------------------------------- Up to $49,999 3.00% 3.09% ----------------------------------------------------------------------------------------- $50,000 - $99,999 3.00% 3.09% ----------------------------------------------------------------------------------------- $100,000 - $249,999 2.50% 2.56% ----------------------------------------------------------------------------------------- $250,000 - $499,999 2.00% 2.04% ----------------------------------------------------------------------------------------- $500,000 - $999,999 1.50% 1.52% ----------------------------------------------------------------------------------------- $1,000,000 or more(c),(d) 0.00% 0.00% -----------------------------------------------------------------------------------------
(a) Because of rounding in the calculation of purchase price, the portion of the sales charge retained by the distributor may vary and the actual sales charge you pay may be more or less than the sales charge calculated using these percentages. (b) Purchase price includes the sales charge. (c) Although there is no sales charge for purchases with a total market value over $1,000,000, and therefore no re-allowance, the distributor may pay a financial intermediary the following out of its own resources: a sales commission of up to 1.00% for a sale of $1,000,000 to $3,999,999; a sales commission up to 0.50% for a sale of $4,000,000 to $49,999,999; and a sales commission up to 0.25% for a sale of $50,000,000 or more. (d) For certain eligible employee benefit plans defined under section 401(a), 401(k), 457 and 403(b) which meet eligibility rules for the waiver of applicable sales charges, the distributor may pay the following out of its own resources: a sale commission of 1.00% for a sale of $1 to $3,999,999 received in eligible employee benefit plans; a sales commission of up to 0.50% for a sale of $4,000,000 to $49,999,999; and a sales commission up to 0.25% for a sale of $50,000,000 or more. See "Initial Sales Charge -- Waivers of the sales charge for Class A shares" for employee benefit plan eligibility rules. Using the sales charge schedule in the table above, for Class A, the public offering price for an investment of less than $50,000, made on the last day of the most recent fiscal period, was determined as shown in the following table. The sales charge is paid to the distributor by the person buying the shares. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. Statement of Additional Information - Dec. 30, 2009 Page 77 TABLE 10. PUBLIC OFFERING PRICE
PUBLIC NET ASSET 1.0 MINUS MAXIMUM OFFERING FUND VALUE SALES CHARGE PRICE ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 ---------------------------------------------------------------------------------------------- RiverSource Income Builder Basic Income $ 8.24 0.9525 $ 8.65 ---------------------------------------------------------------------------------------------- RiverSource Income Builder Enhanced Income 7.60 0.9525 7.98 ---------------------------------------------------------------------------------------------- RiverSource Income Builder Moderate Income 7.86 0.9525 8.25 ---------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Aggressive 6.49 0.9425 6.89 ---------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Conservative 8.51 0.9525 8.93 ---------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate 7.58 0.9425 8.04 ---------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Aggressive 7.01 0.9425 7.44 ---------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Conservative 8.02 0.9525 8.42 ---------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Total Equity 6.03 0.9425 6.40 ---------------------------------------------------------------------------------------------- RiverSource S&P 500 Index (for Class D) 2.73 No sales charge 2.73 ---------------------------------------------------------------------------------------------- RiverSource Small Company Index 2.82 0.9425 2.99 ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 ---------------------------------------------------------------------------------------------- RiverSource Equity Value 6.54 0.9425 6.94 ---------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Growth 2.25 0.9425 2.39 ---------------------------------------------------------------------------------------------- RiverSource Precious Metals and Mining 9.04 0.9425 9.59 ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 ---------------------------------------------------------------------------------------------- RiverSource 120/20 Contrarian Equity 11.42 0.9425 12.12 ---------------------------------------------------------------------------------------------- RiverSource Recovery and Infrastructure 11.62 0.9425 12.33 ---------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2010 6.92 0.9425 7.34 ---------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2015 6.79 0.9425 7.20 ---------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2020 6.33 0.9425 6.72 ---------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2025 6.26 0.9425 6.64 ---------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2030 6.29 0.9425 6.67 ---------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2035 6.22 0.9425 6.60 ---------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2040 6.04 0.9425 6.41 ---------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2045 6.17 0.9425 6.55 ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 ---------------------------------------------------------------------------------------------- RiverSource High Yield Bond 2.30 0.9525 2.41 ---------------------------------------------------------------------------------------------- RiverSource Partners Aggressive Growth 6.13 0.9425 6.50 ---------------------------------------------------------------------------------------------- RiverSource Partners Fundamental Value 3.71 0.9425 3.94 ---------------------------------------------------------------------------------------------- RiverSource Partners Select Value 3.18 0.9425 3.37 ---------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Equity 3.43 0.9425 3.64 ---------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Value 3.35 0.9425 3.55 ---------------------------------------------------------------------------------------------- RiverSource Short Duration U.S. Government 4.63 0.9700 4.77 ---------------------------------------------------------------------------------------------- RiverSource U.S. Government Mortgage 4.77 0.9525 5.01 ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 ---------------------------------------------------------------------------------------------- RiverSource Dividend Opportunity 5.58 0.9425 5.92 ---------------------------------------------------------------------------------------------- RiverSource Real Estate 6.24 0.9425 6.62 ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 ---------------------------------------------------------------------------------------------- RiverSource Cash Management 1.00 No sales charge 1.00 ---------------------------------------------------------------------------------------------- RiverSource Disciplined Equity 4.30 0.9425 4.56 ---------------------------------------------------------------------------------------------- RiverSource Disciplined Small and Mid Cap Equity 6.24 0.9425 6.62 ---------------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value 6.71 0.9425 7.12 ---------------------------------------------------------------------------------------------- RiverSource Floating Rate 7.93 0.9700 8.18 ----------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 78
PUBLIC NET ASSET 1.0 MINUS MAXIMUM OFFERING FUND VALUE SALES CHARGE PRICE ---------------------------------------------------------------------------------------------- RiverSource Income Opportunities $ 9.00 0.9525 $ 9.45 ---------------------------------------------------------------------------------------------- RiverSource Inflation Protected Securities 9.75 0.9700 10.05 ---------------------------------------------------------------------------------------------- RiverSource Limited Duration Bond 9.46 0.9700 9.75 ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 ---------------------------------------------------------------------------------------------- RiverSource California Tax-Exempt 4.85 0.9525 5.09 ---------------------------------------------------------------------------------------------- RiverSource Diversified Bond 4.75 0.9525 4.99 ---------------------------------------------------------------------------------------------- RiverSource Minnesota Tax-Exempt 5.16 0.9525 5.42 ---------------------------------------------------------------------------------------------- RiverSource New York Tax-Exempt 4.86 0.9525 5.10 ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 ---------------------------------------------------------------------------------------------- RiverSource Balanced 8.79 0.9425 9.33 ---------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Growth 7.50 0.9425 7.96 ---------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Value 7.78 0.9425 8.25 ---------------------------------------------------------------------------------------------- RiverSource Diversified Equity Income 8.31 0.9425 8.82 ---------------------------------------------------------------------------------------------- RiverSource Mid Cap Value 6.15 0.9425 6.53 ---------------------------------------------------------------------------------------------- RiverSource Strategic Allocation 8.44 0.9425 8.95 ---------------------------------------------------------------------------------------------- RiverSource Strategic Income Allocation 9.60 0.9525 10.08 ---------------------------------------------------------------------------------------------- Seligman California Municipal High-Yield 6.69 0.9525 7.02 ---------------------------------------------------------------------------------------------- Seligman California Municipal Quality 6.69 0.9525 7.02 ---------------------------------------------------------------------------------------------- Seligman Minnesota Municipal 7.79 0.9525 8.18 ---------------------------------------------------------------------------------------------- Seligman National Municipal 8.12 0.9525 8.52 ---------------------------------------------------------------------------------------------- Seligman New York Municipal 8.32 0.9525 8.73 ---------------------------------------------------------------------------------------------- Seligman TargETFund 2015 6.63 0.9425 7.03 ---------------------------------------------------------------------------------------------- Seligman TargETFund 2025 6.84 0.9425 7.26 ---------------------------------------------------------------------------------------------- Seligman TargETFund 2035 7.09 0.9425 7.52 ---------------------------------------------------------------------------------------------- Seligman TargETFund 2045 7.06 0.9425 7.49 ---------------------------------------------------------------------------------------------- Seligman TargETFund Core 6.44 0.9425 6.83 ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 ---------------------------------------------------------------------------------------------- RiverSource Absolute Return Currency and Income 9.93 0.9700 10.24 ---------------------------------------------------------------------------------------------- RiverSource Disciplined International Equity 6.98 0.9425 7.41 ---------------------------------------------------------------------------------------------- RiverSource Emerging Markets Bond 10.35 0.9525 10.87 ---------------------------------------------------------------------------------------------- RiverSource Global Bond 7.10 0.9525 7.45 ---------------------------------------------------------------------------------------------- RiverSource Partners International Select Growth 5.80 0.9425 6.15 ---------------------------------------------------------------------------------------------- RiverSource Partners International Select Value 5.67 0.9425 6.02 ---------------------------------------------------------------------------------------------- RiverSource Partners International Small Cap 5.08 0.9425 5.39 ---------------------------------------------------------------------------------------------- Seligman Frontier 8.21 0.9425 8.71 ---------------------------------------------------------------------------------------------- Seligman Global Technology 16.50 0.9425 17.51 ---------------------------------------------------------------------------------------------- Threadneedle Asia Pacific (for Class R5) 11.42 N/A N/A ---------------------------------------------------------------------------------------------- Threadneedle Emerging Markets 7.74 0.9425 8.21 ---------------------------------------------------------------------------------------------- Threadneedle European Equity 4.86 0.9425 5.16 ---------------------------------------------------------------------------------------------- Threadneedle Global Equity 6.13 0.9425 6.50 ---------------------------------------------------------------------------------------------- Threadneedle Global Equity Income 8.49 0.9425 9.01 ---------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha 17.65 0.9425 18.73 ---------------------------------------------------------------------------------------------- Threadneedle International Opportunity 7.70 0.9425 8.17 ----------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 79
PUBLIC NET ASSET 1.0 MINUS MAXIMUM OFFERING FUND VALUE SALES CHARGE PRICE ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 ---------------------------------------------------------------------------------------------- RiverSource Intermediate Tax-Exempt $ 4.87 0.9700 $ 5.02 ---------------------------------------------------------------------------------------------- RiverSource Mid Cap Growth 5.24 0.9425 5.56 ---------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Bond 3.37 0.9525 3.54 ---------------------------------------------------------------------------------------------- RiverSource Tax-Exempt High Income 3.72 0.9525 3.91 ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 ---------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Money Market 1.00 No sales charge 1.00 ----------------------------------------------------------------------------------------------
CLASS A - LETTER OF INTENT (LOI) If you intend to invest $50,000 or more over a period of time, you may be able to reduce the sales charge you pay on investments in Class A by completing a LOI form and committing to invest a certain amount. The LOI must be filed with and accepted in good order by the RiverSource Fund Distributors, Inc., the distributor of the funds (the distributor). The LOI can start at any time and you will have up to 13 months to fulfill your commitment. Existing Rights of Accumulation (ROA) can be included for purposes of meeting your commitment under the LOI. For example, a shareholder currently has $60,000 ROA in the funds. Shareholder completes an LOI to invest $100,000 in the funds (ROA eligible accounts). Shareholder only needs to invest an additional $40,000 in the funds' Class A shares over the next 13 months in order to fulfill the LOI commitment, during which time the shareholder receives reduced front-end sales charge(s) on investments. Your investments during this 13-month period will be charged the sales charge that applies to the amount you have committed to invest under the LOI. A portion of your commitment will be invested in Class A shares and placed in escrow. At the end of the 13-month period, the LOI will end and the shares will be released from escrow (less any amount necessary to pay sales charges to the extent the LOI commitment was not met, as described below). Once the LOI has ended or your investments entitle you to a lower sale charge than would otherwise be available to you under the LOI, future sales charges will be determined by ROA as described in the prospectus. If you do not invest the commitment amount by the end of the 13-month period, the remaining unpaid sales charge will be redeemed from the escrowed shares and the remaining balance released from escrow. The commitment amount does not include purchases in any class of funds other than Class A; does not include any new reinvested dividends and directed dividends earned in any funds during the 13-month period; purchases in funds held within a wrap product; and purchases of money market funds unless they are subsequently exchanged to Class A shares of a fund within the 13-month period. A LOI is not an option (absolute right) to buy shares. If you purchase shares through different channels, for example, in a brokerage account or through a third party, you must inform your financial intermediary in writing about the LOI when placing any purchase orders during the period of the LOI. If you do not complete and file the LOI form, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge. CLASS A SHARES Class A shares may be sold at net asset value to certain persons since such sales require less sales effort and lower sales-related expenses as compared with sales to the general public. If you are eligible to purchase Class A shares without a sales charge, you should inform your financial advisor, financial intermediary or the transfer agent of such eligibility and be prepared to provide proof thereof. For Class A shares purchased without a sales charge where a commission was separately paid by the distributor to an authorized financial intermediary effecting the purchase, a 1% CDSC may be charged if you sell your shares within 18 months after purchase. A CDSC will be based on the original purchase cost or the current market value of the shares being sold, whichever is less. INITIAL SALES CHARGE -- WAIVERS OF THE SALES CHARGE FOR CLASS A SHARES. Sales charges do not apply to: - shareholders whose original purchase was in a Strategist fund merged into a RiverSource fund in 2000. - participants of "eligible employee benefit plans" including 403(b) plans for which Ameriprise Financial Services, Inc. (Ameriprise Financial Services) serves as broker-dealer, and the school district or group received a written proposal from Ameriprise Financial Services between November 1, 2007 and December 31, 2008 (each a Qualifying 403(b) Plan). In order for participants in one of these 403(b) plans to receive this waiver, at least one participant account of the 403(b) plan must have been funded at Ameriprise Financial Services prior to December 31, 2009. This waiver may be discontinued for any Qualifying 403(b) Plan, in the sole discretion of the distributor, after December 31, 2009. - to separate accounts established and maintained by an insurance company which are exempt from registration under Section 3(c)(11) of the 1940 Act. Statement of Additional Information - Dec. 30, 2009 Page 80 - plans that (i) own Class B shares of any Seligman fund and (ii) participate in Seligman Growth 401(k) through Ascensus's (formerly BISYS) third party administration platform may, with new contributions, purchase Class A shares at net asset value. Class A shares purchased at net asset value are subject to a CDSC of 1% on shares purchased within 18 months prior to plan termination. - to participants in retirement and deferred compensation plans and trusts used to fund those plans, including but not limited to, those defined in Sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue Code and "rabbi trusts" for which Charles Schwab & Co., Inc. acts as broker dealer. - to participants in plans established at the transfer agent (Seligman funds only) prior to January 7, 2008, the plan had $500,000 or 50 participants when the shares were initially purchased. - to participants in retirement and benefit plans made through financial intermediaries that perform participant recordkeeping or other administrative services for the plans and that have entered into special arrangements as alliance program partners with the funds and/or the distributor specifically for such purchases. - to other investment companies in the RiverSource Family of Funds pursuant to a "fund of funds" arrangement. CDSC -- WAIVERS OF THE CDSC FOR CLASS A SHARES. The CDSC will be waived on sales of shares: - in connection with participation in the Merrill Lynch Small Market 401(k) Program, retirement programs administered or serviced by the Princeton Retirement Group, Paychex, ADP Retirement Services, Hartford Securities Distribution Company, Inc. or NYLIM Service Company LLC, retirement programs or accounts administered or serviced by Mercer HR Services, LLC or its affiliates, or retirement programs or accounts administered or serviced by firms that have a written agreement with the distributor that contemplates a waiver of CDSCs, provided that no sales commission or transaction fee was paid to such authorized financial institution at the time of purchase. CLASS B SHARES Class B shares have a CDSC for six years. Class B shares purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares purchased in a Seligman fund on or prior to June 12, 2009 will convert to Class A shares in the month prior to the ninth year of ownership. Class B shares purchased in a RiverSource fund beginning May 21, 2005 and Class B shares purchased in a Seligman fund beginning June 13, 2009 will convert to Class A shares one month after the completion of the eighth year of ownership. CDSC -- WAIVERS OF THE CDSC FOR CLASS B SHARES. The CDSC will be waived on sales of shares: - in connection with participation in the Merrill Lynch Small Market 401(k) Program, retirement programs administered or serviced by the Princeton Retirement Group, Paychex, ADP Retirement Services, Hartford Securities Distribution Company, Inc. or NYLIM Service Company LLC, retirement programs or accounts administered or serviced by Mercer HR Services, LLC or its affiliates, or retirement programs or accounts administered or serviced by firms that have a written agreement with the distributor that contemplates a waiver of CDSCs, provided that no sales commission or transaction fee was paid to such authorized financial institution at the time of purchase - for shares of RiverSource funds held in investment-only accounts (i.e. accounts where Ameriprise Trust Company does not act as the custodian) at Ameriprise Financial Services on behalf of a trust for an employee benefit plan - for shares of RiverSource funds held in IRAs or certain qualified plans, on or prior to June 12, 2009, such as Keogh plans, tax-sheltered custodial accounts or corporate pension plans where Ameriprise Trust Company is acting as custodian, provided that the shareholder is: - at least 59 1/2 years old and taking a retirement distribution (if the sale is part of a transfer to an IRA or qualified plan, or a custodian-to-custodian transfer, the CDSC will not be waived) OR - selling under an approved substantially equal periodic payment arrangement. CLASS C SHARES Class C shares are available to all investors. Class C shares are sold without a front-end sales charge. For Class C shares, a 1% CDSC may apply if shares are sold within one year after purchase. Class C shares are subject to a distribution fee. CDSC -- WAIVERS OF THE CDSC FOR CLASS C SHARES. The CDSC will be waived on sales of shares: - in connection with participation in the Merrill Lynch Small Market 401(k) Program, retirement programs administered or serviced by the Princeton Retirement Group, Paychex, ADP Retirement Services, Hartford Securities Distribution Company, Inc. or NYLIM Service Company LLC, retirement programs or accounts administered or serviced by Mercer HR Services, LLC or its affiliates, or retirement programs or accounts administered or serviced Statement of Additional Information - Dec. 30, 2009 Page 81 by firms that have a written agreement with the distributor that contemplates a waiver of CDSCs, provided that no sales commission or transaction fee was paid to such authorized financial institution at the time of purchase - for shares of RiverSource funds held in investment-only accounts (i.e. accounts where Ameriprise Trust Company does not act as the custodian) at Ameriprise Financial Services on behalf of a trust for an employee benefit plan and for shares of RiverSource funds held in tax-sheltered custodial accounts where Ameriprise Trust Company is the custodian, in cases where the sale is not a full liquidation of the Qualified Plan Account, and in cases where the sale is a full liquidation of a Qualified Plan Account held for the benefit of multiple plan participants, but the full liquidation is not the result of a mutual fund line-up (plan investment option) change or plan termination. CLASS D SHARES Class D shares are offered through wrap fee programs or other investment products. Class D shares are sold without a front-end sales charge or CDSC. Class D shares are subject to a distribution fee. CLASS E SHARES Class E shares are offered to qualifying institutional investors and brokerage accounts. Class E shares are sold without a front-end sales charge or CDSC. Class E shares are subject to a plan administration fee. CLASS I SHARES Class I shares are offered to qualifying institutional investors. Class I shares are sold without a front-end sales charge or CDSC. CLASS R SHARES Class R2, Class R3, Class R4 and Class R5 shares are offered to certain institutional investors. Class R2, Class R3, Class R4 and Class R5 shares are sold without a front-end sales charge or a CDSC. Class R2 and Class R3 shares are subject to a distribution fee. Class R2, Class R3 and R4 shares are subject to a plan administration fee. The following investors are eligible to purchase Class R2, Class R3, Class R4 and Class R5 shares: - Qualified employee benefit plans; - Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code; - Nonqualified deferred compensation plans; - State sponsored college savings plans established under Section 529 of the Internal Revenue Code; - Health Savings Accounts (HSAs) created pursuant to public law 108-173. Additionally, the following eligible investors may purchase Class R5 shares: - Institutional or corporate accounts above a threshold established by the distributor (currently $1 million per fund or $10 million in all RiverSource funds); and - Bank Trusts. CLASS W SHARES Class W shares are offered to qualifying discretionary accounts. Class W shares are sold without a front-end sales charge or CDSC. Class W shares are subject to a distribution fee. CLASS Y SHARES Class Y shares are offered to certain institutional investors. Class Y shares are sold without a front-end sales charge or a CDSC. Class Y shares are subject to a plan administration fee. The following investors are eligible to purchase Class Y shares: - Qualified employee benefit plans; - Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code; - Nonqualified deferred compensation plans; and - State sponsored college savings plans established under Section 529 of the Internal Revenue Code. In addition, for Class I, Class R and Class W shares, the distributor, in its sole discretion, may accept investments from other purchasers not listed above. Statement of Additional Information - Dec. 30, 2009 Page 82 FUND REORGANIZATIONS Class A shares may be issued without an initial sales charge in connection with the acquisition of cash and securities owned by other investment companies. Any CDSC will be waived in connection with the redemption of shares of the fund if the fund is combined with another fund or in connection with a similar reorganization transaction. REJECTION OF BUSINESS Each fund and the distributor of the fund reserve the right to reject any business, in their sole discretion. SELLING SHARES You have a right to sell your shares at any time. For an explanation of sales procedures, please see the applicable prospectus. During an emergency, the Board can suspend the computation of NAV, stop accepting payments for purchase of shares, or suspend the duty of a fund to redeem shares for more than seven days. Such emergency situations would occur if: - The Exchange closes for reasons other than the usual weekend and holiday closings or trading on the Exchange is restricted, or - Disposal of a fund's securities is not reasonably practicable or it is not reasonably practicable for the fund to determine the fair value of its net assets, or, - The SEC, under the provisions of the 1940 Act, declares a period of emergency to exist. Should a fund stop selling shares, the Board may make a deduction from the value of the assets held by the fund to cover the cost of future liquidations of the assets so as to distribute these costs fairly among all shareholders. Each fund has elected to be governed by Rule 18f-1 under the 1940 Act, which obligates the fund to redeem shares in cash, with respect to any one shareholder during any 90-day period, up to the lesser of $250,000 or 1% of the net assets of the fund at the beginning of the period. Although redemptions in excess of this limitation would normally be paid in cash, the fund reserves the right to make these payments in whole or in part in securities or other assets in case of an emergency, or if the payment of a redemption in cash would be detrimental to the existing shareholders of the fund as determined by the Board. In these circumstances, the securities distributed would be valued as set forth in this SAI. Should a fund distribute securities, a shareholder may incur brokerage fees or other transaction costs in converting the securities to cash. PAY-OUT PLANS You can use any of several pay-out plans to redeem your investment in regular installments. If you redeem shares, you may be subject to a contingent deferred sales charge as discussed in the prospectus. While the plans differ on how the pay-out is figured, they all are based on the redemption of your investment. Net investment income dividends and any capital gain distributions will automatically be reinvested, unless you elect to receive them in cash. If you redeem an IRA or a qualified retirement account, certain restrictions, federal tax penalties, and special federal income tax reporting requirements may apply. You should consult your tax advisor about this complex area of the tax law. Applications for a systematic investment in a class of a fund subject to a sales charge normally will not be accepted while a pay-out plan for any of those funds is in effect. Occasional investments, however, may be accepted. To start any of these plans, please consult your financial intermediary. Your authorization must be received at least five days before the date you want your payments to begin. Payments will be made on a monthly, bimonthly, quarterly, semiannual, or annual basis. Your choice is effective until you change or cancel it. CAPITAL LOSS CARRYOVER For federal income tax purposes, certain funds had total capital loss carryovers at the end of the most recent fiscal period that, if not offset by subsequent capital gains, will expire as provided in the table below. Because the measurement periods for a regulated investment company's income are different for excise tax purposes verses income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the funds are permitted to treat net capital losses realized between November 1 and its fiscal year end ("post-October loss") as occurring on the first day of the following tax year. The total capital loss carryovers below include post-October losses, if applicable. It is unlikely that the Board will authorize a distribution of any net realized capital gains until the available capital loss Statement of Additional Information - Dec. 30, 2009 Page 83 carryover has been offset or has expired except as required by Internal Revenue Service rules. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 11. CAPITAL LOSS CARRYOVER
TOTAL AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT CAPITAL LOSS EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING FUND CARRYOVERS IN 2009 IN 2010 IN 2011 IN 2012 IN 2013 IN 2014 ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Basic Income $ 8,559,573 $0 $ 0 $0 $0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Enhanced Income $13,065,266 $0 $ 0 $0 $0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Moderate Income $19,970,659 $0 $ 0 $0 $0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Aggressive $10,806,229 $0 $ 0 $0 $0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Conservative $ 192,230 $0 $ 0 $0 $0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate $10,391,694 $0 $ 0 $0 $0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Aggressive $13,834,899 $0 $ 0 $0 $0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Conservative $ 2,290,537 $0 $ 0 $0 $0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Total Equity $11,256,800 $0 $ 0 $0 $0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource S&P 500 Index $ 5,965,014 $0 $942,797 $0 $0 $2,640,220 $235,890 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Small Company Index $22,588,242 $0 $ 0 $0 $0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------------------- AMOUNT AMOUNT AMOUNT AMOUNT EXPIRING EXPIRING EXPIRING EXPIRING FUND IN 2015 IN 2016 IN 2017 IN 2018 ------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 ------------------------------------------------------------------------------------ RiverSource Income Builder Basic Income $ 0 $0 $2,942,103 $ 5,617,470 ------------------------------------------------------------------------------------ RiverSource Income Builder Enhanced Income $ 0 $0 $5,920,892 $ 7,144,374 ------------------------------------------------------------------------------------ RiverSource Income Builder Moderate Income $ 0 $0 $7,376,558 $12,594,101 ------------------------------------------------------------------------------------ RiverSource Portfolio Builder Aggressive $ 0 $0 $2,936,474 $ 7,869,755 ------------------------------------------------------------------------------------ RiverSource Portfolio Builder Conservative $ 0 $0 $ 0 $ 192,230 ------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate $ 0 $0 $7,597,638 $ 2,794,056 ------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Aggressive $ 0 $0 $1,997,917 $11,836,982 ------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Conservative $ 0 $0 $1,062,939 $ 1,227,598 ------------------------------------------------------------------------------------ RiverSource Portfolio Builder Total Equity $ 0 $0 $3,787,911 $ 7,468,889 ------------------------------------------------------------------------------------ RiverSource S&P 500 Index $66,065 $0 $ 0 $ 2,080,042 ------------------------------------------------------------------------------------ RiverSource Small Company Index $ 0 $0 $ 0 $22,588,242 ------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 84
TOTAL AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT CAPITAL LOSS EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING FUND CARRYOVERS IN 2009 IN 2010 IN 2011 IN 2012 IN 2013 ------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 ------------------------------------------------------------------------------------------------------------------------ RiverSource Equity Value $ 102,840,472 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Partners Small Cap Growth $ 46,052,763 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Precious Metals and Mining $ 27,030,083 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 ------------------------------------------------------------------------------------------------------------------------ RiverSource 120/20 Contrarian Equity $ 8,822,619 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Recovery and Infrastructure $ 0 -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------ RiverSource Retirement Plus 2010 $ 2,839,371 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Retirement Plus 2015 $ 3,165,812 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Retirement Plus 2020 $ 4,016,808 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Retirement Plus 2025 $ 3,000,254 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Retirement Plus 2030 $ 1,777,786 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Retirement Plus 2035 $ 900,438 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Retirement Plus 2040 $ 622,124 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Retirement Plus 2045 $ 301,915 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 ------------------------------------------------------------------------------------------------------------------------ RiverSource High Yield Bond $1,283,661,310 $0 $517,121,802 $552,664,309 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Partners Aggressive Growth $ 528,390,106 $0 $315,348,050 $23,741,111 $27,111,944 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Partners Fundamental Value $ 100,708,798 $0 $0 $0 -- -- ------------------------------------------------------------------------------------------------------------------------ RiverSource Partners Select Value $ 111,922,284 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Partners Small Cap Equity $ 65,709,663 $0 $7,164,740 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Partners Small Cap Value $ 93,886,708 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Short Duration U.S. Government $ 88,365,852 $0 $0 $0 $0 $36,267,962 ------------------------------------------------------------------------------------------------------------------------ RiverSource U.S. Government Mortgage $ 13,435,568 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 ------------------------------------------------------------------------------------------------------------------------ RiverSource Dividend Opportunity $ 535,432,960 $0 $0 $343,927,468 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Real Estate $ 48,042,039 -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------ AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING FUND IN 2014 IN 2015 IN 2016 IN 2017 IN 2018 --------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 --------------------------------------------------------------------------------------------------- RiverSource Equity Value $0 $0 $0 $25,779,763 $77,060,709 --------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Growth $0 $0 $0 $12,606,381 $33,446,382 --------------------------------------------------------------------------------------------------- RiverSource Precious Metals and Mining $0 $0 $0 $16,291,615 $10,738,468 --------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 --------------------------------------------------------------------------------------------------- RiverSource 120/20 Contrarian Equity $0 $0 $0 $3,090,734 $5,731,885 --------------------------------------------------------------------------------------------------- RiverSource Recovery and Infrastructure -- -- -- -- -- --------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2010 $0 $0 $0 $428,181 $2,411,190 --------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2015 $0 $0 $0 $704,342 $2,461,470 --------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2020 $0 $0 $0 $502,050 $3,514,758 --------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2025 $0 $0 $0 $662,473 $2,337,781 --------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2030 $0 $0 $0 $623,604 $1,154,182 --------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2035 $0 $0 $0 $312,553 $587,885 --------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2040 $0 $0 $0 $370,260 $251,864 --------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2045 $0 $0 $0 $84,212 $217,703 --------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 --------------------------------------------------------------------------------------------------- RiverSource High Yield Bond $19,078,058 $0 $6,050,907 $110,841,094 $77,905,140 --------------------------------------------------------------------------------------------------- RiverSource Partners Aggressive Growth $0 $0 $0 $54,181,922 $108,007,079 --------------------------------------------------------------------------------------------------- RiverSource Partners Fundamental Value -- -- -- $26,053,833 $74,654,965 --------------------------------------------------------------------------------------------------- RiverSource Partners Select Value $0 $0 $0 $34,137,314 $77,784,970 --------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Equity $0 $0 $0 $15,394,778 $43,150,145 --------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Value $0 $0 $0 $20,926,946 $72,959,762 --------------------------------------------------------------------------------------------------- RiverSource Short Duration U.S. Government $20,469,230 $9,579,187 $0 $3,846,817 $18,202,656 --------------------------------------------------------------------------------------------------- RiverSource U.S. Government Mortgage $0 $0 $0 $410,120 $13,025,448 --------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 --------------------------------------------------------------------------------------------------- RiverSource Dividend Opportunity $0 $0 $0 $36,972,874 $154,532,618 --------------------------------------------------------------------------------------------------- RiverSource Real Estate -- -- -- $1,114,883 $46,927,156 ---------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 85
TOTAL AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT CAPITAL LOSS EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING FUND CARRYOVERS IN 2009 IN 2010 IN 2011 IN 2012 IN 2013 ------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 ------------------------------------------------------------------------------------------------------------------------ RiverSource Cash Management $ 15,893,171 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Disciplined Equity $704,651,838 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Disciplined Small and Mid Cap Equity $ 37,163,240 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Disciplined Small Cap Value $ 14,620,644 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Floating Rate $ 70,681,206 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Income Opportunities $ 25,537,605 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Inflation Protected Securities $ 28,705,143 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Limited Duration Bond $ 17,251,758 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 ------------------------------------------------------------------------------------------------------------------------ RiverSource California Tax-Exempt $ 2,622,059 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Diversified Bond $248,546,506 $0 $49,658,521 $0 $5,227,159 $3,354,885 ------------------------------------------------------------------------------------------------------------------------ RiverSource Minnesota Tax-Exempt $ 2,322,451 $0 $0 $0 $0 $1,199,755 ------------------------------------------------------------------------------------------------------------------------ RiverSource New York Tax- Exempt $ 897,923 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING FUND IN 2014 IN 2015 IN 2016 IN 2017 IN 2018 --------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 --------------------------------------------------------------------------------------------------- RiverSource Cash Management $0 $0 $6,554 $7,357,069 $8,529,548 --------------------------------------------------------------------------------------------------- RiverSource Disciplined Equity $0 $0 $0 $63,499,369 $641,152,469 --------------------------------------------------------------------------------------------------- RiverSource Disciplined Small and Mid Cap Equity $93,125 $21,904 $2,186,828 $19,133,377 $15,728,006 --------------------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value $0 $0 $554,680 $6,233,070 $7,832,894 --------------------------------------------------------------------------------------------------- RiverSource Floating Rate $0 $33,562 $3,488,601 $29,093,899 $38,065,144 --------------------------------------------------------------------------------------------------- RiverSource Income Opportunities $0 $0 $1,946,556 $16,249,078 $7,341,971 --------------------------------------------------------------------------------------------------- RiverSource Inflation Protected Securities $0 $0 $0 $8,424,851 $20,280,292 --------------------------------------------------------------------------------------------------- RiverSource Limited Duration Bond $0 $2,206,552 $0 $825,807 $14,219,399 --------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 --------------------------------------------------------------------------------------------------- RiverSource California Tax-Exempt $0 $0 $359,905 $1,247,347 $1,014,807 --------------------------------------------------------------------------------------------------- RiverSource Diversified Bond $10,357,129 $0 $0 $3,705,819 $176,242,993 --------------------------------------------------------------------------------------------------- RiverSource Minnesota Tax-Exempt $913,006 $3,601 $0 $206,089 $0 --------------------------------------------------------------------------------------------------- RiverSource New York Tax- Exempt $0 $0 $3,664 $341,015 $553,244 ---------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 86
TOTAL AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT CAPITAL LOSS EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING FUND CARRYOVERS IN 2009 IN 2010 IN 2011 IN 2012 IN 2013 ------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 ------------------------------------------------------------------------------------------------------------------------ RiverSource Balanced $ 888,451,981 $0 $294,910,142 $368,676,980 $24,886,878 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Disciplined Large Cap Growth $ 41,243,744 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Disciplined Large Cap Value $ 0 -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------ RiverSource Diversified Equity Income $1,110,095,393 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Mid Cap Value $ 566,727,070 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Strategic Allocation $ 346,850,712 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Strategic Income Allocation $ 11,336,901 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ Seligman California Municipal High-Yield $ 0 -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------ Seligman California Municipal Quality $ 0 -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------ Seligman Minnesota Municipal $ 0 -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------ Seligman National Municipal $ 2,099,958 $0 $996,330 $0 $505,484 $0 ------------------------------------------------------------------------------------------------------------------------ Seligman New York Municipal $ 0 -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------ Seligman TargETFund 2015 $ 7,102,014 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ Seligman TargETFund 2025 $ 1,803,909 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ Seligman TargETFund 2035 $ 256,357 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ Seligman TargETFund 2045 $ 541,844 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ Seligman TargETFund Core $ 12,588,348 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING FUND IN 2014 IN 2015 IN 2016 IN 2017 IN 2018 --------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 --------------------------------------------------------------------------------------------------- RiverSource Balanced $0 $8,027,521 $22,923,709 $38,698,637 $130,328,114 --------------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Growth $0 $0 $0 $14,271,533 $26,972,211 --------------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Value -- -- -- -- -- --------------------------------------------------------------------------------------------------- RiverSource Diversified Equity Income $0 $0 $0 $46,346,713 $1,063,748,680 --------------------------------------------------------------------------------------------------- RiverSource Mid Cap Value $0 $0 $0 $47,902,744 $518,824,326 --------------------------------------------------------------------------------------------------- RiverSource Strategic Allocation $0 $0 $0 $21,514,298 $325,336,414 --------------------------------------------------------------------------------------------------- RiverSource Strategic Income Allocation $0 $0 $0 $631,381 $10,705,520 --------------------------------------------------------------------------------------------------- Seligman California Municipal High-Yield -- -- -- -- -- --------------------------------------------------------------------------------------------------- Seligman California Municipal Quality -- -- -- -- -- --------------------------------------------------------------------------------------------------- Seligman Minnesota Municipal -- -- -- -- -- --------------------------------------------------------------------------------------------------- Seligman National Municipal $0 $0 $598,144 $0 $0 --------------------------------------------------------------------------------------------------- Seligman New York Municipal -- -- -- -- -- --------------------------------------------------------------------------------------------------- Seligman TargETFund 2015 $0 $0 $0 $1,531,175 $5,570,839 --------------------------------------------------------------------------------------------------- Seligman TargETFund 2025 $0 $0 $0 $158,889 $1,645,020 --------------------------------------------------------------------------------------------------- Seligman TargETFund 2035 $0 $0 $0 $40,056 $216,301 --------------------------------------------------------------------------------------------------- Seligman TargETFund 2045 $0 $0 $0 $25,322 $516,522 --------------------------------------------------------------------------------------------------- Seligman TargETFund Core $0 $0 $0 $901,259 $11,687,089 ---------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 87
TOTAL AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT CAPITAL LOSS EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING FUND CARRYOVERS IN 2009 IN 2010 IN 2011 IN 2012 IN 2013 IN 2014 ----------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 ----------------------------------------------------------------------------------------------------------------------- RiverSource Absolute Return Currency and Income $ 5,945,153 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined International Equity $285,672,442 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------- RiverSource Emerging Markets Bond $ 17,157,025 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------- RiverSource Global Bond $ 15,099,745 $ 0 $ 3,665,049 $ 0 $ 0 $ 0 $498,771 ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners International Select Growth $185,090,340 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners International Select Value $340,858,587 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners International Small Cap $ 36,130,012 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------- Seligman Frontier $ 8,888,714 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------- Seligman Global Technology $294,571,144 $ 0 $193,291,798 $17,073,210 $ 0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------- Threadneedle Asia Pacific $ 0 -- -- -- -- -- -- ----------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets $ 98,672,638 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------- Threadneedle European Equity $ 44,533,168 $ 0 $ 16,514,517 $ 5,021,215 $ 0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity $339,519,748 $ 0 $143,688,441 $30,509,951 $ 0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income $ 1,477,274 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha $ 1,407,944 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------- Threadneedle International Opportunity $204,715,335 $ 0 $ 59,231,998 $38,262,972 $ 0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------------------- AMOUNT AMOUNT AMOUNT AMOUNT EXPIRING EXPIRING EXPIRING EXPIRING FUND IN 2015 IN 2016 IN 2017 IN 2018 ----------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 ----------------------------------------------------------------------------------- RiverSource Absolute Return Currency and Income $ 0 $ 0 $ 5,945,153 $ 0 ----------------------------------------------------------------------------------- RiverSource Disciplined International Equity $ 0 $23,521,188 $262,151,254 $ 0 ----------------------------------------------------------------------------------- RiverSource Emerging Markets Bond $ 0 $ 2,399,388 $ 14,757,637 $ 0 ----------------------------------------------------------------------------------- RiverSource Global Bond $ 0 $ 2,328,738 $ 8,607,187 $ 0 ----------------------------------------------------------------------------------- RiverSource Partners International Select Growth $ 823,328 $67,466,960 $116,800,052 $ 0 ----------------------------------------------------------------------------------- RiverSource Partners International Select Value $ 0 $ 0 $340,858,587 $ 0 ----------------------------------------------------------------------------------- RiverSource Partners International Small Cap $ 0 $16,740,416 $ 19,389,596 $ 0 ----------------------------------------------------------------------------------- Seligman Frontier $ 0 $ 1,048,243 $ 7,840,471 $ 0 ----------------------------------------------------------------------------------- Seligman Global Technology $17,310,562 $37,526,708 $ 29,368,866 $ 0 ----------------------------------------------------------------------------------- Threadneedle Asia Pacific -- -- -- -- ----------------------------------------------------------------------------------- Threadneedle Emerging Markets $ 0 $28,498,591 $ 70,174,047 $ 0 ----------------------------------------------------------------------------------- Threadneedle European Equity $ 0 $ 4,272,956 $ 18,724,480 $ 0 ----------------------------------------------------------------------------------- Threadneedle Global Equity $ 2,715,902 $62,625,028 $ 99,980,426 $ 0 ----------------------------------------------------------------------------------- Threadneedle Global Equity Income $ 0 $ 182,867 $ 1,294,407 $ 0 ----------------------------------------------------------------------------------- Threadneedle Global Extended Alpha $ 0 $ 577,229 $ 830,715 $ 0 ----------------------------------------------------------------------------------- Threadneedle International Opportunity $ 0 $12,069,463 $ 95,150,902 $ 0 -----------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 88
TOTAL AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT CAPITAL LOSS EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING FUND CARRYOVERS IN 2008 IN 2009 IN 2010 IN 2011 IN 2012 ------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 ------------------------------------------------------------------------------------------------------------------------ RiverSource Intermediate Tax-Exempt $ 538,998 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Mid Cap Growth $21,448,607 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Tax-Exempt Bond $ 9,775,831 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ RiverSource Tax-Exempt High Income $30,950,938 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 ------------------------------------------------------------------------------------------------------------------------ RiverSource Tax-Exempt Money Market $ 675 $0 $0 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING FUND IN 2013 IN 2014 IN 2015 IN 2016 IN 2017 --------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 --------------------------------------------------------------------------------------------------- RiverSource Intermediate Tax-Exempt $0 $177,580 $0 $361,418 $0 --------------------------------------------------------------------------------------------------- RiverSource Mid Cap Growth $0 $0 $0 $21,448,607 $0 --------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Bond $0 $729,270 $0 $9,046,561 $0 --------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt High Income $0 $0 $0 $30,950,938 $0 --------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 --------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Money Market $675 $0 $0 $0 $0 ---------------------------------------------------------------------------------------------------
TAXES SUBCHAPTER M COMPLIANCE Each fund has elected to be taxed under Subchapter M of the Internal Revenue Code as a regulated investment company. Each fund intends to maintain its qualification as a regulated investment company by meeting certain requirements relating to distributions, source of income, and asset diversification. Distribution requirements include distributing at least 90% of the fund's investment company taxable income (which includes net short-term capital gains) and tax-exempt ordinary income to fund shareholders each taxable year. The source of income rules require that at least 90% of the fund's gross income be derived from dividends, interest, certain payments with respect to securities loans, gain from the sale or other disposition of stock, securities or foreign currencies (subject to certain limitations), and certain other income derived with respect to its business of investing in stock, securities or currencies, and net income from certain interests in qualified publicly traded partnerships. Asset diversification requirements are met when the fund owns, at the end of each quarter of its taxable year, a portfolio, 50% of which includes cash and cash items, U.S. government securities, securities of other regulated investment companies and, securities of other issuers in which the fund has not invested more than 5% of the value of the fund's assets (or 10% of the value of the outstanding voting securities of any one issuer). Also, no more than 25% of the fund's assets may be invested in the securities of any one issuer or two or more issuers which the fund controls and which are engaged in the same or similar trades or businesses (excepting U.S. government securities and securities of other regulated investment companies) or the securities of one or more qualified publicly traded partnerships. This is a simplified description of the relevant laws. If the fund fails to qualify as a regulated investment company under Subchapter M, the fund would be taxed as a corporation on the entire amount of its taxable income (including its capital gain) without a dividends paid deduction. Also, "all of" a shareholder's distributions would generally be taxable to shareholders as qualified dividend income (QDI) (or could be treated as a return of capital, if there weren't sufficient earnings and profits) and generally would be eligible for the dividends received deduction in the case of corporate shareholders. Under federal tax law, by the end of a calendar year a fund must declare and pay dividends representing 98% of ordinary income for that calendar year and 98% of net capital gains (both long-term and short-term) for the 12-month period ending Oct. 31 of that calendar year. The fund is subject to an excise tax equal to 4% of the excess, if any, of the amount required to be distributed over the amount actually distributed. Each fund intends to comply with federal tax law and avoid any excise tax. For purposes of the excise tax distributions, section 988 ordinary gains and losses are distributable based on an Oct. 31 year end. This is an exception to the general rule that ordinary income is paid based on a calendar year end. The fund intends to distribute sufficient dividends within each calendar year, as well as on a fiscal year basis, to avoid income and excise taxes. A fund may be subject to U.S. taxes resulting from holdings in passive foreign investment companies (PFIC). To avoid unfavorable tax consequences, a fund may make an election to mark to market its PFIC investments. A foreign corporation is a PFIC when 75% or more of its gross income for the taxable year is passive income or 50% or more of the average value of its assets consists of assets that produce or could produce passive income. Income earned by a fund may have had foreign taxes imposed and withheld on it in foreign countries. Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes. If more than 50% of a fund's total assets at the close of its fiscal year consists of securities of foreign corporations, the fund will be eligible to file an election with the Statement of Additional Information - Dec. 30, 2009 Page 89 Internal Revenue Service (IRS) under which shareholders of the fund would be required to include their pro rata portions of foreign taxes withheld by foreign countries as gross income in their federal income tax returns. These pro rata portions of foreign taxes withheld may be taken as a credit or deduction in computing the shareholders' federal income taxes. If the election is filed, the fund will report to its shareholders the per share amount of such foreign taxes withheld and the amount of foreign tax credit or deduction available for federal income tax purposes. A fund may use equalization payments to satisfy its requirement to make distributions of net investment income and capital gain net income. Equalization payments occur when a fund allocates a portion of its net investment income and realized capital gain net income to redemptions of fund shares. These payments reduce the amount of taxable distributions paid to shareholders. The IRS has not issued any guidance concerning the methods used to allocate investment income and capital gain to redemptions of shares. If the IRS determines that a fund is using an improper method of allocation for these purposes, the fund may be liable for additional federal income tax. This is a brief summary that relates to federal income taxation only. Shareholders should consult their tax advisor as to the application of federal, state, and local income tax laws to fund distributions. See Appendix B for more information regarding state tax-exempt funds. EXCHANGES, PURCHASES AND SALES For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. If you sell shares for less than their cost, the difference is a capital loss. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held more than one year). Capital gain of a non-corporate U.S. shareholder that is recognized in a taxable year beginning before January 1, 2011 is generally taxed at a maximum rate of 15% in respect of shares held for more than one year. Net capital gain of a corporate shareholder is taxed at the same rate as ordinary income. However, if shares on which a long-term capital gain distribution has been received are subsequently sold or redeemed and such shares have been held for six months or less (after taking into account certain hedging transactions), any loss realized will be treated as long-term capital loss to the extent that it does not exceed the long-term capital gain distribution. A capital loss on a sale or redemption of a security in a nonqualified account may be disallowed for tax purposes if the same or a substantially identical security is purchased or acquired (including shares acquired through dividend reinvestment) within 30 days before or after the date of the loss transaction. This is called a wash sale. When a wash sale occurs, the loss is disallowed to the extent of shares repurchased, and the cost basis on the security acquired is increased by the amount of the loss that is disallowed. The loss is disallowed in a nonqualified account whether the purchase is in a nonqualified account or in an IRA or Roth IRA, however, an individual's cost basis in an IRA or Roth IRA is not increased due to the wash sale rules. The wash sale rules apply only to capital losses. Sales of securities that result in capital gains are generally recognized when incurred. If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. FOR EXAMPLE You purchase 100 shares of an equity fund having a public offering price of $10.00 per share. With a sales load of 5.75%, you pay $57.50 in sales load. With a NAV of $9.425 per share, the value of your investment is $942.50. Within 91 days of purchasing that fund, you decide to exchange out of that fund, now at a NAV of $11.00 per share, up from the original NAV of $9.425, and purchase a second fund, at a NAV of $15.00 per share. The value of your investment is now $1,100.00 ($11.00 x 100 shares). You cannot use the $57.50 paid as a sales load when calculating your tax gain or loss in the sale of the first fund shares. So instead of having a $100.00 gain ($1,100.00 - $1,000.00), you have a $157.50 gain ($1,100.00 - $942.50). You can include the $57.50 sales load in the calculation of your tax gain or loss when you sell shares in the second fund. The following paragraphs provide information based on a fund's investment category. You can find your fund's investment category in Table 1. FOR STATE TAX-EXEMPT FIXED INCOME AND TAX-EXEMPT FIXED INCOME FUNDS, all distributions of net investment income during the fund's fiscal year will have the same percentage designated as tax-exempt. This percentage is expected to be substantially the same as the percentage of tax-exempt income actually earned during any particular distribution period. Statement of Additional Information - Dec. 30, 2009 Page 90 FOR BALANCED, EQUITY, FUNDS-OF-FUNDS, TAXABLE MONEY MARKET AND TAXABLE FIXED INCOME FUNDS, if you have a nonqualified investment in a fund and you wish to move part or all of those shares to an IRA or qualified retirement account in the fund, you can do so without paying a sales charge. However, this type of exchange is considered a redemption of shares and may result in a gain or loss for tax purposes. See wash sale discussion above. In addition, this type of exchange may result in an excess contribution under IRA or qualified plan regulations if the amount exchanged exceeds annual contribution limitations. You should consult your tax advisor for further details about this complex subject. DISTRIBUTIONS DIVIDENDS Net investment income dividends (other than qualified dividend income) received and distributions from the excess of net short-term capital gains over net long- term capital losses should be treated as ordinary income for federal income tax purposes. Corporate shareholders are generally entitled to a deduction equal to 70% of that portion of a fund's dividend that is attributable to dividends the fund received from domestic (U.S.) securities. If there is debt-financed portfolio stock, that is, bank financing is used to purchase long securities, the 70% dividends received deduction would be reduced by the average amount of portfolio indebtedness divided by the average adjusted basis in the stock. This does not impact the qualified dividend income available to individual shareholders. For the most recent fiscal period, net investment income dividends qualified for the corporate deduction are shown in the following table. Only certain QDI will be subject to the 15% and 0% (for lower-bracket taxpayers) tax rates for 2008-2010. QDI is dividends earned from domestic corporations and qualified foreign corporations. Qualified foreign corporations are corporations incorporated in a U.S. possession, corporations whose stock is readily tradable on an established U.S. securities market (ADRs), and certain other corporations eligible for relief under an income tax treaty with the U.S. that includes an exchange of information agreement. PFICs are excluded from this treatment. Holding periods for shares must also be met to be eligible for QDI treatment (more than 60 days for common stock and more than 90 days for certain preferred's dividends). Dividends declared in October, November or December, payable to shareholders of record on a specified date in such a month and paid in the following January will be treated as having been paid by a fund and received by each shareholder in December. Under this rule, therefore, shareholders may be taxed in one year on dividends or distributions actually received in January of the following year. The QDI for individuals for the most recent fiscal period is shown in the table below. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 12. CORPORATE DEDUCTION AND QUALIFIED DIVIDEND INCOME
PERCENT OF DIVIDENDS QUALIFYING QUALIFIED DIVIDEND INCOME FUND FOR CORPORATE DEDUCTION FOR INDIVIDUALS -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 -------------------------------------------------------------------------------------------------- RiverSource Income Builder Basic Income 13.39% 15.15% -------------------------------------------------------------------------------------------------- RiverSource Income Builder Enhanced Income 10.32 14.00 -------------------------------------------------------------------------------------------------- RiverSource Income Builder Moderate Income 14.02 16.58 -------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Aggressive 36.36 52.12 -------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Conservative 5.23 7.20 -------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate 12.95 18.45 -------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Aggressive 20.91 29.91 -------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Conservative 8.87 12.44 -------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Total Equity 69.21 99.47 -------------------------------------------------------------------------------------------------- RiverSource S&P 500 Index 100.00 100.00 -------------------------------------------------------------------------------------------------- RiverSource Small Company Index 100.00 100.00 -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 -------------------------------------------------------------------------------------------------- RiverSource Equity Value 100.00 100.00 -------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Growth 0 0 -------------------------------------------------------------------------------------------------- RiverSource Precious Metals and Mining 1.27 7.08 --------------------------------------------------------------------------------------------------
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PERCENT OF DIVIDENDS QUALIFYING QUALIFIED DIVIDEND INCOME FUND FOR CORPORATE DEDUCTION FOR INDIVIDUALS -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 -------------------------------------------------------------------------------------------------- RiverSource 120/20 Contrarian Equity 0% 0% -------------------------------------------------------------------------------------------------- RiverSource Recovery and Infrastructure 0 0 -------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2010 24.54 35.75 -------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2015 31.08 46.03 -------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2020 34.11 56.35 -------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2025 0 0 -------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2030 37.40 63.51 -------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2035 37.91 63.80 -------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2040 100.00 100.00 -------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2045 38.94 64.17 -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 -------------------------------------------------------------------------------------------------- RiverSource High Yield Bond 0 0 -------------------------------------------------------------------------------------------------- RiverSource Partners Aggressive Growth 0 0 -------------------------------------------------------------------------------------------------- RiverSource Partners Fundamental Value 100.00 100.00 -------------------------------------------------------------------------------------------------- RiverSource Partners Select Value 100.00 100.00 -------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Equity 0 0 -------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Value 0 0 -------------------------------------------------------------------------------------------------- RiverSource Short Duration U.S. Government 0 0 -------------------------------------------------------------------------------------------------- RiverSource U.S. Government Mortgage 0 0 -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 -------------------------------------------------------------------------------------------------- RiverSource Dividend Opportunity 90.66 100.00 -------------------------------------------------------------------------------------------------- RiverSource Real Estate 1.32 8.56 -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 -------------------------------------------------------------------------------------------------- RiverSource Cash Management 0 0 -------------------------------------------------------------------------------------------------- RiverSource Disciplined Equity 100.00 100.00 -------------------------------------------------------------------------------------------------- RiverSource Disciplined Small and Mid Cap Equity 100.00 100.00 -------------------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value 100.00 100.00 -------------------------------------------------------------------------------------------------- RiverSource Floating Rate 0 0 -------------------------------------------------------------------------------------------------- RiverSource Income Opportunities 0 0 -------------------------------------------------------------------------------------------------- RiverSource Inflation Protected Securities 0 0 -------------------------------------------------------------------------------------------------- RiverSource Limited Duration Bond 0 0 -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 -------------------------------------------------------------------------------------------------- RiverSource California Tax-Exempt 0 0 -------------------------------------------------------------------------------------------------- RiverSource Diversified Bond 0 0 -------------------------------------------------------------------------------------------------- RiverSource Minnesota Tax-Exempt 0 0 -------------------------------------------------------------------------------------------------- RiverSource New York Tax-Exempt 0 0 --------------------------------------------------------------------------------------------------
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PERCENT OF DIVIDENDS QUALIFYING QUALIFIED DIVIDEND INCOME FUND FOR CORPORATE DEDUCTION FOR INDIVIDUALS -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 -------------------------------------------------------------------------------------------------- RiverSource Balanced 58.23% 67.65% -------------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Growth 100.00 100.00 -------------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Value 46.66 47.51 -------------------------------------------------------------------------------------------------- RiverSource Diversified Equity Income 100.00 100.00 -------------------------------------------------------------------------------------------------- RiverSource Mid Cap Value 100.00 100.00 -------------------------------------------------------------------------------------------------- RiverSource Strategic Allocation 85.51 94.62 -------------------------------------------------------------------------------------------------- RiverSource Strategic Income Allocation 0.31 1.00 -------------------------------------------------------------------------------------------------- Seligman California Municipal High-Yield 0 0 -------------------------------------------------------------------------------------------------- Seligman California Municipal Quality 0 0 -------------------------------------------------------------------------------------------------- Seligman Minnesota Municipal 0 0 -------------------------------------------------------------------------------------------------- Seligman National Municipal 0 0 -------------------------------------------------------------------------------------------------- Seligman New York Municipal 0 0 -------------------------------------------------------------------------------------------------- Seligman TargETFund 2015 53.63 87.73 -------------------------------------------------------------------------------------------------- Seligman TargETFund 2025 50.39 100.00 -------------------------------------------------------------------------------------------------- Seligman TargETFund 2035 48.74 100.00 -------------------------------------------------------------------------------------------------- Seligman TargETFund 2045 43.70 100.00 -------------------------------------------------------------------------------------------------- Seligman TargETFund Core 50.44 63.90 -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 -------------------------------------------------------------------------------------------------- RiverSource Absolute Return Currency and Income 0 0 -------------------------------------------------------------------------------------------------- RiverSource Disciplined International Equity 0.25 100.00 -------------------------------------------------------------------------------------------------- RiverSource Emerging Markets Bond 0 0 -------------------------------------------------------------------------------------------------- RiverSource Global Bond 0 0 -------------------------------------------------------------------------------------------------- RiverSource Partners International Select Growth 2.04 100.00 -------------------------------------------------------------------------------------------------- RiverSource Partners International Select Value 2.08 100.00 -------------------------------------------------------------------------------------------------- RiverSource Partners International Small Cap 0 0 -------------------------------------------------------------------------------------------------- Seligman Frontier 0 0 -------------------------------------------------------------------------------------------------- Seligman Global Technology 0 0 -------------------------------------------------------------------------------------------------- Threadneedle Asia Pacific 0 53.84 -------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets 0.27 81.67 -------------------------------------------------------------------------------------------------- Threadneedle European Equity 0 100.00 -------------------------------------------------------------------------------------------------- Threadneedle Global Equity 77.49 100.00 -------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income 29.74 100.00 -------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha 0 0 -------------------------------------------------------------------------------------------------- Threadneedle International Opportunity 0 100.00 -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 -------------------------------------------------------------------------------------------------- RiverSource Intermediate Tax-Exempt 0 0 -------------------------------------------------------------------------------------------------- RiverSource Mid Cap Growth 25.80 25.95 -------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Bond 0 0 -------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt High Income 0 0 --------------------------------------------------------------------------------------------------
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PERCENT OF DIVIDENDS QUALIFYING QUALIFIED DIVIDEND INCOME FUND FOR CORPORATE DEDUCTION FOR INDIVIDUALS -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 -------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Money Market 0% 0 % --------------------------------------------------------------------------------------------------
CAPITAL GAINS DISTRIBUTIONS Capital gain distributions, if any, received by shareholders (in cash or invested in additional shares) should be treated as long-term capital gains regardless of how long shareholders owned their shares. Short-term capital gains earned by a fund are paid to shareholders as part of their ordinary income dividend and are taxable as ordinary income. Special rates on capital gains may apply to sales of precious metals, if any, owned directly by a fund and to investments in REITs. Individual shareholders will be subject to federal income tax on distributions of net capital gains generally at a maximum rate of 15% if designated as derived from a fund's capital gains from property held for more than one year and recognized in the taxable years beginning before January 1, 2011. Net capital gain of a corporate shareholder is taxed at the same rate as ordinary income. Such distributions are not eligible for the dividends received deduction allowed to corporate shareholders. Shareholders receiving distributions in the form of additional shares issued by a fund will generally be treated for federal income tax purposes as having received a distribution in an amount equal to the cash that could have been elected to be received instead of the additional shares. Under the Internal Revenue Code of 1986 (the Code), gains or losses attributable to fluctuations in exchange rates that occur between the time a fund accrues interest or other receivables, or accrues expenses or other liabilities denominated in a foreign currency and the time the fund actually collects such receivables or pays such liabilities generally are treated as ordinary income or ordinary loss. Similarly, gains or losses on disposition of debt securities denominated in a foreign currency attributable to fluctuations in the value of the foreign currency between the date of acquisition of the security and the date of disposition may be treated as ordinary or capital gains or losses. These gains or losses, referred to under the Code as "section 988" gains or losses, may increase or decrease the amount of a fund's investment company taxable income to be distributed to its shareholders as ordinary income. RETURN OF CAPITAL If a mutual fund is the holder of record of any share of stock on the record date for any dividend payable with respect to the stock, the dividend will be included in gross income by the fund as of the later of (1) the date the share became ex-dividend or (2) the date the fund acquired the share. Because the dividends on some foreign equity investments may be received some time after the stock goes ex-dividend, and in certain rare cases may never be received by the fund, this rule may cause a fund to pay income to its shareholders that it has not actually received. To the extent that the dividend is never received, the fund will take a loss at the time that a determination is made that the dividend will not be received. If a fund's distributions exceed its current and accumulated earnings and profits, that portion of the fund's distributions will be treated as a return of capital to its shareholders. A return of capital is a return of a portion of the shareholder's original investment. A return of capital will generally not be taxable, however, any amounts received in excess of a shareholder's tax basis are treated as capital gain. Forms 1099 will be sent to shareholders to report any return of capital. WITHHOLDING Unless a shareholder provides a certified taxpayer identification number (social security number for individuals) on the account application or other document and certifies that the shareholder is not subject to backup withholding, the fund is required to withhold and remit to the IRS 28% backup withholding on taxable and exempt-interest dividends and redemptions. Shareholders should be aware that, under regulations promulgated by the IRS, a fund may be fined for each account for which a certified taxpayer identification number (social security number for individuals) is not provided. Taxation of a shareholder who, as to the United States, is a nonresident alien individual, foreign trust or estate, foreign corporation, or foreign partnership ("foreign shareholder") depends on whether the income from the fund is "effectively connected" with a U.S. trade or business carried on by such shareholder. If the income from the fund is not effectively connected with a U.S. trade or business carried on by a foreign shareholder, ordinary income and qualified dividends paid to such foreign shareholders generally will be subject to a 30% U.S. withholding tax under existing provisions of the Internal Revenue Code applicable to foreign individuals and entities unless a reduced rate of withholding or a withholding exemption is provided under applicable treaty or law. Nonresident shareholders are urged to consult their own tax advisers concerning the applicability of the U.S. withholding tax. If the income from the fund is effectively connected with a U.S. trade or business carried on by a foreign shareholder, then ordinary income dividends, qualified dividends, capital gain dividends, undistributed capital gains credited to such shareholder and any gains realized upon the sale of shares of the fund will be subject to U.S. federal income tax at the graduated rates applicable to U.S. citizens or domestic corporations. In the case of foreign non-corporate shareholders, the Statement of Additional Information - Dec. 30, 2009 Page 94 fund may be required to backup withhold U.S. federal income tax on distributions that are otherwise exempt from withholding tax (or taxable at a reduced treaty rate) unless such shareholders furnish the fund with proper documentation related to their foreign status. The tax consequences to a foreign shareholder entitled to claim the benefits of an applicable tax treaty may be different from those described herein. Foreign shareholders are urged to consult their own tax advisers with respect to the particular tax consequences to them of an investment in the fund, the procedure for claiming the benefit of a lower treaty rate and the applicability of foreign taxes. SELIGMAN TARGETFUNDS. Each of Seligman TargETFund 2045, Seligman TargETFund 2035, Seligman TargETFund 2025 and Seligman TargETFund 2015 (Target Date Funds) will automatically be combined with Seligman TargETFund Core during their respective target year. The investment manager expects each of these combinations to be effected as an acquisition of the assets and liabilities of the applicable Target Date Fund in exchange for shares of TargETFund Core at net asset value, with the shares of TargETFund Core then distributed to shareholders of the applicable Target Date Fund. Based on current tax rules, the investment manager expects the combination to be effected in a non-taxable transaction. Changes in such tax rules or applicable law or other developments could negatively impact the combination of the Target Date Funds with Seligman TargETFund Core. Due to the impossibility of predicting whether changes in law or other developments may impact the fairness or overall desirability of the combination of any two funds ten or more years in the future, the Board of the Seligman TargETFunds will evaluate each combination in the year it is scheduled to occur under the standards of Rule 17a-8 under the 1940 Act and general principles of fairness, and may approve modifications to the methodology or terminate the combination if it determines that doing so would be in the best interests of shareholders. Any modifications to the manner of combining funds will be presented to shareholders for approval if such approval is required under applicable law. SERVICE PROVIDERS INVESTMENT MANAGEMENT SERVICES RiverSource Investments is the investment manager for each fund. Under the Investment Management Services Agreements, the investment manager, subject to the policies set by the Board, provides investment management services to the funds. For Seligman funds, RiverSource Investments serves as the investment manager effective Nov. 7, 2008, with the completion of the acquisition of J. & W. Seligman & Co. Incorporated by RiverSource Investments and with shareholders having previously approved a new investment management services agreement between the funds and RiverSource Investments. For its services, the investment manager is paid a monthly fee based on the following schedule. Each class of a fund pays its proportionate share of the fee. The fee is calculated for each calendar day on the basis of net assets as of the close of the preceding day. TABLE 13. INVESTMENT MANAGEMENT SERVICES AGREEMENT FEE SCHEDULE
DAILY RATE ON ASSETS ANNUAL RATE AT LAST DAY OF MOST FUND (BILLIONS) EACH ASSET LEVEL RECENT FISCAL PERIOD --------------------------------------------------------------------------------------------------------------------------- RiverSource 120/20 Contrarian Equity First $0.25 0.950% 0.950% Next $0.25 0.930% Next $0.50 0.910% Over $1.0 0.890% ---------------------------------------------------------------------------------------------------------------------------
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DAILY RATE ON ASSETS ANNUAL RATE AT LAST DAY OF MOST FUND (BILLIONS) EACH ASSET LEVEL RECENT FISCAL PERIOD --------------------------------------------------------------------------------------------------------------------------- RiverSource Absolute Return Currency First $1.0 0.890% 0.890% and Income Next $1.0 0.865% Next $1.0 0.840% Next $3.0 0.815% Next $1.5 0.790% Next $1.5 0.775% Next $1.0 0.770% Next $5.0 0.760% Next $5.0 0.750% Next $4.0 0.740% Next $26.0 0.720% Over $50.0 0.700% --------------------------------------------------------------------------------------------------------------------------- RiverSource Balanced First $1.0 0.530% 0.530% Next $1.0 0.505% Next $1.0 0.480% Next $3.0 0.455% Next $1.5 0.430% Next $2.5 0.410% Next $5.0 0.390% Next $9.0 0.370% Over $24.0 0.350% --------------------------------------------------------------------------------------------------------------------------- RiverSource California Tax-Exempt First $0.25 0.410% RiverSource California - 0.410% RiverSource Minnesota Tax-Exempt Next $0.25 0.385% RiverSource Minnesota - 0.404% RiverSource New York Tax-Exempt Next $0.25 0.360% RiverSource New York - 0.410% Next $0.25 0.345% Next $6.5 0.320% Next $2.5 0.310% Next $5.0 0.300% Next $9.0 0.290% Next $26.0 0.270% Over $50.0 0.250% --------------------------------------------------------------------------------------------------------------------------- RiverSource Cash Management First $1.0 0.330 0.295% Next $0.5 0.313% Next $0.5 0.295% Next $0.5 0.278% Next $2.5 0.260% Next $1.0 0.240% Next $1.5 0.220% Next $1.5 0.215% Next $1.0 0.190% Next $5.0 0.180% Next $5.0 0.170% Next $4.0 0.160% Over $24.0 0.150% ---------------------------------------------------------------------------------------------------------------------------
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DAILY RATE ON ASSETS ANNUAL RATE AT LAST DAY OF MOST FUND (BILLIONS) EACH ASSET LEVEL RECENT FISCAL PERIOD --------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Equity First $1.0 0.600% RiverSource Disciplined Equity - 0.588% RiverSource Disciplined Large Cap RiverSource Disciplined Large Cap Next $1.0 0.575% Growth - 0.600% RiverSource Disciplined Large Cap Growth Next $1.0 0.550% Value - 0.600% RiverSource Diversified Equity RiverSource Disciplined Large Cap Value Next $3.0 0.525% Income - 0.558% RiverSource Diversified Equity Income Next $1.5 0.500% Next $2.5 0.485% Next $5.0 0.470% Next $5.0 0.450% Next $4.0 0.425% Next $26.0 0.400% Over $50.0 0.375% --------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined International RiverSource Disciplined International First $0.25 0.800% Equity - 0.788% Equity Next $0.25 0.775% Threadneedle Asia Pacific - 0.800% Threadneedle Asia Pacific Next $0.25 0.750% Threadneedle European Equity - 0.800% Threadneedle European Equity Next $0.25 0.725% Threadneedle Global Equity - 0.788% Threadneedle Global Equity Next $1.0 0.700% Threadneedle Global Equity Income - 0.800% Threadneedle International Threadneedle Global Equity Income Next $5.5 0.675% Opportunity - 0.790% Threadneedle International Opportunity Next $2.5 0.660% Next $5.0 0.645% Next $5.0 0.635% Next $4.0 0.610% Next $26.0 0.600% Over $50.0 0.570% --------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small and Mid First $1.0 0.700% RiverSource Disciplined Small and Mid Cap Cap Equity Next $1.0 0.675% Equity - 0.700% RiverSource Mid Cap Growth Next $1.0 0.650% RiverSource Mid Cap Growth - 0.700% Next $3.0 0.625% Next $1.5 0.600% Next $2.5 0.575% Next $5.0 0.550% Next $9.0 0.525% Next $26.0 0.500% Over $50.0 0.475% --------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value First $0.25 0.850% 0.850% Next $0.25 0.825% Next $0.25 0.800% Next $0.25 0.775% Next $1.0 0.750% Over $2.0 0.725% --------------------------------------------------------------------------------------------------------------------------- RiverSource Diversified Bond First $1.0 0.480 RiverSource Diversified Bond - 0.442% RiverSource Limited Duration Bond Next $1.0 0.455% RiverSource Limited Duration Bond - 0.480% Next $1.0 0.430% Next $3.0 0.405% Next $1.5 0.380% Next $1.5 0.365% Next $1.0 0.360% Next $5.0 0.350% Next $5.0 0.340% Next $4.0 0.330% Next $26.0 0.310% Over $50.0 0.290% ---------------------------------------------------------------------------------------------------------------------------
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DAILY RATE ON ASSETS ANNUAL RATE AT LAST DAY OF MOST FUND (BILLIONS) EACH ASSET LEVEL RECENT FISCAL PERIOD --------------------------------------------------------------------------------------------------------------------------- RiverSource Dividend Opportunity First $0.50 0.610% 0.595% Next $0.50 0.585% Next $1.0 0.560% Next $1.0 0.535% Next $3.0 0.510% Next $4.0 0.480% Next $5.0 0.470% Next $5.0 0.450% Next $4.0 0.425% Next $26.0 0.400% Over $50.0 0.375% --------------------------------------------------------------------------------------------------------------------------- RiverSource Emerging Markets Bond First $0.25 0.720% RiverSource Emerging Markets Bond - 0.719% RiverSource Global Bond Next $0.25 0.695% RiverSource Global Bond - 0.699% Next $0.25 0.670% Next $0.25 0.645% Next $6.5 0.620% Next $2.5 0.605% Next $5.0 0.590% Next $5.0 0.580% Next $4.0 0.560% Next $26.0 0.540% Over $50.0 0.520% --------------------------------------------------------------------------------------------------------------------------- RiverSource Equity Value First $0.50 0.530% 0.530% Next $0.50 0.505% Next $1.0 0.480% Next $1.0 0.455% Next $3.0 0.430% Over $6.0 0.400% --------------------------------------------------------------------------------------------------------------------------- RiverSource Floating Rate First $1.0 0.610% RiverSource Floating Rate - 0.610% RiverSource Income Opportunities Next $1.0 0.585% RiverSource Income Opportunities - 0.610% Next $1.0 0.560% Next $3.0 0.535% Next $1.5 0.510% Next $1.5 0.495% Next $1.0 0.470% Next $5.0 0.455% Next $5.0 0.445% Next $4.0 0.420% Next $26.0 0.405% Over $50.0 0.380% --------------------------------------------------------------------------------------------------------------------------- RiverSource High Yield Bond First $1.0 0.590% 0.586% Next $1.0 0.565% Next $1.0 0.540% Next $3.0 0.515% Next $1.5 0.490% Next $1.5 0.475% Next $1.0 0.450% Next $5.0 0.435% Next $5.0 0.425% Next $4.0 0.400% Next $26.0 0.385% Over $50.0 0.360% ---------------------------------------------------------------------------------------------------------------------------
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DAILY RATE ON ASSETS ANNUAL RATE AT LAST DAY OF MOST FUND (BILLIONS) EACH ASSET LEVEL RECENT FISCAL PERIOD --------------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Basic Income N/A N/A N/A RiverSource Income Builder Enhanced Income RiverSource Income Builder Moderate Income RiverSource Portfolio Builder Aggressive RiverSource Portfolio Builder Conservative RiverSource Portfolio Builder Moderate RiverSource Portfolio Builder Moderate Aggressive RiverSource Portfolio Builder Moderate Conservative RiverSource Portfolio Builder Total Equity RiverSource Retirement Plus 2010 RiverSource Retirement Plus 2015 RiverSource Retirement Plus 2020 RiverSource Retirement Plus 2025 RiverSource Retirement Plus 2030 RiverSource Retirement Plus 2035 RiverSource Retirement Plus 2040 RiverSource Retirement Plus 2045 --------------------------------------------------------------------------------------------------------------------------- RiverSource Inflation Protected First $1.0 0.440% 0.440% Securities Next $1.0 0.415% Next $1.0 0.390% Next $3.0 0.365% Next $1.5 0.340% Next $1.5 0.325% Next $1.0 0.320% Next $5.0 0.310% Next $5.0 0.300% Next $4.0 0.290% Next $26.0 0.270% Over $50.0 0.250% --------------------------------------------------------------------------------------------------------------------------- RiverSource Intermediate Tax-Exempt First $1.0 0.390% 0.390% Next $1.0 0.365% Next $1.0 0.340% Next $3.0 0.315% Next $1.5 0.290% Next $2.5 0.280% Next $5.0 0.270% Next $35.0 0.260% Over $50.0 0.250% ---------------------------------------------------------------------------------------------------------------------------
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DAILY RATE ON ASSETS ANNUAL RATE AT LAST DAY OF MOST FUND (BILLIONS) EACH ASSET LEVEL RECENT FISCAL PERIOD --------------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Value First $1.0 0.700% 0.686% Next $1.0 0.675% Next $1.0 0.650% Next $3.0 0.625% Next $1.5 0.600% Next $2.5 0.575% Next $5.0 0.550% Next $9.0 0.525% Next $26.0 0.500% Over $50.0 0.475% --------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Aggressive Growth First $0.50 0.890% 0.890% Next $0.50 0.865% Next $1.0 0.840% Next $1.0 0.815% Next $3.0 0.790% Over $6.0 0.765% --------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Fundamental First $0.50 0.730% 0.728% Value Next $0.50 0.705% Next $1.0 0.680% Next $1.0 0.655% Next $3.0 0.630% Over $6.0 0.600% --------------------------------------------------------------------------------------------------------------------------- RiverSource Partners International First $0.25 1.000% 0.990% Select Growth Next $0.25 0.975% Next $0.25 0.950% Next $0.25 0.925% Next $1.0 0.900% Over $2.0 0.875% --------------------------------------------------------------------------------------------------------------------------- RiverSource Partners International First $0.25 0.900% 0.863% Select Value Next $0.25 0.875% Next $0.25 0.850% Next $0.25 0.825% Next $1.0 0.800% Over $2.0 0.775% --------------------------------------------------------------------------------------------------------------------------- RiverSource Partners International First $0.25 1.120% 1.120% Small Cap Next $0.25 1.095% Next $0.25 1.070% Next $0.25 1.045% Next $1.0 1.020% Over $2.0 0.995% --------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Select Value First $0.50 0.780% 0.780% Next $0.50 0.755% Next $1.0 0.730% Next $1.0 0.705% Next $3.0 0.680% Over $6.0 0.650% --------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Equity First $0.25 0.970% 0.970% Next $0.25 0.945% Next $0.25 0.920% Next $0.25 0.895% Over $1.0 0.870% ---------------------------------------------------------------------------------------------------------------------------
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DAILY RATE ON ASSETS ANNUAL RATE AT LAST DAY OF MOST FUND (BILLIONS) EACH ASSET LEVEL RECENT FISCAL PERIOD --------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Growth First $0.25 0.920% 0.920% Next $0.25 0.895% Next $0.25 0.870% Next $0.25 0.845% Next $1.0 0.820% Over $2.0 0.795% --------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Value First $0.25 0.970% 0.965% Next $0.25 0.945% Next $0.25 0.920% Next $0.25 0.895% Over $1.0 0.870% --------------------------------------------------------------------------------------------------------------------------- RiverSource Precious Metals and Mining First $0.25 0.800% 0.800% Next $0.25 0.775% Next $0.25 0.750% Next $0.25 0.725% Next $1.0 0.700% Over $2.0 0.675% --------------------------------------------------------------------------------------------------------------------------- RiverSource Real Estate First $1.0 0.840% 0.840% Next $1.0 0.815% Next $1.0 0.790% Next $3.0 0.765% Next $6.0 0.740% Next $12.0 0.730% Over $24.0 0.720% --------------------------------------------------------------------------------------------------------------------------- RiverSource Recovery and Infrastructure First $1.0 0.650% 0.650% Next $1.0 0.600% Next $4.0 0.550% Over $6.0 0.500% --------------------------------------------------------------------------------------------------------------------------- RiverSource S&P 500 Index First $1.0 0.220% 0.220% Next $1.0 0.210% Next $1.0 0.200% Next $4.5 0.190% Next $2.5 0.180% Next $5.0 0.170% Next $9.0 0.160% Next $26.0 0.140% Over $50.0 0.120% --------------------------------------------------------------------------------------------------------------------------- RiverSource Short Duration U.S. Government First $1.0 0.480% 0.480% Next $1.0 0.455% Next $1.0 0.430% Next $3.0 0.405% Next $1.5 0.380% Next $1.5 0.365% Next $1.0 0.340% Next $5.0 0.325% Next $5.0 0.315% Next $4.0 0.290% Next $26.0 0.275% Over $50.0 0.250% ---------------------------------------------------------------------------------------------------------------------------
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DAILY RATE ON ASSETS ANNUAL RATE AT LAST DAY OF MOST FUND (BILLIONS) EACH ASSET LEVEL RECENT FISCAL PERIOD --------------------------------------------------------------------------------------------------------------------------- RiverSource Small Company Index First $0.25 0.360% 0.357% Next $0.25 0.350% Next $0.25 0.340% Next $0.25 0.330% Next $6.5 0.320% Next $7.5 0.300% Next $9.0 0.280% Next $26.0 0.260% Over $50.0 0.240% --------------------------------------------------------------------------------------------------------------------------- RiverSource Strategic Allocation First $1.0 0.570% 0.564% Next $1.0 0.545% Next $1.0 0.520% Next $3.0 0.495% Next $1.5 0.470% Next $2.5 0.450% Next $5.0 0.430% Next $9.0 0.410% Over $24.0 0.390% --------------------------------------------------------------------------------------------------------------------------- RiverSource Strategic Income Allocation First $0.25 0.550% 0.546% Next $0.25 0.525% Next $0.25 0.500% Over $0.75 0.475% --------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Bond First $1.0 0.410% 0.410% Next $1.0 0.385% Next $1.0 0.360% Next $3.0 0.335% Next $1.5 0.310% Next $2.5 0.300% Next $5.0 0.290% Next $9.0 0.280% Next $26.0 0.260% Over $50.0 0.250% --------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt High Income First $1.0 0.470% 0.454% Next $1.0 0.445% Next $1.0 0.420% Next $3.0 0.395% Next $1.5 0.370% Next $2.5 0.360% Next $5.0 0.350% Next $9.0 0.340% Next $26.0 0.320% Over $50.0 0.300% ---------------------------------------------------------------------------------------------------------------------------
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DAILY RATE ON ASSETS ANNUAL RATE AT LAST DAY OF MOST FUND (BILLIONS) EACH ASSET LEVEL RECENT FISCAL PERIOD --------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Money Market First $1.0 0.330% 0.330% Next $0.5 0.313% Next $0.5 0.295% Next $0.5 0.278% Next $2.5 0.260% Next $1.0 0.240% Next $1.5 0.220% Next $1.5 0.215% Next $1.0 0.190% Next $5.0 0.180% Next $5.0 0.170% Next $4.0 0.160% Over $24.0 0.150% --------------------------------------------------------------------------------------------------------------------------- RiverSource U.S. Government Mortgage First $1.0 0.480% 0.480% Next $1.0 0.455% Next $1.0 0.430% Next $3.0 0.405% Next $1.5 0.380% Next $1.5 0.365% Next $1.0 0.360% Next $5.0 0.350% Next $5.0 0.340% Next $4.0 0.330% Next $26.0 0.310% Over $50.0 0.290% --------------------------------------------------------------------------------------------------------------------------- Seligman California Municipal First $0.25 0.410% 0.410% High-Yield(a) Next $0.25 0.385% Seligman California Municipal Quality(a) Next $0.25 0.360% Seligman Minnesota Municipal(a) Next $0.25 0.345% Seligman New York Municipal(a) Next $6.5 0.320% Next $2.5 0.310% Next $5.0 0.300% Next $9.0 0.290% Next $26.0 0.270% Over $50.0 0.250% --------------------------------------------------------------------------------------------------------------------------- Seligman Frontier(b) First $0.75 0.885% 0.885% Over $0.75 0.790% --------------------------------------------------------------------------------------------------------------------------- Seligman Global Technology(c) First $2.0 0.950% 0.950% Next $2.0 0.910% Over $4.0 0.870% --------------------------------------------------------------------------------------------------------------------------- Seligman National Municipal(d) First $1.0 0.410% 0.410% Next $1.0 0.385% Next $1.0 0.360% Next $3.0 0.335% Next $1.5 0.310% Next $2.5 0.300% Next $5.0 0.290% Next $9.0 0.280% Next $26.0 0.260% Over $50.0 0.250% ---------------------------------------------------------------------------------------------------------------------------
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DAILY RATE ON ASSETS ANNUAL RATE AT LAST DAY OF MOST FUND (BILLIONS) EACH ASSET LEVEL RECENT FISCAL PERIOD --------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2015 First $0.5 0.455% 0.455% Seligman TargETFund 2025 Next $0.5 0.410% Seligman TargETFund 2035 Over $1.0 0.365% Seligman TargETFund 2045 Seligman TargETFund Core --------------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets First $0.25 1.100% 1.086% Next $0.25 1.080% Next $0.25 1.060% Next $0.25 1.040% Next $1.0 1.020% Next $5.5 1.000% Next $2.5 0.985% Next $5.0 0.970% Net $5.0 0.960% Next $4.0 0.935% Next $26.0 0.920% Over $50.0 0.900% --------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha First $0.25 1.050% 1.050% Next $0.25 1.030% Next $0.50 1.010% Next $1.0 0.990% ---------------------------------------------------------------------------------------------------------------------------
(a) Prior to June 15, 2009, the investment manager received an annual fee equal to 0.50% of the fund's average daily net assets. (b) Prior to June 15, 2009, the investment manager received a fee equal to 0.95% per annum of the fund's average daily net assets on the first $750 million of net assets and 0.85% per annum of the fund's average daily net assets in excess of $750 million. (c) Prior to June 15, 2009, the investment manager received an annual fee equal to 1.00% of average daily net assets on the first $2 billion of net assets, 0.95% of average daily net assets on the next $2 billion and 0.90% of average daily net assets in excess of $4 billion. (d) Prior to Aug. 31, 2009, the investment manager received an annual fee equal to 0.50% of the fund's average daily net assets. Under the agreement, a fund also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees and charges; fidelity bond premiums; certain legal fees; registration fees for shares; consultants' fees; compensation of Board members, officers and employees not employed by the investment manager or its affiliates; corporate filing fees; organizational expenses; expenses incurred in connection with lending securities; interest and fee expense related to a fund's participation in inverse floater structures; and expenses properly payable by a fund, approved by the Board. For Equity and Balanced Funds, except for RiverSource S&P 500 Index, RiverSource Small Company Index and the Seligman funds before the fee based on the asset charge is paid, it is adjusted for the fund's investment performance relative to a Performance Incentive Adjustment Index (PIA Index) as shown in the table below. The adjustment increased or decreased the fee for the last fiscal period as shown in the following table. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 14. PIA INDEXES
FEE INCREASE OR FUND PIA INDEX (DECREASE) ---------------------------------------------------------------------------------------------- FISCAL YEAR ENDING MARCH 31 ---------------------------------------------------------------------------------------------- RiverSource Equity Value Lipper Large-Cap Value Funds $ 321,014 ---------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Growth Lipper Small-Cap Growth Funds 25,307 ---------------------------------------------------------------------------------------------- RiverSource Precious Metals and Mining Lipper Gold Funds (36,234) ---------------------------------------------------------------------------------------------- FISCAL YEAR ENDING APRIL 30 ---------------------------------------------------------------------------------------------- RiverSource 120/20 Contrarian Equity Russell 3000 Index N/A* ---------------------------------------------------------------------------------------------- RiverSource Recovery and Infrastructure S&P 500 Index N/A* ----------------------------------------------------------------------------------------------
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FEE INCREASE OR FUND PIA INDEX (DECREASE) ---------------------------------------------------------------------------------------------- FISCAL YEAR ENDING MAY 31 ---------------------------------------------------------------------------------------------- RiverSource Partners Aggressive Growth Lipper Mid-Cap Growth Funds $ (182,474) ---------------------------------------------------------------------------------------------- RiverSource Partners Fundamental Value Lipper Large-Cap Core Funds (190,097) ---------------------------------------------------------------------------------------------- RiverSource Partners Select Value Lipper Mid-Cap Value Funds 299,806 ---------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Equity Lipper Small-Cap Core Funds (72,062) ---------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Value Lipper Small-Cap Value Funds (238,798) ---------------------------------------------------------------------------------------------- FISCAL YEAR ENDING JUNE 30 ---------------------------------------------------------------------------------------------- RiverSource Dividend Opportunity Lipper Equity Income Funds (350,345) ---------------------------------------------------------------------------------------------- RiverSource Real Estate Lipper Real Estate Funds (54,067) ---------------------------------------------------------------------------------------------- FISCAL YEAR ENDING JULY 31 ---------------------------------------------------------------------------------------------- RiverSource Disciplined Equity Lipper Large-Cap Core Funds (2,025,724) ---------------------------------------------------------------------------------------------- RiverSource Disciplined Small and Mid Cap Equity Lipper Mid-Cap Core Funds (47,237) ---------------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value Lipper Small-Cap Value Funds 2,491 ---------------------------------------------------------------------------------------------- FISCAL YEAR ENDING SEPTEMBER 30 ---------------------------------------------------------------------------------------------- RiverSource Balanced Lipper Balanced Funds (474,081) ---------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Growth Lipper Large-Cap Growth Funds (9,448) ---------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Value Lipper Large-Cap Value Funds (33,219) ---------------------------------------------------------------------------------------------- RiverSource Diversified Equity Income Lipper Equity Income Funds (5,590,723) ---------------------------------------------------------------------------------------------- RiverSource Mid Cap Value Lipper Mid-Cap Value Funds (2,112,990) ---------------------------------------------------------------------------------------------- RiverSource Strategic Allocation Lipper Flexible Portfolio Funds (556,345) ---------------------------------------------------------------------------------------------- FISCAL YEAR ENDING OCTOBER 31 ---------------------------------------------------------------------------------------------- RiverSource Disciplined International Lipper International Large-Cap Core Equity Funds (629,082) ---------------------------------------------------------------------------------------------- RiverSource Partners International Lipper International Multi-Cap Select Growth Growth Funds (267,871) ---------------------------------------------------------------------------------------------- RiverSource Partners International Lipper International Multi-Cap Value Select Value Funds (1,510,778) ---------------------------------------------------------------------------------------------- RiverSource Partners International Small Cap Lipper International Small-Cap Funds (48,195) ---------------------------------------------------------------------------------------------- MSCI All Country Asia Pacific Ex- Threadneedle Asia Pacific Japan Index N/A(a) ---------------------------------------------------------------------------------------------- Threadneedle Emerging Markets Lipper Emerging Markets Funds (54,050) ---------------------------------------------------------------------------------------------- Threadneedle European Equity Lipper European Funds 97,462 ---------------------------------------------------------------------------------------------- Threadneedle Global Equity Lipper Global Funds (446,000) ---------------------------------------------------------------------------------------------- Threadneedle Global Equity Income MSCI All Country World Index 10,034 ---------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha MSCI All Country World Index N/A(b) ---------------------------------------------------------------------------------------------- Lipper International Large-Cap Core Threadneedle International Opportunity Funds 286,033 ---------------------------------------------------------------------------------------------- FISCAL YEAR ENDING NOVEMBER 30 ---------------------------------------------------------------------------------------------- RiverSource Mid Cap Growth Lipper Mid-Cap Growth Funds (965,508) ----------------------------------------------------------------------------------------------
(a) The first performance incentive adjustment will be made Feb. 1, 2010. See Section titled "Transition Period" below. (b) The first performance incentive adjustment will be made on Aug. 1, 2010. See Section titled "Transition Period" below. FOR ALL FUNDS NOTED IN TABLE 14 EXCEPT RIVERSOURCE 120/20 CONTRARIAN EQUITY, RIVERSOURCE RECOVERY AND INFRASTRUCTURE, AND THREADNEEDLE GLOBAL EXTENDED ALPHA: The adjustment will be determined monthly by measuring the percentage difference over a rolling 12-month period (subject to earlier determination based on the Transition Period, as set forth below) between the annualized performance of one Class A share of the fund and the annualized performance of the PIA Index ("performance difference"). The performance difference is then used to determine the adjustment rate. The adjustment rate, computed to five decimal places, is determined in accordance with the following table and is applied against average daily net assets for the applicable rolling 12-month period or Transition Period, and divided by 12 to obtain the fee reflecting the performance fee adjustment for that month. The table is organized by fund category. You can find your fund's category in Table 1. Statement of Additional Information - Dec. 30, 2009 Page 105 TABLE 15A. PERFORMANCE INCENTIVE ADJUSTMENT CALCULATION
-------------------------------------------------------------------------------------------------------- EQUITY FUNDS BALANCED FUNDS -------------------------------------------------------------------------------------------------------- PERFORMANCE PERFORMANCE DIFFERENCE ADJUSTMENT RATE DIFFERENCE ADJUSTMENT RATE -------------------------------------------------------------------------------------------------------- 0.00% - 0.50% 0 0.00% - 0.50% 0 -------------------------------------------------------------------------------------------------------- 0.50% - 1.00% 6 basis points times the 0.50% - 1.00% 6 basis points times the performance difference over 0.50%, performance difference over 0.50%, times 100 (maximum of 3 basis times 100 (maximum of 3 basis points if a 1% performance points if a 1% performance difference) difference) -------------------------------------------------------------------------------------------------------- 1.00% - 2.00% 3 basis points, plus 3 basis points 1.00% - 2.00% 3 basis points, plus 3 basis points times the performance difference times the performance difference over 1.00%, times 100 (maximum 6 over 1.00%, times 100 (maximum 6 basis points if a 2% performance basis points if a 2% performance difference) difference) -------------------------------------------------------------------------------------------------------- 2.00% - 4.00% 6 basis points, plus 2 basis points 2.00% - 3.00% 6 basis points, plus 2 basis points times the performance difference times the performance difference over 2.00%, times 100 (maximum 10 over 2.00%, times 100 (maximum 8 basis points if a 4% performance basis points if a 3% performance difference) difference) -------------------------------------------------------------------------------------------------------- 4.00% - 6.00% 10 basis points, plus 1 basis point 3.00% or 8 basis points times the performance difference more over 4.00%, times 100 (maximum 12 basis points if a 6% performance difference) -------------------------------------------------------------------------------------------------------- 6.00% or more 12 basis points --------------------------------------------------------------------------------------------------------
For example, if the performance difference for an Equity Fund is 2.38%, the adjustment rate is 0.000676 (0.0006 [6 basis points] plus 0.0038 [the 0.38% performance difference over 2.00%] x 0.0002 [2 basis points] x 100 (0.000076)). Rounded to five decimal places, the adjustment rate is 0.00068. The maximum adjustment rate for the fund is 0.0012 per year. Where the fund's Class A performance exceeds that of the PIA Index, the fee paid to the investment manager will increase. Where the performance of the PIA Index exceeds the performance of the fund's Class A shares, the fee paid to the investment manager will decrease. The 12-month comparison period rolls over with each succeeding month, so that it always equals 12 months, ending with the month for which the performance adjustment is being computed. TRANSITION PERIOD The performance incentive adjustment will not be calculated for the first 6 months from the inception of the fund. After 6 full calendar months, the performance fee adjustment will be determined using the average assets and performance difference over the first 6 full calendar months, and the adjustment rate will be applied in full. Each successive month an additional calendar month will be added to the performance adjustment computation. After 12 full calendar months, the full rolling 12-month period will take affect. CHANGE IN INDEX If the PIA Index ceases to be published for a period of more than 90 days, changes in any material respect, otherwise becomes impracticable or, at the discretion of the Board, is no longer appropriate to use for purposes of a performance incentive adjustment, for example, if Lipper reclassifies the fund from one peer group to another, the Board may take action it deems appropriate and in the best interests of shareholders, including: (1) discontinuance of the performance incentive adjustment until such time as it approves a substitute index; or (2) adoption of a methodology to transition to a substitute index it has approved. In the case of a change in the PIA Index, a fund's performance will be compared to a 12-month blended index return that reflects the performance of the current index for the portion of the 12-month performance measurement period beginning the effective date of the current index and the performance of the prior index for the remainder of the measurement period. At the conclusion of the transition period, the performance of the prior index will be eliminated from the performance incentive adjustment calculation, and the calculation will include only the performance of the current index. Statement of Additional Information - Dec. 30, 2009 Page 106 FOR RIVERSOURCE 120/20 CONTRARIAN EQUITY, RIVERSOURCE RECOVERY AND INFRASTRUCTURE, AND THREADNEEDLE GLOBAL EXTENDED ALPHA: The adjustment will be determined monthly by measuring the percentage difference over a rolling 36-month period (subject to earlier determination based on the Transition Period, as set forth below) between the annualized performance of one Class A share of the fund and the annualized performance of the PIA Index ("performance difference"). The performance difference will then be used to determine the adjustment rate. The adjustment rate, computed to five decimal places, is determined in accordance with the following table and is applied against average daily net assets for the applicable rolling 36-month period or Transition Period, and divided by 12 to obtain the fee reflecting the performance fee adjustment for that month. TABLE 15B. PERFORMANCE INCENTIVE ADJUSTMENT CALCULATION
-------------------------------------------------------------------------------------------------------- RIVERSOURCE 120/20 CONTRARIAN EQUITY RIVERSOURCE RECOVERY AND INFRASTRUCTURE THREADNEEDLE GLOBAL EXTENDED ALPHA -------------------------------------------------------------------------------------------------------- PERFORMANCE PERFORMANCE DIFFERENCE ADJUSTMENT RATE DIFFERENCE ADJUSTMENT RATE -------------------------------------------------------------------------------------------------------- 0.00% - 0.50% 0 0.00% - 1.00% 0 -------------------------------------------------------------------------------------------------------- 0.50% - 1.00% 6 basis points times the 1.00% - 6.00% 10 basis points times the performance difference over 0.50%, performance difference over 1.00%, times 100 (maximum of 3 basis times 100 (maximum 50 basis points points if a 1% performance if a 6% performance difference) difference) -------------------------------------------------------------------------------------------------------- 1.00% - 2.00% 3 basis points, plus 3 basis points 6.00% or 50 basis points times the performance difference more over 1.00%, times 100 (maximum 6 basis points if a 2% performance difference) -------------------------------------------------------------------------------------------------------- 2.00% - 4.00% 6 basis points, plus 2 basis points times the performance difference over 2.00%, times 100 (maximum 10 basis points if a 4% performance difference) -------------------------------------------------------------------------------------------------------- 4.00% - 6.00% 10 basis points, plus 1 basis point times the performance difference over 4.00%, times 100 (maximum 12 basis points if a 6% performance difference) -------------------------------------------------------------------------------------------------------- 6.00% or more 12 basis points --------------------------------------------------------------------------------------------------------
For example, if the performance difference for 120/20 Contrarian Equity is 2.38%, the adjustment rate is 0.00138 [the 1.38% performance difference over 1.00%] x 0.0010 [10 basis points] x 100. Rounded to five decimal places, the adjustment rate is 0.00138. This adjustment rate of 0.00138 is then applied against the average daily net assets for the applicable rolling 36-month or Transition Period, and divided by 12, which provides the performance adjustment fee for that month. Where the fund's Class A performance exceeds that of the PIA Index for the applicable rolling 36-month period or Transition Period, the fee paid to the Investment Manager will increase by the adjustment rate. Where the performance of the PIA Index exceeds the performance of the fund's Class A shares for the applicable rolling 36-month period or Transition Period, the fee paid to the Investment Manager will decrease by the adjustment rate. The 36-month comparison period rolls over with each succeeding month, so that it always equals 36 months, ending with the month for which the performance adjustment is being computed. TRANSITION PERIOD The performance incentive adjustment will not be calculated for the first 24 months from the inception of the fund. After 24 full calendar months, the performance fee adjustment will be determined using the average assets and Performance Difference over the first 24 full calendar months, and the Adjustment Rate will be applied in full. Each successive month an additional calendar month will be added to the performance adjustment computation. After 36 full calendar months, the full rolling 36-month period will take affect. CHANGE IN INDEX If the PIA Index ceases to be published for a period of more than 90 days, changes in any material respect, otherwise becomes impracticable or, at the discretion of the Board, is no longer appropriate to use for purposes of a performance incentive adjustment, the Board may take action it deems appropriate and in the best interests of shareholders, including: Statement of Additional Information - Dec. 30, 2009 Page 107 (1) discontinuance of the performance incentive adjustment until such time as it approves a substitute index, or (2) adoption of a methodology to transition to a substitute index it has approved. In the case of a change the PIA Index, a fund's performance will be compared to a 36-month blended index return that reflects the performance of the current index for the portion of the 36-month performance measurement period beginning the effective date of the current index and the performance of the prior index for the remainder of the measurement period. At the conclusion of the transition period, the performance of the prior index will be eliminated from the performance incentive adjustment calculation, and the calculation will include only the performance of the current index. The table below shows the total management fees paid by each fund for the last three fiscal periods as well as nonadvisory expenses, net of earnings credits, waivers and expenses reimbursed by the investment manager and its affiliates. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 16. MANAGEMENT FEES AND NONADVISORY EXPENSES
---------------------------------------------------------------------------------------------------------------------------------- MANAGEMENT FEES NONADVISORY EXPENSES ---------------------------------------------------------------------------------------------------------------------------------- FUND 2009 2008 2007 2009 2008 2007 ---------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Basic Income N/A N/A N/A $ 139,640 $ 103,636(a) $ 145,971 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Enhanced Income N/A N/A N/A 118,255 134,546(a) 153,282 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Moderate Income N/A N/A N/A 175,842 129,062(a) 202,410 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Aggressive N/A N/A N/A* 199,501 168,942 209,004 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Conservative N/A N/A N/A* 146,492 96,147 134,788 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate N/A N/A N/A* 278,861 247,980 246,216 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Aggressive N/A N/A N/A* 299,503 247,472 355,360 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Conservative N/A N/A N/A* 170,774 117,533 140,615 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Total Equity N/A N/A N/A* 149,589 173,675 188,843 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource S&P 500 Index $ 371,178 $ 579,548 $ 566,109 (194,370) (254,777) (272,996) ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Small Company Index 1,990,095 3,292,392 3,889,499 (1,171,627) (1,007,306) (662,392) ---------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Equity Value 4,340,117 6,797,853 6,969,436 343,552 413,170 361,720 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Growth 1,243,691 1,887,518 2,066,992 (41,768) 99,186 111,014 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Precious Metals and Mining 824,176 956,280 876,127 242,615 175,405 144,337 ---------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource 120/20 Contrarian Equity 368,969 159,311(b) N/A 34,475 21,297(b) N/A ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Recovery and Infrastruc- ture 45,652(c) N/A N/A 18,717(c) N/A N/A ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2010 N/A N/A N/A (4,254) 41 4,075(d) ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2015 N/A N/A N/A (7,894) 310 3,927(d) ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2020 N/A N/A N/A (9,956) 745 6,231(d) ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2025 N/A N/A N/A (12,026) 332 4,478(d) ----------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 108
---------------------------------------------------------------------------------------------------------------------------------- MANAGEMENT FEES NONADVISORY EXPENSES ---------------------------------------------------------------------------------------------------------------------------------- FUND 2009 2008 2007 2009 2008 2007 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2030 N/A N/A N/A $ (9,748) $ 431 $ 2,766(d) ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2035 N/A N/A N/A (7,948) 487 878(d) ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2040 N/A N/A N/A (6,946) (796) 2,640(d) ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2045 N/A N/A N/A (6,418) (2,131) (2,522)(d) ---------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource High Yield Bond $ 6,353,707 $ 9,610,810 $11,401,845 (748,008) 665,785 481,606 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Aggressive Growth 3,280,397 5,729,264 4,627,106 (997,666) (786,490) (1,047,823) ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Fundamental Value 4,416,792 7,668,633 7,530,722 (939,055) (213,176) (215,041) ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Select Value 2,539,813 4,388,735 4,807,861 (278,114) (142,897) (162,440) ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Equity 1,381,155 2,441,742 2,964,236 (435,641) (539,268) (464,274) ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Value 3,098,591 6,511,571 9,159,989 (963,886) (972,781) (878,605) ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Short Duration U.S. Government 3,665,529 3,816,196 4,419,003 (610,585) (771,512) (1,025,939) ---------------------------------------------------------------------------------------------------------------------------------- RiverSource U.S. Government Mortgage 1,731,277 1,958,404 1,348,887 (327,855) (389,262) (438,473) ---------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Dividend Opportunity 6,381,215 12,015,660 10,678,661 (502,682) 626,341 540,349 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Real Estate 1,227,857 1,667,040 2,299,121 (18,514) 138,649 207,925 ---------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Cash Management 12,658,313 15,026,220 12,713,351 (1,868,463) 1,290,897 859,062 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Equity 9,909,438 17,556,244 14,110,274 268,796 726,080 (202,920) ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small and Mid Cap Equity 853,191 365,578 273,481 143,015 125,645 91,799 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value 363,926 286,759 206,071 47,195 33,868 37,535 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Floating Rate 2,210,544 3,509,190 3,332,472 (61,933) 293,676 151,486 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Income Opportunities 1,913,521 1,767,885 2,116,555 291,601 196,944 187,627 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Inflation Protected Securities 3,322,371 2,554,103 1,313,892 (115,062) (238,396) (126,032) ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Limited Duration Bond 844,435 792,200 726,809 (68,816) (78,320) (73,339) ---------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource California Tax-Exempt 663,711 715,946 717,999 73,054 44,499 20,854 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Diversified Bond 15,648,683 14,772,880 12,770,016 (2,314,025) (461,298) (1,129,485) ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Minnesota Tax-Exempt 1,230,393 1,246,083 1,351,439 196,213 506,328 676,782 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource New York Tax- Exempt 220,172 242,807 279,438 9,792 75,790 134,099 ----------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 109
---------------------------------------------------------------------------------------------------------------------------------- MANAGEMENT FEES NONADVISORY EXPENSES ---------------------------------------------------------------------------------------------------------------------------------- FUND 2009 2008 2007 2009 2008 2007 ---------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Balanced $ 2,483,462 $ 3,977,541 $ 6,315,077 $ 346,693 $ 437,940 $ 368,447 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Growth 2,033,555 905,956 114,048(e) 214,462 195,661 54,709(e) ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Value 661,677 6,618(f) N/A 168,055 2,877(f) N/A ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Diversified Equity Income 17,053,076 44,177,652 42,530,087 1,037,819 1,905,627 1,561,033 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Value 9,896,881 18,813,340 15,908,732 776,726 992,201 826,273 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Strategic Allocation 6,604,411 10,108,947 11,025,000 585,299 1,047,907 921,198 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Strategic Income Allocation 1,081,850 904,660 168,875(e) 246,334 294,099 76,656(e) ---------------------------------------------------------------------------------------------------------------------------------- Seligman California Municipal High-Yield 164,150 173,288 174,700 32,933 53,665 32,890 ---------------------------------------------------------------------------------------------------------------------------------- Seligman California Municipal Quality 192,624 196,281 214,476 60,833 90,615 72,092 ---------------------------------------------------------------------------------------------------------------------------------- Seligman Minnesota Municipal 324,501 351,237 375,995 68,180 99,131 88,809 ---------------------------------------------------------------------------------------------------------------------------------- Seligman New York Municipal 352,211 332,574 342,695 75,556 88,770 71,419 ---------------------------------------------------------------------------------------------------------------------------------- Seligman National Municipal 1,147,080 304,747 327,359 62,006 106,685 95,664 ---------------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2015 121,554 207,083 184,907 (54,705) (4,193) 7,243 ---------------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2025 136,473 210,264 157,846 (68,782) (13,470) (551) ---------------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2035 35,438 32,294 6,852 (18,456) (5,254) (15,347) ---------------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2045 19,710 22,283 4,354 (12,505) (3,570) (4,094) ---------------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund Core 272,984 457,038 382,979 (119,771) (10,950) 17,561 ---------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Absolute Return Currency and Income 4,698,565 4,188,137 887,341 205,127 313,877 103,119 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined International Equity 2,174,525 5,209,129 2,161,563 252,387 512,793 358,005 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Emerging Markets Bond 1,320,292 1,182,004 706,943 82,201 172,124 120,044 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Global Bond 3,551,274 5,074,934 3,438,893 (33,836) 165,694 (17,529) ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners International Select Growth 3,240,723 5,965,413 6,048,963 (660,493) 334,550 672,542 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners International Select Value 5,749,639 13,239,202 20,067,871 511,602 1,054,830 1,286,758 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners International Small Cap 496,177 1,057,146 1,270,558 (45,193) 63,912 208,621 ---------------------------------------------------------------------------------------------------------------------------------- Seligman Frontier 321,582 579,499 766,116 (20,898) 200,110 250,909 ---------------------------------------------------------------------------------------------------------------------------------- Seligman Global Technology 2,551,543 3,571,473 3,876,481 386,252 680,094 707,762 ---------------------------------------------------------------------------------------------------------------------------------- Threadneedle Asia Pacific 78,072(g) N/A N/A 21,500(g) N/A N/A ---------------------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets 3,791,476 7,352,591 7,106,815 524,327 1,138,897 1,190,259 ---------------------------------------------------------------------------------------------------------------------------------- Threadneedle European Equity 600,499 980,629 952,484 (31,736) 223,792 199,237 ---------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 2,918,784 5,825,153 6,075,014 350,276 554,139 577,463 ---------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income 177,834 15,723(h) N/A 25,200 2,989(h) N/A ---------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha 64,424 16,485(h) N/A 4,234 1,122(h) N/A ---------------------------------------------------------------------------------------------------------------------------------- Threadneedle International Opportunity 3,074,518 4,661,800 4,923,040 283,182 486,074 545,663 ----------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 110
---------------------------------------------------------------------------------------------------------------------------------- MANAGEMENT FEES NONADVISORY EXPENSES ---------------------------------------------------------------------------------------------------------------------------------- FUND 2008 2007 2006 2008 2007 2006 ---------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Intermediate Tax-Exempt $ 291,762 $ 321,011 $ 435,316 $ 2,588 $ (4,565) $ (25,206) ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Growth 4,726,590 6,373,531 9,852,112 437,496 241,412 670,574 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Bond 2,764,541 3,157,092 3,345,629 506,736 (8,650) 905,255 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt High Income 11,447,732 13,006,578 15,027,647 2,984,232 (847,490) 8,025,340 ---------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Money Market 464,177 406,763 390,170 161,459 32,730 118,441 ----------------------------------------------------------------------------------------------------------------------------------
* Effective Feb. 1, 2006, this fee was eliminated. (a) The fund changed its fiscal year end effective Jan. 31, 2008 from May 31 to Jan. 31. For 2008, the information shown is for the period from June 1, 2007 through Jan. 31, 2008. For years prior to 2008, the fiscal period ended on May 31. (b) For the period from Oct. 18, 2007 (when shares became publicly available) to April 30, 2008. (c) For the fiscal period from Feb. 19, 2009 (when shares became publicly available) to April 30, 2009. (d) For the period from May 18, 2006 (when shares became publicly available) to April 30, 2007. (e) For the period from May 17, 2007 (when shares became publicly available) to Sept. 30, 2007. (f) For the period from Aug. 1, 2008 (when shares became publicly available) to Sept. 30, 2008. (g) For the period from July 15, 2009 (when the Fund became available) to Oct. 31, 2009. (h) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. MANAGER OF MANAGERS EXEMPTION The funds have received an order from the SEC that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for a fund without first obtaining shareholder approval. The order permits the fund to add or change unaffiliated subadvisers or the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. For all Seligman funds except, Seligman Global Smaller Companies, and for RiverSource California Tax-Exempt, RiverSource Cash Management, RiverSource Diversified Bond, RiverSource Global Bond, RiverSource High Yield Bond, RiverSource Intermediate Tax-Exempt, RiverSource Minnesota Tax-Exempt, RiverSource New York Tax-Exempt, RiverSource Short Duration U.S. Government, RiverSource Tax-Exempt Bond, RiverSource Tax-Exempt High Income, RiverSource Tax-Exempt Money Market and RiverSource U.S. Government Mortgage funds: before the fund may rely on the order, holders of a majority of the fund's outstanding voting securities will need to approve operating the fund in this manner. There is no assurance shareholder approval, if sought, will be received, and no changes will be made without shareholder approval until that time. SUBADVISORY AGREEMENTS The assets of certain funds are managed by subadvisers that have been selected by the investment manager, subject to the review and approval of the Board. The investment manager has recommended the subadvisers to the Board based upon its assessment of the skills of the subadvisers in managing other assets with objectives and investment strategies substantially similar to those of the applicable fund. Short-term investment performance is not the only factor in selecting or terminating a subadviser, and the investment manager does not expect to make frequent changes of subadvisers. Certain subadvisers, affiliated with the investment manager, have been directly approved by shareholders. These subadvisers are noted in Table 18. The investment manager allocates the assets of a fund with multiple subadvisers among the subadvisers. Each subadviser has discretion, subject to oversight by the Board and the investment manager, to purchase and sell portfolio assets, consistent with the fund's investment objectives, policies, and restrictions. Generally, the services that a subadviser provides to the fund are limited to asset management and related recordkeeping services. The investment manager has entered into an advisory agreement with each subadviser under which the subadviser provides investment advisory assistance and day-to-day management of some or all of the fund's portfolio, as well as investment research and statistical information. A subadviser may also serve as a discretionary or non-discretionary investment adviser to management or advisory accounts that are unrelated in any manner to the investment manager or its affiliates. Statement of Additional Information - Dec. 30, 2009 Page 111 The following table shows the advisory fee schedules for fees paid by the investment manager to subadvisers for funds that have subadvisers. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 17. SUBADVISERS AND SUBADVISORY AGREEMENT FEE SCHEDULES
PARENT FUND SUBADVISER COMPANY FEE SCHEDULE --------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 --------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Davis Selected Advisers, N/A 0.45% on the first $100 million, reducing to Fundamental Value LP (Davis)(a), (b) 0.25% as assets increase (effective June 18, 2001) --------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Barrow, Hanley, Mewhinney & D 1.00% on the first $10 million, Small Cap Value Strauss (BHMS)(a) reducing to 0.30% as assets (effective March 12, 2004) increase ------------------------------------------------------------------------------------------------------ Donald Smith & Co., Inc. N/A 0.60% on the first $175 million, (Donald Smith)(a) reducing to 0.55% as assets (effective March 12, 2004) increase ------------------------------------------------------------------------------------------------------ Federated MDTA, LLC (MDTA)(a) A 0.60% on the first $75 million, reducing to (effective June 6, 2008) 0.50% as assets increase ------------------------------------------------------------------------------------------------------ Metropolitan West Capital Management, LLC E 0.50% on all assets (MetWest Capital) (effective April 24, 2006) --------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 --------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Columbia Wanger Asset Management L.P. F 0.70% on the first $150 million, reducing to International Select (Columbia WAM)(a),(d) 0.50% as assets increase Growth (effective Sept. 5, 2001) ------------------------------------------------------------------------------------------------------ Principal Global Investors, LLC I 0.40% on the first $250 million, reducing to (Principal Global) 0.25% as assets increase (effective April 24, 2006) --------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners AllianceBernstein L.P. N/A 0.65% on the first $75 million, reducing to International Select (AllianceBernstein) 0.30% as assets increase Value (effective Sept. 17, 2001) ------------------------------------------------------------------------------------------------------ Mondrian Investment Partners Limited N/A 0.70% on all assets (Mondrian) (effective August 18, 2008) ------------------------------------------------------------------------------------------------------ Tradewinds Global Investors, LLC N/A 0.50% on the first $250 million, reducing to (Tradewinds) 0.40 as assets increase (effective August 18, 2008) --------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Columbia WAM(a),(d) F 0.70% on the first $150 million, reducing to International Small Cap (effective Aug. 10, 2009) 0.50% as assets increase ------------------------------------------------------------------------------------------------------ Batterymarch Financial Management, Inc. G 0.75% on the first $100 million, reducing to (Batterymarch) 0.70% as assets increase (effective April 24, 2006) --------------------------------------------------------------------------------------------------------------------------------- Threadneedle Asia Pacific Threadneedle International Limited(b) H 0.50% on the first $250 million, reducing to (Threadneedle) 0.40% as assets increase, and subject to a (effective July 15, 2009) performance incentive adjustment(c) --------------------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Threadneedle(b) H 0.45% of the first $150 million, reducing to Markets (effective July 9, 2004) 0.30% as assets increase, and subject to a performance incentive adjustment(c) ---------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 112
PARENT FUND SUBADVISER COMPANY FEE SCHEDULE --------------------------------------------------------------------------------------------------------------------------------- Threadneedle European Threadneedle(b) H 0.35% of the first $150 million, reducing to Equity (effective July 9, 2004) 0.20% as assets increase, and subject to a performance incentive adjustment(c) --------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Threadneedle(b) H 0.35% of the first $150 million, reducing to Equity (effective July 9, 2004) 0.20% as assets increase, and subject to a performance incentive adjustment(b) --------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Threadneedle(b) H 0.45% of the first $250 million, reducing to Equity Income (effective Aug. 1, 2008) 0.35% as assets increase, and subject to a performance incentive adjustment(c) --------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Threadneedle(b) H 0.70% of the first $250 million, reducing to Extended Alpha (effective Aug. 1, 2008) 0.60% as assets increase, and subject to a performance incentive adjustment(c) --------------------------------------------------------------------------------------------------------------------------------- Threadneedle Threadneedle(b) H 0.35% of the first $150 million, reducing to International Opportunity (effective July 9, 2004) 0.20% as assets increase, and subject to a performance incentive adjustment(c) ---------------------------------------------------------------------------------------------------------------------------------
(a) The fee is calculated based on the combined net assets subject to the subadviser's investment management. (b) Davis is a 1940 Act affiliate of the investment manager because it owns or has owned more than 5% of the publicly issued securities of the investment manager's parent company, Ameriprise Financial. Threadneedle is an affiliate of the investment manager as an indirect wholly-owned subsidiary of Ameriprise Financial. (c) The adjustment for Threadneedle is based on the performance of one Class A share of the fund and the change in the PIA Index described in Table 14. The performance of the fund and the Index will be calculated using the method described above for the performance incentive adjustment paid to the investment manager under the terms of the Investment Management Services Agreement. The amount of the adjustment to Threadneedle's fee, whether positive or negative, shall be equal to the following amount of the performance incentive adjustment made to the investment management fee payable to the investment manager under the terms of the Investment Management Services Agreement: 50% for Threadneedle Emerging Markets, Threadneedle European Equity, Threadneedle Global Equity and Threadneedle International Opportunity; 100% for Threadneedle Global Equity Income and Threadneedle Global Extended Alpha. The performance incentive adjustment was effective Dec. 1, 2004. (d) On September 29, 2009, Bank of America Corporation ("BAC") entered into an agreement to sell a portion of the asset management business of Columbia Management Group, LLC, including Columbia WAM, to Ameriprise Financial, Inc., the parent company of RiverSource Investments (the "Transaction"). The Transaction is subject to certain approvals and other conditions to closing, and is currently expected to close in the spring of 2010. The Transaction is not expected to result in any change in the Columbia WAM personnel who manage the Funds or in the manner in which the Fund is managed. In addition, RiverSource Investments would remain the investment manager of the Fund and, as such, would continue to be the entity that oversees the overall management of the Fund. Nonetheless, the Transaction is expected to result in a change of control of Columbia WAM under the federal securities laws and thus would cause the automatic termination of the current investment sub-advisory agreement with Columbia WAM. In connection with the Transaction, the Board determined to recommend that shareholders approve a new investment sub-advisory agreement in order to assure that Columbia WAM may continue to provide subadvisory services to the Fund following the Transaction. The services provided by Columbia WAM under the new investment subadvisory agreement and the fee levels payable to Columbia WAM for subadvisory services would remain unchanged from the services provided and fee levels payable under the current investment subadvisory agreement. A - Federated MDTA LLC is an indirect, wholly-owned subsidiary of Federated Investors, Inc. B - American Century Investment Management, Inc. is a direct, wholly-owned subsidiary of American Century Companies, Inc. C - Systematic is an affiliate of Affiliated Managers Group. D - BHMS is an independent-operating subsidiary of Old Mutual Asset Management. E - Metropolitan West Capital Management, LLC (MetWest Capital) is a subsidiary of Wells Fargo & Company and operates within the Evergreen Investments unit of its asset management division. F - Columbia WAM is an indirect wholly-owned subsidiary of Columbia Management Group, Inc., which in turn is a wholly-owned subsidiary of Bank of America Corporation. G - Batterymarch is a wholly-owned, independent subsidiary of Legg Mason, Inc. H - Threadneedle is an indirect wholly-owned subsidiary of Ameriprise Financial. I - Principal Global Investors, LLC is a wholly-owned, indirect subsidiary of Principal Financial Group, Inc. Statement of Additional Information - Dec. 30, 2009 Page 113 The following table shows the subadvisory fees paid by the investment manager to subadvisers in the last three fiscal periods. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 18. SUBADVISORY FEES
SUBADVISORY FEES PAID ------------------------------------------ FUND SUBADVISER 2009 2008 2007 ----------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Former subadviser: Essex Investment $ 171,944 $ 257,999 $ 281,295 Growth Management Company, LLC (from Sept. 23, 2005 to Aug. 7, 2009) ------------------------------------------------------------------------------------- Former subadviser: MDTA (from Sept. 23, 255,223 397,581 411,034 2005 to Aug. 7, 2009) ------------------------------------------------------------------------------------- Former subadviser: Turner (from Aug. 18, 167,422 241,810 265,516 2003 to Aug. 7, 2009) ------------------------------------------------------------------------------------- Former subadviser: UBS Global Asset 194,949 293,079 342,871 Management (Americas) (from Aug. 18, 2003 to Aug. 7, 2009) ----------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Aggressive Former subadviser: American Century 983,026 1,438,912 1,321,245 Growth Investment Management, Inc. (from April 24, 2003 to Nov. 6, 2009) ------------------------------------------------------------------------------------- Former subadviser: Turner Investment 900,672 1,310,040 1,304,994 Partners, Inc. (from April 24, 2003 to Nov. 6, 2009) ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Fundamental Davis 2,020,698 3,220,929 3,673,544 Value ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Select Former subadviser: Systematic Financial 608,750 1,025,272 753,292(a) Value Management, L.P. (from Sept. 29, 2006 to Nov. 6, 2009) ------------------------------------------------------------------------------------- Former subadviser: WEDGE Capital 666,913 981,822 776,260(a) Management L.L.P. (from Sept. 29, 2006 to Nov. 6, 2009) ------------------------------------------------------------------------------------- Former subadviser: GAMCO Asset N/A N/A 786,466(b) Management Inc. (from inception to September 28, 2006) ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Former subadviser: American Century 280,018 506,417 662,396 Equity (from Dec. 12, 2003 to Aug. 7, 2009) ------------------------------------------------------------------------------------- Former subadviser: Jennison Associates 271,108 107,599(c) N/A LLC (from Feb. 22, 2008 to Aug. 7, 2009) ------------------------------------------------------------------------------------- Former subadviser: Lord Abbett & Co. LLC 363,340 583,123 677,462 (from Dec. 12, 2003 to Aug. 7, 2009) ------------------------------------------------------------------------------------- Former subadviser: Wellington Management N/A 362,413(d) 650,960* Company, LLP (from Dec. 12, 2003 to Feb. 22, 2008) ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap BHMS 437,027 865,372 970,241 Value ------------------------------------------------------------------------------------- Donald Smith 497,789 984,692 1,180,183 ------------------------------------------------------------------------------------- MDTA 443,715 N/A(e) N/A ------------------------------------------------------------------------------------- MetWest Capital 466,432 955,503 1,769,553 ------------------------------------------------------------------------------------- Former subadviser: Franklin Portfolio 22,583 964,510 1,198,029 Associates (from March 2004 to June 6, 2008) ------------------------------------------------------------------------------------- Former subadviser: Goldman Sachs Asset N/A N/A 38,601(f) Management, L.P. (from Aug. 2002 to April 24, 2006) ----------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Columbia WAM 956,567 1,557,963 1,568,158 International Select Growth ------------------------------------------------------------------------------------- Principal Global 866,239 1,849,485 1,760,150 -----------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 114
SUBADVISORY FEES PAID ------------------------------------------ FUND SUBADVISER 2009 2008 2007 ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners AllianceBernstein $2,170,338 $6,268,208 $7,962,307 International Select Value ------------------------------------------------------------------------------------- Mondrian 714,196 77,048(g) N/A ------------------------------------------------------------------------------------- Tradewinds 1,116,798 129,124(g) N/A ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Columbia WAM 41,203(h) N/A N/A International Small Cap ------------------------------------------------------------------------------------- Batterymarch 188,913 386,194 439,593 ------------------------------------------------------------------------------------- Former subadviser: AIG Global Investment 127,498(i) 355,245 425,696 Corp. (from April 24, 2006 to Aug. 7, 2009) ----------------------------------------------------------------------------------------------------------------------- Threadneedle Asia Pacific Threadneedle 42,462(j) N/A N/A ----------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets Threadneedle 1,469,749 2,801,637 2,728,720 ----------------------------------------------------------------------------------------------------------------------- Threadneedle European Equity Threadneedle 260,772 443,279 406,594 ----------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Threadneedle 1,168,151 2,269,177 2,408,387 ----------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Threadneedle 104,654 9,057(k) N/A Income ----------------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended Threadneedle 43,117 11,750(k) N/A Alpha ----------------------------------------------------------------------------------------------------------------------- Threadneedle International Threadneedle 1,254,178 1,907,215 1,895,712 Opportunity -----------------------------------------------------------------------------------------------------------------------
* Beginning on July 1, 2006, under the Subadvisory Agreement, RiverSource Investments is subject to a minimum annual fee of $350,000, payable to Wellington Management. (a) For the fiscal period from Sept. 29, 2006 to May 31, 2007. (b) For the fiscal period from June 1, 2006 to Sept. 28, 2006. (c) For the fiscal period from Feb. 22, 2008 to May 31, 2008. (d) For the fiscal period from June 1, 2007 to Feb. 22, 2008. (e) The subadviser did not begin managing the fund until after the fund's fiscal year end. (f) Payments made to subadviser in accordance with termination agreement. (g) For the fiscal period from Aug. 18, 2008 to Oct. 31, 2008. (h) For the fiscal period from Aug. 10, 2009 to Oct. 31, 2009. (i) For the fiscal period from Nov. 1, 2008 to Aug. 7, 2009. (j) For the fiscal period from July 15, 2009 to Oct. 31, 2009. (k) For the fiscal period from Aug. 1, 2008 to Oct. 31, 2008. Statement of Additional Information - Dec. 30, 2009 Page 115 PORTFOLIO MANAGERS. For funds other than money market funds, the following table provides information about the fund's portfolio managers as of the end of the most recent fiscal period. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 19. PORTFOLIO MANAGERS
Other Accounts Managed (excluding the fund) --------------------------------------------------------- Potential APPROXIMATE Ownership Conflicts NUMBER AND TYPE TOTAL NET PERFORMANCE BASED of Fund of Structure of FUND PORTFOLIO MANAGER OF ACCOUNT* ASSETS ACCOUNTS(a) Shares Interest Compensation ------------------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Dimitris Bertsimas 32 RICs $9.23 billion 9 RICs ($6.78 B) None Income Builder 2 PIVs $595.75 million Basic Income 15 other accounts $948.29 million -------------------------------------------------------------------------------------------- Colin Lundgren 16 RICs $948.29 million None None (6) (21) ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Dimitris Bertsimas 32 RICs $9.26 billion 9 RICs ($6.78 B) None Income Builder 2 PIVs $595.75 million Enhanced Income 15 other accounts $948.29 million -------------------------------------------------------------------------------------------- Colin Lundgren 16 RICs $981.77 million None None (6) (21) ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Dimitris Bertsimas 32 RICs $9.06 billion 9 RICs ($6.78 B) $100,001 - Income Builder 2 PIVs $595.75 million $500,000 Moderate Income 15 other accounts $948.29 million -------------------------------------------------------------------------------------------- Colin Lundgren 16 RICs $779.16 million None $100,001 - (6) (21) $500,000 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Kent M. Bergene(b) $10,001 - Portfolio $50,000 Builder Aggressive -------------------- ------------- David M. Joy 5 RICs $2.48 billion None None (1) (22) -------------------- ------------- Michelle M. None Keeley(c) -------------------- ------------- William F. None Truscott(c) ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Kent M. Bergene(b) $10,001 - Portfolio $50,000 Builder Conservative -------------------- ------------- David M. Joy 5 RICs $2.64 billion None None (1) (22) -------------------- ------------- Michelle M. None Keeley(c) -------------------- ------------- William F. None Truscott(c) ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Kent M. Bergene(b) $50,001 - Portfolio $100,000 Builder Moderate -------------------- ------------- David M. Joy 5 RICs $2.0 billion None None (1) (22) -------------------- ------------- Michelle M. None Keeley(c) -------------------- ------------- William F. None Truscott(c) ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Kent M. Bergene(b) $10,001 - Portfolio $50,000 Builder Moderate Aggressive -------------------- ------------- David M. Joy None (1) (22) -------------------- ------------- Michelle M. 5 RICs $2.04 billion None None Keeley(c) -------------------- ------------- William F. $50,001 - Truscott(c) $100,000 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Kent M. Bergene(b) $10,001 - Portfolio $50,000 Builder Moderate Conservative -------------------- ------------- David M. Joy 5 RICs $2.51 billion None None (1) (22) -------------------- ------------- Michelle M. None Keeley(c) -------------------- ------------- William F. None Truscott(c) ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Kent M. Bergene(b) $10,001 - Portfolio $50,000 Builder Total Equity -------------------- ------------- David M. Joy 5 RICs $2.54 billion None $100,000 - (1) (22) $500,000 -------------------- ------------- Michelle M. None Keeley(c) -------------------- ------------- William F. None Truscott(c) ------------------------------------------------------------------------------------------------------------------------------------ RiverSource S&P Dimitris Bertsimas 32 RICs $9.44 billion 9 RICs ($6.78 B) None 500 Index 2 PIVs $595.75 million 15 other accounts $948.29 million (2) (21) -------------------------------------------------------------------------------------------- Georgios Vetoulis 2 RICs $511.99 million None None 1 PIV $586.92 million ------------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 116
Other Accounts Managed (excluding the fund) --------------------------------------------------------- Potential APPROXIMATE Ownership Conflicts NUMBER AND TYPE TOTAL NET PERFORMANCE BASED of Fund of Structure of FUND PORTFOLIO MANAGER OF ACCOUNT* ASSETS ACCOUNTS(a) Shares Interest Compensation ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Dimitris Bertsimas 32 RICs $9.12 billion 9 RICs ($6.78 B) None Small Company 2 PIVs $595.75 million Index 15 other accounts $948.29 million (2) (21) -------------------------------------------------------------------------------------------- Georgios Vetoulis 2 RICs $186.05 million None None 1 PIV $586.92 million ------------------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Warren Spitz 16 RICs $10.59 billion 10 RICs ($10.2 B) $10,001 - Equity Value 2 PIVs $35.83 million $50,000 (2) (23) 10 other accounts(d) $319.21 million -------------------------------------------------------------------------------------------- Steve Schroll $50,001 - 15 RICs $10.56 billion $100,000 -------------------- ------------- Laton Spahr 2 PIVs $35.83 million 9 RICs ($10.2 B) $100,001 - 10 other accounts(d) $319.21 million $500,000 -------------------- ------------- Paul Stocking $50,001 - $100,000 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Michael J. Alpert(j) 1 RIC $35.63 million Partners Small 0 PIVs $0 Cap Growth 12 other accounts $378.43 None None (2) (45) million(d) --------------------------------------------------------- Stephan B. Yost(j) 1 RIC $35.63 million 0 PIVs $0 12 other accounts $378.43 million(d) ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Clay Hoes 1 PIV $46.70 million None $1 - $10,000 (2),(3) (23) Precious Metals ------------------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Warren Spitz 16 RICs $11.50 billion 10 RICs ($11.05 B) None 120/20 2 PIVs $38.06 million Contrarian 10 other accounts(d) $400.77 million Equity -------------------------------------------------------------------------------------------- Steve Schroll $10,001 - 15 RICs $11.43 billion 9 RICs ($10.98 B) $50,000 -------------------- ------------- Laton Spahr 2 PIVs $38.06 million $100,001 - (2) (23) 10 other accounts(d) $400.77 million $500,000 -------------------- ------------- Paul Stocking $100,001 - $500,000 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Warren Spitz 16 RICs $11.47 billion 10 RICs ($11.01 B) $500,001 - (2) (23) Recovery and 2 PIVs $38.06 million $1,000,000 Infrastructure 10 other accounts(d) $400.77 million ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Dimitris Bertsimas 31 RICs $9.75 billion 9 RICs ($7.0 B) (6) (21) Retirement Plus 1 PIV $606.31 million 2010 14 other accounts(d) $2.50 billion None ------------------------------------------------------------------------------ Colin Lundgren 16 RICs $1.28 billion None 4 other accounts $41.11 million ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Dimitris Bertsimas 31 RICs $9.74 billion 9 RICs ($7.0 B) None (6) (21) Retirement Plus 1 PIV $606.31 million 2015 14 other accounts(d) $2.50 billion ------------------------------------------------------------------------------ Colin Lundgren 16 RICs $1.27 billion None 4 other accounts $41.11 million ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Dimitris Bertsimas 31 RICs $9.74 billion 9 RICs ($7.0 B) None (6) (21) Retirement Plus 1 PIV $606.31 million 2020 14 other accounts(d) $2.50 billion ------------------------------------------------------------------------------ Colin Lundgren 16 RICs $1.27 billion None 4 other accounts $41.11 million ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Dimitris Bertsimas 31 RICs $9.74 billion 9 RICs ($7.0 B) $10,001 - (6) (21) Retirement Plus 1 PIV $606.31 million $50,000 2025 14 other accounts(d) $2.50 billion -------------------------------------------------------------------------------------------- Colin Lundgren 16 RICs $1.27 billion None None 4 other accounts $41.11 million ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Dimitris Bertsimas 31 RICs $9.73 billion 9 RICs ($7.0 B) Over (6) (21) Retirement Plus 1 PIV $606.31 million $1,000,000 2030 14 other accounts(d) $2.50 billion -------------------------------------------------------------------------------------------- Colin Lundgren 16 RICs $1.27 billion None $10,001 - 4 other accounts $41.11 million $50,000 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Dimitris Bertsimas 31 RICs $9.74 billion 9 RICs ($7.0 B) None (6) (21) Retirement Plus 1 PIV $606.31 million 2035 14 other accounts(d) $2.50 billion ------------------------------------------------------------------------------ Colin Lundgren 16 RICs $1.28 billion None 4 other accounts $41.11 million ------------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 117
Other Accounts Managed (excluding the fund) --------------------------------------------------------- Potential APPROXIMATE Ownership Conflicts NUMBER AND TYPE TOTAL NET PERFORMANCE BASED of Fund of Structure of FUND PORTFOLIO MANAGER OF ACCOUNT* ASSETS ACCOUNTS(a) Shares Interest Compensation ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Dimitris Bertsimas 31 RICs $9.75 billion 9 RICs ($7.0 B) None (6) (21) Retirement Plus 1 PIV $606.31 million 2040 14 other accounts(d) $2.50 billion ------------------------------------------------------------------------------ Colin Lundgren 16 RICs $1.28 billion None 4 other accounts $41.11 million ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Dimitris Bertsimas 31 RICs $9.75 billion 9 RICs ($7.0 B) None (6) (21) Retirement Plus 1 PIV $606.31 million 2045 14 other accounts(d) $2.50 billion ------------------------------------------------------------------------------ Colin Lundgren 16 RICs $1.28 billion None 4 other accounts $41.11 million ------------------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource High Scott Schroepfer 10 RICs $12.4 billion None $500,001 - Yield Bond 0 PIVs $0 $1,000,000 (2) (27) 0 other accounts $0 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource John Schonberg(k) 8 RICs $1.43 billion (2) (44) Partners 2 PIVs $20.71 million Aggressive 6 other accounts $1.2 million Growth --------------------------------------------------------- ---------------------- Sam Murphy(k) 2 RICs $1.05 million 2 RICs ($1.05 M) None 3 other accounts $0.12 million --------------------------------------------------------- Mike Marzolf(k) 2 RICs $1.05 million (2), (3) (44) 2 other accounts $0.05 million ------------------------------------------------------------------------------------------------------------------------------------ RiverSource DAVIS: Partners Christopher C. Davis 29 RICs $49.0 billion Fundamental 12 PIVs $799.0 million Value 122 other $7.5 billion None None(f) (9) (29) accounts(e) --------------------------------------------------------- Kenneth C. Feinberg 27 RICs $49.0 billion 11 PIVs $732.0 million 113 other $6.8 billion accounts(e) ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Steve Schroll(l) 13 RICs $14.15 billion Partners Select 2 PIVs $48.35 million Value 18 other accounts(d) $8.64 billion --------------------------------------------------------- Laton Spahr(l) 13 RICs $14.15 billion 9 RICs ($13.65 B) None (2) (23) 2 PIVs $48.35 million 16 other accounts(d) $4.89 billion --------------------------------------------------------- Paul Stocking(l) 13 RICs $14.15 billion 2 PIVs $48.35 million 21 other accounts(d) $8.85 billion ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Neil T. Eigen(j) 7 RICs $587.6 million Partners Small 1 PIV $113.71 million Cap Equity 64 other accounts $2.59 1 RIC ($149.7 M) None (2) (26) billion(d) --------------------------------------------------------- Richard S. Rosen(j) 7 RICs $587.6 million 1 PIV $113.71 million 64 other accounts $2.59 billion(d) ------------------------------------------------------------------------------------------------------------------------------------ RiverSource DONALD SMITH: Partners Small Donald G. Smith 1 RIC $609 million 1 RIC ($609M) Cap Value -------------------- Richard L. Greenberg 1 PIV $97 million None (10) (32) 30 other accounts $1,751 million ------------------------------------------------------------------------------------------------------------------- MDTA: Daniel J. Mahr -------------------- Douglas Thunen 9 RIC $740.9 million 1 other account -------------------- Frederick Konopka 3 PIV $179.1 million ($411,922) None (5) (25) -------------------- Brian M. Greenberg 57 other accounts $3.27 billion ------------------------------------------------------------------------------------------------------------------- BHMS: James S. McClure 4 RIC $484.1 million None -------------------- John P. Harloe 1 PIV $3.5 million None (12) (33) 15 other accounts $458.1 million ------------------------------------------------------------------------------------------------------------------- METWEST: Samir Sikka 4 RICs $347.8 million None 3 PIVs $61.2 million None (13) (34) 9 other accounts $54.4 million ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Todd White 13 RICs $13.21 billion 2 other accounts $50,001 - Short Duration 7 PIVs $3.39 billion ($93.84M) $100,000 U.S. Government 39 other accounts $19.29 (2) (27) billion(d) -------------------------------------------------------------------------------------------- John McColley 2 RICs $565.3 million None None 0 PIVs $0 0 other accounts $0 ------------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 118
Other Accounts Managed (excluding the fund) --------------------------------------------------------- Potential APPROXIMATE Ownership Conflicts NUMBER AND TYPE TOTAL NET PERFORMANCE BASED of Fund of Structure of FUND PORTFOLIO MANAGER OF ACCOUNT* ASSETS ACCOUNTS(a) Shares Interest Compensation ------------------------------------------------------------------------------------------------------------------------------------ RiverSource U.S. Todd White 13 RICs $13.58 billion 2 other accounts $50,001 - Government 7 PIVs $3.39 billion ($93.84M) $100,000 Mortgage 39 other accounts $19.29 (2) (27) billion(d) -------------------------------------------------------------------------------------------- Jason J. Callan 0 RICs $0 None None 0 PIVs $0 0 other accounts $0 ------------------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Warren Spitz 16 RICs $11.86 billion 8 RICs ($11.1 B) $1 - Dividend 2 PIVs $40.6 million $10,000 Opportunity 10 other accounts $427.1 million(d) -------------------------------------------------------------------------------------------- Steve Schroll $50,000 - (2) (23) 15 RICs $11.68 billion 8 RICs ($11.1 B) $100,000 -------------------- ------------- Laton Spahr 2 PIVs $40.6 million $100,001 - 10 other accounts $427.1 $500,000 million(d) -------------------- ------------- Paul Stocking $10,001 - $50,000 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Real Julene Melquist 0 RICs $0 None $10,001 - (2),(3) (23) Estate 0 PIVs $0 $50,000 0 other accounts $0 ------------------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Dimitris Bertsimas 31 RICs $8.83 billion 8 RICs ($5.82 B) $100,001- Disciplined 1 PIV $593.72 million $500,000 Equity 1 other account $2.55 billion (2) (21) -------------------------------------------------------------------------------------------- Gina Mourtzinou 11 RICs $6.58 billion 7 RICs ($5.46 B) $50,001- 4 other accounts $99.99 million $100,000 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Dimitris Bertsimas 31 RICs $10.53 billion 8 RICs ($7.51 B) $100,001- (2) (21) Disciplined 1 PIV $593.72 million $500,000 Small and Mid 1 other account $2.55 billion Cap Equity -------------------------------------------------------------------------------------------- Gina Mourtzinou 11 RICs $8.28 billion 7 RICs ($7.16 B) None 4 other accounts $99.99 million -------------------------------------------------------------------------------------------- Steve Kokkotos 2 RICs $931.20 million 2 RICs ($931.2 M) $10,001- 1 other account $7.13 million $50,000 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Dimitris Bertsimas 31 RICs $10.64 billion 8 RICs ($7.62 B) $100,001- (2) (21) Disciplined 1 PIV $593.72 million $500,000 Small Cap Value 1 other account $2.55 billion -------------------------------------------------------------------------------------------- Gina Mourtzinou 11 RICs $8.38 billion 7 RICs ($7.27 B) $10,001- 4 other accounts $99.99 million $50,000 -------------------------------------------------------------------------------------------- Steve Kokkotos 2 RICs $1.04 billion 2 RICs (1.04 B) $10,001- 1 other account $7.13 million $50,000 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Lynn Hopton 11 PIVs $4.85 billion None None (2) (35) Floating Rate 3 other accounts $430.04 million -------------------- ------------- Yvonne Stevens None --------------------------------------------------------- ------------- Steve Staver None None $50,001- $100,000 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Brian Lavin 1 RIC $1.65 billion None $50,001- (2) (27) Income 1 PIV $8.21 million $100,000 Opportunities 1 other account $596.79 million ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Todd White 13 RICs $13.32 billion 3 RICs ($976.24 M); $10,001- (2) (27) Inflation 7 PIVs $3.24 billion 2 other accounts $50,000 Protected 37 other accounts(d) $19.37 billion ($160.99 M) Securities ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Tom Murphy 8 RICs $10.28 billion 3 RICs ($1.39 B) $50,001- (2) (27) Limited Duration 2 PIVs $816.27 million $100,000 Bond 15 other accounts $12.23 billion -------------------------------------------------------------------------------------------- Timothy J. Doubek 1 other account $25.37 million None $10,001- $50,000 ------------------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource 10 RICs $4.34 billion California Tax- 8 other accounts $6.35 billion Exempt ---------------- ------------------------------------ RiverSource Catherine Stienstra 10 RICs $4.18 billion None None (2) (27) Minnesota Tax- 8 other accounts $6.35 billion Exempt ---------------- ------------------------------------ RiverSource New 10 RICs $4.45 billion York Tax-Exempt 8 other accounts $6.35 billion ------------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 119
Other Accounts Managed (excluding the fund) --------------------------------------------------------- Potential APPROXIMATE Ownership Conflicts NUMBER AND TYPE TOTAL NET PERFORMANCE BASED of Fund of Structure of FUND PORTFOLIO MANAGER OF ACCOUNT* ASSETS ACCOUNTS(a) Shares Interest Compensation ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Tom Murphy 6 RICs $6.26 billion 3 RICs ($916.13 M) $10,001- Diversified Bond 2 PIVs $826.67 million $50,000 14 other accounts $12.60 billion -------------------------------------------------------------------------------------------- Scott Schroepfer 7 RICs $8.29 billion 3 RICs ($916.13 M) None (2) (27) ------------------------------------------------------------------------------ Todd White 10 RICs $10.20 billion 3 RICs ($916.13 M); $50,001- 7 PIVs $3.21 billion 2 other accounts $100,000 35 other accounts(d) $20.05 billion ($161.06) ------------------------------------------------------------------------------------------------------------------------------------ FOR FUND WITH FISCAL PERIOD ENDING SEPTEMBER 30 ------------------------------------------------------------------------------------------------------------------------------------ Balanced Warren Spitz 13 RICs $14.05 billion 9 RICs ($13.55 B) None 2 PIVs $48.35 million 18 other accounts(d) $6.70 billion -------------------------------------------------------------------------------------------- Steve Schroll 12 RICs $13.73 billion None 2 PIVs $48.35 million 18 other accounts(d) $2.42 billion --------------------------------------------------------- ------------- Laton Spahr 12 RICs $13.73 billion 8 RICs ($13.23 B) $1 - $10,000 (2) (23) 2 PIVs $48.35 million 16 other accounts(d) $2.96 billion --------------------------------------------------------- ------------- Paul Stocking 12 RICs $13.73 billion None 2 PIVs $48.35 million 21 other accounts(d) $6.91 billion ------------------------------------------------------------------------------------------------------------------- Tom Murphy 6 RICs $10.40 billion 2 RICs ($729.4 M) None 2 PIVs $835.61 million 18 other accounts $15.33 billion -------------------------------------------------------------------------------------------- Scott Schroepfer 7 RICs $12.47 billion 2 RICs ($729.4 M) None (2) (27) 4 other accounts $8.13 billion -------------------------------------------------------------------------------------------- Todd White 10 RICs $14.35 billion 2 RICs ($729.4 M); None 7 PIVs $3.12 billion 2 other accounts 41 other accounts(d) $24.80 billion ($161.1 M) ------------------------------------------------------------------------------------------------------------------------------------ Disciplined Dimitris Bertsimas 29 RICs $10.68 billion 7 RICs ($7.6 B) None (2) (21) Large Cap Growth 1 PIV $636.13 million 18 other accounts(d) $7.71 billion -------------------------------------------------------------------------------------------- Gina Mourtzinou 9 RICs $8.28 billion 6 RICs ($7.19 B) None 12 other accounts $1.83 billion ------------------------------------------------------------------------------------------------------------------------------------ Disciplined Dimitris Bertsimas 29 RICs $11.02 billion 7 RICs ($7.94 B) None Large Cap Value 1 PIV $636.13 million 18 other accounts(d) $7.71 billion -------------------------------------------------------------------------------------------- Gina Mourtzinou 9 RICs $8.62 billion 6 RICs ($7.53 B) None (2) (21) 12 other accounts $1.83 billion ------------------------------------------------------------------------------------------------------------------------------------ Diversified Warren Spitz 13 RICs $9.91 billion 9 RICs ($9.42 B) $50,001- Equity Income 2 PIVs $48.35 million $100,000 18 other accounts(d) $6.70 billion -------------------------------------------------------------------------------------------- Laton Spahr 12 RICs $9.59 billion 8 RICs ($9.09 B) $100,001- 2 PIVs $48.35 million $500,000 16 other accounts(d) $2.96 billion --------------------------------------------------------- ------------- Steve Schroll 12 RICs $9.59 billion $50,001- (2) (23) 2 PIVs $48.35 million $100,000 18 other accounts(d) $2.42 billion --------------------------------------------------------- ------------- Paul Stocking 12 RICs $9.59 billion $100,001- 2 PIVs $48.35 million $500,000 21 other accounts(d) $6.91 billion ------------------------------------------------------------------------------------------------------------------------------------ Mid Cap Value Warren Spitz 13 RICs $12.40 billion 9 RICs ($11.9 B) $1-$10,000 2 PIVs $48.35 million 18 other accounts(d) $6.70 billion -------------------------------------------------------------------------------------------- Laton Spahr 12 RICs $12.07 billion $100,001- 2 PIVs $48.35 million $500,000 16 other accounts(d) $2.96 billion --------------------------------------------------------- ------------- Steve Schroll 12 RICs $12.07 billion 8 RICs ($11.58 B) $50,001- (2) (23) 2 PIVs $48.35 million $100,000 18 other accounts(d) $2.42 billion --------------------------------------------------------- ------------- Paul Stocking 12 RICs $12.07 billion $100,001- 2 PIVs $48.35 million $500,000 21 other accounts(d) $6.91 billion ------------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 120
Other Accounts Managed (excluding the fund) --------------------------------------------------------- Potential APPROXIMATE Ownership Conflicts NUMBER AND TYPE TOTAL NET PERFORMANCE BASED of Fund of Structure of FUND PORTFOLIO MANAGER OF ACCOUNT* ASSETS ACCOUNTS(a) Shares Interest Compensation ------------------------------------------------------------------------------------------------------------------------------------ Strategic Tom Murphy 6 RICs $10.23 billion 2 RICs ($5.65 M) None Allocation 2 PIVs $835.61 million 18 other accounts $15.33 billion -------------------------------------------------------------------------------------------- Scott Schroepfer 7 RICs $12.31 billion 2 RICs (5.65 M) None 4 other accounts $8.13 billion (2) (27) -------------------------------------------------------------------------------------------- Todd White 10 RICs $14.18 billion 2 RICs (5.65 M); None 7 PIVs $3.12 billion 2 other accounts 41 other accounts(d) $24.80 billion ($161.1 M) ------------------------------------------------------------------------------------------------------------------- Dimitris Bertsimas 29 RICs $10.41 billion 7 RICs ($7.33 B) Over $500,000 1 PIV $636.13 million 18 other accounts(d) $7.71 billion -------------------------------------------------------------------------------------------- Gina Mourtzinou 9 RICs $8.28 billion 6 RICs ($6.92 B) $100,001- 12 other accounts $1.83 billion $500,000 (2) (21) -------------------------------------------------------------------------------------------- Alex Sauer-Budge 1 RIC $408.21 million 1 RIC ($408.21 M) $1-$10,000 2 other accounts $221.56 million -------------------------------------------------------------------------------------------- Steve E. Kokkotos 2 RICs $197.22 million 2 RICs ($197.22 M) $50,001- 3 other accounts $516.51 million $100,000 ------------------------------------------------------------------------------------------------------------------------------------ Strategic Income Colin Lundgren 16 RICs $1.24 billion None None Allocation 14 other accounts $1.22 billion -------------------------------------------------------------------------------------------- Gene Tannuzzo 2 other accounts $0.04 million None $1-$10,000 (2) (27) ------------------------------------------------------------------------------------------------------------------------------------ Seligman Catherine Stienstra 10 RICs $4.64 billion None None (2) (27) California 11 other accounts $6.76 billion Municipal High- Yield ------------------------------------------------------------------------------------------------------------------------------------ Seligman Catherine Stienstra 10 RICs $4.64 billion None None (2) (27) California 11 other accounts $6.76 billion Municipal Quality ------------------------------------------------------------------------------------------------------------------------------------ Seligman Catherine Stienstra 10 RICs $4.61 billion None None (2) (27) Minnesota 11 other accounts $6.76 billion Municipal ------------------------------------------------------------------------------------------------------------------------------------ Seligman Catherine Stienstra 10 RICs $3.98 billion None None (2) (27) National 11 other accounts $6.76 billion Municipal ------------------------------------------------------------------------------------------------------------------------------------ Seligman New Catherine Stienstra 10 RICs $4.59 billion None None (2) (27) York Municipal 11 other accounts $6.76 billion ------------------------------------------------------------------------------------------------------------------------------------ Seligman John Schonberg 6 RICs $1.23 billion 2 RICs ($1.12 B) None (2) (44) TargETFund 2015 2 PIVs $20.41 million 5 other accounts $1.13 million ------------------------------------------------------------------------------------------------------------------- Charles Kadlec 4 RICs $107.69 million None $100,001 - (2) (22) 7 other accounts $9.88 million $500,000 --------------------------------------------------------- ------------- Gary Terpening 4 RICs $107.69 million None 3 other accounts $0.40 million ------------------------------------------------------------------------------------------------------------------------------------ Seligman John Schonberg 6 RICs $1.23 billion 2 RICs ($1.12 B) None (2) (44) TargETFund 2025 2 PIVs $20.41 million 5 other accounts $1.13 million ------------------------------------------------------------------------------------------------------------------- Charles Kadlec 4 RICs $99.96 million None $100,001 - (2) (22) 7 RICs $9.88 million $500,000 --------------------------------------------------------- ------------- Gary Terpening 4 RICs $99.96 million $100,001 - 3 other accounts $0.40 million $500,000 ------------------------------------------------------------------------------------------------------------------------------------ Seligman John Schonberg 6 RICs $1.23 billion 2 RICs ($1.12 B) None (2) (44) TargETFund 2035 2 PIVs $20.41 million 5 other accounts $1.13 million ------------------------------------------------------------------------------------------------------------------- Charles Kadlec 4 RICs $124.47 million None $1 - (2) (22) 7 RICs $9.88 million $10,000 --------------------------------------------------------- ------------- Gary Terpening 4 RICs $124.47 million None 3 other accounts $0.40 million ------------------------------------------------------------------------------------------------------------------------------------ Seligman John Schonberg 6 RICs $1.23 billion 2 RICs ($1.12 B) None (2) (44) TargETFund 2045 2 PIVs $20.41 million 5 other accounts $1.13 million ------------------------------------------------------------------------------------------------------------------- Charles Kadlec 4 RICs $129.70 million None $10,001 - (2) (22) 7 RICs $9.88 million $50,000 --------------------------------------------------------- ------------- Gary Terpening 4 RICs $129.70 million None 3 other accounts $0.40 million ------------------------------------------------------------------------------------------------------------------------------------ Seligman John Schonberg 6 RICs $1.23 billion 2 RICs ($1.12 B) None (2) (44) TargETFund Core 2 PIVs $20.41 million 5 other accounts $1.13 million ------------------------------------------------------------------------------------------------------------------- Charles Kadlec 4 RICs $75.53 million None $100,001 - (2) (22) 7 RICs $9.88 million $500,000 --------------------------------------------------------- ------------- Gary Terpening 4 RICs $75.53 million None 3 other accounts $0.40 million ------------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 121
Other Accounts Managed (excluding the fund) --------------------------------------------------------- Potential APPROXIMATE Ownership Conflicts NUMBER AND TYPE TOTAL NET PERFORMANCE BASED of Fund of Structure of FUND PORTFOLIO MANAGER OF ACCOUNT* ASSETS ACCOUNTS(a) Shares Interest Compensation ------------------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Nicholas Pifer 5 RICs $4.79 billion None $50,001 - (2) (27) Absolute Return 3 PIVs $33.59 million $100,000 Currency and 17 other accounts(d) $6.27 billion Income ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Dimitris Bertsimas 29 RICs $10.53 billion 7 RICs ($7.54 B) $100,001 - Disciplined 1 PIV $609.30 million $500,000 (2) (21) International 18 other accounts(d) $6.10 billion Equity -------------------------------------------------------------------------------------------- Alex Sauer-Budge 1 RIC $877.17 million 1 RIC ($877.17 M) $0-$10,000 2 other accounts $0.21 million ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Nicholas Pifer 5 RICs $4.77 billion $10,001 - Emerging Markets 3 PIVs $33.59 million None $50,000 (2) (27) Bond 17 other accounts(d) $6.27 billion --------------------------------------------------------- ------------- Jim Carlene 4 PIVs $174.53 million $10,001 - 7 other accounts $966.74 million $50,000 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Nicholas Pifer 5 RICs $4.51 billion None $50,001 - (2) (27) Global Bond 3 PIVs $33.59 million $100,000 17 other accounts(d) $6.27 billion ------------------------------------------------------------------------------------------------------------------------------------ RiverSource COLUMBIA WAM: Partners International Select Growth P. Zachary Egan 2 RICs $4.10 billion None None (15) (37) --------------------------------------------------------- Louis J. Mendes 3 RICs $5.50 billion ------------------------------------------------------------------------------------------------------------------- PRINCIPAL GLOBAL: John Pihlblad 9 RICs $3.14 billion 2 PIVs $373.39 million None None (16) (38) 3 other accounts $257.06 million --------------------------------------------------------- Steven Larson 6 RICs $2.20 billion 1 PIV $105.81 million 2 other accounts $257.06 million ------------------------------------------------------------------------------------------------------------------------------------ RiverSource ALLIANCEBERNSTEIN: Partners International Select Value Kevin F. Simms 112 RICs $38.41 billion 3 RICs ($6.56 B); -------------------- Henry S. D'Auria 195 PIVs $19.99 billion 3 PIVs ($839 M); -------------------- Sharon E. Fay 33,923 other $96.14 billion 86 other ($8.82 B) accounts ------------------------------------------------------------------------------ Marilyn G. Fedak 43 RICs $11.20 billion 1 RIC ($3.64 B); 52 PIVs $1.43 billion 8 other ($584 M) None (17) (39) 33,271 other $23.54 billion accounts ------------------------------------------------------------------------------ Giulio Martini 53 RICs $23.88 billion 2 RICs ($2.92 B); 94 PIVs $17.06 billion 2 PIVs ($792 M); 548 other accounts $58.71 billion 62 other ($6.79 B) ------------------------------------------------------------------------------------------------------------------- MONDRIAN: Ormala Krishnan 1 RIC $363.0 million None None (8) (40) 1 PIV $406.0 million 11 other accounts $1.08 billion ------------------------------------------------------------------------------------------------------------------- TRADEWINDS: Peter Boardman 4 RICs $1.80 billion 9 PIVs $906.79 million None None (11) (41) 41,851 other $11.98 billion accounts --------------------------------------------------------- Alberto Jimenez 4 RICs $1.81 billion Crespo 9 PIVs $906.79 million 41,848 other $11.85 billion accounts ------------------------------------------------------------------------------------------------------------------------------------ RiverSource COLUMBIA WAM: Partners International Small Cap P. Zachary Egan 2 RICs $4.30 billion None None (15) (37) --------------------------------------------------------- Louis Mendes III 3 RICs $5.60 billion ------------------------------------------------------------------------------------------------------------------- BATTERYMARCH: Adam Petryk 7 RICs $2.59 billion 18 PIVs $1.43 billion None None (18) (42) 28 other accounts $4.16 billion --------------------------------------------------------- Charles F. Lovejoy 3 RICs $1.51 billion -------------------- Christopher W. Floyd 11 PIVs $651.76 million 18 other accounts $2.03 billion ------------------------------------------------------------------------------------------------------------------------------------ Seligman Michael Alpert 1 RIC $97.15 million None (2) (45) Frontier 18 other accounts $1.44 billion 1 RIC (97.15 M) --------------------------------------------------------- ------------- Stephen Yost 1 RIC $97.15 million None 16 other accounts $9.07 billion ------------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 122
Other Accounts Managed (excluding the fund) --------------------------------------------------------- Potential APPROXIMATE Ownership Conflicts NUMBER AND TYPE TOTAL NET PERFORMANCE BASED of Fund of Structure of FUND PORTFOLIO MANAGER OF ACCOUNT* ASSETS ACCOUNTS(a) Shares Interest Compensation ------------------------------------------------------------------------------------------------------------------------------------ Seligman Global Richard M. Parower 3 RICs $3.40 billion $100,001 - Technology 5 PIVs $904.02 million $500,000 6 other accounts $3.39 billion --------------------------------------------------------- ------------- Paul H. Wick 3 RICs $3.40 billion None 5 PIVs $904.02 million 5 other accounts $3.04 billion --------------------------------------------------------- ------------- Reema D. Shah 3 RICs $3.40 billion None None (2) (36) 5 PIVs $904.02 million 8 other accounts $9.11 billion --------------------------------------------------------- ------------- Ajay Diwan 3 RICs $3.40 billion None 5 PIVs $904.02 million 7 other accounts $5.76 billion --------------------------------------------------------- ------------- Benjamin Lu 1 RIC $6.11 million $0 - 2 PIVs $41.12 million $10,000 1 other account $0.01 million ------------------------------------------------------------------------------------------------------------------------------------ Threadneedle THREADNEEDLE: Asia Pacific Vanessa Donegan 2 PIVs $2.17 billion 1 other ($156.61 M) None(g) (14) (43) 7 other accounts $4.16 billion ------------------------------------------------------------------------------ Rafael Polatinsky 1 PIV $201.29 million None 4 other accounts $20.0 billion ------------------------------------------------------------------------------------------------------------------------------------ Threadneedle THREADNEEDLE: Emerging Markets Julian A.S. Thompson 1 RIC $832.97 million 1 RIC ($832.97 M) (14) (43) -------------------- -------------------- Jules Mort 4 PIVs $984.10 million None None(g) 2 other accounts $29.80 million ------------------------------------------------------------------------------------------------------------------------------------ Threadneedle THREADNEEDLE: European Equity Rob Jones 3 PIVs $169.95 million None 1 other accounts $39.35 million None(g) (14) (43) ------------------------------------------------------------------------------ Dan Ison 4 PIVs $211.49 million 1 PIV ($86.38 M) ------------------------------------------------------------------------------------------------------------------------------------ Threadneedle THREADNEEDLE: Global Equity Stephen Thornber 2 RICs $28.09 million None 3 PIVs $779.53 million 3 other accounts $411.64 million None(g) (14) (43) ------------------------------------------------------------------------------ Andrew Holliman 2 RICs $7.50 million 1 RIC, 1 PIV 6 PIVs $1.63 billion ($16.2 M) ------------------------------------------------------------------------------------------------------------------------------------ Threadneedle THREADNEEDLE: Global Equity Income Stephen Thornber 2 RICs $481.64 million 1 RIC ($481.64 M) 3 PIVs $779.53 million 3 other accounts $411.64 million None(g) (14) (43) ------------------------------------------------------------------------------ Jeremy Podger 2 RICs $28.09 million 3 PIVs, 1 other 7 PIV $144.71 million ($96.2 M) 4 other accounts $120.63 million ------------------------------------------------------------------------------------------------------------------------------------ Threadneedle THREADNEEDLE: Global Extended Alpha Andrew Holliman 1 RICs $481.64 million 1 RIC, 1 PIV 6 PIVs $1.63 billion ($16.2 M) ------------------------------------------------------------------------------ Jeremy Podger 1 RICs $28.09 million 3 PIVs, 1 other None(g) (14) (43) 7 PIV $692.70 million ($96.2 M) 4 other accounts $120.63 million ------------------------------------------------------------------------------------------------------------------------------------ Threadneedle THREADNEEDLE: International Opportunity Alex Lyle 1 RIC $552.78 million 1 RIC ($552.78 M); 16 PIVs $1.20 million 1 other ($221.18 M) 30 other accounts $2.17 billion None(g) (14) (43) ------------------------------------------------------------------------------ Esther Perkins 1 RIC $552.78 million 1 RIC ($552.78 M) 3 other accounts $264.31 million ------------------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Catherine Stienstra 5 RICs $3.30 billion None None (2) (27) Intermediate 11 other accounts $6.33 billion Tax-Exempt ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Mid John K. Schonberg 2 RICs $256.55 million 2 RICs None (2) (44) Cap 2 PIVs $15.93 million ($256.55 M) Growth 3 other accounts $2.61 million ------------------------------------------------------------------------------------------------------------------- Sam Murphy 1 RIC $246.40 million 1 RIC ($246.4 M) None (2),(3) (44) -------------------- Mike Marzolf ------------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 123
Other Accounts Managed (excluding the fund) --------------------------------------------------------- Potential APPROXIMATE Ownership Conflicts NUMBER AND TYPE TOTAL NET PERFORMANCE BASED of Fund of Structure of FUND PORTFOLIO MANAGER OF ACCOUNT* ASSETS ACCOUNTS(a) Shares Interest Compensation ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Tax- Catherine Stienstra 5 RICs $2.77 billion None None (2) (28) Exempt 11 other accounts $6.33 billion Bond ------------------------------------------------------------------------------------------------------------------------------------ RiverSource Tax- Catherine Stienstra 5 RICs $1.18 billion None None (2) (27) Exempt 11 other accounts $6.33 billion High Income ------------------------------------------------------------------------------------------------------------------------------------
* RIC refers to a Registered Investment Company; PIV refers to a Pooled Investment Vehicle. (a) Number of accounts for which the advisory fee paid is based in part or wholly on performance and the aggregate net assets in those accounts. (b) Mr. Bergene has overall accountability for the group that monitors the subadvisers for the funds and for making recommendations to the Boards of Directors on changes to those subadvisers. (c) Ms. Keeley, who serves as Executive Vice President -- Equity and Fixed Income for RiverSource Investments, and Mr. Truscott, who serves as Chief Investment Officer for RiverSource Investments, oversee the portfolio managers who manage other accounts for RiverSource Investments, including the underlying funds in which the Funds-of-Funds invest, and other accounts managed by RiverSource Investments and its affiliates including institutional assets, proprietary assets and hedge funds. (d) Reflects each wrap program strategy as a single client, rather than counting each participant in the program as a separate client. (e) Wrap accounts have been counted at the sponsor level. (f) Neither Christopher Davis nor Kenneth Feinberg own any shares of RiverSource Partners Fundamental Value Fund. However, both portfolio managers have over $1 million invested in the Davis Funds, which are managed in a similar style. (g) The fund is available for sale only in the U.S. The portfolio managers do not reside in the U.S. and therefore do not hold any shares of the fund. (h) The portfolio manager began managing the fund after its last fiscal year end; reporting information is as of Oct. 31, 2008. (i) The portfolio manager began managing the fund after its last fiscal year end; reporting information is provided as of Jan. 31, 2009. (j) The portfolio manager began managing the fund after its last fiscal year end; reporting information is provided as of May 31, 2009. (k) The portfolio manager began managing the fund after its last fiscal year end; reporting information is provided as of Nov. 30, 2009. (l) The portfolio manager began managing the fund after its last fiscal year end; reporting information is provided as of Sept. 30, 2009. POTENTIAL CONFLICTS OF INTEREST (1) RIVERSOURCE: Management of Funds-of-Funds differs from that of the other funds. The portfolio management process is set forth generally below and in more detail in the funds' prospectus. Management of the portfolios is based on initial asset class guidance provided by the Capital Markets Committee, a group of RiverSource Investments investment professionals, and subsequent allocation determinations by the Asset Allocation Committee and Fund Selection Committee within established guidelines set forth in the prospectus. The Asset Allocation Committee, comprised of portfolio managers Joy, Keeley and Truscott, determines each funds-of-fund's allocation among the three main asset classes (equity, fixed income and cash) and allocation among investment categories within each asset class. The Fund Selection Committee, comprised portfolio managers Bergene, Joy, Keeley and Truscott, determines each funds-of-fund's allocation among the underlying funds. These allocation determinations are reviewed by the Asset Allocation Committee and Fund Selection Committee at least quarterly. Because of the structure of the funds-of-funds, the potential conflicts of interest for the portfolio managers may be different than the potential conflicts of interest for portfolio managers who manage other funds. These potential conflicts of interest include - The portfolio managers of the underlying funds are under the supervision of portfolio managers Keeley and Truscott. Keeley and Truscott may have influence over the management of the underlying funds through their supervision of the underlying funds' portfolio managers and/or through their ability, as part of the Asset Allocation Committee and Fund Selection Committee, to influence the allocation of funds-of-funds assets to or away from the underlying funds. - Portfolio managers Joy, Keeley and Truscott also serve as members of the Capital Markets Committee. As described above, the Capital Markets Committee provides initial guidance with respect to asset allocation, and its view may play a significant role in the asset class determinations made by the Asset Allocation Committee and, as a result, in the underlying fund determinations made by the Fund Selection Committee. In addition to the accounts above, portfolio managers may manage accounts in a personal capacity that may include holdings that are similar to, or the same as, those of the fund. The investment manager has in place a Code of Ethics that is designed to address conflicts and that, among other things, imposes restrictions on the ability of the portfolio managers and other "investment access persons" to invest in securities that may be recommended or traded in the fund and other client accounts. (2) RIVERSOURCE: RiverSource Investments portfolio managers may manage one or more mutual funds as well as other types of accounts, including hedge funds, proprietary accounts, separate accounts for institutions and individuals, and other pooled investment vehicles. Portfolio managers make investment decisions for an account or portfolio based on its investment objectives and policies, and other relevant investment considerations. A portfolio manager may manage another account whose fees may be materially greater than the management fees paid by the Fund and may include a performance-based fee. Management of multiple funds and accounts may create potential conflicts of interest relating to Statement of Additional Information - Dec. 30, 2009 Page 124 the allocation of investment opportunities, competing investment decisions made for different accounts and the aggregation and allocation of trades. In addition, RiverSource Investments monitors a variety of areas (e.g., allocation of investment opportunities) and compliance with the firm's Code of Ethics, and places additional investment restrictions on portfolio managers who manage hedge funds and certain other accounts. RiverSource Investments has a fiduciary responsibility to all of the clients for which it manages accounts. RiverSource Investments seeks to provide best execution of all securities transactions and to aggregate securities transactions and then allocate securities to client accounts in a fair and equitable basis over time. RiverSource Investments has developed policies and procedures, including brokerage and trade allocation policies and procedures, designed to mitigate and manage the potential conflicts of interest that may arise from the management of multiple types of accounts for multiple clients. In addition to the accounts above, portfolio managers may manage accounts in a personal capacity that may include holdings that are similar to, or the same as, those of the fund. The investment manager's Code of Ethics is designed to address conflicts and, among other things, imposes restrictions on the ability of the portfolio managers and other "investment access persons" to invest in securities that may be recommended or traded in the fund and other client accounts. (3) RIVERSOURCE: The portfolio manager's responsibilities also include working as a securities analyst. This dual role may give rise to conflicts with respect to making investment decisions for accounts that the portfolio manager manages versus communicating his or her analyses to other portfolio managers concerning securities that he or she follows as an analyst. (4) TURNER: As is typical for many money managers, potential conflicts of interest may arise related to Turner's management of accounts including the fund where not all accounts are able to participate in a desired IPO, or other limited opportunity, relating to use of soft dollars and other brokerage practices, related to the voting of proxies, employee personal securities trading, and relating to a variety of other circumstances. In all cases, however, Turner believes it has written policies and procedures in place reasonably designed to prevent violations of the federal securities laws and to prevent material conflicts of interest from arising. Please also see Turner's Form ADV, Part II for a description of some of its policies and procedures in this regard. (5) MDTA: As a general matter, certain conflicts of interest may arise in connection with a portfolio manager's management of a fund's investments, on the one hand, and the investments of other accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various accounts managed could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Fund. Alternatively, to the extent that the same investment opportunities might be desirable for more than one account, possible conflicts could arise in determining how to allocate them. Other potential conflicts might include conflicts created by specific portfolio manager compensation arrangements, and conflicts relating to selection of brokers or dealers to execute fund portfolio trades and/or specific uses of commissions from Fund portfolio trades (for example, research, or "soft dollars"). The Adviser has structured the portfolio managers' compensation in a manner, and the Fund has adopted policies and procedures, reasonably designed to safeguard the Fund from being negatively affected as a result of any such potential conflicts. (6) RIVERSOURCE: Management of the Income Builder and Retirement Plus Funds- of-Funds differs from that of the other funds. The portfolio management process is set forth generally below and in more detail in the funds' prospectus. Management of the portfolios is based on proprietary, quantitative techniques and qualitative review of the quantitative output. Using these methodologies, a group of RiverSource Investments' investment professionals allocates each fund's assets within and across different asset classes in an effort to achieve the fund's objective of providing a high level of current income and growth of capital. After the initial allocation, the fund will be rebalanced monthly in an effort to maximize the level of income and capital growth, incorporating various measures of relative value subject to constraints that set minimum or maximum exposure within asset classes, as set forth in the prospectus. Within the equity and fixed income asset classes, the quantitative model establishes allocations for the funds, seeking to achieve each fund's objective by investing in defined investment categories. The target allocation range constraints are intended, in part, to promote diversification within the asset classes. Because of the structure of the funds-of-funds, the potential conflicts of interest for the portfolio managers may be different than the potential conflicts of interest for portfolio managers who manage other funds. These potential conflicts of interest include: - In certain cases, the portfolio managers of the underlying funds are the same as the portfolio managers of the Income Builder and Retirement Plus Funds-of-Funds, and could influence the allocation of funds-of-funds assets to or away from the underlying funds that they manage. - RiverSource Investments, LLC and its affiliates may receive higher compensation as a result of allocations to underlying funds with higher fees. - RiverSource Investments, LLC monitors the performance of the underlying funds and may, from time to time, recommend to the board of directors of the funds a change in portfolio management or fund strategy or the closure or merger of an underlying fund. In addition, RiverSource Investments, LLC may believe that certain funds may benefit Statement of Additional Information - Dec. 30, 2009 Page 125 from additional assets or could be harmed by redemptions. All of these factors may also influence decisions in connection with the allocation of funds-of-funds assets to or away from certain underlying funds. In addition to the accounts above, portfolio managers may manage accounts in a personal capacity that may include holdings that are similar to, or the same as, those of the fund. The investment manager has in place a Code of Ethics that is designed to address conflicts and that, among other things, imposes restrictions on the ability of the portfolio managers and other "investment access persons" to invest in securities that may be recommended or traded in the fund and other client accounts. (7) AMERICAN CENTURY: Certain conflicts of interest may arise in connection with the management of multiple portfolios. Potential conflicts include, for example, conflicts among investment strategies and conflicts in the allocation of investment opportunities. American Century has adopted policies and procedures that are designed to minimize the effects of these conflicts. Responsibility for managing American Century client portfolios is organized according to investment discipline. Investment disciplines include, for example, quantitative equity, small- and mid-cap growth, large-cap growth, value, international, fixed income, asset allocation, and sector funds. Within each discipline are one or more portfolio teams responsible for managing specific client portfolios. Generally, client portfolios with similar strategies are managed by the same team using the same objective, approach, and philosophy. Accordingly, portfolio holdings, position sizes, and industry and sector exposures tend to be similar across similar portfolios, which minimizes the potential for conflicts of interest. For each investment strategy, one portfolio is generally designated as the "policy portfolio." Other portfolios with similar investment objectives, guidelines and restrictions are referred to as "tracking portfolios." When managing policy and tracking portfolios, a portfolio team typically purchases and sells securities across all portfolios that the team manages. American Century's trading systems include various order entry programs that assist in the management of multiple portfolios, such as the ability to purchase or sell the same relative amount of one security across several funds. In some cases a tracking portfolio may have additional restrictions or limitations that cause it to be managed separately from the policy portfolio. Portfolio managers make purchase and sale decisions for such portfolios alongside the policy portfolio to the extent the overlap is appropriate, and separately, if the overlap is not. American Century may aggregate orders to purchase or sell the same security for multiple portfolios when it believes such aggregation is consistent with its duty to seek best execution on behalf of its clients. Orders of certain client portfolios may, by investment restriction or otherwise, be determined not available for aggregation. American Century has adopted policies and procedures to minimize the risk that a client portfolio could be systematically advantaged or disadvantaged in connection with the aggregation of orders. To the extent equity trades are aggregated, shares purchased or sold are generally allocated to the participating portfolios pro rata based on order size. Because initial public offerings (IPOs) are usually available in limited supply and in amounts too small to permit across- the-board pro rata allocations, American Century has adopted special procedures designed to promote a fair and equitable allocation of IPO securities among clients over time. Fixed income securities transactions are not executed through a centralized trading desk. Instead, portfolio teams are responsible for executing trades with broker/dealers in a predominantly dealer marketplace. Trade allocation decisions are made by the portfolio manager at the time of trade execution and orders entered on the fixed income order management system. Finally, investment of American Century's corporate assets in proprietary accounts may raise additional conflicts of interest. To mitigate these potential conflicts of interest, American Century has adopted policies and procedures intended to provide that trading in proprietary accounts is performed in a manner that does not give improper advantage to American Century to the detriment of client portfolios. (8) MONDRIAN: Mondrian does not foresee any material conflicts of interest that may arise in the management of the funds and any other accounts managed with similar investment guidelines. Mondrian acts solely as an investment manager and does not engage in any other business activities. The following is a list of some potential conflicts of interest that can arise in the course of normal investment management business activities. Mondrian maintains and operates various policies and procedures which are designed to prevent or manage any of the conflicts identified below so that the interests of its clients are always put ahead of Mondrian's own interests or those of its employees and directors: Allocation of aggregated trades Mondrian may from time to time aggregate trades for a number of its clients. Mondrian's policy requires that all allocations of aggregated trades must be fair between clients. Transactions involving commingled orders are allocated in a manner deemed equitable to each account. When a combined order is executed in a series of transactions, at different prices, each account participating in the order may be allocated an average price obtained from the broker/dealer. When a trade can be allocated in a cost efficient manner to our clients, it will be prorated across all participating accounts. Mondrian may randomly allocate purchases or sales among participating Statement of Additional Information - Dec. 30, 2009 Page 126 accounts when the amounts involved are too small to be evenly proportioned in a cost efficient manner. In performing random allocations, Mondrian will consider consistency of strategy implementation among participating accounts. Allocation of investment opportunities Mondrian is an investment manager of multiple client portfolios. As such, it has to ensure that investment opportunities are allocated fairly between clients. There is a potential risk that Mondrian may favor one client over another client in making allocations of investment opportunities. Mondrian makes security selection decisions at committee level. Those securities identified as investment opportunities are added to a list of approved securities; portfolios will hold only such approved securities. All portfolios governed by the same or a similar mandate will be structured similarly (that is, will hold the same or comparable stocks), and will exhibit similar characteristics. Sale and purchase opportunities identified at regular investment meetings will be applied to portfolios across the board, subject to the requirements of individual client mandates. See also "Side-by-side management of hedge funds" below. Allocation of IPO opportunities Initial Public Offerings ("IPO's") present a potential conflict of interest when they are priced at a discount to the anticipated secondary market price and the issuer has restricted or scaled back its allocation due to market demand. In such instances, the IPO allocation could be divided among a small select group of clients with others not receiving the allocation they would otherwise be entitled to. Mondrian clients with relevant mandates are given an equal opportunity, proportionate to the size of their portfolio, to participate in IPO trades. All IPO purchases are allocated on a strict pro-rata basis. Dealing in investments as principal in connections with the provision of seed capital A conflict of interest exists when a portfolio management firm manages its own money alongside client money. Mondrian generally does not trade for its own account. However, Mondrian and its affiliates have provided the seed capital to certain investment vehicles that have been established by Mondrian group entities. Mondrian serves as the investment manager to these investment vehicles. Mondrian operates dealing policies designed to ensure the fair and equal treatment of all clients e.g. the allocation of aggregated trades among clients. These policies ensure that any portfolios in which Mondrian has an investment interest do not receive favorable treatment relative to other client portfolios. Directorships and external arrangements Certain Mondrian staff may hold positions in external organizations. There is a potential risk that Mondrian personnel may place their own interests (resulting from outside employment/directorships) ahead of the interests of Mondrian clients. Before accepting an executive or non-executive directorship or any other appointment in another company, employees, including executive directors, must obtain the prior approval of the Chief Executive Officer. The Chief Compliance Officer must also be informed of all such appointments and changes. The CEO and CCO will only permit appointments that would not present a conflict of interest with the individual's responsibilities to Mondrian clients. Dual agency Dual Agency (also known as Cross Trading) concerns those transactions where Mondrian may act as agent for both the buyer and seller. In such circumstances there is a potential conflict of interest as it may be possible to favor one client over another when establishing the execution price and/or commission rate. Although it rarely does so, Mondrian may act as agent for both buying and selling parties with respect to transactions in investments. If Mondrian proposes to act in such capacity, the Portfolio Manager will first obtain approval from the Chief Compliance Officer. The CCO has an obligation to ensure that both parties are treated fairly in any such trade. Employee personal account dealing There are a number of potential conflicts when staff of an investment firm engage in buying and selling securities for their personal account. Mondrian has arrangements in place to ensure that none of its directors, officers or employees (or persons connected to them by way of a business or domestic relationship) effects any transaction on their own account which conflicts with client interests. Mondrian's rules which govern personal account dealing and general ethical standards are set out in the Mondrian Investment Partners Code of Ethics. Statement of Additional Information - Dec. 30, 2009 Page 127 Gifts and entertainment (received) In the normal course of business Mondrian employees may receive gifts and entertainment from third parties e.g. brokers and other service providers. This results in a potential conflict of interest when selecting third parties to provide services to Mondrian and its clients. Mondrian has a policy which requires that gifts and entertainment received are reported to the Chief Compliance Officer (any items in excess of L100 require pre-approval). All gifts and entertainment are reviewed to ensure that they are not inappropriate and that staff have not been unduly influenced by them. Gifts and entertainment (given) In the normal course of business, Mondrian employees may provide gifts and entertainment to third parties. Excessively lavish gifts and entertainment would be inappropriate. Mondrian has a policy which requires that any gifts and entertainment provided are reported to the Chief Compliance Officer (any items in excess of L200 require pre-approval). All gifts and entertainment are reviewed to ensure that they are not inappropriate and that staff have not attempted to obtain undue influence from them. Performance fees Where an investment firm has clients with a performance fee arrangement there is a risk that those clients could be favored over clients without performance fees. Mondrian charges fees as a proportion of assets under management. In a very limited number of situations, in addition to this fee basis, certain accounts also include a performance fee basis. The potential conflict of interest arising from these fee arrangements is addressed by Mondrian's procedures for the allocation of aggregated trades among clients. Investment opportunities are allocated totally independently of fee arrangements. Side-by-side management of hedge funds (Mondrian Alpha Funds) Where an investment manager has responsibility for managing long only portfolios alongside portfolios that can take short positions there is potential for a conflict of interest to arise between the two types of portfolio. Mondrian acts as investment manager for two Fixed Income Alpha and one Equity Alpha fund. The Alpha Funds are permitted to take short positions and are also permitted to invest in some or all of the same securities that Mondrian manages for other clients. Mondrian is satisfied that the investment styles of these different products significantly reduce the likelihood of a conflict of interest arising. However, Mondrian has a number of policies and procedures in place that are designed to ensure that any potential conflicts are correctly managed and monitored so that all clients are treated fairly. Soft dollar arrangements Where an investment manager has soft dollar arrangements in place with a broker/dealer there is a potential conflict of interest as trading volumes through that broker/dealer are usually important in ensuring that soft dollar targets are met. As is typical in the investment management industry, Mondrian client funds are used to pay brokerage commissions for the execution of transactions in the client's portfolio. As part of that execution service, brokers generally provide proprietary research to their clients as to the value of securities, the advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities; furnishing of analyses and reports concerning issuers, securities or industries; and providing information on economic factors and trends. Proprietary research may be used by Mondrian in connection with its investment decision-making process with respect to one or more accounts managed by it, and it may or may not be used, or used exclusively, with respect to the account generating the brokerage. With the exception of the receipt of proprietary research, Mondrian has no other soft dollar or commission sharing arrangements in place with brokers. (9) DAVIS: Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one portfolio or other account. More specifically, portfolio managers who manage multiple portfolios and/or other accounts are presented with the following potential conflicts: - The management of multiple portfolios and/or other accounts may result in a portfolio manager devoting unequal time and attention to the management of each portfolio and/or other account. Davis Advisors seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline. Most other accounts managed by a portfolio manager are managed using the same investment models that are used in connection with the management of the portfolios. Statement of Additional Information - Dec. 30, 2009 Page 128 - If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one portfolio or other account, a portfolio may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible portfolios and other accounts. To deal with these situations, Davis Advisors has adopted procedures for allocating portfolio transactions across multiple accounts. - With respect to securities transactions for the portfolios, Davis Advisors determines which broker to use to execute each order, consistent with its duty to seek best execution of the transaction. However, with respect to certain other accounts (such as mutual funds, other pooled investment vehicles that are not registered mutual funds, and other accounts managed for organizations and individuals), Davis Advisors may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, Davis Advisors may place separate, non- simultaneous, transactions for a portfolio and another account which may temporarily affect the market price of the security or the execution of the transaction, or both, to the detriment of the portfolio or the other account. - Finally, substantial investment of Davis Advisor or Davis Family assets in certain mutual funds may lead to conflicts of interest. To mitigate these potential conflicts of interest, Davis Advisors has adopted policies and procedures intended to ensure that all clients are treated fairly over time. Davis Advisors does not receive an incentive based fee on any account. (10) DONALD SMITH: Donald Smith & Co., Inc. is very sensitive to conflicts of interest that could possibly arise in its capacity of serving as an investment adviser. It remains committed to resolving any and all conflicts in the best interest of its clients. Donald Smith & Co., Inc. is an independent investment advisor with no parent or subsidiary organizations. Additionally, it has no affiliated organizations, brokerage, nor any investment banking activities. Clients include mutual funds, public and corporate pension plans, endowments and foundations, and other separate accounts. Donald Smith & Co., Inc. has put in place systems, policies and procedures, which have been designed to maintain fairness in portfolio management across all clients. Potential conflicts between funds or with other types of accounts are managed via allocation policies and procedures, internal review processes, and direct oversight by Donald G. Smith, President. (11) TRADEWINDS: Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one account. More specifically, portfolio managers who manage multiple accounts are presented with several potential conflicts, which is not intended to be an exhaustive list: - The management of multiple accounts may result in a portfolio manager devoting unequal time and attention to the management of each account. Tradewinds seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline. Most accounts managed by a portfolio manager in a particular investment strategy are managed using the same investment models. - If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one account, an account may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible accounts. To deal with these situations, Tradewinds has adopted procedures for fairly allocating portfolio transactions across multiple accounts. - With respect to many of its clients' accounts, Tradewinds determines which broker to use to execute transaction orders, consistent with its duty to seek best execution of the transaction. However, with respect to certain other accounts, Tradewinds may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, Tradewinds may place separate, non-simultaneous, transactions for a Fund and other accounts which may temporarily affect the market price of the security or the execution of the transaction, or both, to the detriment of the Fund or the other accounts. - Some clients are subject to different regulations. As a consequence of this difference in regulatory requirements, some clients may not be permitted to engage in all the investment techniques or transactions or to engage in these transactions to the same extent as the other accounts managed by the portfolio manager. Finally, the appearance of a conflict of interest may arise where Tradewinds has an incentive, such as a performance-based management fee, which relates to the management of some accounts, with respect to which a portfolio manager has day-to-day management responsibilities. Tradewinds has adopted certain compliance procedures which are designed to address these types of conflicts common among investment managers. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises. (12) BHMS: Actual or potential conflicts of interest may arise when a portfolio manager has management responsibilities to more than one account (including the Fund). BHMS manages potential conflicts between funds or with other types of accounts through allocation policies and procedures, internal review processes and oversight by directors and Statement of Additional Information - Dec. 30, 2009 Page 129 independent third parties to ensure that no client, regardless of type or fee structure, is intentionally favored at the expense of another. Allocation policies are designed to address potential conflicts in situations where two or more funds or accounts participate in investment decisions involving the same securities. (13) METWEST: Certain conflicts of interest may arise in connection with the management of multiple portfolios and investment strategies. Potential conflicts include the allocation of investment opportunities across client accounts and the allocation of similar investments across different strategies. MetWest Capital has adopted policies and procedures designed to minimize the effects of these conflicts. Responsibility for managing MetWest Capital client portfolios is organized according to investment strategy. All accounts in each strategy are managed to a model portfolio, as specified by the investment team. The investment team implements the model consistently across client portfolios. Consequently, position sizes and industry and sector allocations are similar across our clients' portfolios. Typically, no positions differ from portfolio to portfolio, except in the case of client-imposed restrictions. For such a portfolio, the investment team determines the position(s) that comply with client requirements. This process minimizes the potential for conflicts of interest. MetWest Capital's allocation policy allocates all investment opportunities among clients in the fairest possible way, taking into account clients' best interests. We have adopted policies and procedures designed to ensure that allocations do not involve a practice of favoring or disfavoring any strategy, client or group of clients. Account and strategy performance is never a factor in trade allocations. When necessary, we address known conflicts of interests in our trading practices by disclosure to clients and/or in our Form ADV or other appropriate action. The decision to buy or sell a position in the model portfolio is based on the direction of the investment team. Once the decision is made, traders prepare the trade "blocks." All participating strategies and client portfolios (those without pending cash flows or prohibited transactions) are block-traded together, typically grouped either by custodian or trade broker according to best-execution practices. Orders are placed to ensure random fills so that no one strategy, client or group of clients is favored or disfavored on a systematic basis. Each portfolio/relationship manager is responsible for reviewing the blocks and implementing all buy and sell orders for his/her accounts, taking into consideration client-specific factors. A committee, comprised of the Chief Investment Officer and portfolio/relationship managers, reviews trade reports for all accounts on a daily basis. (14) THREADNEEDLE: Threadneedle Investments portfolio managers may manage one or more mutual funds as well as other types of accounts, including proprietary accounts, separate accounts for institutions, and other pooled investment vehicles. Portfolio managers make investment decisions for an account or portfolio based on its investment objectives and policies, and other relevant investment considerations. A portfolio manager may manage a separate account or other pooled investment vehicle whose fees may be materially greater than the management fees paid by the Fund and may include a performance-based fee. Management of multiple funds and accounts may create potential conflicts of interest relating to the allocation of investment opportunities, and the aggregation and allocation of trades. In addition, the portfolio manager's responsibilities at Threadneedle Investments include working as a securities analyst. This dual role may give rise to conflicts with respect to making investment decisions for accounts that he/she manages versus communicating his/her analyses to other portfolio managers concerning securities that he/she follows as an analyst. Threadneedle Investments has a fiduciary responsibility to all of the clients for which it manages accounts. Threadneedle Investments seeks to provide best execution of all securities transactions and to aggregate securities transactions and then allocate securities to client accounts in a fair and timely manner. Threadneedle Investments has developed policies and procedures, including brokerage and trade allocation policies and procedures, designed to mitigate and manage the potential conflicts of interest that may arise from the management of multiple types of accounts for multiple clients. (15) COLUMBIA WAM: Like other investment professionals with multiple clients, a Fund's portfolio manager(s) may face certain potential conflicts of interest in connection with managing both the Fund and other accounts at the same time. The Advisor (Columbia Wanger Asset Management) and the Funds have adopted compliance policies and procedures that attempt to address certain of the potential conflicts that portfolio managers face in this regard. Certain of these conflicts of interest are summarized below. The management of accounts with different advisory fee rates and/or fee structures, including accounts that pay advisory fees based on account performance (performance fee accounts), if any, may raise potential conflicts of interest for a portfolio manager by creating an incentive to favor higher fee accounts. Potential conflicts of interest also may arise when a portfolio manager has personal investments in other accounts that may create an incentive to favor those accounts. As a general matter and subject to the Advisor's Code of Ethics and certain limited exceptions, the Advisor's investment professionals do not have the opportunity to invest in client accounts, other than the Funds. Statement of Additional Information - Dec. 30, 2009 Page 130 A portfolio manager who is responsible for managing multiple funds and/or accounts may devote unequal time and attention to the management of those funds and/or accounts. The effects of this potential conflict may be more pronounced where funds and/or accounts managed by a particular portfolio manager have different investment strategies. A portfolio manager may be able to select or influence the selection of the broker/dealers that are used to execute securities transactions for the Funds. A portfolio manager's decision as to the selection of broker/dealers could produce disproportionate costs and benefits among the Funds and the other accounts the portfolio manager manages. A potential conflict of interest may arise when a portfolio manager buys or sells the same securities for a Fund and other accounts. On occasions when a portfolio manager considers the purchase or sale of a security to be in the best interests of a Fund as well as other accounts, the Advisor's trading desk may, to the extent consistent with applicable laws and regulations, aggregate the securities to be sold or bought in order to obtain the best execution and lower brokerage commissions, if any. Aggregation of trades may create the potential for unfairness to a Fund or another account if a portfolio manager favors one account over another in allocating the securities bought or sold. "Cross trades," in which a portfolio manager sells a particular security held by a Fund to another account (potentially saving transaction costs for both accounts), could involve a potential conflict of interest if, for example, a portfolio manager is permitted to sell a security from one account to another account at a higher price than an independent third party would pay. The Advisor and the Funds have adopted compliance procedures that provide that any transactions between the Fund and another account managed by the Advisor are to be made at an independent current market price, consistent with applicable laws and regulation. Another potential conflict of interest may arise based on the different investment objectives and strategies of a Fund and other accounts managed by its portfolio manager(s). Depending on another account's objectives and other factors, a portfolio manager may give advice to and make decisions for a Fund that may differ from advice given, or the timing or nature of decisions made, with respect to another account. A portfolio manager's investment decisions are the product of many factors in addition to basic suitability for the particular account involved. Thus, a portfolio manager may buy or sell a particular security for certain accounts, and not for a Fund, even though it could have been bought or sold for the Fund at the same time. A portfolio manager also may buy a particular security for one or more accounts when one or more other accounts are selling the security (including short sales). There may be circumstances when a portfolio manager's purchases or sales of portfolio securities for one or more accounts may have an adverse effect on other accounts, including the Funds. A Fund's portfolio manager(s) also may have other potential conflicts of interest in managing the Fund, and the description above is not a complete description of every conflict that could be deemed to exist in managing both the Fund and other accounts. Many of the potential conflicts of interest to which the Advisor's portfolio managers are subject are essentially the same as or similar to the potential conflicts of interest related to the investment management activities of the Advisor and its affiliates. (16) PRINCIPAL GLOBAL: Principal Global Investors provides investment advisory services to numerous clients other than the Fund. The investment objectives and policies of these accounts may differ from those of the Fund. Based on these differing circumstances, potential conflicts of interest may arise because the subadviser may be required to pursue different investment strategies on behalf of the Fund and other client accounts. For example, a subadviser may be required to consider an individual client's existing positions, personal tax situation, suitability, personal biases and investment time horizon, which considerations would not affect his investment decisions on behalf of the Fund. This means that research on securities to determine the merits of including them in the Fund's portfolio are similar, but not identical, to those employed in building private client portfolios. As a result, there may be instances in which a subadviser purchases or sells an investment for one or more private accounts and not for the Fund, or vice versa. To the extent the Fund and other clients seek to acquire the same security at about the same time, the Fund may not be able to acquire as large a position in such security as it desires or it may have to pay a higher price for the security. Similarly, the Fund may not be able to obtain as large an execution of an order to sell or as high a price for any particular security if the subadviser desires to sell the same portfolio security at the same time on behalf of other clients. On the other hand, if the same securities are bought or sold at the same time by more than one client, the resulting participation in volume transactions could produce better executions for the Fund. Personal Trading: Access Persons of Principal Global Investors, as defined in Principal Global Investors' Code of Ethics, may buy and sell for themselves securities of issuers that Principal Global Investors also trades for its clients, so long as those purchases and sales are conducted in accordance with the Code of Ethics. To avoid conflicts of interest with clients, the Code of Ethics provides for the maintenance of a master securities list that includes all securities then traded by Principal Global Investors for purchase or sale on behalf of clients. Access Persons are required to make inquiry before Statement of Additional Information - Dec. 30, 2009 Page 131 completing a personal securities transaction to determine whether the proposed transaction conforms to the Code of Ethics. Each calendar quarter, personnel complete a report of personal securities transaction. These reports are reviewed each quarter to determine whether anyone completing such a report has purchased or sold a security in a manner not in accordance with the Code of Ethics. Allocation of Trades: Principal Global Investors acts as investment adviser for a variety of individual accounts, ERISA accounts, mutual funds, insurance company separate accounts, and public employee retirement plans and places orders to trade portfolio securities for each of these accounts. If, in carrying out the investment objectives of its clients, occasions arise in which Principal Global Investors deems it advisable to purchase or sell the same equity securities for two or more client accounts at the same or approximately the same time, the Registrant may submit the orders to purchase or sell to a broker/dealer for execution on an aggregate or "bunched" basis. The Registrant will not aggregate orders unless it believes that aggregation is consistent with (1) its duty to seek best execution and (2) the terms of its investment advisory agreements. In order to prevent conflicts of interest, Principal Global Investors has a policy and procedures in place to equitably distribute allocations of shares purchased or sold in a "bunched" trade. Principal Global Investors' policy prohibits any allocation of trades in a manner that Principal Global Investors' proprietary accounts, affiliated accounts, or any particular client(s) or group of clients receive more favorable treatment than other client accounts. (17) ALLIANCEBERNSTEIN: As an investment adviser and fiduciary, AllianceBernstein owes its clients and shareholders an undivided duty of loyalty. We recognize that conflicts of interest are inherent in our business and accordingly have developed policies and procedures (including oversight monitoring) reasonably designed to detect, manage and mitigate the effects of actual or potential conflicts of interest in the area of employee personal trading, managing multiple accounts for multiple clients, including AllianceBernstein Mutual Funds, and allocating investment opportunities. Investment professionals, including portfolio managers and research analysts, are subject to the above- mentioned policies and oversight monitoring to ensure that all clients are treated equitably. We place the interests of our clients first and expect all of our employees to meet their fiduciary duties. Employee Personal Trading AllianceBernstein has adopted a Code of Business Conduct and Ethics that is designed to detect and prevent conflicts of interest when investment professionals and other personnel of AllianceBernstein own, buy or sell securities which may be owned by, or bought or sold for, clients. Personal securities transactions by an employee may raise a potential conflict of interest when an employee owns or trades in a security that is owned or considered for purchase or sale by a client, or recommended for purchase or sale by an employee to a client. Subject to the reporting requirements and other limitations of its Code of Business Conduct and Ethics, AllianceBernstein permits its employees to engage in personal securities transactions, and also allows them to acquire investments in the AllianceBernstein Mutual Funds through direct purchase, 401K/profit sharing plan investment and/or notionally in connection with deferred incentive compensation awards. AllianceBernstein's Code of Ethics and Business Conduct requires disclosure of all personal accounts and maintenance of brokerage accounts with designated broker-dealers approved by AllianceBernstein. The Code also requires preclearance of all securities transactions and imposes a 90 day holding period for securities purchased by employees to discourage short-term trading. Managing Multiple Accounts for Multiple Clients AllianceBernstein has compliance policies and oversight monitoring in place to address conflicts of interest relating to the management of multiple accounts for multiple clients. Conflicts of interest may arise when an investment professional has responsibilities for the investments of more than one account because the investment professional may be unable to devote equal time and attention to each account. The investment professional or investment professional teams for each client may have responsibilities for managing all or a portion of the investments of multiple accounts with a common investment strategy, including other registered investment companies, unregistered investment vehicles, such as hedge funds, pension plans, separate accounts, collective trusts and charitable foundations. Among other things, AllianceBernstein's policies and procedures provide for the prompt dissemination to investment professionals of initial or changed investment recommendations by analysts so that investment professionals are better able to develop investment strategies for all accounts they manage. In addition, investment decisions by investment professionals are reviewed for the purpose of maintaining uniformity among similar accounts and ensuring that accounts are treated equitably. No investment professional that manages client accounts carrying performance fees is compensated directly or specifically for the performance of those accounts. Investment professional compensation reflects a broad contribution in multiple dimensions to long-term investment success for our clients and is not tied specifically to the performance of any particular client's account, nor is it directly tied to the level or change in the level of assets under management. Statement of Additional Information - Dec. 30, 2009 Page 132 Allocating Investment Opportunities AllianceBernstein has policies and procedures intended to address conflicts of interest relating to the allocation of investment opportunities. These policies and procedures are designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The investment professionals at AllianceBernstein routinely are required to select and allocate investment opportunities among accounts. Portfolio holdings, position sizes, and industry and sector exposures tend to be similar across similar accounts, which minimizes the potential for conflicts of interest relating to the allocation of investment opportunities. Nevertheless, investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons. AllianceBernstein's procedures are also designed to prevent potential conflicts of interest that may arise when AllianceBernstein has a particular financial incentive, such as a performance-based management fee, relating to an account. An investment professional may perceive that he or she has an incentive to devote more time to developing and analyzing investment strategies and opportunities or allocating securities preferentially to accounts for which AllianceBernstein could share in investment gains. To address these conflicts of interest, AllianceBernstein's policies and procedures require, among other things, the prompt dissemination to investment professionals of any initial or changed investment recommendations by analysts; the aggregation of orders to facilitate best execution for all accounts; price averaging for all aggregated orders; objective allocation for limited investment opportunities (e.g., on a rotational basis) to ensure fair and equitable allocation among accounts; and limitations on short sales of securities. These procedures also require documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. (18) BATTERYMARCH: Batterymarch recognizes that actual or potential conflicts may arise in managing multiple client accounts. A brief description of some of the potential conflicts of interest and compliance factors that may arise as a result is included below. We do not believe any of these potential conflicts of interest and compliance factors pose significant risk to any client account. Allocation of Limited Investment Opportunities If an investment team identifies a limited investment opportunity (including initial public offerings) that may be suitable for multiple client accounts, each account may not be able to take full advantage of that opportunity due to liquidity constraints or other factors. Batterymarch has adopted policies and procedures designed to ensure that allocations of limited investment opportunities are conducted in a fair and equitable manner between client accounts. Allocation of Partially-Filled Transactions in Securities Batterymarch often aggregates for execution as a single transaction orders for the purchase or sale of a particular security for multiple client accounts. If Batterymarch is unable to fill an aggregated order completely, but receives a partial fill, Batterymarch will typically allocate the transactions relating to the partially filled order to clients on a pro-rata basis with a minimum fill size. Batterymarch may make exceptions from this general policy from time to time based on factors such as the availability of cash, country/regional/sector allocation decisions, investment guidelines and restrictions, and the costs for minimal allocation actions. Opposite (i.e., Contradictory) Transactions in Securities Batterymarch provides investment advisory services for various clients and under various investment mandates and may give advice, and take action, with respect to any of those clients that may differ from the advice given, or the timing or nature of action taken, with respect to any other individual client account. In the course of providing advisory services, Batterymarch may simultaneously recommend the sale of a particular security for one client account while recommending the purchase of the same or a similar security for another account. This may occur for a variety of reasons. For example, in order to raise cash to handle a redemption/withdrawal from a client account, Batterymarch may be forced to sell a security that is ranked a "buy" by its stock selection model. Certain Batterymarch portfolio managers that manage long-only portfolios also manage portfolios that sell securities short. As such, Batterymarch may purchase or sell a security in one or more of its long-only portfolios under management during the same day it executes an opposite transaction in the same or a similar security for one or more of its portfolios under management that hold securities short, and certain Batterymarch client account portfolios may contain securities sold short that are simultaneously held as long positions in certain of the long-only portfolios managed by Batterymarch. The stock selection model(s), risk controls and portfolio construction rules used by Batterymarch to manage its clients' long-only portfolios differ from the model and rules that are used to manage client account portfolios that hold securities short. Because different stock selection models, risk controls and Statement of Additional Information - Dec. 30, 2009 Page 133 portfolio construction rules are used, it is possible that the same or similar securities may be ranked differently for different mandates and that the timing of trading in such securities may differ. Selection of Brokers/Dealers In selecting a broker or dealer, Batterymarch may choose a broker whose commission rate is in excess of that which another broker might have charged for the same transaction, based upon Batterymarch's judgment of that broker's superior execution capabilities and/or as a result of Batterymarch's perceived value of the broker's research services. Although Batterymarch does not participate in any traditional soft dollar arrangements whereby a broker purchases research from a third party on Batterymarch's behalf, Batterymarch does receive proprietary research services from brokers. Batterymarch generally seeks to achieve trade executions with brokers of the highest quality and at the lowest possible cost, although there can be no assurance that this objective will always be achieved. Batterymarch does not enter into any arrangements with brokers, formal or otherwise, regarding order flow as a result of research received. Clients should consider that there is a potential conflict of interest between their interests in obtaining best execution and an investment adviser's receipt of research from brokers selected by the investment adviser for trade executions. The proprietary research services which Batterymarch obtains from brokers may be used to service all of Batterymarch's clients and not just those clients paying commissions to brokers providing those research services, and not all proprietary research may be used by Batterymarch for the benefit of the one or more client accounts which paid commissions to a broker providing such research. Personal Securities Transactions Batterymarch allows its employees to trade in securities that it recommends to advisory clients. Batterymarch's supervised persons, to the extent not prohibited by Batterymarch's Code of Ethics, may buy, hold or sell securities or investment products (including interests in partnerships and investment companies) at or about the same time that Batterymarch is purchasing, holding or selling the same or similar securities or investment products for client account portfolios and the actions taken by such persons on a personal basis may be, or may be deemed to be, inconsistent with the actions taken by Batterymarch for its client accounts. Batterymarch employees may also invest in mutual funds that are managed by Batterymarch. This may result in a potential conflict of interest since Batterymarch employees have knowledge of such funds' investment holdings, which is non-public information. Clients should understand that these activities may create a conflict of interest between Batterymarch, its supervised persons and its clients. To address this, Batterymarch has adopted a written Code of Ethics designed to prevent and detect personal trading activities that may interfere or conflict with client interests (including shareholders' interests in funds managed by Batterymarch). Batterymarch and certain Batterymarch employees may also have ownership interests in certain other client accounts, including pooled investment vehicles, that invest in long and short positions. Firm and employee ownership of such accounts may create additional potential conflicts of interest for Batterymarch. Performance-Based Fee Arrangements Batterymarch manages some accounts under performance-based fee arrangements. Batterymarch recognizes that this type of incentive compensation creates the risk for potential conflicts of interest. This structure may create an incentive to allocate investments having a greater potential for higher returns to accounts of those clients paying the higher performance fee. To prevent conflicts of interest, Batterymarch generally requires portfolio decisions to be made on a product specific basis. Additionally, Batterymarch requires average pricing of all aggregated orders. Lastly, the investment performance on specific accounts is not a factor in determining the portfolio managers' compensation; performance analysis is reviewed on an aggregate product basis. Although Batterymarch believes that its policies and procedures are appropriate to prevent, eliminate or minimize the harm of many potential conflicts of interest between Batterymarch, its related persons and clients, clients should be aware that no set of policies and procedures can possibly anticipate or relieve all potential conflicts of interest. Moreover, it is possible that additional potential conflicts of interest may exist that Batterymarch has not identified in the summary above. Batterymarch's CCO conducts a review of the firm's potential conflicts of interest and a risk assessment on an annual basis. (19) SYSTEMATIC: Systematic Financial Management, L.P. (Systematic) is an affiliated firm of Affiliated Managers Group, Inc. (AMG). The AMG Affiliates do not formulate advice for Systematic's clients and do not, in Systematic's view, present any potential conflict of interest with Systematic's clients. From time to time, potential conflicts of interest may arise between a portfolio manager's management of the investments of the Funds, on the one hand, and the management of other accounts, on the other. The portfolio managers oversee the investment of various types of accounts in the same strategy, such as mutual funds, pooled investment vehicles and separate accounts for individuals Statement of Additional Information - Dec. 30, 2009 Page 134 and institutions. Investment decisions generally are applied to all accounts utilizing that particular strategy, taking into consideration client restrictions, instructions and individual needs. A portfolio manager may manage an account whose fees may be higher or lower than the fee charged to a Fund to provide for varying client circumstances. Management of multiple funds and accounts may create potential conflicts of interest relating to the allocation of investment opportunities, and the aggregation and allocation of client trades. Additionally, the management of the Funds and other accounts may result in a portfolio manager devoting unequal time and attention to the management of the Funds or other accounts. However, Systematic has a variety of internal controls in place that are reasonably designed to detect such conflicts and protect the interest of its clients. During the normal course of managing assets for multiple clients of varying types and asset levels, the portfolio managers may encounter conflicts of interest that could, if not properly addressed, be harmful to one or more of our clients. Those of a material nature that are encountered most frequently involve security selection, employee personal securities trading, proxy voting and the allocation of securities. To mitigate these conflicts and ensure its clients are not impacted negatively by the adverse actions of Systematic or its employees, Systematic has implemented a series of policies and procedures including, but not limited to, its Code of Ethics, which addresses personal securities trading, Proxy Voting Policy and Trade Error Policy, designed to prevent and detect conflicts when they occur. Systematic reasonably believes that these and other policies combined with the periodic review and testing performed by its compliance professionals adequately protects the interest of its clients. A portfolio manager may also face other potential conflicts of interest in managing the Funds, and the description above is not a complete description of every conflict of interest that could be deemed to exist in managing both the Fund and the other accounts listed above. (20) WEDGE: During the normal course of managing assets for multiple clients of varying types and asset levels, WEDGE will inevitably encounter conflicts of interest that could, if not properly addressed, be harmful to one or more of its clients. Those of a material nature that are encountered most frequently surround security selection, brokerage selection, employee personal securities trading, proxy voting and the allocation of securities. WEDGE is therefore forced to consider the possible personal conflicts that occur for an analyst and portfolio manager as well as those for the firm when a security is recommended for purchase or sale. When trading securities, WEDGE must address the issues surrounding the selection of brokers to execute trades considering the personal conflicts of the trader and the firm's conflict to obtain best execution of client transactions versus offsetting the cost of research or enhancing its relationship with a broker for potential future gain. And finally, WEDGE must consider the implications that a limited supply or demand for a particular security poses on the allocation of that security across accounts. To mitigate these conflicts and ensure its clients are not negatively impacted by the adverse actions of WEDGE or its employees, WEDGE has implemented a series of policies including its Personal Security Trading Policy, Proxy Voting Policy, Equity Trading Policy, Trading Error Policy, and others designed to prevent and detect conflicts when they occur. WEDGE reasonably believes that these and other policies combined with the periodic review and testing performed by its compliance professionals adequately protects the interests of its clients. STRUCTURE OF COMPENSATION (21) RIVERSOURCE: Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus, and (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus and equity incentive awards are paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. Funding for the bonus pool is determined by a percentage of the aggregate assets under management in the accounts managed by the portfolio managers, including the fund, and by the short term (typically one-year) and long-term (typically three-year, five-year and ten-year) performance of those accounts in relation to the relevant peer group universe. Funding for the bonus pool would also include a percentage of any performance fees earned on long/short mutual funds managed by the Team. With respect to hedge funds and separately managed accounts that follow a hedge fund mandate, funding for the bonus pool is a percentage of performance fees earned on the hedge funds or accounts managed by the portfolio managers. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the part of the bonus pool and to determine the exact amount of each portfolio manager's bonus paid from this portion of the bonus pool based on his/her performance as an employee. In addition, where portfolio managers invest in a hedge fund managed by the investment manager, they receive a cash reimbursement for the investment management fees charged on their hedge fund investments. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Certain investment personnel are also eligible to defer a portion of their compensation. An individual making this type of election can allocate the deferral to the returns associated with one or more products they manage or support or to certain other products managed by their investment team. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. Statement of Additional Information - Dec. 30, 2009 Page 135 (22) RIVERSOURCE: The compensation of RiverSource Investments employees consists of (i) a base salary, (ii) an annual cash bonus, and (iii) equity incentive awards in the form of stock options and/or restricted stock. The annual cash bonus is based on management's assessment of the employee's performance relative to individual and business unit goals and objectives. For portfolio managers Joy, Keeley and Truscott, may be based, in part, on achieving certain investment performance goals and retaining and attracting assets under management, and for portfolio manager Bergene, on developing competitive products, managing existing products, and selecting and monitoring subadvisers for funds. In addition, subject to certain vesting requirements, the compensation of portfolio managers Joy, Keeley and Truscott, includes an annual award based on the performance of Ameriprise Financial over rolling three-year periods. This program is being discontinued and the final award under this plan covers the three-year period that started in January 2007 and ends in December 2009. RiverSource Investments' portfolio managers are provided with a benefits package including life insurance, health insurance and participation in the company's 401(k) plan comparable to that received by other RiverSource Investments employees. Depending upon their job level, RiverSource Investments' portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (23) RIVERSOURCE: Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus, and (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus and equity incentive awards are paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. With the exception of Mr. Spitz, the bonus pool is determined by a percentage of the aggregate assets under management in the accounts managed by the portfolio managers, including the fund, plus, where applicable, a percentage of the assets of the funds they support as research analysts, and by the short term (typically one-year) and long-term (typically three-year and five-year) performance of those accounts in relation to the relevant peer group universe. Mr. Spitz receives a bonus based on management fees on one product and asset retention efforts associated with other products managed by the team. Funding for the bonus pool may also include a percentage of any performance fees earned on long/short mutual funds managed by the Team. One member of the team does not participate in the pool but instead receives a bonus based on management fees on one product and asset retention efforts associated with other products managed by the team. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the part of the bonus pool and to determine the exact amount of each portfolio manager's bonus paid from this portion of the bonus pool based on his/her performance as an employee. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Certain investment personnel are also eligible to defer a portion of their compensation. An individual making this type of election can allocate the deferral to the returns associated with one or more products they manage or support or to certain other products managed by their investment team. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (24) TURNER: Turner's investment professionals receive a base salary commensurate with their level of experience. Turner's goal is to maintain competitive base salaries through review of industry standards, market conditions, and salary surveys. Bonus compensation, which is a multiple of base salary, is based on the performance of each individual's sector and portfolio assignments relative to appropriate market benchmarks. In addition, each employee is eligible for equity awards. Turner believes this compensation provides incentive to attract and retain highly qualified people. The objective performance criteria noted above accounts for 90% of the bonus calculation. The remaining 10% is based upon subjective, "good will" factors including teamwork, interpersonal relations, the individual's contribution to overall success of the firm, media and client relations, presentation skills, and professional development. Portfolio managers/analysts are reviewed on an annual basis. The Chief Investment Officer, Robert E. Turner, CFA, is responsible for setting base salaries, bonus targets, and making all subjective judgments related to an investment professionals' compensation. (25) MDTA: The portfolio managers are paid a fixed base salary and a variable annual incentive. Base salary is determined within a market competitive position-specific salary range, based on experience and performance. For purposes of calculating the annual incentive amount, each mutual fund and institutional account managed by MDTA is categorized as reflecting one of several designated "Strategies." The annual incentive amount is based on current calendar year asset-weighted composite investment performance of each Strategy, which is measured on a total return basis gross of fees and expenses vs. the Strategy's designated benchmark (i.e., with respect to the Fund's Strategy, Russell 2000 Value Index). The portfolio managers are also part of investment teams for other accounts in addition to the Fund. Such other accounts may be categorized as reflecting different Strategies, which may have different benchmarks. Although the performance of each Strategy composite is considered in calculating the annual incentive amount, their relative weightings differ. The performance of one of the other Strategies (which does not include the Fund in its composite Statement of Additional Information - Dec. 30, 2009 Page 136 performance) represents a significant portion of the calculation. The remaining Strategies are divided into two groups, with each Strategy within a group receiving equal weighting. The Strategy to which the Fund is assigned and the other Strategies in the same group receive higher weighting than Strategies in the other group. As a separate matter, pursuant to the terms of a business acquisition agreement, the portfolio managers may receive additional consideration based on the achievement of specified revenue targets. In addition, Daniel Mahr was awarded a grant of restricted Federated stock. Awards of restricted stock are discretionary and are made in variable amounts based on the subjective judgment of MDTA's senior management. (26) RIVERSOURCE: Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus and (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus and equity incentive awards are paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. Funding for the bonus pool is determined by a percentage of the aggregate assets under management in the accounts managed by the portfolio managers, including the fund, and by the short term (typically one-year) and long-term (typically three-year and five-year) performance of those accounts in relation to the relevant peer group universe. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the part of the bonus pool and to determine the exact amount of each portfolio manager's bonus paid from this portion of the bonus pool based on his/her performance as an employee. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Certain investment personnel are also eligible to defer a portion of their compensation. An individual making this type of election can allocate the deferral to the returns associated with one or more products they manage or support or to certain other products managed by their investment team. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (27) RIVERSOURCE: Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus, a portion of which may be subject to a mandatory deferral program, and may include (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus is paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. The bonus pool is determined by the aggregate market competitive bonus targets for the teams of which the portfolio manager is a member and by the short-term (typically one-year) and long-term (typically three-year) performance of those accounts in relation to applicable benchmarks or the relevant peer group universe. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the part of the bonus pool and to determine the exact amount of each portfolio manager's bonus paid from this portion of the bonus pool based on his/her performance as an employee. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Certain investment personnel are also eligible to defer a portion of their compensation. An individual making this type of election can allocate the deferral to the returns associated with one or more products they manage or support or to certain other products managed by their investment team. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (28) AMERICAN CENTURY: The compensation of American Century's portfolio managers is structured to align the interests of portfolio managers with those of the shareholders whose assets they manage. For the fiscal year ended May 31, 2009, it included the components described below, each of which is determined with reference to a number of factors, such as overall performance, market competition, and internal equity. Compensation is not directly tied to the value of assets held in client portfolios. Base Salary Portfolio managers receive base pay in the form of a fixed annual salary. Bonus A significant portion of portfolio manager compensation takes the form of an annual incentive bonus tied to performance. Bonus payments are determined by a combination of factors. One factor is fund investment performance. For most American Century mutual funds, investment performance is measured by a combination of one- and three- year pre-tax performance relative to various benchmarks and/or internally-customized peer groups. The performance comparison periods may be adjusted based on a fund's inception date or a portfolio manager's tenure on the fund. Custom peer groups are constructed using all the funds in appropriate Lipper or Morningstar categories as a starting point. Funds are then eliminated from the peer group that is both more stable over the long- term (i.e., has less peer Statement of Additional Information - Dec. 30, 2009 Page 137 turnover) and that more closely represents the fund's true peers based on internal investment mandates. In 2008, American Century Investments began placing increased emphasis on long-term performance and is phasing in five year performance periods. Portfolio managers may have responsibility for multiple American Century mutual funds. In such cases, the performance of each is assigned a percentage weight appropriate for the portfolio manager's relative levels of responsibility. Portfolio managers also may have responsibility for portfolios that are managed in a fashion similar to that of other American Century mutual funds. This is the case for the Partners Small Cap Equity and Partners Aggressive Growth Funds. If the performance of a similarly managed account is considered for purposes of compensation, it is either measured in the same way as a comparable American Century mutual fund (i.e., relative to the performance of a benchmark and/or peer group) or relative to the performance of such mutual fund. Performance of Partners Small Cap Equity Fund is measured relative to the performance of a comparable American Century mutual fund. Performance of Partners Aggressive Growth Fund is not separately considered in determining portfolio manager compensation. A second factor in the bonus calculation relates to the performance of all American Century funds managed according to a particular investment style, such as U.S. growth, U.S. value, international, quantitative or fixed income. Performance is measured for each product individually as described above and then combined to create an overall composite for the product group. These composites may measure one-year performance (equal weighted) or a combination of one- and three-year performance (asset weighted) depending on the portfolio manager's responsibilities and products managed. This feature is designed to encourage effective teamwork among portfolio management teams in achieving long-term investment success for similarly styled portfolios. A portion of some portfolio managers' bonuses may be tied to individual performance goals, such as research projects and the development of new products. Restricted Stock Plans Portfolio managers are eligible for grants of restricted stock of ACC. These grants are discretionary, and eligibility and availability can vary from year to year. The size of an individual's grant is determined by individual and product performance as well as other product-specific considerations. Grants can appreciate/depreciate in value based on the performance of the ACC stock during the restriction period (generally three to four years). Deferred Compensation Plans Portfolio managers are eligible for grants of deferred compensation. These grants are used in very limited situations, primarily for retention purposes. Grants are fixed and can appreciate/depreciate in value based on the performance of the American Century mutual funds in which the portfolio manager chooses to invest them. (29) DAVIS: Kenneth Feinberg's compensation as a Davis Advisors employee consists of (i) a base salary, (ii) an annual bonus equal to a percentage of growth in Davis Advisors' profits, (iii) awards of equity ("Units") in Davis Advisors including Units, options on Units, and/or phantom Units, and (iv) an incentive plan whereby Davis Advisors purchases shares in selected funds managed by Davis Advisors. At the end of specified periods, generally five years following the date of purchase, some, all, or none of the fund shares will be registered in the employee's name based on fund performance after expenses on a pre- tax basis versus the S&P 500 Index and versus peer groups as defined by Morningstar or Lipper. Davis Advisors' portfolio managers are provided benefits packages including life insurance, health insurance, and participation in company 401(k) plan comparable to that received by other company employees. Christopher Davis's annual compensation as an employee of Davis Advisors consists of a base salary. Davis Advisors' portfolio managers are provided benefits packages including life insurance, health insurance, and participation in company 401(k) plan comparable to that received by other company employees. (30) SYSTEMATIC: Ron Mushock and Kevin McCreesh are limited partners of the firm and Co-Portfolio Managers for the strategy. As Partners, their compensation consists of a combination of a fixed base salary, and a share of Systematic's profits based upon each Partner's respective individual ownership position in Systematic. Although total compensation is influenced by Systematic's overall profitability and therefore is based in part on the aggregate performance of all of Systematic's portfolios, including the Fund. Compensation is not based on performance of the Fund individually. The Partners are provided with a benefits package, including health insurance, and participation in a company 401(k) plan, comparable to that received by other Systematic employees. The Portfolio Managers are not compensated based solely on the performance of, or the value of assets held in, the Fund or any other individual portfolio managed by Systematic. (31) WEDGE: WEDGE's incentive compensation has been structured to reward all professionals for their contribution to the overall growth and profitability of the firm. Compensation is not directly tied to fund performance or growth in assets for any fund or other account managed by a portfolio manager. General Partners are compensated via a percentage of the firm's net profitability following a peer review, which focuses on performance in their specific area of responsibility, as well as their contribution to the general management of the firm, and their importance to the firm in Statement of Additional Information - Dec. 30, 2009 Page 138 the future. Other investment professionals receive a competitive salary and bonus based on the firm's investment and business success and their specific contribution to that record. (32) DONALD SMITH: All employees at Donald Smith & Co., Inc. are compensated on incentive plans. The compensation for portfolio managers, analysts and traders at Donald Smith consists of a base salary, a partnership interest in the firm's profits, and possibly an additional, discretionary bonus. This discretionary bonus can exceed 100% of the base salary if performance for clients exceeds established benchmarks. The current benchmark utilized is the Russell 2000 Value Index. Additional distribution of firm ownership is a strong motivation for continued employment at Donald Smith & Co., Inc. Administrative personnel are also given a bonus as a function of their contribution and the profitability of the firm. (33) BHMS: In addition to base salary, all portfolio managers and analysts at BHMS share in a bonus pool that is distributed semi-annually. Analysts and portfolio managers are rated on their value added to the team- oriented investment process. Overall compensation applies with respect to all accounts managed and compensation does not differ with respect to distinct accounts managed by a portfolio manager. Compensation is not tied to a published or private benchmark. It is important to understand that contributions to the overall investment process may include not recommending securities in an analyst's sector if there are no compelling opportunities in the industries covered by that analyst. The compensation of portfolio managers is not directly tied to fund performance or growth in assets for any fund or other account managed by a portfolio manager and portfolio managers are not compensated for bringing in new business. Of course, growth in assets from the appreciation of existing assets and/or growth in new assets will increase revenues and profit. The consistent, long-term growth in assets at any investment firm is to a great extent, dependent upon the success of the portfolio management team. The compensation of the portfolio management team at the Adviser will increase over time, if and when assets continue to grow through competitive performance. (34) METWEST: MetWest Capital's compensation system is designed not only to attract and retain experienced, highly qualified investment personnel, but also to closely align employees' interests with clients' interests. Compensation for investment professionals consists of a base salary, bonus, and generous benefits. Benefits include a comprehensive insurance benefits program (medical, vision and dental), 401(k) plan with an employer-matched contribution. A material portion of each such professional's annual compensation is in the form of a bonus tied to results relative to clients' benchmarks and overall client satisfaction. Bonuses may range from 20% to over 100% of salary. MetWest Capital's compensation system is not determined on an account- specific basis. Rather, bonuses are tied to overall firm profitability and composite performance relative to the benchmark. The primary benchmark for the Small Cap Intrinsic Value strategy is the Russell 2000 Value Index. To reinforce long-term focus, performance is measured over MetWest Capital's investment horizon (typically two to four years). Analysts are encouraged to maintain a long-term focus and are not compensated for the number of their recommendations that are purchased in the portfolio. Rather, their bonuses are tied to overall strategy performance. Mr. Lisenbee is an owner of MetWest Capital. As such, his compensation consists of a fixed salary and participation in the firm's profits. (35) RIVERSOURCE: Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus and may include (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus is paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. Funding for the bonus pool is based upon a percentage of profits generated by the institutional portfolios they manage. Lynn Hopton and Yvonne Stevens may also be paid from a bonus pool based upon the performance of the mutual fund(s) they manage. Funding for this bonus pool is determined by a percentage of the aggregate assets under management in the mutual fund(s) they manage, and by the short term (typically one-year) and long-term (typically three- year) performance of the mutual fund(s) in relation to the relevant peer group universe. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the bonus pool related to mutual funds and to determine the exact amount of each portfolio manager's bonus paid from this portion of the bonus pool based on his/her performance as an employee. Senior management of RiverSource Investments does not have discretion over the size of the bonus pool related to institutional portfolios. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Certain investment personnel are also eligible to defer a portion of their compensation. An individual making this type of election can allocate the deferral to the returns associated with one or more products they manage or support or to certain other products managed by their investment team. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (36) RIVERSOURCE: Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus, and may include (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus, and in some instances the base salary, are paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. The bonus pool is determined by a percentage of the management fees on the accounts Statement of Additional Information - Dec. 30, 2009 Page 139 managed by the portfolio managers, including the fund. The percentage of management fees that fund the bonus pool is based on the short term (typically one-year) and long-term (typically three-year and five-year) performance of those accounts in relation to the relevant peer group universe. Funding for the bonus pool may also include a percentage of any performance fees earned on long/short mutual funds managed by the Team. With respect to hedge funds and separately managed accounts that follow a hedge fund mandate, funding for the bonus pool is a percentage of performance fees earned on the hedge funds or accounts managed by the portfolio managers. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (37) COLUMBIA WAM: As of December 31, 2008, the portfolio managers received all of their compensation from the Advisor and its parent company, Columbia Management. P. Zachary Egan and Louis J. Mendes each received compensation in the form of salary and incentive compensation. Typically, a high proportion of an analyst's or portfolio manager's bonus is paid in cash with a smaller proportion going into two separate incentive plans. The first plan is a notional investment based on the performance of certain Columbia Funds, including the Columbia Acorn Funds. The second plan consists of Bank of America restricted stock and/or options. For 2008, investments in the second plan were made through a deferred cash program. Both plans vest over three years from the date of issuance. The CWAM total incentive compensation pool, including cash and the two incentive plans, is based on formulas, with investment performance of individual portfolio managers and certain analysts, plus firm-wide investment performance, as primary drivers. Analysts and portfolio managers are positioned in a number of compensation tiers based on cumulative performance of the portfolios they manage. Performance of each Fund for purposes of portfolio manager compensation is measured relative to its primary benchmark. One and three year performance periods primarily drive incentive levels. Excellent performance results in advancement to a higher tier until the highest tier is reached. Higher tiers have higher base compensation levels and wider incentive compensation ranges. While cumulative performance places analysts and managers in tiers, current year performance drives changes in incentive compensation levels. Incentive compensation varies by tier, and can range between a fraction of base pay to several times base pay; the objective being to provide very competitive total compensation for high performing analysts and portfolio managers. If a fund's performance declines, the compensation incentives available to its analysts and portfolio manager(s) also declines. (38) PRINCIPAL GLOBAL: Principal Global Investors offers all employees a competitive total remuneration package which is reviewed on an annual basis to ensure market competitiveness. Total cash compensation is targeted at the median of the market and benefits are targeted slightly above median. The investment staff is compensated under a base salary plus variable annual bonus (incentive compensation). Incentive compensation for equity portfolio managers is derived from a profit pool based and allocated to individuals based on relative investment performance and other subjective factors such as team profitability, individual performance and collaborative efforts. A percentage (75%) of the profit pool is delivered in the form of cash with the balance of the pool (25%) deferred for a 3 year period in the form of co-investment and Principal Financial Group equity. Individual co-investment aligns portfolio managers' deferred compensation with the fund or strategy they manage thereby providing a more aligned interest with their respective client's interests. - Investment performance is based on gross performance versus a benchmark, peer group or both, depending on the client mandate. - Performance versus peers is measured for a period up to five years (shorter if the portfolio manager has managed the respective portfolio for a period less than three years). - Investment performance incentive payout starts at 66th percentile and reaches 100% at the 25th percentile for the 1, 3, and 5-year periods. 2% of incentive payout is achieved at 66th percentile. No payout is realized if performance is below 67th percentile. As a wholly-owned subsidiary of Principal Financial Group, all Principal Global employees are eligible to participate in our Employee Stock Purchase Plan that allows them to purchase company stock at a 15% discount every six months. In addition, through our 401(k) plan, employees are able to contribute to an Employee Stock Ownership Plan (ESOP) through which they can buy additional company stock. (39) ALLIANCEBERNSTEIN: AllianceBernstein's compensation program for investment professionals is designed to be competitive and effective in order to attract and retain the highest caliber employees. The compensation program for investment professionals is designed to reflect their ability to generate long-term investment success for our clients. Investment professionals do not receive any direct compensation based upon the investment returns of any individual client account, nor is compensation tied directly to the level or change in the level of assets under management. Investment professionals' annual compensation is comprised of the following: (i) Fixed base salary: This is generally the smallest portion of compensation. The base salary is a relatively low, fixed salary within a similar range for all investment professionals. The base salary does not change significantly from year-to-year, and hence, is not particularly sensitive to performance. Statement of Additional Information - Dec. 30, 2009 Page 140 (ii) Discretionary incentive compensation in the form of an annual cash bonus: AllianceBernstein's overall profitability determines the total amount of incentive compensation available to investment professionals. This portion of compensation is determined subjectively based on qualitative and quantitative factors. In evaluating this component of an investment professional's compensation, AllianceBernstein considers the contribution to his/her team or discipline as it relates to that team's overall contribution to the long-term investment success, business results and strategy of AllianceBernstein. Quantitative factors considered include, among other things, relative investment performance (e.g., by comparison to competitor or peer group funds or similar styles of investments, and appropriate, broad-based or specific market indices), and consistency of performance. There are no specific formulas used to determine this part of an investment professional's compensation and the compensation is not tied to any pre-determined or specified level of performance. AllianceBernstein also considers qualitative factors such as the complexity and risk of investment strategies involved in the style or type of assets managed by the investment professional; success of marketing/business development efforts and client servicing; seniority/length of service with the firm; management and supervisory responsibilities; and fulfillment of AllianceBernstein's leadership criteria. (iii) Discretionary incentive compensation in the form of awards under AllianceBernstein's Partners Compensation Plan ("deferred awards"): AllianceBernstein's overall profitability determines the total amount of deferred awards available to investment professionals. The deferred awards are allocated among investment professionals based on criteria similar to those used to determine the annual cash bonus. Deferred awards, which are in the form of AllianceBernstein's publicly traded securities, vest over a four-year period and are generally forfeited if the employee resigns or AllianceBernstein terminates his/her employment. (iv) Contributions under AllianceBernstein's Profit Sharing/401(k) Plan: The contributions are based on AllianceBernstein's overall profitability. The amount and allocation of the contributions are determined at the sole discretion of AllianceBernstein. (40) MONDRIAN: Mondrian has the following programs in place to retain key investment staff: 1. Competitive Salary -- All investment professionals are remunerated with a competitive base salary. 2. Profit Sharing Bonus Pool -- All Mondrian staff, including portfolio managers and senior officers, qualify for participation in an annual profit sharing pool determined by the company's profitability (approximately 30% of profits). 3. Equity Ownership -- Mondrian is ultimately controlled by a partnership of senior management and Hellman & Friedman LLC, an independent private equity firm. Mondrian is currently 67% owned by its senior employees, including the majority of investment professionals, senior client service officers, and senior operations personnel. The private equity funds sponsored by Hellman & Friedman LLC are passive, non-controlling minority investors in Mondrian and do not have day-to-day involvement in the management of Mondrian. Incentives (Bonus and Equity Programs) focus on the key areas of research quality, long-term and short-term stock performance, teamwork, client service and marketing. As an individual's ability to influence these factors depends on that individual's position and seniority within the firm, so the allocation of participation in these programs will reflect this. At Mondrian, the investment management of particular portfolios is not "star manager" based but uses a team system. This means that Mondrian's investment professionals are primarily assessed on their contribution to the team's effort and results, though with an important element of their assessment being focused on the quality of their individual research contribution. Compensation Committee In determining the amount of bonuses and equity awarded, Mondrian's Board of Directors consults with the company's Compensation Committee, who will make recommendations based on a number of factors including investment research, organization management, team work, client servicing and marketing. Defined Contribution Pension Plan All portfolio managers are members of the Mondrian defined contribution pension plan where Mondrian pays a regular monthly contribution and the member may pay additional voluntary contributions if they wish. The Plan is governed by Trustees who have responsibility for the trust fund and payments of benefits to members. In addition, the Plan provides death benefits for death in service and a spouse's or dependant's pension may also be payable. Mondrian believes that this compensation structure, coupled with the opportunities that exist within a successful and growing business, are adequate to attract and retain high caliber employees. (41) TRADEWINDS: Tradewinds offers a highly competitive compensation structure with the purpose of attracting and retaining the most talented investment professionals. These professionals are rewarded through a combination of cash and long-term incentive compensation as determined by the firm's executive committee. Total cash compensation (TCC) consists of both a base salary and an annual bonus that can be a multiple of the base salary. The firm annually benchmarks TCC to prevailing industry norms with the objective of achieving competitive levels for all contributing professionals. Statement of Additional Information - Dec. 30, 2009 Page 141 Available bonus pool compensation is primarily a function of the firm's overall annual profitability. Individual bonuses are based primarily on the following: - Overall performance of client portfolios; - Objective review of stock recommendations and the quality of primary research; - Subjective review of the professional's contributions to portfolio strategy, teamwork, collaboration and work ethic. To further strengthen our incentive compensation package and to create an even stronger alignment to the long-term success of the firm, Tradewinds has made available to most investment professionals equity participation opportunities, the values of which are determined by the increase in profitability of Tradewinds over time. Finally, some of our investment professionals have received additional remuneration as consideration for signing employment agreements. These agreements range from retention agreements to long-term employment contracts with significant non-solicitation and, in some cases, non- compete clauses. (42) BATTERYMARCH: In addition to customary employee benefits (e.g., medical coverage), Batterymarch's compensation for investment professionals includes: - competitive base salaries; - individual performance-based bonuses based on the investment professionals' added value to the portfolios for which they are responsible measured on a one-, three- and five-year basis versus benchmarks and peer universes as well as their contributions to research, client service and new business development; - corporate profit-sharing; and - annual contribution to a non-qualified deferred compensation plan that has a cliff-vesting requirement (i.e., they must remain employed with the firm for at least 31 months to receive payment). Performance is evaluated on an aggregate product basis that the portfolio manager is responsible for and is generally not analyzed by any individual client portfolios. Portfolio manager compensation is not tied to, nor increased or decreased as the result of, any performance fees that may be earned by Batterymarch. Lastly, portfolio managers do not receive a percentage of the revenue earned on any of Batterymarch's client portfolios. (43) THREADNEEDLE: To align the interests of our investment staff with those of our clients the remuneration plan for senior individuals comprises basic salary, an annual profit share (linked to individual performance and the profitability of the company) and a Long Term Incentive Plan known as the Equity Incentive Plan ("EIP") linked to measures of Threadneedle's corporate success. Threadneedle believes this encourages longevity of service. The split between each component varies between investment professionals and will be dependent on performance and the type of funds they manage. The split of the profit share focuses on three key areas of success: - Performance of own funds and research recommendations, - Performance of all portfolios in the individual's team, - Broader contribution to the wider thinking of the investment team, e.g. idea generation, interaction with colleagues and commitment for example to assisting the sales effort. Consideration of the individual's general contribution is designed to encourage fund managers to think beyond personal portfolio performance and considers contributions made in: - Inter-team discussions, including asset allocation, global sector themes and weekly investment meetings, - Intra-team discussion, stock research and investment insights, - Marketing support, including written material and presentations. It is important to appreciate that in order to maximize an individual's rating and hence their profit share, they need to score well in all areas. It is not sufficient to produce good personal fund performance without contributing effectively to the team and wider investment department. This structure is closely aligned with the Threadneedle's investment principles of sharing ideas and effective communication. (44) RIVERSOURCE: Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus, and (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus and equity incentive awards are paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. The bonus pool is determined by a percentage of the aggregate assets under management in the accounts managed by the portfolio managers, including the fund, plus, where applicable, a percentage of the assets of the funds they support as research analysts, and by the short term (typically one-year) and long-term (typically three-year) performance of those accounts in relation to the relevant peer group universe. Funding for the bonus pool may also include a percentage of any performance fees earned on long/short mutual funds managed by the Team. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the part of the bonus pool and to Statement of Additional Information - Dec. 30, 2009 Page 142 determine the exact amount of each portfolio manager's bonus paid from this portion of the bonus pool based on his/her performance as an employee. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Certain investment personnel are also eligible to defer a portion of their compensation. An individual making this type of election can allocate the deferral to the returns associated with one or more products they manage or support or to certain other products managed by their investment team. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (45) RIVERSOURCE: Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus and (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus and equity incentive awards are paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. Funding for the bonus pool is determined by the short term (typically one-year) and long-term (typically three-year and five-year) performance of the accounts managed by the portfolio managers, including the fund, in relation to the relevant peer group universe. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the part of the bonus pool and to determine the exact amount of each portfolio manager's bonus paid from this portion of the bonus pool based on his/her performance as an employee. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Certain investment personnel are also eligible to defer a portion of their compensation. An individual making this type of election can allocate the deferral to the returns associated with one or more products they manage or support or to certain other products managed by their investment team. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. Statement of Additional Information - Dec. 30, 2009 Page 143 ADMINISTRATIVE SERVICES Each fund listed in the table below has an Administrative Services Agreement with Ameriprise Financial. Under this agreement, the fund pays Ameriprise Financial for providing administration and accounting services. The fee is calculated as follows: TABLE 20. ADMINISTRATIVE SERVICES AGREEMENT FEE SCHEDULE
ASSET LEVELS AND BREAKPOINTS IN APPLICABLE FEES ------------------------------------------------------------------------------------------ $500,000,001 - $1,000,000,001 - $3,000,000,001 - FUND $0 - 500,000,000 1,000,000,000 3,000,000,000 $12,000,000,000 12,000,000,001 + ------------------------------------------------------------------------------------------------------------------------------ RiverSource 120/20 Contrarian Equity 0.080% 0.075% 0.070% 0.060% 0.050% RiverSource Absolute Return Currency and Income RiverSource Disciplined International Equity RiverSource Disciplined Small Cap Value RiverSource Emerging Markets Bond RiverSource Global Bond RiverSource Partners International Select Growth RiverSource Partners International Select Value RiverSource Partners International Small Cap RiverSource Partners Small Cap Equity RiverSource Partners Small Cap Growth RiverSource Partners Small Cap Value RiverSource Small Company Index RiverSource Strategic Allocation Seligman Frontier Seligman Global Technology Threadneedle Asia Pacific Threadneedle Emerging Markets Threadneedle European Equity Threadneedle Global Equity Threadneedle Global Equity Income Threadneedle Global Extended Alpha Threadneedle International Opportunity ------------------------------------------------------------------------------------------------------------------------------ RiverSource California Tax-Exempt 0.070% 0.065% 0.060% 0.050% 0.040% RiverSource Diversified Bond RiverSource Floating Rate RiverSource High Yield Bond RiverSource Income Opportunities RiverSource Inflation Protected RiverSource Intermediate Tax- Exempt RiverSource Limited Duration Bond RiverSource Minnesota Tax-Exempt RiverSource New York Tax-Exempt RiverSource Short Duration U.S. Government RiverSource Strategic Income Allocation RiverSource Tax-Exempt Bond RiverSource Tax-Exempt High Income RiverSource U.S. Government Mortgage Seligman California Municipal High-Yield
Statement of Additional Information - Dec. 30, 2009 Page 144
ASSET LEVELS AND BREAKPOINTS IN APPLICABLE FEES ------------------------------------------------------------------------------------------ $500,000,001 - $1,000,000,001 - $3,000,000,001 - FUND $0 - 500,000,000 1,000,000,000 3,000,000,000 $12,000,000,000 12,000,000,001 + ------------------------------------------------------------------------------------------------------------------------------ Seligman California Municipal Quality Seligman Minnesota Municipal Seligman National Municipal Seligman New York Municipal 0.070% 0.065% 0.060% 0.050% 0.040% ------------------------------------------------------------------------------------------------------------------------------ RiverSource Balanced 0.060% 0.055% 0.050% 0.040% 0.030% RiverSource Cash Management RiverSource Disciplined Equity RiverSource Disciplined Large Cap Growth RiverSource Disciplined Large Cap Value RiverSource Disciplined Small and Mid Cap Equity RiverSource Diversified Equity Income RiverSource Dividend Opportunity RiverSource Equity Value RiverSource Mid Cap Growth RiverSource Mid Cap Value RiverSource Partners Aggressive Growth RiverSource Partners Fundamental Value RiverSource Partners Select Value RiverSource Precious Metals and Mining RiverSource Real Estate RiverSource S&P 500 Index RiverSource Recovery and Infrastructure RiverSource Tax-Exempt Money Market Seligman TargETFund 2015 Seligman TargETFund 2025 Seligman TargETFund 2035 Seligman TargETFund 2045 Seligman TargETFund Core ------------------------------------------------------------------------------------------------------------------------------ RiverSource Income Builder Basic Income 0.020% 0.020% 0.020% 0.020% 0.020% RiverSource Income Builder Enhanced Income RiverSource Income Builder Moderate Income RiverSource Portfolio Builder Aggressive RiverSource Portfolio Builder Conservative RiverSource Portfolio Builder Moderate RiverSource Portfolio Builder Moderate Aggressive RiverSource Portfolio Builder Moderate Conservative RiverSource Portfolio Builder Total Equity RiverSource Retirement Plus 2010 RiverSource Retirement Plus 2015 RiverSource Retirement Plus 2020 RiverSource Retirement Plus 2025 RiverSource Retirement Plus 2030 RiverSource Retirement Plus 2035 RiverSource Retirement Plus 2040 RiverSource Retirement Plus 2045 ------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 145 The fee is calculated for each calendar day on the basis of net assets as of the close of the preceding day. Fees paid in each of the last three fiscal periods are shown in the table below. The table also shows the daily rate applied to each fund's net assets as of the last day of the most recent fiscal period. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 21. ADMINISTRATIVE FEES
---------------------------------------------------------------------------------------------------------------------------- ADMINISTRATIVE SERVICES FEES PAID IN: DAILY RATE --------------------------------------------------------------------------------------------------- APPLIED TO FUND 2009 2008 2007 FUND ASSETS ---------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 ----------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Basic Income $ 56,956 $ 38,041(a) $ 25,671 0.020% ----------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Enhanced Income 54,275 45,848(a) 37,153 0.020 ----------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Moderate Income 108,149 82,229(a) 58,560 0.020 ----------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Aggressive 96,644 110,897 86,301 0.020 ----------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Conservative 36,929 26,665 24,051 0.020 ----------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate 193,553 183,783 138,034 0.020 ----------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Aggressive 205,250 223,400 172,602 0.020 ----------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Conservative 72,830 62,617 50,763 0.020 ----------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Total Equity 84,413 101,924 76,312 0.020 ----------------------------------------------------------------------------------------------------------------- RiverSource S&P 500 Index 101,230 158,059 153,231 0.060 ----------------------------------------------------------------------------------------------------------------- RiverSource Small Company Index 446,427 738,676 867,030 0.080 ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 ----------------------------------------------------------------------------------------------------------------- RiverSource Equity Value 448,794 680,124 674,042 0.060 ----------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Growth 105,946 159,051 173,239 0.080 ----------------------------------------------------------------------------------------------------------------- RiverSource Precious Metals and Mining 64,531 77,686 67,215 0.060 ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 ----------------------------------------------------------------------------------------------------------------- RiverSource 120/20 Contrarian Equity 31,071 13,416(b) N/A 0.080 ----------------------------------------------------------------------------------------------------------------- RiverSource Recovery and Infrastructure 4,214(c) N/A N/A 0.060 ----------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2010 2,441 3,623 1,779(d) 0.020 ----------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2015 4,449 5,483 1,861(d) 0.020 ----------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2020 4,871 7,572 2,961(d) 0.020 ----------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2025 5,145 7,280 2,293(d) 0.020 ----------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2030 5,001 7,160 2,579(d) 0.020 ----------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2035 3,258 4,249 1,548(d) 0.020 ----------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2040 2,051 4,915 2,928(d) 0.020 ----------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2045 1,726 1,670 586(d) 0.020 ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 ----------------------------------------------------------------------------------------------------------------- RiverSource High Yield Bond 722,190 1,069,014 1,259,292 0.066 ----------------------------------------------------------------------------------------------------------------- RiverSource Partners Aggressive Growth 232,850 350,088 334,364 0.060 ----------------------------------------------------------------------------------------------------------------- RiverSource Partners Fundamental Value 374,303 594,407 645,012 0.060 ----------------------------------------------------------------------------------------------------------------- RiverSource Partners Select Value 172,308 300,721 355,085 0.060 ----------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Equity 119,853 208,114 267,622 0.080 ----------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Value 277,260 565,329 754,675 0.080 ----------------------------------------------------------------------------------------------------------------- RiverSource Short Duration U.S. Government 521,265 541,748 623,283 0.069 ----------------------------------------------------------------------------------------------------------------- RiverSource U.S. Government Mortgage 252,478 285,601 196,713 0.070 ----------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 ----------------------------------------------------------------------------------------------------------------- RiverSource Dividend Opportunity 642,082 1,033,158 884,333 0.057 ----------------------------------------------------------------------------------------------------------------- RiverSource Real Estate 91,566 132,646 153,117 0.060 -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 146
---------------------------------------------------------------------------------------------------------------------------- ADMINISTRATIVE SERVICES FEES PAID IN: DAILY RATE --------------------------------------------------------------------------------------------------- APPLIED TO FUND 2009 2008 2007 FUND ASSETS ---------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 ----------------------------------------------------------------------------------------------------------------- RiverSource Cash Management $2,132,989 $2,507,729 $2,141,669 0.051% ----------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Equity 1,094,618 1,701,542 1,224,572 0.054 ----------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small and Mid Cap Equity 77,180 38,114 24,904 0.060 ----------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value 34,017 30,592 20,681 0.080 ----------------------------------------------------------------------------------------------------------------- RiverSource Floating Rate 253,669 398,924 378,190 0.070 ----------------------------------------------------------------------------------------------------------------- RiverSource Income Opportunities 219,083 202,872 242,883 0.069 ----------------------------------------------------------------------------------------------------------------- RiverSource Inflation Protected Securities 515,776 399,972 209,028 0.069 ----------------------------------------------------------------------------------------------------------------- RiverSource Limited Duration Bond 123,147 115,529 105,993 0.070 ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 ----------------------------------------------------------------------------------------------------------------- RiverSource California Tax-Exempt 113,317 122,235 122,586 0.070 ----------------------------------------------------------------------------------------------------------------- RiverSource Diversified Bond 2,122,615 2,012,548 1,752,212 0.059 ----------------------------------------------------------------------------------------------------------------- RiverSource Minnesota Tax-Exempt 212,293 215,249 234,353 0.070 ----------------------------------------------------------------------------------------------------------------- RiverSource New York Tax-Exempt 37,590 41,455 47,710 0.070 ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 ----------------------------------------------------------------------------------------------------------------- RiverSource Balanced 331,811 519,542 623,784 0.059 ----------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Growth 203,583 101,276 11,405(e) 0.059 ----------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Value 69,490 662(f) N/A 0.060 ----------------------------------------------------------------------------------------------------------------- RiverSource Diversified Equity Income 1,985,768 3,272,256 3,449,519 0.048 ----------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Value 946,227 1,335,281 1,196,773 0.054 ----------------------------------------------------------------------------------------------------------------- RiverSource Strategic Allocation 962,590 1,505,894 1,340,234 0.076 ----------------------------------------------------------------------------------------------------------------- RiverSource Strategic Income Allocation 137,849 115,139 21,493(e) 0.070 ------------------------------------------------------------------------------------------------------------ Seligman California Municipal High-Yield* 7,436 N/A N/A 0.070 ----------------------------------------------------------------------------------------------------------------- Seligman California Municipal Quality* 8,837 N/A N/A 0.070 ----------------------------------------------------------------------------------------------------------------- Seligman Minnesota Municipal* 14,896 N/A N/A 0.070 ----------------------------------------------------------------------------------------------------------------- Seligman National Municipal* 42,999 N/A N/A 0.069 ----------------------------------------------------------------------------------------------------------------- Seligman New York Municipal* 17,197 N/A N/A 0.070 ----------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2015* 4,585 N/A N/A 0.060 ----------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2025* 5,686 N/A N/A 0.060 ----------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2035* 1,661 N/A N/A 0.060 ----------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2045* 835 N/A N/A 0.060 ----------------------------------------------------------------------------------------------------------------- Seligman TargETFund Core* 10,074 N/A N/A 0.060 -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 147
---------------------------------------------------------------------------------------------------------------------------- ADMINISTRATIVE SERVICES FEES PAID IN: DAILY RATE --------------------------------------------------------------------------------------------------- APPLIED TO FUND 2009 2008 2007 FUND ASSETS ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 ----------------------------------------------------------------------------------------------------------------- RiverSource Absolute Return Currency and Income $ 417,444 $ 373,454 $ 79,761 0.080% ----------------------------------------------------------------------------------------------------------------- RiverSource Disciplined International Equity 282,974 549,173 209,295 0.080 ----------------------------------------------------------------------------------------------------------------- RiverSource Emerging Markets Bond 146,703 131,334 78,549 0.080 ----------------------------------------------------------------------------------------------------------------- RiverSource Global Bond 401,109 572,976 388,646 0.080 ----------------------------------------------------------------------------------------------------------------- RiverSource Partners International Select Growth 282,773 511,522 490,174 0.080 ----------------------------------------------------------------------------------------------------------------- RiverSource Partners International Select Value 651,133 1,395,090 1,759,221 0.078 ----------------------------------------------------------------------------------------------------------------- RiverSource Partners International Small Cap 38,884 79,183 92,062 0.080 ----------------------------------------------------------------------------------------------------------------- Seligman Frontier 10,073 N/A N/A 0.030 ----------------------------------------------------------------------------------------------------------------- Seligman Global Technology 102,757 N/A N/A 0.040 ----------------------------------------------------------------------------------------------------------------- Threadneedle Asia Pacific 7,807(g) N/A N/A 0.080 ----------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets 280,656 498,019 503,279 0.079 ----------------------------------------------------------------------------------------------------------------- Threadneedle European Equity 50,304 96,107 105,886 0.080 ----------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 340,869 549,601 611,621 0.080 ----------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income 16,780 1,528(h) N/A 0.080 ----------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha 4,908 1,256(h) N/A 0.080 ----------------------------------------------------------------------------------------------------------------- Threadneedle International Opportunity 281,413 460,205 540,718 0.080 ----------------------------------------------------------------------------------------------------------------- 2008 2007 2006 ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 ----------------------------------------------------------------------------------------------------------------- RiverSource Intermediate Tax-Exempt $ 52,367 57,618 74,912 0.070 ----------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Growth 471,791 652,889 946,943 0.060 ----------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Bond 463,150 525,515 544,894 0.069 ----------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt High Income 1,603,416 1,823,812 2,064,819 0.063 ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 ----------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Money Market 84,396 73,957 69,922 0.060% -----------------------------------------------------------------------------------------------------------------
* Prior to June 15, 2009, and for Seligman National, prior to Aug. 31, 2009, the fund did not pay a separate administrative services fee. Fees for administration services were included in the fund's management fees as charged by the fund's pervious investment manager. (a) The fund changed its fiscal year end effective Jan. 31, 2008 from May 31 to Jan. 31. For 2008, the information shown is for the period from June 1, 2007 through Jan. 31, 2008. For years prior to 2008, the fiscal period ended on May 31. (b) For the period from Oct. 18, 2007 (when shares became publicly available) to April 30, 2008. (c) For the period from Feb. 19, 2009 (when shares became publicly available) to April 30, 2009. (d) For the period from May 18, 2006 (when shares became publicly available) to April 30, 2007. (e) For the period from May 17, 2007 (when shares became publicly available) to Sept. 30, 2007. (f) For the period from Aug. 1, 2008 (when shares became publicly available) to Sept. 30, 2008. (g) For the period from July 15, 2009 (when the Fund became available) to Oct. 31, 2009. (h) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. TRANSFER AGENCY SERVICES Each fund has a Transfer Agency Agreement with RiverSource Service Corporation (the "transfer agent") located at 734 Ameriprise Financial Center, Minneapolis, MN 55474. This agreement governs RiverSource Service Corporation's responsibility for administering and/or performing transfer agent functions, for acting as service agent in connection with dividend and distribution functions and for performing shareholder account administration agent functions in connection with the purchase, exchange and redemption or repurchase of the fund's shares. CLASS A, CLASS B, CLASS C AND CLASS D. For Class A, Class B, Class C and Class D, RiverSource Service Corporation will earn a fee from the fund determined by multiplying the number of shareholder accounts at the end of the day by a rate determined for each class per year and dividing by the number of days in the year. The fund will pay on the basis of the relative percentage of net assets of each class of shares, first allocating the base fee (equal to Class A shares) across share classes, and then allocating the incremental per share class fee, based on the number of shareholder accounts. The fee varies depending on the investment category of the fund. You can find your fund's investment category in Table 1. Statement of Additional Information - Dec. 30, 2009 Page 148 BALANCED, EQUITY, FUNDS-OF-FUNDS - EQUITY FUNDS The annual per account fee accrued daily and payable monthly, for the applicable classes is as follows:
Class A Class B Class C Class D ------- ------- ------- ------- $19.50 $20.50 $20.00 $19.50
FUNDS-OF-FUNDS - FIXED INCOME, STATE TAX-EXEMPT FIXED INCOME, TAXABLE FIXED INCOME, TAX-EXEMPT FIXED INCOME FUNDS The annual per account fee accrued daily and payable monthly, for the applicable classes is as follows:
Class A Class B Class C ------- ------- ------- $20.50 $21.50 $21.00
MONEY MARKET FUNDS The annual per account fee accrued daily and payable monthly, for the applicable classes is as follows. The fee for RiverSource Tax-Exempt Money Market Fund, which does not have separate classes of shares, is the same as that applicable to Class A:
Class A Class B Class C ------- ------- ------- $22.00 $23.00 $22.50
CLASS E, CLASS R2, CLASS R3, CLASS R4, CLASS R5, CLASS W AND CLASS Y. For Class E, Class R2, Class R3, Class R4, Class R5, Class W and Class Y, RiverSource Service Corporation will earn a fee from the fund, accrued daily and payable monthly, determined by multiplying the average daily net assets of the applicable class by the annual rate shown below:
Class E Class R2 Class R3 Class R4 Class R5 Class W Class Y ------- -------- -------- -------- -------- ------- ------- 0.05% 0.05% 0.05% 0.05% 0.05% 0.20% 0.05%
In addition, an annual closed-account fee of $5.00 per inactive account is charged on a pro rata basis for 12 months from the date the account becomes inactive. The transfer agent also charges an annual fee of $3 per account serviced directly by the fund or its designated agent for Class A, Class B and Class C shares. The fees paid to RiverSource Service Corporation may be changed by the Board without shareholder approval. PLAN ADMINISTRATION SERVICES The funds* have a Plan Administration Services Agreement with the transfer agent. Under the agreement the fund pays for plan administration services, including services such as implementation and conversion services, account set- up and maintenance, reconciliation and account recordkeeping, education services and administration to various plan types, including 529 plans, retirement plans and Health Savings Accounts (HSAs). The fee for services is equal on an annual basis to the following percentage of the average daily net assets of the fund attributable to the applicable class:
Class E Class R2 Class R3 Class R4 Class Y ------- -------- -------- -------- ------- 0.15% 0.25% 0.25% 0.25% 0.15%
The fees paid to the transfer agent may be changed by the Board without shareholder approval. * Currently, not all funds offer classes of shares that are subject to this fee. You can reference Table 8 for the classes of shares your fund offers. DISTRIBUTION SERVICES RiverSource Fund Distributors, Inc., an indirect wholly-owned subsidiary of RiverSource Investments, 50611 Ameriprise Financial Center, Minneapolis, MN 55474, serves as the funds' principal underwriter and distributor. Prior to June 1, 2009, for RiverSource and Threadneedle funds, RiverSource Distributors, Inc. also served as principal underwriter and distributor to the funds. Prior to Oct. 1, 2007, for RiverSource and Threadneedle funds, Ameriprise Financial Services, Inc. also served as principal underwriter and distributor to the funds. Prior to Nov. 7, 2008, for Seligman funds, Seligman Advisors, Inc. also served as principal underwriter and distributor to the funds. The fund's shares are offered on a continuous basis. Under a Distribution Agreement, sales charges deducted for distributing fund shares are paid to the distributor daily. The following table shows the sales charges paid to the distributor and the amount retained by the distributor after paying commissions and other Statement of Additional Information - Dec. 30, 2009 Page 149 expenses for each of the last three fiscal periods. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 22. SALES CHARGES PAID TO DISTRIBUTOR
----------------------------------------------------------------------------------------------------------------------------------- AMOUNT RETAINED AFTER PAYING SALES CHARGES PAID TO DISTRIBUTOR COMMISSIONS AND OTHER EXPENSES ----------------------------------------------------------------------------------------------------------------------------------- FUND 2009 2008 2007 2009 2008 2007 ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder $ 466,216 $ 688,587(a)$ 1,155,448 $ (21,562) $ (56,086)(a)$ 6,089 Basic Income ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder 296,977 831,981(a) 1,678,918 (533) 176,661(a) 287,006 Enhanced Income ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder 654,937 1,279,681(a) 2,955,938 77,641 34,001(a) 435,561 Moderate Income ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 2,081,242 2,848,037 3,260,693 552,795 799,417 1,029,231 Aggressive ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 528,590 384,348 455,765 16,829 4,989 94,296 Conservative ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 3,277,766 3,944,827 4,127,743 661,689 702,939 1,084,978 Moderate ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 4,181,445 5,635,597 6,845,238 1,125,393 1,613,677 2,326,266 Moderate Aggressive ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 982,012 1,088,559 1,084,727 153,386 140,630 252,979 Moderate Conservative ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 1,561,130 2,257,735 2,414,356 319,114 471,536 594,766 Total Equity ----------------------------------------------------------------------------------------------------------------------------------- RiverSource S&P 500 Index N/A N/A N/A N/A N/A N/A ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Small Company Index 365,094 563,878 973,579 317,088 117,897 220,620 ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Equity Value 374,068 496,313 928,630 65,246 16,594 86,064 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap 110,096 174,193 265,315 13,222 25,734 52,127 Growth ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Precious Metals and 159,379 192,503 178,460 55,468 50,572 33,944 Mining ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource 120/20 Contrarian 57,137 149,480(b) N/A 5,429 46,196(b) N/A Equity ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Recovery and 221,190(c) N/A N/A (7,085)(c) N/A N/A Infrastructure ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 7,536 32,694 2,283(d) 1,465 11,266 (6,048)(d) 2010 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 17,354 70,298 35,493(d) 5,173 50,360 27,942(d) 2015 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 26,015 41,850 35,121(d) 12,539 21,519 23,828(d) 2020 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 21,208 49,187 38,880(d) 7,872 25,003 25,335(d) 2025 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 19,999 51,530 29,205(d) 9,336 28,063 15,221(d) 2030 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 14,670 31,469 21,303(d) 6,101 19,162 13,718(d) 2035 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 17,700 39,332 14,822(d) 8,815 21,208 7,670(d) 2040 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 16,697 23,890 10,606(d) 6,510 12,087 5,832(d) 2045 ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource High Yield Bond 974,983 882,107 1,787,813 108,896 41,174 139,630 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Aggressive 243,591 390,356 359,329 59,181 83,271 63,452 Growth ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners 494,967 766,263 1,266,023 43,220 58,252 158,689 Fundamental Value ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Select 187,112 314,511 518,110 15,783 25,291 61,797 Value ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap 114,800 184,740 309,112 26,375 48,448 95,646 Equity -----------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 150
----------------------------------------------------------------------------------------------------------------------------------- AMOUNT RETAINED AFTER PAYING SALES CHARGES PAID TO DISTRIBUTOR COMMISSIONS AND OTHER EXPENSES ----------------------------------------------------------------------------------------------------------------------------------- FUND 2009 2008 2007 2009 2008 2007 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap $ 287,969 $ 607,350 $ 1,147,620 $ 38,780 $ 117,005 $ 249,915 Value ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Short Duration U.S. 530,165 660,354 962,025 107,433 (152,827) (85,482) Government ----------------------------------------------------------------------------------------------------------------------------------- RiverSource U.S. Government 101,207 136,891 252,402 (70,344) (116,397) (67,241) Mortgage ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Dividend 798,182 1,648,530 2,653,148 39,934 206,622 266,495 Opportunity ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Real Estate 98,301 211,915 813,437 18,158 63,306 218,298 -----------------------------------------------------------------------------------------------------------------------------------
FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Cash Management 367,743 339,219 437,392 367,712 339,111 423,832 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Equity 261,402 412,821 661,751 67,822 85,890 140,529 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small 24,097 26,228 55,865 7,132 7,923 9,445 and Mid Cap Equity ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small 8,386 6,647 15,644 2,011 1,943 1,960 Cap Value ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Floating Rate 189,836 380,143 1,282,342 11,806 (174,369) (554,729) ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Income 951,690 135,655 320,351 251,745 (11,090) (6,952) Opportunities ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Inflation Protected 332,292 407,706 105,703 101,013 51,044 18,732 Securities ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Limited Duration 145,544 92,255 136,687 17,573 9,475 28,890 Bond ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource California Tax- 92,347 91,928 150,760 9,806 5,945 46,117 Exempt ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Diversified Bond 1,922,949 1,992,222 2,340,251 (92,219) 176,513 419,415 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Minnesota Tax- 406,782 463,447 338,160 84,001 37,217 12,594 Exempt ----------------------------------------------------------------------------------------------------------------------------------- RiverSource New York Tax-Exempt 20,992 29,401 43,518 8,033 8,217 6,984 ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Balanced 189,413 287,586 474,702 39,038 36,359 32,524 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large 69,425 87,685 20,834(e) 15,099 30,621 5,197(e) Cap Growth ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large 2,270 0(f) N/A 566 0(f) N/A Cap Value ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Diversified Equity 3,383,179 6,331,545 9,553,810 496,151 1,204,186 1,407,616 Income ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Value 954,172 2,444,490 3,538,910 207,568 898,395 862,120 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Strategic 2,055,294 5,371,458 8,570,846 347,495 1,321,113 1,738,063 Allocation ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Strategic Income 600,969 400,285 267,319(e) 2,484 28,302 26,129(e) Allocation ----------------------------------------------------------------------------------------------------------------------------------- Seligman California Municipal 37,316 98,702 18,611 36,272 13,104 3,125 High-Yield ----------------------------------------------------------------------------------------------------------------------------------- Seligman California Municipal 60,005 37,798 15,149 56,335 5,413 2,159 Quality ----------------------------------------------------------------------------------------------------------------------------------- Seligman Minnesota Municipal 66,716 49,497 35,607 55,756 6,427 4,740 ----------------------------------------------------------------------------------------------------------------------------------- Seligman National Municipal 222,346 57,892 18,992 199,904 7,651 3,601 ----------------------------------------------------------------------------------------------------------------------------------- Seligman New York Municipal 166,632 48,724 31,659 157,302 7,550 6,334 ----------------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2015 22,260 77,218 242,913 22,260 9,521 25,977 ----------------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2025 26,925 79,939 188,122 26,925 9,918 19,976 ----------------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2035 3,094 13,483 13,573 2,975 1,677 1,493 ----------------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2045 7,658 27,815 7,910 7,508 3,493 791 ----------------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund Core 24,251 126,638 297,932 24,251 15,617 30,512 -----------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 151
----------------------------------------------------------------------------------------------------------------------------------- AMOUNT RETAINED AFTER PAYING SALES CHARGES PAID TO DISTRIBUTOR COMMISSIONS AND OTHER EXPENSES ----------------------------------------------------------------------------------------------------------------------------------- 2009 2008 2007 2009 2008 2007 ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Absolute Return $ 118,256 $ 288,047 $ 10,519 $ 40,664 $ 52,383 $ 3,448 Currency and Income ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined 61,779 168,692 130,761 8,596 36,899 14,894 International Equity ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Emerging Markets 70,770 41,906 25,743 28,245 10,486 1,421 Bond ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Global Bond 218,412 391,577 314,002 32,697 118,930 215,442 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners 213,399 560,302 885,940 43,200 118,125 226,007 International Select Growth ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners 580,503 1,584,444 4,085,674 68,413 235,164 641,699 International Select Value ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners 53,930 88,479 164,026 26,245 20,053 19,649 International Small Cap ----------------------------------------------------------------------------------------------------------------------------------- Seligman Frontier 1,357 10,431 25,638 735 1,351 3,856 ----------------------------------------------------------------------------------------------------------------------------------- Seligman Global Technology 221,563 265,528 309,290 184,936 233,685 274,719 ----------------------------------------------------------------------------------------------------------------------------------- Threadneedle Asia Pacific(g) N/A N/A N/A N/A N/A N/A ----------------------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets 558,505 780,872 886,062 140,308 (4,109,358) (7,004,024) ----------------------------------------------------------------------------------------------------------------------------------- Threadneedle European Equity 68,398 124,828 226,464 19,191 35,391 90,745 ----------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 361,007 800,774 896,578 60,748 114,011 99,098 ----------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 38,564 18,558(h) N/A 7,576 4,340(h) N/A Income ----------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended 8,674 1,795(h) N/A 3,445 307(h) N/A Alpha ----------------------------------------------------------------------------------------------------------------------------------- Threadneedle International 168,431 319,850 501,090 37,276 49,744 56,669 Opportunity ----------------------------------------------------------------------------------------------------------------------------------- 2008 2007 2006 2008 2007 2006 ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Intermediate Tax- 59,348 62,985 115,280 (792) (10,183) 29,590 Exempt ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Growth 360,393 608,683 1,388,577 59,123 115,052 346,497 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Bond 319,831 313,115 346,932 64,831 (19,725) 79,024 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt High 1,042,555 1,182,244 1,485,792 151,444 181,059 389,650 Income ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 ----------------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Money N/A N/A N/A N/A N/A N/A Market -----------------------------------------------------------------------------------------------------------------------------------
(a) The fund changed its fiscal year end effective Jan. 31, 2008 from May 31 to Jan. 31. For 2008, the information shown is for the period from June 1, 2007 through Jan. 31, 2008. For years prior to 2008, the fiscal period ended on May 31. (b) For the period from Oct. 18, 2007 (when shares became publicly available) to April 30, 2008. (c) For the period from Feb. 19, 2009 (when shares became publicly available) to April 30, 2009. (d) For the period from May 18, 2006 (when shares became publicly available) to April 30, 2007. (e) For the period from May 17, 2007 (when shares became publicly available) to Sept. 30, 2007. (f) For the period from Aug. 1, 2008 (when shares became publicly available) to Sept. 30, 2008. (g) For the period from July 15, 2009 (when the Fund became available) to Oct. 31, 2009. (h) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. Part of the sales charge may be paid to selling dealers who have agreements with the distributor. The distributor will retain the balance of the sales charge. At times the entire sales charge may be paid to selling dealers. PLAN AND AGREEMENT OF DISTRIBUTION To help defray the cost of distribution and servicing not covered by the sales charges received under the Distribution Agreement, each fund listed in Table 24. 12b-1 Fees, approved a Plan of Distribution (the "Plan") and entered into an Statement of Additional Information - Dec. 30, 2009 Page 152 agreement under the Plan pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, of the type known as a reimbursement plan, the fund pays the distributor a fee up to actual expenses incurred at an annual rate as follows: FOR FUNDS OTHER THAN MONEY MARKET FUNDS: The fee is equal on an annual basis to the following percentage of the average daily net assets of the fund attributable to the applicable class:
Class A Class B Class C Class D Class R2 Class R3 Class W ------- ------- ------- ------- -------- -------- ------- 0.25% 1.00% 1.00% 0.25% 0.50% 0.25% 0.25%
For Class B and Class C, of the 1.00% fee, up to 0.75% is reimbursed for distribution expenses. Up to an additional 0.25% of the 1.00% fee is paid to the distributor to reimburse certain expenses incurred in connection with providing services to fund shareholders. For Class R2 and Class R3, up to the entire amount of the fee shall be reimbursed for distribution expenses. Of that amount, for Class R2, up to 0.25% of the 0.50% fee may be reimbursed for shareholder servicing expenses. FOR MONEY MARKET FUNDS: The fee for services is equal on an annual basis to the following percentage of the average daily net assets of the fund attributable to the applicable class. The fee for RiverSource Tax-Exempt Money Market, which does not have separate classes of shares, is the same as that applicable to Class A:
Class A Class B Class C Class R2 Class W ------- ------- ------- -------- ------- 0.10% 0.85% 0.75% 0.50% 0.10%
For Class B, of the 0.85% fee, up to 0.75% is reimbursed for distribution expenses. Up to an additional 0.10% of the 0.85% fee is paid to the distributor to reimburse certain expenses incurred in connection with providing services to fund shareholders. The distributor has currently agreed not to be reimbursed by the fund for distribution (12b-1) fees equal to 0.10% of the 0.85% fee for Class B and 0.25% for Class R2. FOR ALL FUNDS: Distribution and shareholder servicing expenses include payment of distribution and shareholder servicing fees to financial institutions that sell shares of the fund. Financial institutions may compensate their financial advisors with the distribution and shareholder servicing fees paid to them by the distributor. Payments under the Plan are intended to result in an increase in fund assets and thus potentially result in economies of scale and lower costs for all shareholders. Each class has exclusive voting rights on the Plan as it applies to that class. In addition, because Class B shares convert to Class A shares, Class B shareholders have the right to vote on any material increase to expenses charged under the Class A plan. Distribution expenses covered under this Plan include commissions to financial intermediaries and expenses related to printing prospectuses and reports used for sales purposes, the preparation, printing and distribution of advertising and sales literature, personnel, travel, office and equipment, and other distribution-related expenses. Shareholder service expenses include costs of establishing and maintaining shareholder accounts and records, assisting with purchase, redemption and exchange requests, arranging for bank wires, monitoring dividend payments from the funds on behalf of shareholders, forwarding certain shareholder communications from funds to shareholders, receiving and responding to inquiries and answering questions regarding the funds, aiding in maintaining the investment of shareholders in the funds and other service-related expenses. A substantial portion of the expenses are not specifically identified to any one of the funds. The fee is not allocated to any one service (such as advertising, compensation to financial intermediaries, or other uses). However, a significant portion of the fee is generally used for sales and promotional expenses. The Plan must be approved annually by the Board, including a majority of the Board members who are not "interested persons" (as defined in the 1940 Act) of the fund (Independent Directors), if it is to continue for more than a year. At least quarterly, the Board reviews written reports concerning the amounts expended under the Plan and the purposes for which such expenditures were made. The Plan and any agreement related to it may be terminated at any time by vote of a majority of Board members who are not interested persons of the fund and have no direct or indirect financial interest in the operation of the Plan or in any agreement related to the Plan, or by vote of a majority of the outstanding voting securities of the relevant class of shares or by the distributor. Any agreement related to the Plan will terminate in the event of its assignment, as that term is defined in the 1940 Act. The Plan may not be amended to increase the amount to be spent for distribution without shareholder approval, and all material Statement of Additional Information - Dec. 30, 2009 Page 153 amendments to the Plan must be approved by a majority of the Board members, including a majority of the Independent Directors and who do not have a financial interest in the operation of the Plan or any agreement related to it. The selection and nomination of Independent Directors is the responsibility of the other Independent Directors. Independent Directors do not have any direct or indirect financial interest in the operation of the Plan or any related agreement. For its most recent fiscal period, each fund paid 12b-1 fees as shown in the following table. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 23. 12B-1 FEES
FUND CLASS A CLASS B CLASS C CLASS D CLASS R2 CLASS R3 CLASS W ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 ------------------------------------------------------------------------------------------------------------------- RiverSource RiverSource $ 593,211 $ 362,603 $112,193 N/A N/A N/A N/A Income Builder Basic Income ------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder 580,823 278,815 110,421 N/A N/A N/A N/A Enhanced Income ------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder 1,158,585 587,094 185,812 N/A N/A N/A N/A Moderate Income ------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 969,765 809,179 142,465 N/A N/A N/A N/A Aggressive ------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 328,254 434,092 99,134 N/A N/A N/A N/A Conservative ------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 1,870,904 1,818,537 374,530 N/A N/A N/A N/A Moderate ------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 2,048,240 1,742,740 319,656 N/A N/A N/A N/A Moderate Aggressive ------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 687,072 724,001 168,921 N/A N/A N/A N/A Moderate Conservative ------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 850,481 691,958 125,500 N/A N/A N/A N/A Total Equity ------------------------------------------------------------------------------------------------------------------- RiverSource S&P 500 Index N/A N/A N/A $91,928 N/A N/A N/A ------------------------------------------------------------------------------------------------------------------- RiverSource Small Company 1,166,038 914,171 N/A N/A N/A N/A N/A Index ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 ------------------------------------------------------------------------------------------------------------------- RiverSource Equity Value 1,688,097 830,333 44,669 N/A $ 18 $ 353 $ 9 ------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small 160,344 205,641 25,972 N/A 15 8 N/A Cap Growth ------------------------------------------------------------------------------------------------------------------- RiverSource Precious Metals 229,611 135,038 20,903 N/A N/A N/A N/A and Mining ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 ------------------------------------------------------------------------------------------------------------------- RiverSource 120/20 Contrarian 78,294 18,994 10,617 N/A N/A N/A N/A Equity ------------------------------------------------------------------------------------------------------------------- RiverSource Recovery and 9,478 3,157 1,947 N/A 9 5 N/A Infrastructure(a) ------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 8,900 N/A N/A N/A 18 9 N/A 2010 ------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 13,407 N/A N/A N/A 18 9 N/A 2015 ------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 8,463 N/A N/A N/A 19 9 N/A 2020 ------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5,737 N/A N/A N/A 20 9 N/A 2025 ------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 8,216 N/A N/A N/A 21 10 N/A 2030 ------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 3,286 N/A N/A N/A 17 9 N/A 2035 ------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 3,151 N/A N/A N/A 18 11 N/A 2040 ------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 2,870 N/A N/A N/A 17 9 N/A 2045 ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 ------------------------------------------------------------------------------------------------------------------- RiverSource High Yield Bond 2,194,454 1,126,604 154,385 N/A 47 1,124 32,692 ------------------------------------------------------------------------------------------------------------------- RiverSource Partners 637,734 400,332 20,799 N/A 367 16 N/A Aggressive Growth ------------------------------------------------------------------------------------------------------------------- RiverSource Partners 1,016,187 892,153 98,358 N/A N/A N/A N/A Fundamental Value ------------------------------------------------------------------------------------------------------------------- RiverSource Partners Select 524,683 439,515 44,376 N/A N/A N/A N/A Value ------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small 326,818 153,089 14,814 N/A N/A N/A N/A Cap Equity ------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small 587,080 760,649 67,562 N/A 1,288 28 N/A Cap Value -------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 154
FUND CLASS A CLASS B CLASS C CLASS D CLASS R2 CLASS R3 CLASS W ------------------------------------------------------------------------------------------------------------------- RiverSource Short Duration $1,393,600 $1,284,921 $111,382 N/A N/A N/A $ 11 U.S. Government ------------------------------------------------------------------------------------------------------------------- RiverSource U.S. Government 213,851 267,370 40,318 N/A N/A N/A N/A Mortgage ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 ------------------------------------------------------------------------------------------------------------------- RiverSource Dividend 2,154,545 1,012,961 150,461 N/A $ 18 $ 9 8 Opportunity ------------------------------------------------------------------------------------------------------------------- RiverSource Real Estate 137,477 83,293 9,596 N/A N/A N/A 5 ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 ------------------------------------------------------------------------------------------------------------------- RiverSource Cash Management 4,078,135 863,598 77,611 N/A N/A N/A 50,965 ------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined 1,808,099 231,197 20,366 N/A 14 7 2,229,343 Equity ------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small 26,259 9,361 2,044 N/A N/A N/A 233,585 and Mid Cap Equity ------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small 24,904 3,242 642 N/A 14 8 N/A Cap Value ------------------------------------------------------------------------------------------------------------------- RiverSource Floating Rate 512,870 162,968 144,229 N/A N/A N/A 9 ------------------------------------------------------------------------------------------------------------------- RiverSource Income 468,741 249,052 113,732 N/A N/A N/A N/A Opportunities ------------------------------------------------------------------------------------------------------------------- RiverSource Inflation 579,520 348,185 110,716 N/A N/A N/A 553,667 Protected Securities ------------------------------------------------------------------------------------------------------------------- RiverSource Limited Duration 165,150 74,699 23,364 N/A N/A N/A 11 Bond ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 ------------------------------------------------------------------------------------------------------------------- RiverSource California Tax- 388,632 39,496 24,784 N/A N/A N/A N/A Exempt ------------------------------------------------------------------------------------------------------------------- RiverSource Diversified Bond 4,876,489 2,344,842 378,881 N/A 135 23 1,433,055 ------------------------------------------------------------------------------------------------------------------- RiverSource Minnesota Tax- 703,042 127,738 92,844 N/A N/A N/A N/A Exempt ------------------------------------------------------------------------------------------------------------------- RiverSource New York Tax- 124,348 32,203 7,408 N/A N/A N/A N/A Exempt ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 ------------------------------------------------------------------------------------------------------------------- RiverSource Balanced 1,240,431 190,901 34,422 N/A 54 N/A N/A ------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large 285,822 31,420 14,405 N/A 31 16 148,342 Cap Growth ------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large 2,658 717 132 N/A 33 16 203,257 Cap Value ------------------------------------------------------------------------------------------------------------------- RiverSource Diversified 7,673,291 4,133,298 654,310 N/A 32,750 224,770 7 Equity Income ------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Value 2,975,723 1,048,865 359,404 N/A 56,692 82,312 7 ------------------------------------------------------------------------------------------------------------------- RiverSource Strategic 2,727,681 1,272,157 456,933 N/A 16 8 N/A Allocation ------------------------------------------------------------------------------------------------------------------- RiverSource Strategic Income 421,534 206,718 76,158 N/A 23 11 N/A Allocation ------------------------------------------------------------------------------------------------------------------- Seligman California Municipal 42,842 N/A 54,350 N/A N/A N/A N/A High-Yield ------------------------------------------------------------------------------------------------------------------- Seligman California Municipal 54,798 N/A 34,584 N/A N/A N/A N/A Quality ------------------------------------------------------------------------------------------------------------------- Seligman Minnesota Municipal 99,128 N/A 9,092 N/A N/A N/A N/A ------------------------------------------------------------------------------------------------------------------- Seligman National Municipal 461,232 N/A 105,746 N/A N/A N/A N/A ------------------------------------------------------------------------------------------------------------------- Seligman New York Municipal 99,753 N/A 67,646 N/A N/A N/A N/A ------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2015 29,037 N/A 116,119 N/A 7,361 N/A N/A ------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2025 34,200 N/A 114,588 N/A 11,757 N/A N/A ------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2035 10,620 N/A 17,945 N/A 6,060 N/A N/A ------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2045 6,401 N/A 6,705 N/A 3,486 N/A N/A ------------------------------------------------------------------------------------------------------------------- Seligman TargETFund Core 45,600 N/A 289,930 N/A 41,727 N/A N/A -------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 155
FUND CLASS A CLASS B CLASS C CLASS D CLASS R2 CLASS R3 CLASS W ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 ------------------------------------------------------------------------------------------------------------------- RiverSource Absolute Return $ 416,349 $ 35,353 $ 98,315 N/A N/A N/A $ 530,074 Currency and Income ------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined 115,524 76,758 9,922 N/A $ 15 $ 7 530,215 International Equity ------------------------------------------------------------------------------------------------------------------- RiverSource Emerging Markets 35,486 15,974 3,265 N/A N/A N/A 254,174 Bond ------------------------------------------------------------------------------------------------------------------- RiverSource Global Bond 593,225 367,588 44,351 N/A N/A N/A 147,100 ------------------------------------------------------------------------------------------------------------------- RiverSource Partners 414,628 250,377 42,614 N/A 110 N/A N/A International Select Growth ------------------------------------------------------------------------------------------------------------------- RiverSource Partners 1,476,812 892,831 106,186 N/A N/A N/A N/A International Select Value ------------------------------------------------------------------------------------------------------------------- RiverSource Partners 57,422 42,653 4,096 N/A N/A N/A N/A International Small Cap ------------------------------------------------------------------------------------------------------------------- Seligman Frontier 56,264 11,282 86,834 N/A 453 3 N/A ------------------------------------------------------------------------------------------------------------------- Seligman Global Technology 469,642 85,618 559,118 N/A 15,300 3 N/A ------------------------------------------------------------------------------------------------------------------- Threadneedle Asia Pacific(b) N/A N/A N/A N/A N/A N/A N/A ------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets 715,248 302,533 99,973 N/A 13,518 N/A N/A ------------------------------------------------------------------------------------------------------------------- Threadneedle European Equity 134,391 81,471 9,558 N/A N/A N/A N/A ------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 884,744 362,565 57,394 N/A 192 8 8 ------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 38,589 17,080 2,551 N/A 36 18 N/A Income ------------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended 5,199 2,820 1,035 N/A 36 18 N/A Alpha ------------------------------------------------------------------------------------------------------------------- Threadneedle International 576,787 226,132 30,118 N/A 1,240 8 N/A Opportunity ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 ------------------------------------------------------------------------------------------------------------------- RiverSource Intermediate Tax- 166,850 57,473 23,235 N/A N/A N/A N/A Exempt ------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Growth 1,589,639 958,780 48,434 N/A N/A N/A N/A ------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Bond 1,613,863 236,766 50,563 N/A N/A N/A N/A ------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt High 6,157,145 713,646 137,909 N/A N/A N/A N/A Income ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 ------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Money 140,660 N/A N/A N/A N/A N/A N/A Market -------------------------------------------------------------------------------------------------------------------
(a) For the period from Feb. 19, 2009 (when shares became publicly available) to April 30, 2009. (b) For the period from July 15, 2009 (when shares became publicly available) to Oct. 31, 2009. Statement of Additional Information - Dec. 30, 2009 Page 156 FOR FUNDS WITH CLASS B AND CLASS C SHARES: The following table provides the amount of distribution expenses, as a dollar amount and as a percentage of net assets, incurred by the distributor and not yet reimbursed ("unreimbursed expense") for Class B and Class C shares. These amounts are based on the most recent information available as of July 31, 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. TABLE 24. UNREIMBURSED DISTRIBUTION EXPENSES
PERCENTAGE OF PERCENTAGE OF CLASS B CLASS C FUND CLASS B NET ASSETS CLASS C NET ASSETS ------------------------------------------------------------------------------------------------------- RiverSource 120/20 Contrarian Equity $ 72,000 4.36% $ 13,000 0.75% ------------------------------------------------------------------------------------------------------- RiverSource Absolute Return Currency and 158,000 4.78% 36,000 0.38% Income ------------------------------------------------------------------------------------------------------- RiverSource Balanced 761,000 3.81% 30,000 1.00% ------------------------------------------------------------------------------------------------------- RiverSource California Tax-Exempt 88,000 2.28% 23,000 0.88% ------------------------------------------------------------------------------------------------------- RiverSource Cash Management 7,276,000 7.57% 63,000 0.88% ------------------------------------------------------------------------------------------------------- RiverSource Disciplined Equity 700,000 3.40% 25,000 1.19% ------------------------------------------------------------------------------------------------------- RiverSource Disciplined International Equity 363,000 4.36% 12,000 1.10% ------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Growth 180,000 4.56% 12,000 0.71% ------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large Cap Value 8,000 7.60% 0 0.00% ------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small and Mid Cap 57,000 4.81% 4,000 1.39% Equity ------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small Cap Value 17,000 4.99% 1,000 1.30% ------------------------------------------------------------------------------------------------------- RiverSource Diversified Bond 8,045,000 3.24% 228,000 0.48% ------------------------------------------------------------------------------------------------------- RiverSource Diversified Equity Income 17,469,000 3.98% 692,000 1.00% ------------------------------------------------------------------------------------------------------- RiverSource Dividend Opportunity 3,522,000 3.57% 172,000 1.05% ------------------------------------------------------------------------------------------------------- RiverSource Emerging Markets Bond 81,000 3.90% 44,000 11.13% ------------------------------------------------------------------------------------------------------- RiverSource Equity Value 1,575,000 2.64% 45,000 1.18% ------------------------------------------------------------------------------------------------------- RiverSource Floating Rate 928,000 5.64% 89,000 0.57% ------------------------------------------------------------------------------------------------------- RiverSource Global Bond 1,158,000 3.12% 52,000 1.15% ------------------------------------------------------------------------------------------------------- RiverSource High Yield Bond 3,680,000 3.11% 177,000 0.70% ------------------------------------------------------------------------------------------------------- RiverSource Income Builder Basic Income 1,815,000 6.12% 58,000 0.55% ------------------------------------------------------------------------------------------------------- RiverSource Income Builder Enhanced Income 1,252,000 6.25% 50,000 0.59% ------------------------------------------------------------------------------------------------------- RiverSource Income Builder Moderate Income 2,459,000 5.77% 79,000 0.54% ------------------------------------------------------------------------------------------------------- RiverSource Income Opportunities 1,498,000 3.80% 222,000 0.63% ------------------------------------------------------------------------------------------------------- RiverSource Inflation Protected Securities 1,193,000 3.94% 116,000 1.04% ------------------------------------------------------------------------------------------------------- RiverSource Intermediate Tax-Exempt 125,000 2.67% 38,000 0.92% ------------------------------------------------------------------------------------------------------- RiverSource Limited Duration Bond 359,000 4.09% 52,000 0.56% ------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Growth 1,741,000 2.92% 42,000 0.75% ------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Value 4,796,000 4.24% 263,000 0.68% ------------------------------------------------------------------------------------------------------- RiverSource Minnesota Tax-Exempt 239,000 1.85% 80,000 0.69% ------------------------------------------------------------------------------------------------------- RiverSource New York Tax-Exempt 64,000 1.86% 8,000 0.87% ------------------------------------------------------------------------------------------------------- RiverSource Partners Aggressive Growth 893,000 2.83% 22,000 1.23% ------------------------------------------------------------------------------------------------------- RiverSource Partners Fundamental Value 2,620,000 3.73% 106,000 1.23% ------------------------------------------------------------------------------------------------------- RiverSource Partners International Select 999,000 3.75% 37,000 1.20% Growth ------------------------------------------------------------------------------------------------------- RiverSource Partners International Select 3,997,000 4.19% 139,000 1.26% Value ------------------------------------------------------------------------------------------------------- RiverSource Partners International Small Cap 222,000 4.69% 5,000 1.13% ------------------------------------------------------------------------------------------------------- RiverSource Partners Select Value 1,345,000 3.77% 42,000 1.07% ------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Equity 482,000 3.89% 20,000 1.44% ------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Growth 458,000 3.30% 27,000 1.31% ------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Value 2,016,000 3.00% 78,000 1.20% ------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Aggressive 3,299,000 4.71% 138,000 0.81% -------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 157
PERCENTAGE OF PERCENTAGE OF CLASS B CLASS C FUND CLASS B NET ASSETS CLASS C NET ASSETS ------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Conservative 2,240,000 4.85% 114,000 0.77% ------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate 8,145,000 4.69% 359,000 0.74% ------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate 7,053,000 4.63% 290,000 0.82% Aggressive ------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate 3,236,000 4.79% 160,000 0.77% Conservative ------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Total Equity 2,781,000 4.93% 118,000 0.92% ------------------------------------------------------------------------------------------------------- RiverSource Precious Metals and Mining 408,000 2.76% 15,000 0.57% ------------------------------------------------------------------------------------------------------- RiverSource Real Estate 431,000 6.71% 12,000 1.42% ------------------------------------------------------------------------------------------------------- RiverSource Recovery and Infrastructure 167,000 1.84% 24,000 0.32% ------------------------------------------------------------------------------------------------------- Seligman Frontier 22,000 1.86% 1,326,000 14.03% ------------------------------------------------------------------------------------------------------- Seligman Global Technology 105,000 1.50% 4,673,000 7.33% ------------------------------------------------------------------------------------------------------- RiverSource Short Duration U.S. Government 3,971,000 3.71% 113,000 0.87% ------------------------------------------------------------------------------------------------------- RiverSource Small Company Index 1,625,000 2.84% N/A N/A ------------------------------------------------------------------------------------------------------- RiverSource Strategic Allocation 6,846,000 5.19% 367,000 0.79% ------------------------------------------------------------------------------------------------------- RiverSource Strategic Income Allocation 1,169,000 4.08% 59,000 0.53% ------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Bond 438,000 2.04% 53,000 0.69% ------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt High Income 1,065,000 2.00% 131,000 0.93% ------------------------------------------------------------------------------------------------------- RiverSource U.S. Government Mortgage 979,000 4.20% 35,000 0.83% ------------------------------------------------------------------------------------------------------- Seligman California Municipal High-Yield N/A N/A 217,000 3.83% ------------------------------------------------------------------------------------------------------- Seligman California Municipal Quality N/A N/A 251,000 7.63% ------------------------------------------------------------------------------------------------------- Seligman Minnesota Municipal N/A N/A 100,000 8.26% ------------------------------------------------------------------------------------------------------- Seligman National Municipal N/A N/A 453,000 1.30% ------------------------------------------------------------------------------------------------------- Seligman New York Municipal N/A N/A 286,000 3.68% ------------------------------------------------------------------------------------------------------- Seligman TargETFund 2015 N/A N/A 1,043,000 8.87% ------------------------------------------------------------------------------------------------------- Seligman TargETFund 2025 N/A N/A 1,096,000 8.80% ------------------------------------------------------------------------------------------------------- Seligman TargETFund 2035 N/A N/A 338,000 14.04% ------------------------------------------------------------------------------------------------------- Seligman TargETFund 2045 N/A N/A 189,000 24.38% ------------------------------------------------------------------------------------------------------- Seligman TargETFund Core N/A N/A 1,829,000 6.53% ------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets 1,091,000 2.81% 46,000 0.76% ------------------------------------------------------------------------------------------------------- Threadneedle European Equity 189,000 1.93% 15,000 1.41% ------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 1,466,000 3.61% 63,000 1.27% ------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income 101,000 4.31% 5,000 1.46% ------------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha 24,000 7.45% 1,000 0.88% ------------------------------------------------------------------------------------------------------- Threadneedle International Opportunity 816,000 3.21% 30,000 1.35% -------------------------------------------------------------------------------------------------------
PAYMENTS TO FINANCIAL INTERMEDIARIES The distributor and its affiliates make or support additional cash payments out of their own resources (including profits earned from providing services to the funds) to financial intermediaries, including payment to affiliated broker- dealers, in connection with agreements between the distributor and financial intermediaries pursuant to which these financial intermediaries sell fund shares and provide services to their clients who are shareholders of the funds. These payments do not change the price paid by investors and fund shareholders for the purchase or ownership of shares of the funds, and these payments are not reflected in the fees and expenses of the funds, as they are not paid by the funds. These payments are in addition to fees paid by the funds to the distributor under 12b-1 plans, which fees may be used to compensate financial intermediaries for the distribution of fund shares and the servicing of fund shareholders, or paid by the funds to the transfer agent under the transfer agent agreement or plan administration agreement, which fees may be used to support networking or servicing fees to compensate financial intermediaries for supporting shareholder account maintenance, sub-accounting, plan recordkeeping or other services provided directly by the financial intermediary to shareholders or plans and plan participants, including retirement plans, 529 plans, Health Savings Account plans, or other plans, where participants beneficially own shares of the funds. Statement of Additional Information - Dec. 30, 2009 Page 158 These payments are typically made pursuant to an agreement between the distributor and the financial intermediary, and are typically made in support of marketing and sales support efforts or program and shareholder servicing, as further described below. These payments are usually calculated based on a percentage of fund assets owned through the financial intermediary and/or as a percentage of fund sales attributable to the financial intermediary. Certain financial intermediaries require flat fees instead of or in addition to these asset-based fees as compensation for including or maintaining funds on their platforms, and, in certain situations, may require the reimbursement of ticket or operational charges -- fees that a financial intermediary charges its representatives for effecting transactions in the funds. The amount of payment varies by financial intermediary, and often is significant. In addition, the amount of payments may differ based upon the type of fund sold or maintained; for instance, the amount of payments for an equity fund may differ from payments for a money-market or fixed income fund. Asset-based payments generally will be made in a range of up to 0.25% of assets or 0.25% of sales or some combination thereof. Exceptions to these general ranges will be considered on a case-by-case basis. Flat fees or annual minimum fees required by a financial intermediary in addition to such asset-based fees, are considered on a case-by-case basis. MARKETING AND SALES SUPPORT Payments may be paid in support of retail, institutional, plan or other fee- based advisory program distribution efforts. These payments are typically made by the distributor in its efforts to advertise to and/or educate the financial intermediary's personnel, including its registered representatives, about the fund. As a result of these payments, the distributor may obtain a higher profile and greater visibility for the fund within the financial intermediary's organization, including placement of the fund on the financial intermediary's preferred or recommended list. The distributor may also obtain greater access to sales meetings, sales representatives, and management representatives of the financial intermediary, including potentially having increased opportunity for fund representatives to participate in and/or present at conferences or seminars, sales or training programs for invited registered representatives and their clients and other events sponsored by the financial intermediary. PROGRAM AND SHAREHOLDER SERVICING Payments may be made in support of recordkeeping, reporting, transaction processing, and other plan administration services provided by a financial intermediary to or through retirement plans, 529 plans, Health Savings Account plans, or other plans or fee-based advisory programs but may also be made in support of certain retail advisory programs, including wrap programs. A financial intermediary may perform program services itself or may arrange with a third party to perform program services. These payments may also include services rendered in connection with fund selection and monitoring, employee enrollment and education, plan balance rollover or separation, or other similar services. Below is a list of firms that the distributor and its affiliates make payments to for the above described services. - ACS HR Solutions - ADP Broker-Dealer, Inc. - American Century Investment Management, Inc. and American Century Investment Services, Inc. - Ameriprise Financial Services, Inc./American Enterprise Investment Services, Inc. - Associated Securities Corp. - Benefit Plans Administrative Services, Inc. and Community Bank System, Inc. - Boston Financial Data Services, Inc. - Charles Schwab Trust Co - Charles Schwab and Company, Inc. - Citigroup Global Markets Inc. - Columbia Management Advisors, LLC and Columbia Management Distributors, Inc. - Digital Retirement Solutions - Expertplan - Fidelity Brokerage Services/National Financial Services - Fidelity Investments Institutional Operations Company/Fidelity Investments Institutional Service Company - FTJ Fund Choice - GWFS Equities, Inc. (Fascore) - Hartford Life Insurance Company - Hartford Securities Distribution Company, Inc. - ICMA-RC Services LLC - ING Institutional Plan Services, LLC - ING Life Insurance and Annuity - ING National Trust - J.P. Morgan Chase Bank, N.A. - J.P. Morgan Retirement Plan Services, LLC - John Hancock Life Insurance Co - John Hancock Life Insurance Co New York - Lincoln Retirement Services Company LLC - LPL Financial Corporation - Massachusetts Mutual Life Insurance Company (Mass Mutual/MML) - Mercer HR Services, LLC - Merrill Lynch, Pierce, Fenner & Smith, Inc. - Mid Atlantic Capital Corp - Minnesota Life Insurance Company a/k/a Securian - Morgan Stanley & Co., Inc. - MSCS Financial Services, LLC (Matrix) - Mutual Service Corporation Statement of Additional Information - Dec. 30, 2009 Page 159 - Nationwide Financial/Nationwide Investment Services Corp - Newport Retirement Services, Inc. - NYLife Distributors LLC - Oppenheimer & Co. Inc. - Plan Administrators, Inc. - Principal Life Insurance Company - Prudential Insurance Company of America - Prudential Investment Management Services LLC/Prudential Investments LLC - Raymond James & Associates and Raymond James Financial Services - RBC Capital Markets Corporation - Reliance Trust Company - The Retirement Plan Company, LLC - Securities America, Inc. - Security Trust Company - Standard Retirement Services, Inc. - TD Ameritrade Trust Company - The Princeton Retirement Group and GPC Securities, Inc. - UBS Financial Services, Inc. - UVest Financial Services Group, Inc. - Vanguard Fiduciary Trust Co/The Vanguard Group Inc. - Vertical Management Systems, Inc. - Wachovia Retirement Services - Wachovia Bank NA - Waterstone Financial Group, Inc. - Wells Fargo Advisors, LLC - Wells Fargo Bank N.A. - Wilmington Trust Company - Wilmington Trust Retirement and Institutional Services Company OTHER PAYMENTS The distributor and its affiliates may separately pay financial intermediaries in order to participate in and/or present at conferences or seminars, sales or training programs for invited registered representatives and other financial intermediary employees, client and investor events and other financial intermediary-sponsored events, and for travel expenses, including lodging incurred by registered representatives and other employees in connection with prospecting, asset retention and due diligence trips. The amount of these payments varies depending upon the nature of the event. The distributor and its affiliates make payments for such events as they deem appropriate, subject to internal guidelines and applicable law. From time to time, to the extent permitted by SEC and NASD rules and by other applicable laws and regulations, the distributor and its affiliates may make other reimbursements or payment to financial intermediaries or their registered representatives, including non-cash compensation, in the form of gifts of nominal value, occasional meals, tickets, or other entertainment, support for due diligence trips, training and educational meetings or conference sponsorships, support for recognition programs, and other forms of non-cash compensation permissible under regulations to which these financial intermediaries and their representatives are subject. To the extent these are made as payments instead of reimbursement, they may provide profit to the financial intermediary to the extent the cost of such services was less than the actual expense of the service. The financial intermediary through which you are purchasing or own shares of funds has been authorized directly or indirectly by the distributor to sell funds and/or to provide services to you as a shareholder of funds. Investors and current shareholders may wish to take such payment arrangements into account when considering and evaluating any recommendations they receive relating to fund shares. If you have questions regarding the specific details regarding the payments your financial intermediary may receive from the distributor or its affiliates related to your purchase or ownership of funds, please contact your financial intermediary. CUSTODIAN SERVICES The funds' securities and cash are held pursuant to a custodian agreement with JPMorgan Chase Bank, N.A. (JPMorgan), 1 Chase Manhattan Plaza, 19th Floor, New York, NY 10005. The custodian is permitted to deposit some or all of their securities in central depository systems as allowed by federal law. For its services, each fund pays its custodian a maintenance charge and a charge per transaction in addition to reimbursing the custodian's out-of-pocket expenses. As part of this arrangement, securities purchased outside the United States are maintained in the custody of various foreign branches of JPMorgan or in other financial institutions as permitted by law and by the fund's custodian agreement. BOARD SERVICES CORPORATION The funds have an agreement with Board Services Corporation (Board Services) located at 901 Marquette Avenue South, Suite 2810, Minneapolis, MN 55402. This agreement sets forth the terms of Board Services' responsibility to serve as an agent of the funds for purposes of administering the payment of compensation to each Independent Director, to provide Statement of Additional Information - Dec. 30, 2009 Page 160 office space for use by the funds and their boards, and to provide any other services to the boards or the independent members, as may be reasonably requested. ORGANIZATIONAL INFORMATION Each fund is an open-end management investment company. The funds' headquarters are at 901 S. Marquette Ave., Suite 2810, Minneapolis, MN 55402-3268. SHARES The shares of a fund represent an interest in that fund's net assets only (and profits or losses), and, in the event of liquidation, each share of a fund would have the same rights to dividends and assets as every other share of that fund. VOTING RIGHTS As a shareholder in a fund, you have voting rights over the fund's management and fundamental policies. You are entitled to vote based on your total dollar interest in the fund. Each class, if applicable, has exclusive voting rights with respect to matters for which separate class voting is appropriate under applicable law. Shares of the RiverSource and Threadneedle funds have cumulative voting rights with respect to the election of Board members. This means that you have as many votes as the dollar amount you own, including the fractional amount, multiplied by the number of members to be elected, all of which may, in the shareholder's discretion, be voted for a single director. The Seligman funds do not provide for cumulative voting rights. DIVIDEND RIGHTS Dividends paid by a fund, if any, with respect to each applicable class of shares will be calculated in the same manner, at the same time, on the same day, and will be in the same amount, except for differences resulting from differences in fee structures. SHAREHOLDER LIABILITY For funds organized as Massachusetts business trusts, under Massachusetts law, shareholders of a Massachusetts business trust may, under certain circumstances, be held personally liable as partners for its obligation. However, the Declaration of Trust that establishes a trust, a copy of which, together with all amendments thereto (the "Declaration of Trust"), is on file with the office of the Secretary of the Commonwealth of Massachusetts for each applicable fund, contains an express disclaimer of shareholder liability for acts or obligations of the Trust, or of any fund in the Trust. The Declaration of Trust provides that, if any shareholder (or former shareholder) of a fund in the Trust is charged or held to be personally liable for any obligation or liability of the Trust, or of any fund in the Trust, solely by reason of being or having been a shareholder and not because of such shareholder's acts or omissions or for some other reason, the Trust (upon request of the shareholder) shall assume the defense against such charge and satisfy any judgment thereon, and the shareholder or former shareholder (or the heirs, executors, administrators or other legal representatives thereof, or in the case of a corporation or other entity, its corporate or other general successor) shall be entitled (but solely out of the assets of the fund of which such shareholder or former shareholder is or was the holder of shares) to be held harmless from and indemnified against all loss and expense arising from such liability. The Declaration of Trust also provides that the Trust may maintain appropriate insurance (for example, fidelity bond and errors and omissions insurance) for the protection of the Trust, its shareholders, Trustees, officers, employees and agents covering possible tort and other liabilities. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which both inadequate insurance existed and the Trust itself was unable to meet its obligations. The Declaration of Trust further provides that obligations of the Trust are not binding upon the Trustees individually, but only upon the assets and property of the Trust, and that the Trustees will not be liable for any action or failure to act, errors of judgment, or mistakes of fact or law, but nothing in the Declaration of Trust or other agreement with a Trustee protects a Trustee against any liability to which he or she would otherwise be subject by reason of his or her willful bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office. By becoming a shareholder of the fund, each shareholder shall be expressly held to have assented to and agreed to be bound by the provisions of the Declaration of Trust. Statement of Additional Information - Dec. 30, 2009 Page 161 TABLE 25. FUND HISTORY TABLE FOR RIVERSOURCE FAMILY OF FUNDS
FISCAL DATE OF DATE BEGAN FORM OF STATE OF YEAR FUND* ORGANIZATION OPERATIONS ORGANIZATION ORGANIZATION END DIVERSIFIED** ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE BOND SERIES, 4/29/81, 4/8/86(1) Corporation NV/MN 7/31 INC.(2) ---------------------------------------------------------------------------------------------------------------------- RiverSource Floating Rate 2/16/06 Yes Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Income 6/19/03 Yes Opportunities Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Inflation 3/4/04 No Protected Securities Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Limited Duration 6/19/03 Yes Bond Fund ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE CALIFORNIA TAX- 4/7/86 Business Trust MA 8/31(10) EXEMPT TRUST ---------------------------------------------------------------------------------------------------------------------- RiverSource California Tax- 8/18/86 No Exempt Fund ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE DIMENSIONS SERIES, 2/20/68, 4/8/86(1) Corporation NV/MN 7/31 INC. ---------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small 5/18/06 Yes and Mid Cap Equity Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small 2/16/06 Yes Cap Value Fund ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE DIVERSIFIED INCOME 6/27/74, 4/8/86(1) Corporation NV/MN 8/31 SERIES, INC.(2) ---------------------------------------------------------------------------------------------------------------------- RiverSource Diversified Bond 10/3/74 Yes Fund(3) ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE EQUITY SERIES, 3/18/57, 4/8/86(1) Corporation NV/MN 11/30 INC. ---------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Growth 6/4/57 Yes Fund(4) ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE GLOBAL SERIES, 10/28/88 Corporation MN 10/31 INC. ---------------------------------------------------------------------------------------------------------------------- RiverSource Absolute Return 6/15/06 Yes Currency and Income Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Emerging Markets 2/16/06 No Bond Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Global Bond Fund 3/20/89 No ---------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets 11/13/96 Yes Fund(4),(5),(11) ---------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 5/29/90 Yes Fund(5),(6),(11) ---------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 8/1/08 Yes Income Fund ---------------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended 8/1/08 Yes Alpha Fund ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE GOVERNMENT INCOME 3/12/85 Corporation MN 5/31 SERIES, INC. ---------------------------------------------------------------------------------------------------------------------- RiverSource Short Duration 8/19/85 Yes U.S. Government Fund(3) ---------------------------------------------------------------------------------------------------------------------- RiverSource U.S. Government 2/14/02 Yes Mortgage Fund ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE GOVERNMENT MONEY 6/29/76 1/31/77 Corporation MD 12/31 Yes MARKET FUND, INC.(17) ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE HIGH YIELD INCOME 8/17/83 Corporation MN 5/31 SERIES, INC. ---------------------------------------------------------------------------------------------------------------------- RiverSource High Yield Bond 12/8/83 Yes Fund(3) ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE INCOME SERIES, 2/10/45; 4/8/86(1) Corporation NV/MN 1/31(7) INC. ---------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder 2/16/06 Yes Basic Income Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder 2/16/06 Yes Enhanced Income Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder 2/16/06 Yes Moderate Income Fund ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE INTERNATIONAL 5/9/01 Corporation MN 10/31 MANAGERS SERIES, INC.(2) ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners 9/28/01 Yes International Select Growth Fund(11) ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners 9/28/01 Yes International Select Value Fund(11) ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners 10/3/02 Yes International Small Cap Fund(11) ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE INTERNATIONAL 7/18/84 Corporation MN 10/31 SERIES, INC.(2) ---------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined 5/18/06 Yes International Equity Fund ---------------------------------------------------------------------------------------------------------------------- Threadneedle Asia Pacific 7/15/09 Yes Fund ---------------------------------------------------------------------------------------------------------------------- Threadneedle European Equity 6/26/00 Yes Fund(5),(11) ---------------------------------------------------------------------------------------------------------------------- Threadneedle International 11/15/84 Yes Opportunity Fund(4),(5),(11) ----------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 162
FISCAL DATE OF DATE BEGAN FORM OF STATE OF YEAR FUND* ORGANIZATION OPERATIONS ORGANIZATION ORGANIZATION END DIVERSIFIED** ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE INVESTMENT SERIES, 1/18/40; 4/8/86(1) Corporation NV/MN 9/30 INC. ---------------------------------------------------------------------------------------------------------------------- RiverSource Balanced Fund(4) 4/16/40 Yes ---------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large 5/17/07 Yes Cap Growth Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large 8/1/08 Yes Cap Value Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Diversified 10/15/90 Yes Equity Income Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Value 2/14/02 Yes Fund ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP SERIES, 5/21/70, 4/8/86(1) Corporation NV/MN 7/31 INC.(2) ---------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined 4/24/03 Yes Equity Fund(4) ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE MANAGERS SERIES, 3/20/01 Corporation MN 5/31 INC.(2) ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners 4/24/03 Yes Aggressive Growth Fund(11) ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners 6/18/01 Yes Fundamental Value Fund(11) ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners Select 3/8/02 Yes Value Fund(11) ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small 3/8/02 Yes Cap Equity Fund(4),(11) ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small 6/18/01 Yes Cap Value Fund(11) ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE MARKET ADVANTAGE 8/25/89 Corporation MN 1/31 SERIES, INC. ---------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 3/4/04 Yes Conservative Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 3/4/04 Yes Moderate Conservative Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 3/4/04 Yes Moderate Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 3/4/04 Yes Moderate Aggressive Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 3/4/04 Yes Aggressive Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 3/4/04 Yes Total Equity Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource S&P 500 Index 10/25/99 Yes Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Small Company 8/19/96 Yes Index Fund ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE MONEY MARKET 8/22/75; 4/8/86(1) Corporation NV/MN 7/31 SERIES, INC. ---------------------------------------------------------------------------------------------------------------------- RiverSource Cash Management 10/6/75 Yes Fund ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE SECTOR SERIES, 3/25/88 Corporation MN 6/30 INC. ---------------------------------------------------------------------------------------------------------------------- RiverSource Dividend 8/1/88 Yes Opportunity Fund(8) ---------------------------------------------------------------------------------------------------------------------- RiverSource Real Estate Fund 3/4/04 No ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE SELECTED SERIES, 10/5/84 Corporation MN 3/31 INC. ---------------------------------------------------------------------------------------------------------------------- RiverSource Precious Metals 4/22/85 No and Mining Fund(9) ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE SERIES TRUST(14) 1/27/06 Business Trust MA 4/30 ---------------------------------------------------------------------------------------------------------------------- RiverSource 120/20 Contrarian 10/18/07 Yes Equity Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Recovery and 2/19/09 No Infrastructure Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 Yes 2010 Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 Yes 2015 Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 Yes 2020 Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 Yes 2025 Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 Yes 2030 Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 Yes 2035 Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 Yes 2040 Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 Yes 2045 Fund ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE SHORT TERM 4/23/68, 4/8/86(1) Corporation NV/MN 7/31 INVESTMENTS SERIES, INC.(15) ---------------------------------------------------------------------------------------------------------------------- RiverSource Short-Term Cash 9/26/06 Yes Fund ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE SPECIAL TAX-EXEMPT 4/7/86 Business Trust MA 8/31(10) SERIES TRUST ---------------------------------------------------------------------------------------------------------------------- RiverSource Minnesota Tax- 8/18/86 No Exempt Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource New York Tax- 8/18/86 No Exempt Fund ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC 10/9/84 Corporation MN 9/30 ALLOCATION SERIES, INC.(2) ----------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 163
FISCAL DATE OF DATE BEGAN FORM OF STATE OF YEAR FUND* ORGANIZATION OPERATIONS ORGANIZATION ORGANIZATION END DIVERSIFIED** ---------------------------------------------------------------------------------------------------------------------- RiverSource Strategic 1/23/85 Yes Allocation Fund(4) ---------------------------------------------------------------------------------------------------------------------- RiverSource Strategic Income 5/17/07 Yes Allocation Fund ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE STRATEGY SERIES, 1/24/84 Corporation MN 3/31 INC. ---------------------------------------------------------------------------------------------------------------------- RiverSource Equity Value Fund 5/14/84 Yes ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small 1/24/01 Yes Cap Growth Fund(11) ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE TAX-EXEMPT INCOME 12/21/78; 4/8/86(1) Corporation NV/MN 11/30 SERIES, INC.(2) ---------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt High 5/7/79 Yes Income Fund(4) ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE TAX-EXEMPT MONEY 2/29/80, 4/8/86(1) Corporation NV/MN 12/31 MARKET SERIES, INC.(2) ---------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Money 8/5/80 Yes Market Fund(4) ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE TAX-EXEMPT SERIES, 9/30/76, 4/8/86(1) Corporation NV/MN 11/30 INC. ---------------------------------------------------------------------------------------------------------------------- RiverSource Intermediate Tax- 11/13/96 Yes Exempt Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Bond 11/24/76 Yes Fund ---------------------------------------------------------------------------------------------------------------------- RIVERSOURCE VARIABLE SERIES 9/11/07 Business Trust MA 12/31 TRUST(12) ---------------------------------------------------------------------------------------------------------------------- Disciplined Asset Allocation 5/1/08 Yes Portfolios - Aggressive ---------------------------------------------------------------------------------------------------------------------- Disciplined Asset Allocation 5/1/08 Yes Portfolios - Conservative ---------------------------------------------------------------------------------------------------------------------- Disciplined Asset Allocation 5/1/08 Yes Portfolios - Moderate ---------------------------------------------------------------------------------------------------------------------- Disciplined Asset Allocation 5/1/08 Yes Portfolios - Moderately Aggressive ---------------------------------------------------------------------------------------------------------------------- Disciplined Asset Allocation 5/1/08 Yes Portfolios - Moderately Conservative ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners Variable 5/1/06 Yes Portfolio - Fundamental Value Fund(11) ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners Variable 2/4/04 Yes Portfolio - Select Value Fund(11) ---------------------------------------------------------------------------------------------------------------------- RiverSource Partners Variable 8/14/01 Yes Portfolio - Small Cap Value Fund(11) ---------------------------------------------------------------------------------------------------------------------- RiverSource Variable 4/30/86 Yes Portfolio - Balanced Fund(4) ---------------------------------------------------------------------------------------------------------------------- RiverSource Variable 10/31/81 Yes Portfolio - Cash Management Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Variable 9/10/04 Yes Portfolio - Core Equity Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Variable 10/13/81 Yes Portfolio - Diversified Bond Fund(3) ---------------------------------------------------------------------------------------------------------------------- RiverSource Variable 9/15/99 Yes Portfolio - Diversified Equity Income Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Variable 10/13/81 Yes Portfolio - Dynamic Equity Fund(5),(16) ---------------------------------------------------------------------------------------------------------------------- RiverSource Variable 5/1/96 No Portfolio - Global Bond Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Variable 9/13/04 No Portfolio - Global Inflation Protected Securities Fund(13) ---------------------------------------------------------------------------------------------------------------------- RiverSource Variable 5/1/96 Yes Portfolio - High Yield Bond Fund(3) ---------------------------------------------------------------------------------------------------------------------- RiverSource Variable 6/1/04 Yes Portfolio - Income Opportunities Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Variable 5/1/01 Yes Portfolio - Mid Cap Growth Fund(4) ---------------------------------------------------------------------------------------------------------------------- RiverSource Variable 5/2/05 Yes Portfolio - Mid Cap Value Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Variable 5/1/00 Yes Portfolio - S&P 500 Index Fund ---------------------------------------------------------------------------------------------------------------------- RiverSource Variable 9/15/99 Yes Portfolio - Short Duration U.S. Government Fund(3) ---------------------------------------------------------------------------------------------------------------------- Seligman Variable 9/15/99 Yes Portfolio - Growth Fund(16) ---------------------------------------------------------------------------------------------------------------------- Seligman Variable 02/4/04 Yes Portfolio - Larger-Cap Value Fund(16) ---------------------------------------------------------------------------------------------------------------------- Seligman Variable 9/15/99 Yes Portfolio - Smaller-Cap Value Fund(16) ---------------------------------------------------------------------------------------------------------------------- Threadneedle Variable 5/1/00 Yes Portfolio - Emerging Markets Fund(4),(5),(11) ---------------------------------------------------------------------------------------------------------------------- Threadneedle Variable 1/13/92 Yes Portfolio - International Opportunity Fund(4),(5),(11) ---------------------------------------------------------------------------------------------------------------------- SELIGMAN CAPITAL FUND, INC. 10/21/68 10/9/69 Corporation MD 12/31 Yes ---------------------------------------------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND 10/8/82 6/23/83 Corporation MD 12/31 Yes INFORMATION FUND, INC. ---------------------------------------------------------------------------------------------------------------------- SELIGMAN FRONTIER FUND, INC. 7/9/84 12/10/84 Corporation MD 10/31 Yes ---------------------------------------------------------------------------------------------------------------------- SELIGMAN GLOBAL FUND SERIES, 11/22/91 Corporation MD 10/31 INC. ----------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 164
FISCAL DATE OF DATE BEGAN FORM OF STATE OF YEAR FUND* ORGANIZATION OPERATIONS ORGANIZATION ORGANIZATION END DIVERSIFIED** ---------------------------------------------------------------------------------------------------------------------- Seligman Global Smaller 9/9/92 Yes Companies Fund ---------------------------------------------------------------------------------------------------------------------- Seligman Global Technology 5/23/94 Yes Fund ---------------------------------------------------------------------------------------------------------------------- SELIGMAN GROWTH FUND, INC. 1/26/37 4/1/37 Corporation MD 12/31 Yes ---------------------------------------------------------------------------------------------------------------------- SELIGMAN LASALLE REAL ESTATE 5/30/03 Corporation MD 12/31 FUND SERIES, INC. ---------------------------------------------------------------------------------------------------------------------- RiverSource LaSalle Global 12/29/06 No Real Estate Fund(17) ---------------------------------------------------------------------------------------------------------------------- RiverSource LaSalle Monthly 7/16/03 No Dividend Real Estate Fund(17) ---------------------------------------------------------------------------------------------------------------------- SELIGMAN MUNICIPAL FUND 8/8/83 Corporation MD 9/30 SERIES, INC. ---------------------------------------------------------------------------------------------------------------------- Seligman National Municipal 12/31/83 Yes Class ---------------------------------------------------------------------------------------------------------------------- Seligman Minnesota Municipal 12/30/83 No Class ---------------------------------------------------------------------------------------------------------------------- Seligman New York Municipal 1/3/84 No Class ---------------------------------------------------------------------------------------------------------------------- SELIGMAN MUNICIPAL SERIES 7/25/84 Business Trust MA 9/30 TRUST ---------------------------------------------------------------------------------------------------------------------- Seligman California Municipal 11/20/84 No High-Yield Series ---------------------------------------------------------------------------------------------------------------------- Seligman California Municipal 11/20/84 No Quality Series ---------------------------------------------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS, INC. 7/1/87 Corporation MD 12/31 ---------------------------------------------------------------------------------------------------------------------- Seligman Capital Portfolio 6/21/88 Yes ---------------------------------------------------------------------------------------------------------------------- Seligman Cash Management 6/21/88 Yes Portfolio ---------------------------------------------------------------------------------------------------------------------- Seligman Common Stock 6/21/88 Yes Portfolio ---------------------------------------------------------------------------------------------------------------------- Seligman Communications and 10/11/94 Yes Information Portfolio ---------------------------------------------------------------------------------------------------------------------- Seligman Global Technology 5/1/96 Yes Portfolio ---------------------------------------------------------------------------------------------------------------------- Seligman International Growth 5/3/93 Yes Portfolio ---------------------------------------------------------------------------------------------------------------------- Seligman Investment Grade 6/21/88 Yes Fixed Income Portfolio ---------------------------------------------------------------------------------------------------------------------- Seligman Large-Cap Value 5/1/98 Yes Portfolio ---------------------------------------------------------------------------------------------------------------------- Seligman Smaller-Cap Value 5/1/98 Yes Portfolio ---------------------------------------------------------------------------------------------------------------------- SELIGMAN TARGETHORIZON ETF 7/6/05 Corporation MD 9/30 PORTFOLIOS, INC. ---------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2015 10/3/05 Yes ---------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2025 10/3/05 Yes ---------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2035 10/2/06 Yes ---------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2045 10/2/06 Yes ---------------------------------------------------------------------------------------------------------------------- Seligman TargETFund Core 10/3/05 Yes ---------------------------------------------------------------------------------------------------------------------- SELIGMAN VALUE FUND SERIES, 1/27/97 Corporation MD 12/31 INC. ---------------------------------------------------------------------------------------------------------------------- Seligman Large-Cap Value Fund 4/25/97 Yes ---------------------------------------------------------------------------------------------------------------------- Seligman Smaller-Cap Value 4/25/97 Yes Fund ----------------------------------------------------------------------------------------------------------------------
* Effective Oct. 1, 2005 American Express Funds changed its name to RiverSource funds and the names Threadneedle and Partners were removed from fund names. ** If a Non-diversified fund is managed as if it were a diversified fund for a period of three years, its status under the 1940 Act will convert automatically from Non-diversified to diversified. A diversified fund may convert to Non-diversified status only with shareholder approval. (1) Date merged into a Minnesota corporation incorporated on April 8, 1986. (2) Effective April 21, 2006, AXP Discovery Series, Inc. changed its name to RiverSource Bond Series, Inc.; AXP Fixed Income Series, Inc. changed its name to RiverSource Diversified Income Series, Inc.; AXP Growth Series, Inc. changed its name to RiverSource Large Cap Series, Inc.; AXP High Yield Tax-Exempt Series, Inc. changed its name to RiverSource Tax-Exempt Income Series, Inc.; AXP Managed Series, Inc. changed its name to RiverSource Strategic Allocation Series, Inc.; AXP Partners International Series, Inc. changed its name to RiverSource International Managers Series, Inc.; AXP Partners Series, Inc. changed its name to RiverSource Managers Series, Inc.; AXP Tax-Free Money Series, Inc. changed its name to RiverSource Tax-Exempt Money Market Series, Inc.; and for all other corporations and business trusts, AXP was replaced with RiverSource in the registrant name. (3) Effective June 27, 2003, Bond Fund changed its name to Diversified Bond Fund, Federal Income Fund changed its name to Short Duration U.S. Government Fund and Extra Income Fund changed its name to High Yield Bond Fund, Variable Portfolio - Bond Fund changed its name to Variable Portfolio - Diversified Bond Fund, Variable Portfolio - Extra Income Fund changed its name to Variable Portfolio - High Yield Bond Fund and Variable Portfolio - Federal Income Fund changed its name to Variable Portfolio - Short Duration U.S. Government Fund. (4) Effective Oct. 1, 2005, Equity Select Fund changed its name to Mid Cap Growth Fund, High Yield Tax-Exempt Fund changed its name to Tax-Exempt High Income Fund, Managed Allocation Fund changed its name to Strategic Allocation Fund, Mutual changed its name to Balanced Fund, Partners Growth Fund changed its name to Fundamental Growth Fund, Partners International Core Fund changed its name to International Equity Fund, Partners Small Cap Core Fund changed its name to Small Cap Equity Fund, Quantitative Large Cap Statement of Additional Information - Dec. 30, 2009 Page 165 Equity Fund changed its name to Disciplined Equity Fund, Tax-Free Money Fund changed its name to Tax-Exempt Money Market Fund, and Threadneedle International Fund changed its name to International Opportunity Fund. Variable Portfolio - Equity Select Fund changed its name to Variable Portfolio - Mid Cap Growth Fund, Variable Portfolio - Threadneedle Emerging Markets Fund changed its name to Variable Portfolio - Emerging Markets Fund, Variable Portfolio - Threadneedle International Fund changed its name to Variable Portfolio - International Opportunity Fund, and Variable Portfolio - Managed Fund changed its name to Variable Portfolio - Balanced Fund. (5) Effective July 9, 2004, Emerging Markets Fund changed its name to Threadneedle Emerging Markets Fund, European Equity Fund changed its name to Threadneedle European Equity Fund, Global Equity Fund changed its name to Threadneedle Global Equity Fund, and International Fund changed its name to Threadneedle International Fund, Variable Portfolio - Capital Resource Fund changed its name to Variable Portfolio - Large Cap Equity Fund, Variable Portfolio - Emerging Markets Fund changed its name to Variable Portfolio - Threadneedle Emerging Markets Fund and Variable Portfolio - International Fund changed its name to Variable Portfolio - Threadneedle International Fund. (6) Effective Oct. 20, 2003, Global Growth Fund changed its name to Global Equity Fund. (7) Effective Jan. 31, 2008, the fiscal year end was changed from May 31 to Jan. 31. (8) Effective Feb. 18, 2004, Utilities Fund changed its name to Dividend Opportunity Fund. (9) Effective Nov. 1, 2006, Precious Metals Fund changed its name to Precious Metals and Mining Fund. (10) Effective April 13, 2006, the fiscal year end was changed from June 30 to Aug. 31. (11) Effective March 31, 2008, RiverSource Emerging Markets Fund changed its name to Threadneedle Emerging Markets Fund; RiverSource Global Equity Fund changed its name to Threadneedle Global Equity Fund; RiverSource European Equity Fund changed its name to Threadneedle European Equity Fund; RiverSource International Opportunity Fund changed its name to Threadneedle International Opportunity Fund; RiverSource International Aggressive Growth Fund changed its name to RiverSource Partners International Select Growth Fund; RiverSource International Select Value Fund changed its name to RiverSource Partners International Select Value Fund; RiverSource International Small Cap Fund changed its name to RiverSource Partners International Small Cap Fund; RiverSource Aggressive Growth Fund changed its name to RiverSource Partners Aggressive Growth Fund; RiverSource Fundamental Value Fund changed its name to RiverSource Partners Fundamental Value Fund; RiverSource Select Value Fund changed its name to RiverSource Partners Select Value Fund; RiverSource Small Cap Equity Fund changed its name to RiverSource Partners Small Cap Equity Fund; RiverSource Small Cap Value Fund changed its name to RiverSource Partners Small Cap Value Fund; RiverSource Small Cap Growth Fund changed its name to RiverSource Partners Small Cap Growth Fund; RiverSource Variable Portfolio - Fundamental Value Fund changed its name to RiverSource Partners Variable Portfolio - Fundamental Value Fund; RiverSource Variable Portfolio - Select Value Fund changed its name to RiverSource Partners Variable Portfolio - Select Value Fund; and RiverSource Variable Portfolio - Small Cap Value Fund changed its name to RiverSource Partners Variable Portfolio - Small Cap Value Fund. (12) Prior to January 2008, the assets of the funds in RiverSource Variable Series Trust were held by funds organized under six separate Minnesota Corporations. (13) Effective June 8, 2005, Variable Portfolio - Inflation Protected Securities Fund changed its name to Variable Portfolio - Global Inflation Protected Securities Fund. (14) Prior to September 11, 2007, RiverSource Series Trust was known as RiverSource Retirement Series Trust. (15) Prior to April 21, 2006, RiverSource Short Term Investments Series, Inc. was known as AXP Stock Series, Inc. (16) Effective May 1, 2009, RiverSource Variable Portfolio - Growth Fund changed its name to Seligman Variable Portfolio - Growth Fund, RiverSource Variable Portfolio - Large Cap Equity Fund changed its name to RiverSource Variable Portfolio - Dynamic Equity Fund, RiverSource Variable Portfolio - Large Cap Value Fund changed its name to Seligman Variable Portfolio - Larger-Cap Value Fund, and RiverSource Variable Portfolio - Small Cap Advantage Fund changed its name to Seligman Variable Portfolio - Smaller-Cap Value Fund. (17) Effective Sept. 25, 2009, Seligman Cash Management Fund, Inc. changed its name to RiverSource Government Money Market Fund, Inc.; Seligman LaSalle Global Real Estate Fund changed its name to RiverSource LaSalle Global Real Estate Fund; and Seligman LaSalle Monthly Dividend Real Estate Fund changed its name to RiverSource LaSalle Monthly Dividend Real Estate Fund. Statement of Additional Information - Dec. 30, 2009 Page 166 BOARD MEMBERS AND OFFICERS Shareholders elect a Board that oversees a fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of each fund's Board members. The RiverSource Family of Funds consists of 132 funds, which includes 100 RiverSource funds and 32 Seligman funds. Under current Board policy, members may serve until the next regular shareholders' meeting, until he or she reaches the mandatory retirement age established by the Board, or the fifteenth anniversary of the first Board meeting they attended as members of the Board. On Nov. 7, 2008, RiverSource Investments announced the closing of its acquisition of J. & W. Seligman & Co. Incorporated (the "Seligman Acquisition"). In connection with the Seligman Acquisition, Messrs. Leroy C. Richie and John F. Maher, who were members of the Seligman funds' Board prior to Nov. 7, 2008, began service on the Board after the Seligman Acquisition, which resulted in an overall increase from ten directors to twelve for all funds. TABLE 26. BOARD MEMBERS INDEPENDENT BOARD MEMBERS
POSITION HELD WITH FUNDS AND LENGTH OF PRINCIPAL OCCUPATION OTHER COMMITTEE NAME, ADDRESS, AGE SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS MEMBERSHIPS ---------------------------------------------------------------------------------------------------------------------- Kathleen Blatz Board member Chief Justice, Minnesota None Board Governance, 901 S. Marquette Ave. since 2006 Supreme Court, 1998-2006; Compliance, Minneapolis, MN 55402 Attorney Investment Review, Age 55 Audit ---------------------------------------------------------------------------------------------------------------------- Arne H. Carlson Board member Chair, RiverSource Family of None Board Governance, 901 S. Marquette Ave. since 1999 Funds, 1999-2006; former Compliance, Minneapolis, MN 55402 Governor of Minnesota Contracts, Age 75 Executive, Investment Review ---------------------------------------------------------------------------------------------------------------------- Pamela G. Carlton Board member President, Springboard-Partners None Distribution, 901 S. Marquette Ave. since 2007 in Cross Cultural Leadership Investment Review, Minneapolis, MN 55402 (consulting company) Audit Age 55 ---------------------------------------------------------------------------------------------------------------------- Patricia M. Flynn Board member Trustee Professor of Economics None Board Governance, 901 S. Marquette Ave. since 2004 and Management, Bentley Contracts, Minneapolis, MN 55402 University; former Dean, Investment Review Age 59 McCallum Graduate School of Business, Bentley University ---------------------------------------------------------------------------------------------------------------------- Anne P. Jones Board member Attorney and Consultant None Board Governance, 901 S. Marquette Ave. since 1985 Compliance, Minneapolis, MN 55402 Executive, Age 74 Investment Review, Audit ---------------------------------------------------------------------------------------------------------------------- Jeffrey Laikind, CFA Board member Former Managing Director, American Progressive Distribution, 901 S. Marquette Ave. since 2005 Shikiar Asset Management Insurance Executive, Minneapolis, MN 55402 Investment Review, Age 74 Audit ---------------------------------------------------------------------------------------------------------------------- Stephen R. Lewis, Jr. Chair of the President Emeritus and Valmont Industries, Board Governance, 901 S. Marquette Ave. Board since Professor of Economics, Inc. (manufactures Compliance, Minneapolis, MN 55402 2007, Board Carleton College irrigation systems) Contracts, Age 70 member since Executive, 2002 Investment Review ---------------------------------------------------------------------------------------------------------------------- John F. Maher Board member Retired President and Chief None Distribution, 901 S. Marquette Ave. since 2008 Executive Officer and former Investment Review, Minneapolis, MN 55402 Director, Great Western Audit Age 66 Financial Corporation (financial services), 1986-1997 ----------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 167
POSITION HELD WITH FUNDS AND LENGTH OF PRINCIPAL OCCUPATION OTHER COMMITTEE NAME, ADDRESS, AGE SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS MEMBERSHIPS ---------------------------------------------------------------------------------------------------------------------- Catherine James Paglia Board member Director, Enterprise Asset None Board Governance, 901 S. Marquette Ave. since 2004 Management, Inc. (private real Compliance, Minneapolis, MN 55402 estate and asset management Contracts, Age 57 company) Executive, Investment Review ---------------------------------------------------------------------------------------------------------------------- Leroy C. Richie Board member Counsel, Lewis & Munday, P.C. Digital Ally, Inc. Contracts, 901 S. Marquette Ave. since 2008 since 1987; Vice President and (digital imaging); Distribution, Minneapolis, MN 55402 General Counsel, Automotive Infinity, Inc. (oil Investment Review Age 68 Legal Affairs, Chrysler and gas exploration Corporation, 1990-1997 and production); OGE Energy Corp. (energy and energy services) ---------------------------------------------------------------------------------------------------------------------- Alison Taunton-Rigby Board member Chief Executive Officer and Idera Pharmaceuticals, Contracts, 901 S. Marquette Ave. since 2002 Director, RiboNovix, Inc. since Inc. (biotechnology); Distribution, Minneapolis, MN 55402 2003 (biotechnology); former Healthways, Inc. Executive, Age 65 President, Forester Biotech (health management Investment Review programs) ----------------------------------------------------------------------------------------------------------------------
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
POSITION HELD WITH FUNDS AND LENGTH OF PRINCIPAL OCCUPATION COMMITTEE NAME, ADDRESS, AGE SERVICE DURING PAST FIVE YEARS OTHER DIRECTORSHIPS MEMBERSHIPS -------------------------------------------------------------------------------------------------------------------------------- William F. Truscott Board member President - U.S. Asset Management and None None 53600 Ameriprise Financial since 2001, Vice Chief Investment Officer, Ameriprise Center President since Financial, Inc. since 2005; President, Minneapolis, MN 55474 2002 Chairman of the Board and Chief Age 49 Investment Officer, RiverSource Investments, LLC since 2001; Director, President and Chief Executive Officer, Ameriprise Certificate Company since 2006; Chairman of the Board and Chief Executive Officer, RiverSource Distributors, Inc. since 2006 and of RiverSource Fund Distributors, Inc. since 2008; and Senior Vice President - Chief Investment Officer, Ameriprise Financial, Inc., 2001-2005 --------------------------------------------------------------------------------------------------------------------------------
* Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of RiverSource Investments or Ameriprise Financial. The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the funds' other officers are: TABLE 27. FUND OFFICERS
POSITION HELD WITH FUNDS AND LENGTH OF PRINCIPAL OCCUPATION NAME, ADDRESS, AGE SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since Director and Senior Vice President - Asset 172 Ameriprise Financial Center 2006 Management, Products and Marketing, Minneapolis, MN 55474 RiverSource Investments, LLC and Director and Age 44 Vice President - Asset Management, Products and Marketing, RiverSource Distributors, Inc. since 2006 and of RiverSource Fund Distributors, Inc. since 2008; Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004-2006; President, Touchstone Investments, 2002-2004 --------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 168
POSITION HELD WITH FUNDS AND LENGTH OF PRINCIPAL OCCUPATION NAME, ADDRESS, AGE SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President Executive Vice President - Equity and Fixed 172 Ameriprise Financial Center since 2004 Income, Ameriprise Financial, Inc. and Minneapolis, MN 55474 RiverSource Investments, LLC since 2006; Vice Age 45 President - Investments, Ameriprise Certificate Company since 2003; Senior Vice President - Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 -------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President Chief Administrative Officer, RiverSource 5228 Ameriprise Financial Center since 2006 Investments, LLC since 2009; Vice Minneapolis, MN 55474 President - Asset Management and Trust Company Age 44 Services, RiverSource Investments, LLC, 2006- 2009; Vice President - Operations and Compliance, RiverSource Investments, LLC, 2004-2006; Director of Product Development - Mutual Funds, Ameriprise Financial, Inc., 2001-2004 -------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since Vice President - Investment Accounting, 105 Ameriprise Financial Center 2002 Ameriprise Financial, Inc. since 2002; Chief Minneapolis, MN 55474 Financial Officer, RiverSource Distributors, Age 54 Inc. since 2006 and of RiverSource Fund Distributors, Inc. since 2008 -------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel - Asset 5228 Ameriprise Financial Center General Counsel Management, Ameriprise Financial, Inc. since Minneapolis, MN 55474 and Secretary 2005; Chief Counsel, RiverSource Distributors, Age 50 since 2006 Inc. and Chief Legal Officer and Assistant Secretary, RiverSource Investments, LLC since 2006; Chief Counsel, RiverSource Fund Distributors, Inc. since 2008; Vice President, General Counsel and Secretary, Ameriprise Certificate Company since 2005; Vice President - Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 -------------------------------------------------------------------------------------------------- Eleanor T.M. Hoagland Chief Compliance Chief Compliance Officer, RiverSource 100 Park Avenue Officer since Investments, LLC, Ameriprise Certificate New York, NY 10010 2009 Company and RiverSource Service Corporation Age 58 since 2009; Chief Compliance Officer for each of the Seligman funds since 2004; Anti Money Laundering Prevention Officer and Identity Theft Prevention Officer for each of the Seligman funds, 2008-2009; Managing Director, J. & W. Seligman & Co. Incorporated and Vice- President for each of the Seligman funds, 2004-2008. -------------------------------------------------------------------------------------------------- Neysa M. Alecu Money Laundering Vice President - Compliance, Ameriprise 2934 Ameriprise Financial Center Prevention Financial, Inc. since 2008; Anti-Money Minneapolis, MN 55474 Officer since Laundering Officer, Ameriprise Financial, Inc. Age 45 2004 since 2004; Compliance Director, Ameriprise Financial, Inc., 2004-2008. --------------------------------------------------------------------------------------------------
RESPONSIBILITIES OF BOARD WITH RESPECT TO FUND MANAGEMENT The Board initially approves an Investment Management Services Agreement and other contracts with the investment manager and its affiliates, and other service providers. Once the contracts are approved, the Board monitors the level and quality of services including commitments of service providers to achieve expected levels of investment performance and shareholder services. In addition, the Board oversees that processes are in place to assure compliance with applicable rules, regulations and investment policies and addresses possible conflicts of interest. Annually, the Board evaluates the services received under the contracts by receiving reports covering investment performance, shareholder services, marketing, and the investment manager's profitability in order to determine whether to continue existing contracts or negotiate new contracts. COMMITTEES OF THE BOARD The Board has organized the following standing committees to facilitate its work: Board Governance Committee, Compliance Committee, Contracts Committee, Distribution Committee, Executive Committee, Investment Review Committee and Audit Committee. These Committees are comprised solely of Independent Directors (persons who are not "interested persons" of the fund as that term is defined in the 1940 Act. The table above describing each Director also includes their respective committee memberships. The duties of these committees are described below. Statement of Additional Information - Dec. 30, 2009 Page 169 Mr. Lewis, as Chair of the Board, acts as a point of contact between the Independent Directors and the investment manager between Board meetings in respect of general matters. BOARD GOVERNANCE COMMITTEE -- Recommends to the Board the size, structure and composition of the Board and its committees; the compensation to be paid to members of the Board; and a process for evaluating the Board's performance. The committee also reviews candidates for Board membership including candidates recommended by shareholders. The committee also makes recommendations to the Board regarding responsibilities and duties of the Board, oversees proxy voting and supports the work of the Board Chair in relation to furthering the interests of the Funds and their shareholders on external matters. The committee also reviews candidates for Board membership, including candidates recommended by shareholders. To be considered as a candidate for director, recommendations must include a curriculum vitae and be mailed to the Chair of the Board, RiverSource Family of Funds, 901 Marquette Avenue South, Suite 2810, Minneapolis, MN 55402-3268. To be timely for consideration by the committee, the submission, including all required information, must be submitted in writing not less than 120 days before the date of the proxy statement for the previous year's annual meeting of stockholders, if such a meeting is held. The committee will consider only one candidate submitted by such a shareholder or group for nomination for election at a meeting of shareholders. The committee will not consider self-nominated candidates or candidates nominated by members of a candidate's family, including such candidate's spouse, children, parents, uncles, aunts, grandparents, nieces and nephews. The committee will consider and evaluate candidates submitted by the nominating shareholder or group on the basis of the same criteria as those used to consider and evaluate candidates submitted from other sources. The committee may take into account a wide variety of factors in considering director candidates, including (but not limited to): (i) the candidate's knowledge in matters relating to the investment company industry; (ii) any experience possessed by the candidate as a director or senior officer of other public or private companies; (iii) the candidate's educational background; (iv) the candidate's reputation for high ethical standards and personal and professional integrity; (v) any specific financial, technical or other expertise possessed by the candidate, and the extent to which such expertise would complement the Board's existing mix of skills and qualifications; (vi) the candidate's perceived ability to contribute to the ongoing functions of the Board, including the candidate's ability and commitment to attend meetings regularly, work collaboratively with other members of the Board and carry out his or her duties in the best interests of the fund; (vii) the candidate's ability to qualify as an independent director; and (viii) such other criteria as the committee determines to be relevant in light of the existing composition of the Board and any anticipated vacancies or other factors. COMPLIANCE COMMITTEE -- Supports the funds' maintenance of a strong compliance program by providing a forum for Independent Directors to consider compliance matters impacting the Funds or their key service providers; developing and implementing, in coordination with the funds' Chief Compliance Officer (CCO), a process for the review and consideration of compliance reports that are provided to the Boards; and providing a designated forum for the funds' CCO to meet with Independent Directors on a regular basis to discuss compliance matters. CONTRACTS COMMITTEE -- Reviews and oversees the contractual relationships with service providers. Receives and analyzes reports covering the level and quality of services provided under contracts with the fund and advises the Board regarding actions taken on these contracts during the annual review process. DISTRIBUTION COMMITTEE -- Reviews and supports product development, marketing, sales activity and practices related to the funds and will report to the Board as appropriate. EXECUTIVE COMMITTEE -- Acts for the Board between meetings of the Board. INVESTMENT REVIEW COMMITTEE -- Reviews and oversees the management of the funds' assets. Considers investment management policies and strategies; investment performance; risk management techniques; and securities trading practices and reports areas of concern to the Board. AUDIT COMMITTEE -- Oversees the accounting and financial reporting processes of the funds and internal controls over financial reporting. Oversees the quality and integrity of the funds' financial statements and independent audits as well as the funds' compliance with legal and regulatory requirements relating to the funds' accounting and financial reporting, internal controls over financial reporting and independent audits. The committee also makes recommendations regarding the selection of the funds' independent auditor and reviews and evaluates the qualifications, independence and performance of the auditor. Statement of Additional Information - Dec. 30, 2009 Page 170 This table shows the number of times the committees met during each fund's most recent fiscal period. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 28. COMMITTEE MEETINGS
BOARD INVESTMENT GOVERNANCE COMPLIANCE CONTRACTS DISTRIBUTION EXECUTIVE REVIEW AUDIT FISCAL PERIOD COMMITTEE COMMITTEE COMMITTEE COMMITTEE COMMITTEE COMMITTEE COMMITTEE ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 5 5 6 3 3 5 5 January 31 ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 5 5 6 3 3 6 6 March 31 ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 5 5 6 4 4 6 6 April 30 ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 5 5 6 4 4 6 6 May 31 ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 5 5 6 4 4 6 6 June 30 ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 5 5 6 4 4 6 6 July 31 ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 5 5 6 4 4 6 6 August 31 ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 5 5 6 4 4 6 6 September 30 ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 5 5 6 4 3 6 6 October 31 ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 6 5 6 3 2 5 5 November 30 ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 5 5 6 3 3 5 5 December 31 -----------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 171 BOARD MEMBER HOLDINGS The following table shows the Board members' dollar range of equity securities beneficially owned on Dec. 31, 2008 of each individual fund owned by a Board member, and the aggregate dollar range of equity securities of all funds overseen by the Board members. TABLE 29. BOARD MEMBER HOLDINGS Based on net asset values as of Dec. 31, 2008:
AGGREGATE DOLLAR RANGE OF SHARES OWNED DOLLAR RANGE OF SHARES IN THE RIVERSOURCE BOARD MEMBER FUND OWNED IN THE FUND FAMILY OF FUNDS --------------------------------------------------------------------------------------------------------------------------------- Kathleen Blatz RiverSource Absolute Return Currency and $10,001-$50,000 Over $100,000 Income ------------------------------------------------------------------------ RiverSource Dividend Opportunity Over $100,000 ------------------------------------------------------------------------ RiverSource LaSalle International Real $0-$10,000 Estate ------------------------------------------------------------------------ RiverSource Partners Small Cap Growth $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Partners Small Cap Value $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Precious Metals and Mining $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Real Estate $10,001-$50,000 ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ RiverSource Strategic Allocation Over $100,000 ------------------------------------------------------------------------ Threadneedle Emerging Markets $10,001-$50,000 ------------------------------------------------------------------------ Threadneedle International Opportunity $50,001-$100,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 --------------------------------------------------------------------------------------------------------------------------------- Arne H. Carlson RiverSource Cash Management $10,001-$50,000 Over $100,000 ------------------------------------------------------------------------ RiverSource Disciplined Equity $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Disciplined International $10,001-$50,000 Equity ------------------------------------------------------------------------ RiverSource Dividend Opportunity $10,001-$50,000 ------------------------------------------------------------------------ RiverSource LaSalle International Real $0-$10,000 Estate ------------------------------------------------------------------------ RiverSource Partners International Select $0-$10,000 Value ------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate $50,001-$100,000 ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ RiverSource Strategic Allocation $10,001-$50,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 ---------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 172
AGGREGATE DOLLAR RANGE OF SHARES OWNED DOLLAR RANGE OF SHARES IN THE RIVERSOURCE BOARD MEMBER FUND OWNED IN THE FUND FAMILY OF FUNDS --------------------------------------------------------------------------------------------------------------------------------- Pamela G. Carlton RiverSource Absolute Return Currency and $0-$10,000 $50,001-$100,000 Income ------------------------------------------------------------------------ RiverSource Diversified Equity Income $10,001-$50,000 ------------------------------------------------------------------------ RiverSource LaSalle International Real $0-$10,000 Estate ------------------------------------------------------------------------ RiverSource Short Duration U.S. Government $50,001-$100,000 ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ Threadneedle Emerging Markets $0-$10,000 ------------------------------------------------------------------------ Threadneedle Global Equity $0-$10,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 --------------------------------------------------------------------------------------------------------------------------------- Patricia M. Flynn RiverSource Growth* $10,001-$50,000 Over $100,000** ------------------------------------------------------------------------ RiverSource LaSalle International Real $0-$10,000 Estate ------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate $50,001-$100,000 Aggressive* ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ Strategic Allocation* Over $100,000 ------------------------------------------------------------------------ Tri-Continental Corporation $10,001-$50,000 --------------------------------------------------------------------------------------------------------------------------------- Anne P. Jones RiverSource Disciplined Equity $10,001-$50,000 Over $100,000 ------------------------------------------------------------------------ RiverSource Diversified Bond $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Diversified Equity Income $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Global Bond Over $100,000 ------------------------------------------------------------------------ RiverSource Growth Fund $0-$10,000 ------------------------------------------------------------------------ RiverSource High Yield Bond Over $100,000 ------------------------------------------------------------------------ RiverSource LaSalle International Real $0-$10,000 Estate ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ RiverSource Short Duration U.S. Government Over $100,000 ------------------------------------------------------------------------ RiverSource Small Company Index Over $100,000 ------------------------------------------------------------------------ RiverSource Strategic Allocation $50,001-$100,000 ------------------------------------------------------------------------ Threadneedle Global Equity $10,001-$50,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 --------------------------------------------------------------------------------------------------------------------------------- Jeffrey Laikind RiverSource Cash Management Over $100,000 Over $100,000 ------------------------------------------------------------------------ RiverSource LaSalle International Real $0-$10,000 Estate ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 ---------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 173
AGGREGATE DOLLAR RANGE OF SHARES OWNED DOLLAR RANGE OF SHARES IN THE RIVERSOURCE BOARD MEMBER FUND OWNED IN THE FUND FAMILY OF FUNDS --------------------------------------------------------------------------------------------------------------------------------- Stephen R. Lewis, Jr. RiverSource 120/20 Contrarian Equity $10,001-$50,000 Over $100,000** ------------------------------------------------------------------------ RiverSource Absolute Return Currency and $10,001-$50,000 Income ------------------------------------------------------------------------ RiverSource Disciplined Large Cap Growth $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Diversified Equity Income Over $100,000 ------------------------------------------------------------------------ RiverSource Dividend Opportunity $10,001-$50,000 ------------------------------------------------------------------------ RiverSource LaSalle International Real $0-$10,000 Estate ------------------------------------------------------------------------ RiverSource Mid Cap Growth $0-$10,000 ------------------------------------------------------------------------ RiverSource Portfolio Builder Total Equity $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Strategic Allocation $10,001-$50,000 ------------------------------------------------------------------------ Seligman Communications and Information $10,001-$50,000 ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ Threadneedle Emerging Markets $10,001-$50,000 ------------------------------------------------------------------------ Threadneedle Global Equity Income $10,001-$50,000 ------------------------------------------------------------------------ Threadneedle International Opportunity $50,001-$100,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 ---------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 174
AGGREGATE DOLLAR RANGE OF SHARES OWNED DOLLAR RANGE OF SHARES IN THE RIVERSOURCE BOARD MEMBER FUND OWNED IN THE FUND FAMILY OF FUNDS --------------------------------------------------------------------------------------------------------------------------------- John F. Maher RiverSource Equity Value $0-$10,000 Over $100,000** ------------------------------------------------------------------------ RiverSource LaSalle Global Real Estate $10,001-$50,000 ------------------------------------------------------------------------ RiverSource LaSalle International Real $0-$10,000 Estate ------------------------------------------------------------------------ RiverSource LaSalle Monthly Dividend Real $0-$10,000 Estate ------------------------------------------------------------------------ Seligman Capital $10,001-$50,000 ------------------------------------------------------------------------ Seligman Common Stock $0-$10,000 ------------------------------------------------------------------------ Seligman Communications and Information $10,001-$50,000 ------------------------------------------------------------------------ Seligman Core Fixed Income $0-$10,000 ------------------------------------------------------------------------ Seligman Emerging Markets $0-$10,000 ------------------------------------------------------------------------ Seligman Frontier $10,001-$50,000 ------------------------------------------------------------------------ Seligman Global Growth $0-$10,000 ------------------------------------------------------------------------ Seligman Global Smaller Companies $0-$10,000 ------------------------------------------------------------------------ Seligman Global Technology $0-$10,000 ------------------------------------------------------------------------ Seligman Growth $0-$10,000 ------------------------------------------------------------------------ Seligman High-Yield $0-$10,000 ------------------------------------------------------------------------ Seligman Income and Growth $0-$10,000 ------------------------------------------------------------------------ Seligman International Growth $10,001-$50,000 ------------------------------------------------------------------------ Seligman Large-Cap Value $10,001-$50,000 ------------------------------------------------------------------------ Seligman National Municipal $0-$10,000 ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ Seligman Smaller-Cap Value $0-$10,000 ------------------------------------------------------------------------ Seligman U.S. Government Securities $0-$10,000 ------------------------------------------------------------------------ Tri-Continental Corporation $50,001-$100,000 --------------------------------------------------------------------------------------------------------------------------------- Catherine James Paglia RiverSource Cash Management Over $100,000 Over $100,000** ------------------------------------------------------------------------ RiverSource LaSalle International Real $0-$10,000 Estate ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ Threadneedle Global Equity Over $100,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 ---------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 175
AGGREGATE DOLLAR RANGE OF SHARES OWNED DOLLAR RANGE OF SHARES IN THE RIVERSOURCE BOARD MEMBER FUND OWNED IN THE FUND FAMILY OF FUNDS --------------------------------------------------------------------------------------------------------------------------------- Leroy C. Richie RiverSource LaSalle International Real $0-$10,000 Over $100,000 Estate ------------------------------------------------------------------------ Seligman Capital $0-$10,000 ------------------------------------------------------------------------ Seligman Common Stock $0-$10,000 ------------------------------------------------------------------------ Seligman Communications and Information $0-$10,000 ------------------------------------------------------------------------ Seligman Core Fixed Income $0-$10,000 ------------------------------------------------------------------------ Seligman Emerging Markets $0-$10,000 ------------------------------------------------------------------------ Seligman Frontier $0-$10,000 ------------------------------------------------------------------------ Seligman Global Growth $0-$10,000 ------------------------------------------------------------------------ Seligman Global Smaller Companies $0-$10,000 ------------------------------------------------------------------------ Seligman Global Technology $0-$10,000 ------------------------------------------------------------------------ Seligman Growth $0-$10,000 ------------------------------------------------------------------------ Seligman High-Yield $0-$10,000 ------------------------------------------------------------------------ Seligman Income and Growth $0-$10,000 ------------------------------------------------------------------------ Seligman International Growth $0-$10,000 ------------------------------------------------------------------------ Seligman Large-Cap Value $0-$10,000 ------------------------------------------------------------------------ Seligman Michigan Municipal $0-$10,000 ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ Seligman Smaller-Cap Value $0-$10,000 ------------------------------------------------------------------------ Seligman U.S. Government Securities $0-$10,000 ------------------------------------------------------------------------ Tri-Continental Corporation Over $100,000 --------------------------------------------------------------------------------------------------------------------------------- Alison Taunton Rigby RiverSource 120/20 Contrarian Equity $10,001-$50,000 Over $100,000 ------------------------------------------------------------------------ RiverSource Absolute Return Currency and $50,001-$100,000 Income ------------------------------------------------------------------------ RiverSource Cash Management Over $100,000 ------------------------------------------------------------------------ RiverSource Diversified Equity Income $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Growth Fund $50,001-$100,000 ------------------------------------------------------------------------ RiverSource Income Builder Enhanced Income Over 100,000 ------------------------------------------------------------------------ RiverSource LaSalle International Real $1-$10,000 Estate ------------------------------------------------------------------------ RiverSource Mid Cap Value $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Partners International Select $50,001-$100,000 Growth ------------------------------------------------------------------------ RiverSource Partners Small Cap Value $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Strategic Allocation $50,001-$100,000 ------------------------------------------------------------------------ Seligman Select Municipal $1-$10,000 ------------------------------------------------------------------------ Threadneedle Emerging Markets $50,001-$100,000 ------------------------------------------------------------------------ Tri Continental Corporation $1-$10,000 ---------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 176
AGGREGATE DOLLAR RANGE OF SHARES OWNED DOLLAR RANGE OF SHARES IN THE RIVERSOURCE BOARD MEMBER FUND OWNED IN THE FUND FAMILY OF FUNDS --------------------------------------------------------------------------------------------------------------------------------- William F. Truscott RiverSource 120/20 Contrarian Equity $10,001-$50,000 Over $100,000 ------------------------------------------------------------------------ RiverSource Absolute Return Currency and $50,001-$100,000 Income ------------------------------------------------------------------------ RiverSource Cash Management $0-$10,000 ------------------------------------------------------------------------ RiverSource Disciplined Equity Over $100,000 ------------------------------------------------------------------------ RiverSource Disciplined International Over $100,000 Equity ------------------------------------------------------------------------ RiverSource Disciplined Small and Mid Cap $10,001-$50,000 Equity ------------------------------------------------------------------------ RiverSource Diversified Bond Over $100,000 ------------------------------------------------------------------------ RiverSource Dividend Opportunity Over $100,000 ------------------------------------------------------------------------ RiverSource Emerging Markets Bond $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Floating Rate Over $100,000 ------------------------------------------------------------------------ RiverSource Global Bond Over $100,000 ------------------------------------------------------------------------ RiverSource Global Technology $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Growth $50,001- $100,000 ------------------------------------------------------------------------ RiverSource High Yield Bond $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Income Opportunities $50,001- $100,000 ------------------------------------------------------------------------ RiverSource Inflation Protected Securities $10,001-$50,000 ------------------------------------------------------------------------ RiverSource LaSalle International Real $0-$10,000 Estate ------------------------------------------------------------------------ RiverSource Mid Cap Value $50,001-$100,000 ------------------------------------------------------------------------ RiverSource Partners International Select Over $100,000 Growth ------------------------------------------------------------------------ RiverSource Partners International Select $10,001-$50,000 Value ------------------------------------------------------------------------ RiverSource Partners Small Cap Equity Over $100,000 ------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate $50,001-$100,000 Aggressive ------------------------------------------------------------------------ RiverSource Retirement Plus 2035 $10,001-$50,000 ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ RiverSource Strategic Allocation Over $100,000 ------------------------------------------------------------------------ Strategic Income Allocation Over $100,000 ------------------------------------------------------------------------ Threadneedle Emerging Markets $0-$10,000 ------------------------------------------------------------------------ Threadneedle Global Equity Over $100,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 ---------------------------------------------------------------------------------------------------------------------------------
* Deferred compensation invested in share equivalents: A. Flynn RiverSource Growth................... $10,001-$50,000 RiverSource Portfolio Builder $50,001-$100,000 Moderate Aggressive.................. RiverSource Strategic Allocation..... Over $100,000
Statement of Additional Information - Dec. 30, 2009 Page 177 B. Lewis RiverSource Absolute Return Currency $10,001-$50,000 and Income........................... RiverSource Disciplined Large Cap $10,001-$50,000 Growth............................... RiverSource Diversified Equity $50,001-$100,000 Income............................... RiverSource Portfolio Builder Total $10,001-$50,000 Equity............................... Threadneedle Emerging Markets........ $10,001-$50,000 Threadneedle International $50,001-$100,000 Opportunity.......................... C. Maher RiverSource Equity Value............. $0-$10,000 Seligman Capital..................... $0-$10,000 Seligman Communications & $10,001-$50,000 Information.......................... Seligman Frontier.................... $10,001-$50,000 Seligman International Growth........ $0-$10,000 Seligman Large-Cap Value............. $10,001-$50,000 RiverSource LaSalle Global Real $0-$10,000 Estate............................... Tri-Continental Corporation.......... $10,001-$50,000 D. Paglia Threadneedle Global Equity........... Over $100,000
** Total includes deferred compensation invested in share equivalents. This table shows the Board members' dollar range of equity securities beneficially owned on Sept. 30, 2009 of each individual fund owned by a Board member, and the aggregate dollar range of equity securities of all RiverSource funds overseen by the Board member. TABLE 29A. BOARD MEMBER HOLDINGS -- AS OF QUARTER END Based on net asset values as of Sept. 30, 2009:
AGGREGATE DOLLAR RANGE OF SHARES OWNED DOLLAR RANGE OF SHARES IN THE RIVERSOURCE BOARD MEMBER FUND OWNED IN THE FUND FAMILY OF FUNDS --------------------------------------------------------------------------------------------------------------------------------- Kathleen Blatz RiverSource Absolute Return Currency and $50,001-$100,000 Over $100,000 Income ------------------------------------------------------------------------ RiverSource Dividend Opportunity Over $100,000 ------------------------------------------------------------------------ RiverSource Income Opportunities Fund $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Partners Small Cap Growth $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Partners Small Cap Value $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Precious Metals and Mining $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Real Estate $50,001-$100,000 ------------------------------------------------------------------------ RiverSource Strategic Allocation Over $100,000 ------------------------------------------------------------------------ Seligman Communication and Information Fund $10,001-$50,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Seligman National Municipal Fund $0-$10,000 ------------------------------------------------------------------------ Threadneedle Emerging Markets $10,001-$50,000 ------------------------------------------------------------------------ Threadneedle International Opportunity $50,001-$100,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 ---------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 178
AGGREGATE DOLLAR RANGE OF SHARES OWNED DOLLAR RANGE OF SHARES IN THE RIVERSOURCE BOARD MEMBER FUND OWNED IN THE FUND FAMILY OF FUNDS --------------------------------------------------------------------------------------------------------------------------------- Arne Carlson RiverSource Dividend Opportunity $10,001-$50,000 Over $100,000 ------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Recovery and Infrastructure $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Short Duration U.S. Government $10,001-$50,000 ------------------------------------------------------------------------ Seligman Communications and Information $10,001-$50,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Seligman National Municipal Class $0-$10,000 ------------------------------------------------------------------------ Threadneedle Emerging Markets $10,001-$50,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 --------------------------------------------------------------------------------------------------------------------------------- Pamela Carlton RiverSource Absolute Return Currency and $0-$10,000 Over $100,000** Income ------------------------------------------------------------------------ RiverSource Diversified Equity Income $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Floating Rate* $0-$10,000 ------------------------------------------------------------------------ RiverSource Short Duration U.S. Government $50,001-$100,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Seligman National Municipal Class $0-$10,000 ------------------------------------------------------------------------ Threadneedle Emerging Markets $0-$10,000 ------------------------------------------------------------------------ Threadneedle Global Equity $0-$10,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 --------------------------------------------------------------------------------------------------------------------------------- Patricia M. Flynn RiverSource Portfolio Builder Moderate $50,001-$100,000 Over $100,000** Aggressive* ------------------------------------------------------------------------ RiverSource Strategic Allocation* Over $100,000 ------------------------------------------------------------------------ Seligman Growth* $50,001-$100,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Threadneedle International Opportunity* $0-$10,000 ------------------------------------------------------------------------ Tri-Continental Corporation $10,001-$50,000 ---------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 179
AGGREGATE DOLLAR RANGE OF SHARES OWNED DOLLAR RANGE OF SHARES IN THE RIVERSOURCE BOARD MEMBER FUND OWNED IN THE FUND FAMILY OF FUNDS --------------------------------------------------------------------------------------------------------------------------------- Anne P. Jones RiverSource Disciplined Equity $10,001-$50,000 Over $100,000 ------------------------------------------------------------------------ RiverSource Diversified Bond $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Diversified Equity Income $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Global Bond Over $100,000 ------------------------------------------------------------------------ RiverSource High Yield Bond Over $100,000 ------------------------------------------------------------------------ RiverSource Short Duration U.S. Government Over $100,000 ------------------------------------------------------------------------ RiverSource Small Company Index Over $100,000 ------------------------------------------------------------------------ RiverSource Strategic Allocation $50,001-$100,000 ------------------------------------------------------------------------ Seligman Growth $10,001-$50,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Seligman National Municipal Class $0-$10,000 ------------------------------------------------------------------------ Threadneedle Global Equity $10,001-$50,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 --------------------------------------------------------------------------------------------------------------------------------- Jeffrey Laikind RiverSource 120/20 Contrarian Equity $50,001-$100,000 Over $100,000 ------------------------------------------------------------------------ RiverSource Cash Management Over $100,000 ------------------------------------------------------------------------ RiverSource Dividend Opportunity $50,001-$100,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Seligman National Municipal Class $0-$10,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 --------------------------------------------------------------------------------------------------------------------------------- Stephen R. Lewis, Jr. RiverSource 120/20 Contrarian Equity $10,001-$50,000 Over $100,000** ------------------------------------------------------------------------ RiverSource Absolute Return Currency and $10,001-$50,000 Income* ------------------------------------------------------------------------ RiverSource Disciplined Large Cap Growth* $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Diversified Bond* $50,001-$100,000 ------------------------------------------------------------------------ RiverSource Diversified Equity Income* Over $100,000 ------------------------------------------------------------------------ RiverSource Dividend Opportunity $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Mid Cap Growth $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Strategic Allocation $10,001-$50,000 ------------------------------------------------------------------------ Seligman Communications and Information* $50,001-$100,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Seligman National Municipal Class $0-$10,000 ------------------------------------------------------------------------ Threadneedle Emerging Markets* $50,001-$100,000 ------------------------------------------------------------------------ Threadneedle Global Equity Income $10,001-$50,000 ------------------------------------------------------------------------ Threadneedle International Opportunity* $50,001-$100,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 ---------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 180
AGGREGATE DOLLAR RANGE OF SHARES OWNED DOLLAR RANGE OF SHARES IN THE RIVERSOURCE BOARD MEMBER FUND OWNED IN THE FUND FAMILY OF FUNDS --------------------------------------------------------------------------------------------------------------------------------- John F. Maher RiverSource Diversified Equity Income $10,001-$50,000 Over $100,000** ------------------------------------------------------------------------ RiverSource Equity Value $10,001-$50,000 ------------------------------------------------------------------------ Seligman Communications and Information* Over $100,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Tri-Continental Corporation $10,001-$50,000 --------------------------------------------------------------------------------------------------------------------------------- Catherine James Paglia RiverSource Floating Rate* Over $100,000 Over $100,000** ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 --------------------------------------------------------------------------------------------------------------------------------- Leroy C. Richie RiverSource Balanced $0-$10,000 Over $100,000 ------------------------------------------------------------------------ RiverSource Disciplined Equity $0-$10,000 ------------------------------------------------------------------------ RiverSource Diversified Bond $0-$10,000 ------------------------------------------------------------------------ RiverSource High Yield Bond $0-$10,000 ------------------------------------------------------------------------ RiverSource Partners International Select $0-$10,000 Growth ------------------------------------------------------------------------ RiverSource Short Duration U.S. Government $0-$10,000 ------------------------------------------------------------------------ Seligman Capital $0-$10,000 ------------------------------------------------------------------------ Seligman Communications and Information $0-$10,000 ------------------------------------------------------------------------ Seligman Frontier $0-$10,000 ------------------------------------------------------------------------ Seligman Global Smaller Companies $0-$10,000 ------------------------------------------------------------------------ Seligman Global Technology $0-$10,000 ------------------------------------------------------------------------ Seligman Growth $0-$10,000 ------------------------------------------------------------------------ Seligman Large-Cap Value $0-$10,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Seligman National Municipal Class $0-$10,000 ------------------------------------------------------------------------ Seligman Smaller-Cap Value $0-$10,000 ------------------------------------------------------------------------ Threadneedle Emerging Markets $0-$10,000 ------------------------------------------------------------------------ Threadneedle Global Equity $0-$10,000 ------------------------------------------------------------------------ Tri-Continental Corporation Over $100,000 ---------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 181
AGGREGATE DOLLAR RANGE OF SHARES OWNED DOLLAR RANGE OF SHARES IN THE RIVERSOURCE BOARD MEMBER FUND OWNED IN THE FUND FAMILY OF FUNDS --------------------------------------------------------------------------------------------------------------------------------- Alison Taunton Rigby RiverSource 120/20 Contrarian Equity $10,001-$50,000 Over $100,000 ------------------------------------------------------------------------ RiverSource Absolute Return Currency and $50,001-$100,000 Income ------------------------------------------------------------------------ RiverSource Diversified Equity Income $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Income Builder Enhanced Income Over 100,000 ------------------------------------------------------------------------ RiverSource Mid Cap Value $50,001-$100,000 ------------------------------------------------------------------------ RiverSource Partners International Select $50,001-$100,000 Growth ------------------------------------------------------------------------ RiverSource Partners Small Cap Value $50,001-$100,000 ------------------------------------------------------------------------ RiverSource Strategic Allocation $50,001-$100,000 ------------------------------------------------------------------------ Seligman Communications and Information $10,001-$50,000 ------------------------------------------------------------------------ Seligman Growth $50,001-$100,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $1-$10,000 ------------------------------------------------------------------------ Seligman National Municipal Class $0-$10,000 ------------------------------------------------------------------------ Threadneedle Emerging Markets $50,001-$100,000 ------------------------------------------------------------------------ Tri-Continental Corporation $1-$10,000 ---------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 182
AGGREGATE DOLLAR RANGE OF SHARES OWNED DOLLAR RANGE OF SHARES IN THE RIVERSOURCE BOARD MEMBER FUND OWNED IN THE FUND FAMILY OF FUNDS --------------------------------------------------------------------------------------------------------------------------------- Ted Truscott RiverSource 120/20 Contrarian Equity $10,001-$50,000 Over $100,000 ------------------------------------------------------------------------ RiverSource Absolute Return Currency and $50,001-$100,000 Income ------------------------------------------------------------------------ RiverSource Cash Management $0-$10,000 ------------------------------------------------------------------------ RiverSource Disciplined Equity Over $100,000 ------------------------------------------------------------------------ RiverSource Disciplined International Over $100,000 Equity ------------------------------------------------------------------------ RiverSource Disciplined Large Cap Growth $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Disciplined Large Cap Value $50,001-$100,000 ------------------------------------------------------------------------ RiverSource Disciplined Small and Mid Cap $10,001-$50,000 Equity ------------------------------------------------------------------------ RiverSource Diversified Bond Over $100,000 ------------------------------------------------------------------------ RiverSource Diversified Equity Income $0-$10,000 ------------------------------------------------------------------------ RiverSource Dividend Opportunity $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Emerging Markets Bond $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Global Bond Over $100,000 ------------------------------------------------------------------------ RiverSource High Yield Bond Over $100,000 ------------------------------------------------------------------------ RiverSource Income Opportunities $50,001- $100,000 ------------------------------------------------------------------------ RiverSource Inflation Protected Securities $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Limited Duration Bond Over $100,000 ------------------------------------------------------------------------ RiverSource Mid Cap Value $50,001-$100,000 ------------------------------------------------------------------------ RiverSource Partners International Select Over $100,000 Growth ------------------------------------------------------------------------ RiverSource Partners International Select $10,001-$50,000 Value ------------------------------------------------------------------------ RiverSource Partners Small Cap Equity Over $100,000 ------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate $50,001-$100,000 Aggressive ------------------------------------------------------------------------ RiverSource Retirement Plus 2035 $10,001-$50,000 ------------------------------------------------------------------------ RiverSource Strategic Allocation Over $100,000 ------------------------------------------------------------------------ RiverSource Strategic Income Allocation Over $100,000 ------------------------------------------------------------------------ Seligman Communications and Information $10,001-$50,000 ------------------------------------------------------------------------ Seligman Global Technology $10,001-$50,000 ------------------------------------------------------------------------ Seligman Growth Over $100,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Seligman National Municipal Class $0-$10,000 ------------------------------------------------------------------------ Threadneedle Emerging Markets $10,001-$50,000 ------------------------------------------------------------------------ Threadneedle Global Equity Over $100,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 ---------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 183 * Deferred compensation invested in share equivalents: A. Carlton RiverSource Floating Rate............ $0-$10,000 B. Flynn Seligman Growth...................... $50,001-$100,000 RiverSource Portfolio Builder $50,001-$100,000 Moderate Aggressive.................. RiverSource Strategic Allocation..... $50,001-$100,000 Threadneedle International $0-$10,000 Opportunity.......................... C. Lewis RiverSource Absolute Return Currency $10,001-$50,000 and Income........................... RiverSource Disciplined Large Cap $10,001-$50,000 Growth............................... RiverSource Diversified Bond......... $50,001-$100,000 RiverSource Diversified Equity $50,001-$100,000 Income............................... Seligman Communications and $10,001-$50,000 Information.......................... Threadneedle Emerging Markets........ $10,001-$50,000 Threadneedle International $50,001-$100,000 Opportunity.......................... D. Maher Seligman Communications and Over $100,000 Information.......................... E. Paglia RiverSource Floating Rate............ Over $100,000
** Total includes deferred compensation invested in share equivalents. As of 30 days prior to the date of this SAI, the Board members and officers as a group owned 1.44% of RiverSource Retirement Plus 2035 Fund Class A. The Board members and officers as a group owned less than 1% of the outstanding shares of any class of any other fund in the RiverSource Family of Funds. Statement of Additional Information - Dec. 30, 2009 Page 184 COMPENSATION OF BOARD MEMBERS TOTAL COMPENSATION. The following table shows the total compensation paid to independent Board members from all the funds in the last fiscal period. TABLE 30. BOARD MEMBER COMPENSATION - ALL FUNDS
TOTAL CASH COMPENSATION FROM BOARD MEMBER(a) FUNDS PAID TO BOARD MEMBER ---------------------------------------------------------------------------------------------- Kathleen Blatz $167,500 ---------------------------------------------------------------------------------------------- Arne H. Carlson 172,500 ---------------------------------------------------------------------------------------------- Pamela G. Carlton 155,000(b) ---------------------------------------------------------------------------------------------- Patricia M. Flynn 160,000(b) ---------------------------------------------------------------------------------------------- Anne P. Jones 167,500 ---------------------------------------------------------------------------------------------- Jeffrey Laikind 155,000 ---------------------------------------------------------------------------------------------- Stephen R. Lewis, Jr. 400,000(b) ---------------------------------------------------------------------------------------------- John F. Maher 132,083(b) ---------------------------------------------------------------------------------------------- Catherine James Paglia 172,500(b) ---------------------------------------------------------------------------------------------- Leroy Richie 160,000 ---------------------------------------------------------------------------------------------- Alison Taunton-Rigby 160,000 ----------------------------------------------------------------------------------------------
(a) Board member compensation is a combination of a base fee and meeting fees, with the exception of the Chair of the Board, who receives a base annual compensation. Payment of compensation is administered by a company providing limited administrative services to the funds and to the Board. (b) Ms. Carlton, Ms. Flynn, Mr. Lewis, Mr. Maher and Ms. Paglia elected to defer a portion of the total cash compensation payable during the period in the amount of $49,667, $52,625, $60,000, $120,458 and $30,000, respectively. Amount deferred by fund is set forth in Table 31. Additional information regarding the deferred compensation plan is described below. The Independent Directors determine the amount of compensation that they receive, including the amount paid to the Chair of the Board. In determining compensation for the Independent Directors, the Independent Directors take into account a variety of factors including, among other things, their collective significant work experience (e.g., in business and finance, government or academia). The Independent Directors also recognize that these individuals' advice and counsel are in demand by other organizations, that these individuals may reject other opportunities because the time demands of their duties as Independent Directors, and that they undertake significant legal responsibilities. The Independent Directors also consider the compensation paid to independent board members of other mutual fund complexes of comparable size. In determining the compensation paid to the Chair, the Independent Directors take into account, among other things, the Chair's significant additional responsibilities (e.g., setting the agenda for Board meetings, communicating or meeting regularly with the Funds' Chief Compliance Officer, Counsel to the Independent Directors, and the Funds' service providers) which result in a significantly greater time commitment required of the Board Chair. The Chair's compensation, therefore, has generally been set at a level between 2.5 and 3 times the level of compensation paid to other independent Board members. Effective Jan. 1, 2008, independent Board members are paid an annual retainer of $95,000. Committee and sub- committee Chairs each receive an additional annual retainer of $5,000. In addition, independent Board members are paid the following fees for attending Board and committee meetings: $5,000 per day of in- person Board meetings and $2,500 per day of in-person committee or sub-committee meetings (if such meetings are not held on the same day as a Board meeting). Independent Board members are not paid for special meetings conducted by telephone. In 2008, the Board's Chair will receive total annual cash compensation of $400,000. The Independent Directors may elect to defer payment of up to 100% of the compensation they receive in accordance with a Deferred Compensation Plan (the Deferred Plan). Under the Deferred Plan, a Board member may elect to have his or her deferred compensation treated as if they had been invested in shares of one or more funds in the RiverSource Family of Funds and the amount paid to the Board member under the Deferred Plan will be determined based on the performance of such investments. Distributions may be taken in a lump sum or over a period of years. The Deferred Plan will remain unfunded for federal income tax purposes under the Internal Revenue Code of 1986, as amended. It is anticipated that deferral of Board member compensation in accordance with the Deferred Plan will have, at most, a negligible impact on fund assets and liabilities. Statement of Additional Information - Dec. 30, 2009 Page 185 COMPENSATION FROM EACH FUND. The following table shows the compensation paid to independent Board members from each fund during its last fiscal period. TABLE 31. BOARD MEMBER(a) Compensation -- Individual Funds
AGGREGATE COMPENSATION FROM FUND -------------------------------------------------------- FUND BLATZ CARLSON CARLTON FLYNN JONES LAIKIND --------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 --------------------------------------------------------------------------------- RiverSource Income * * * * * * Builder Basic Income --------------------------------------------------------------------------------- RiverSource Income * * * * * * Builder Enhanced Income --------------------------------------------------------------------------------- RiverSource Income * * * * * * Builder Moderate Income --------------------------------------------------------------------------------- RiverSource Portfolio * * * * * * Builder Aggressive --------------------------------------------------------------------------------- RiverSource Portfolio * * * * * * Builder Conservative --------------------------------------------------------------------------------- RiverSource Portfolio * * * * * * Builder Moderate --------------------------------------------------------------------------------- RiverSource Portfolio * * * * * * Builder Moderate Aggressive --------------------------------------------------------------------------------- RiverSource Portfolio * * * * * * Builder Moderate Conservative --------------------------------------------------------------------------------- RiverSource Portfolio * * * * * * Builder Total Equity --------------------------------------------------------------------------------- RiverSource S&P 500 $ 391 $ 398 $ 366 $ 375 $ 391 $ 364 Index -- total Amount deferred 0 0 14 180 0 0 --------------------------------------------------------------------------------- RiverSource Small 1,310 1,331 1,225 1,254 1,310 1,220 Company Index -- total Amount deferred 0 0 44 604 0 0 --------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 --------------------------------------------------------------------------------- RiverSource Equity 1,924 1,967 1,800 1,855 1,924 1,787 Value -- total Amount deferred 0 0 129 860 0 0 --------------------------------------------------------------------------------- RiverSource Partners 329 336 308 317 329 306 Small Cap Growth -- total Amount deferred 0 0 21 147 0 0 --------------------------------------------------------------------------------- RiverSource Precious 270 279 254 265 270 251 Metals and Mining -- total Amount deferred 0 0 25 119 0 0 --------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 --------------------------------------------------------------------------------- RiverSource 120/20 100 102 93 96 99 92 Contrarian Equity -- total Amount deferred 0 0 10 42 0 0 --------------------------------------------------------------------------------- RiverSource Recovery 29 32 27 30 29 27 and Infrastructure -- total Amount deferred 0 0 11 9 0 0 --------------------------------------------------------------------------------- RiverSource Retirement * * * * * * Plus 2010 --------------------------------------------------------------------------------- RiverSource Retirement * * * * * * Plus 2015 --------------------------------------------------------------------------------- RiverSource Retirement * * * * * * Plus 2020 --------------------------------------------------------------------------------- RiverSource Retirement * * * * * * Plus 2025 --------------------------------------------------------------------------------- RiverSource Retirement * * * * * * Plus 2030 --------------------------------------------------------------------------------- RiverSource Retirement * * * * * * Plus 2035 --------------------------------------------------------------------------------- RiverSource Retirement * * * * * * Plus 2040 --------------------------------------------------------------------------------- RiverSource Retirement * * * * * * Plus 2045 --------------------------------------------------------------------------------- AGGREGATE COMPENSATION FROM FUND --------------------------------------------------- TAUNTON- FUND LEWIS MAHER PAGLIA RICHIE RIGBY ---------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 ---------------------------------------------------------------------------- RiverSource Income * * * * * Builder Basic Income ---------------------------------------------------------------------------- RiverSource Income * * * * * Builder Enhanced Income ---------------------------------------------------------------------------- RiverSource Income * * * * * Builder Moderate Income ---------------------------------------------------------------------------- RiverSource Portfolio * * * * * Builder Aggressive ---------------------------------------------------------------------------- RiverSource Portfolio * * * * * Builder Conservative ---------------------------------------------------------------------------- RiverSource Portfolio * * * * * Builder Moderate ---------------------------------------------------------------------------- RiverSource Portfolio * * * * * Builder Moderate Aggressive ---------------------------------------------------------------------------- RiverSource Portfolio * * * * * Builder Moderate Conservative ---------------------------------------------------------------------------- RiverSource Portfolio * * * * * Builder Total Equity ---------------------------------------------------------------------------- RiverSource S&P 500 $ 903 $ 58 $ 380 $ 90 $ 371 Index -- total Amount deferred 138 36 337 0 0 ---------------------------------------------------------------------------- RiverSource Small 3,024 181 1,273 287 1,241 Company Index -- total Amount deferred 462 111 1,140 0 0 ---------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 ---------------------------------------------------------------------------- RiverSource Equity 4,319 428 1,876 621 1,829 Value -- total Amount deferred 669 322 1,493 0 0 ---------------------------------------------------------------------------- RiverSource Partners 739 70 319 102 312 Small Cap Growth -- total Amount deferred 114 53 257 0 0 ---------------------------------------------------------------------------- RiverSource Precious 626 81 265 108 260 Metals and Mining -- total Amount deferred 98 63 191 0 0 ---------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 ---------------------------------------------------------------------------- RiverSource 120/20 225 31 97 43 95 Contrarian Equity -- total Amount deferred 34 26 65 0 0 ---------------------------------------------------------------------------- RiverSource Recovery 67 27 32 30 30 and Infrastructure -- total Amount deferred 10 27 0 0 0 ---------------------------------------------------------------------------- RiverSource Retirement * * * * * Plus 2010 ---------------------------------------------------------------------------- RiverSource Retirement * * * * * Plus 2015 ---------------------------------------------------------------------------- RiverSource Retirement * * * * * Plus 2020 ---------------------------------------------------------------------------- RiverSource Retirement * * * * * Plus 2025 ---------------------------------------------------------------------------- RiverSource Retirement * * * * * Plus 2030 ---------------------------------------------------------------------------- RiverSource Retirement * * * * * Plus 2035 ---------------------------------------------------------------------------- RiverSource Retirement * * * * * Plus 2040 ---------------------------------------------------------------------------- RiverSource Retirement * * * * * Plus 2045 ----------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 186
AGGREGATE COMPENSATION FROM FUND -------------------------------------------------------------------------------------------------- TAUNTON- FUND BLATZ CARLSON CARLTON FLYNN JONES LAIKIND LEWIS MAHER PAGLIA RICHIE RIGBY ---------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource High Yield $ 2,858 $ 2,939 $ 2,658 $ 2,760 $ 2,858 $ 2,658 $ 6,516 $1,161 $ 2,817 $1,508 $ 2,738 Bond -- total Amount deferred 0 0 399 1,153 0 0 990 999 1,609 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners 1,019 1,042 947 978 1,019 947 2,273 338 984 461 971 Aggressive Growth -- total Amount deferred 0 0 113 424 0 0 346 282 638 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners 1,679 1,718 1,561 1,613 1,679 1,561 3,739 574 1,635 783 1,600 Fundamental Value -- total Amount deferred 0 0 189 697 0 0 569 473 1,054 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Select 757 775 704 728 756 704 1,702 283 739 370 722 Value -- total Amount deferred 0 0 94 311 0 0 259 234 454 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap 394 403 367 379 394 367 880 136 383 183 375 Equity -- total Amount deferred 0 0 45 164 0 0 134 112 246 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap 913 935 849 878 913 849 2,042 328 891 436 871 Value -- total Amount deferred 0 0 109 377 0 0 311 272 559 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Short Duration U.S. Government -- total 2,066 2,127 1,922 2,003 2,066 1,922 4,646 846 2,069 1,151 1,983 Amount deferred 0 0 282 838 0 0 709 706 1,201 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource U.S. Government Mortgage -- total 959 987 892 929 959 892 2,156 388 956 523 920 Amount deferred 0 0 129 390 0 0 329 324 559 0 0 ---------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Dividend 3,044 3,122 2,834 2,939 3,044 2,834 6,877 1,442 3,178 1,835 2,913 Opportunity -- total Amount deferred 0 0 497 1,193 0 0 1,047 1,241 1,681 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Real 407 417 380 392 407 380 921 183 423 227 389 Estate -- total Amount deferred 0 0 63 161 0 0 140 158 234 0 0 ---------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Cash 12,299 12,654 11,462 11,931 12,300 11,462 26,969 6,321 12,902 8,362 11,817 Management -- total Amount deferred 0 0 2,287 4,694 0 0 4,115 5,468 6,102 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined 5,709 5,852 5,322 5,512 5,709 5,322 12,387 2,781 5,955 3,649 5,464 Equity -- total Amount deferred 0 0 1,019 2,194 0 0 1,887 2,415 2,947 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small 383 396 356 373 383 356 865 262 403 319 370 and Mid Cap Equity -- total Amount deferred 0 0 98 133 0 0 132 233 118 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small 118 122 109 114 118 110 265 76 123 91 113 Cap Value -- total Amount deferred 0 0 29 41 0 0 40 68 39 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Floating 1,003 1,030 934 969 1,003 935 2,213 525 1,045 671 962 Rate -- total Amount deferred 0 0 201 375 0 0 336 475 458 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Income 905 934 843 876 905 843 2,049 600 944 726 871 Opportunities -- total Amount deferred 0 0 243 309 0 0 310 562 250 0 0 ----------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 187
AGGREGATE COMPENSATION FROM FUND -------------------------------------------------------------------------------------------------- TAUNTON- FUND BLATZ CARLSON CARLTON FLYNN JONES LAIKIND LEWIS MAHER PAGLIA RICHIE RIGBY ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Inflation $ 2,105 $ 2,161 $ 1,961 $ 2,035 $ 2,105 $ 1,961 $ 4,589 $1,054 $ 2,201 $1,390 $ 2,017 Protected Securities -- total Amount deferred 0 0 385 805 0 0 700 916 1,062 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Limited Duration 506 519 471 489 506 471 1,112 277 528 359 485 Bond -- total Amount deferred 0 0 106 187 0 0 169 248 218 0 0 ---------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource California Tax- 444 457 412 429 444 412 1,003 263 465 335 426 Exempt -- total Amount deferred 0 0 98 161 0 0 153 234 179 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Diversified 9,578 9,858 8,910 9,270 9,578 8,910 21,784 5,758 10,028 7,302 9,191 Bond -- total Amount deferred 0 0 2,180 3,449 0 0 3,315 5,171 3,715 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Minnesota Tax- 830 855 772 804 830 772 1,887 502 870 636 797 Exempt -- total Amount deferred 0 0 189 299 0 0 287 450 321 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource New York Tax- 147 151 137 142 147 137 334 88 154 112 141 Exempt -- total Amount deferred 0 0 33 53 0 0 51 79 57 0 0 ---------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Balanced -- total 1,543 1,585 1,436 1,491 1,543 1,436 3,469 1,042 1,614 1,297 1,477 Amount deferred 0 0 392 534 0 0 529 940 477 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large 952 977 883 913 952 882 2,194 730 988 850 908 Cap Growth -- total Amount deferred 0 0 291 304 0 0 332 691 163 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large 330 339 305 315 330 305 770 277 341 308 314 Cap Value -- total Amount deferred 0 0 116 97 0 0 116 273 18 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Diversified Equity 11,145 11,437 10,376 10,768 11,145 10,376 24,962 7,460 11,656 9,314 10,667 Income -- total Amount deferred 0 0 2,800 3,875 0 0 3,806 6,697 3,540 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap 4,836 4,960 4,498 4,664 4,836 4,498 10,838 3,287 5,051 4,070 4,622 Value -- total Amount deferred 0 0 1,242 1,665 0 0 1,651 2,970 1,461 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Strategic 3,493 3,591 3,253 3,382 3,493 3,253 7,846 2,335 3,661 2,928 3,350 Allocation -- total Amount deferred 0 0 873 1,219 0 0 1,197 2,091 1,124 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Strategic Income 544 559 505 523 544 506 1,238 397 567 475 520 Allocation -- total Amount deferred 0 0 155 179 0 0 188 369 123 0 0 ---------------------------------------------------------------------------------------------------------------------------------- Seligman California Municipal 86 89 79 75 86 80 194 74 73 82 82 High-Yield -- total Amount deferred 0 0 25 20 0 0 25 68 0 0 0 ---------------------------------------------------------------------------------------------------------------------------------- Seligman California Municipal 101 105 93 88 101 94 228 87 86 97 97 Quality -- total Amount deferred 0 0 30 23 0 0 29 20 0 0 0 ---------------------------------------------------------------------------------------------------------------------------------- Seligman Minnesota 170 176 156 148 170 157 382 146 145 162 162 Municipal -- total Amount deferred 0 0 50 39 0 0 0 134 0 0 0 ---------------------------------------------------------------------------------------------------------------------------------- Seligman National 625 643 582 587 624 582 1,494 528 615 600 600 Municipal -- total Amount deferred 0 0 221 171 0 0 216 517 0 0 0 ----------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 188
AGGREGATE COMPENSATION FROM FUND -------------------------------------------------------------------------------------------------- TAUNTON- FUND BLATZ CARLSON CARLTON FLYNN JONES LAIKIND LEWIS MAHER PAGLIA RICHIE RIGBY ---------------------------------------------------------------------------------------------------------------------------------- Seligman New York Municipal -- total $ 187 $ 194 $ 173 $ 165 $ 187 $ 173 $ 425 $ 162 $ 164 $ 179 $ 179 Amount deferred 0 0 57 44 0 0 55 150 0 0 0 ---------------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 61 62 56 52 61 56 134 52 50 58 58 2015 -- total Amount deferred 0 0 17 14 0 0 16 47 0 0 0 ---------------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 69 71 64 60 69 64 154 59 58 66 66 2025 -- total Amount deferred 0 0 20 16 0 0 19 54 0 0 0 ---------------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 18 19 17 16 19 17 42 16 16 18 18 2035 -- total Amount deferred 0 0 0 0 0 0 5 15 0 0 0 ---------------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 10 10 9 8 10 9 23 9 9 10 10 2045 -- total Amount deferred 0 0 3 2 0 0 0 8 0 0 0 ---------------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 136 140 125 116 136 125 301 116 112 129 129 Core -- total Amount deferred 0 0 39 30 0 0 37 105 0 0 0 ---------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Absolute Return Currency and Income -- total 1,356 1,410 1,252 1,322 1,356 1,252 3,201 1,017 1,446 1,306 1,306 Amount deferred 0 0 366 459 0 0 490 891 364 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined International Equity -- total 908 931 840 873 908 840 2,166 699 951 863 863 Amount deferred 0 0 260 297 0 0 331 625 206 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Emerging Markets Bond -- total 465 477 430 447 465 430 1,118 363 486 443 442 Amount deferred 0 0 137 150 0 0 170 330 94 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Global 1,293 1,329 1,196 1,246 1,293 1,196 3,068 970 1,361 1,232 1,232 Bond -- total Amount deferred 0 0 361 428 0 0 469 866 318 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners International Select Growth -- total 903 929 836 870 903 836 2,159 703 947 861 861 Amount deferred 0 0 266 293 0 0 329 637 186 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners International Select Value -- total 2,143 2,201 1,983 2,062 2,143 1,983 5,121 1,674 2,245 2,042 2,042 Amount deferred 0 0 633 693 0 0 780 1,518 432 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners International Small Cap -- total 124 128 115 120 124 115 299 98 130 119 119 Amount deferred 0 0 37 40 0 0 46 89 24 0 0 ---------------------------------------------------------------------------------------------------------------------------------- Seligman Frontier -- total 89 92 83 77 89 82 205 76 75 85 85 Amount deferred 0 0 26 20 0 0 26 70 0 0 0 ---------------------------------------------------------------------------------------------------------------------------------- Seligman Global Technology -- total 673 691 622 595 672 622 1,581 583 594 640 640 Amount deferred 0 0 209 162 0 0 210 545 0 0 0 ---------------------------------------------------------------------------------------------------------------------------------- Threadneedle Asia Pacific(a) -- total 22 22 20 21 22 20 60 20 22 20 20 Amount deferred 0 0 8 6 0 0 9 20 0 0 0 ---------------------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets -- total 878 898 814 841 878 814 2,144 703 912 835 835 Amount deferred 0 0 275 276 0 0 325 656 137 0 0 ---------------------------------------------------------------------------------------------------------------------------------- Threadneedle European Equity -- total 161 166 149 155 161 149 385 125 169 153 153 Amount deferred 0 0 47 52 0 0 59 113 34 0 0 ----------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 189
AGGREGATE COMPENSATION FROM FUND -------------------------------------------------------------------------------------------------- TAUNTON- FUND BLATZ CARLSON CARLTON FLYNN JONES LAIKIND LEWIS MAHER PAGLIA RICHIE RIGBY ---------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global $1,092 $1,124 $1,010 $1,052 $1,092 $1,010 $ 2,613 $855 $1,145 $1,043 $1,043 Equity -- total Amount deferred 0 0 325 352 0 0 398 780 213 0 0 ---------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income -- total 54 55 50 52 54 50 131 44 56 52 52 Amount deferred 0 0 17 17 0 0 20 41 7 0 0 ---------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha -- total 16 16 14 15 16 15 38 12 16 15 15 Amount deferred 0 0 5 5 0 0 6 11 3 0 0 ---------------------------------------------------------------------------------------------------------------------------------- Threadneedle International Opportunity -- total 902 927 835 869 902 835 2,163 709 945 861 861 Amount deferred 0 0 268 291 0 0 329 642 178 0 0 ---------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Intermediate Tax-Exempt -- total 176 179 164 166 176 164 393 N/A 169 $ 21 166 Amount deferred 0 0 0 81 0 0 63 N/A 167 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Growth -- total 1,781 1,807 1,657 1,683 1,781 1,657 4,103 N/A 1,702 128 1,683 Amount deferred 0 0 0 822 0 0 672 N/A 1,687 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Bond -- total 1,561 1,582 1,451 1,472 1,561 1,451 3,497 N/A 1,497 172 1,472 Amount deferred 0 0 0 718 0 0 564 N/A 1,477 0 0 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt High Income -- total 5,855 5,939 5,442 5,525 5,855 5,442 13,163 N/A 5,610 623 5,525 Amount deferred 0 0 0 2,696 0 0 2,121 N/A 5,539 0 0 ---------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 ---------------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Money Market -- total 340 344 317 325 340 317 757 25 333 69 321 Amount deferred 0 0 0 161 0 0 116 0 326 0 0 ----------------------------------------------------------------------------------------------------------------------------------
* Funds-of-Funds do not pay additional compensation to the Board members for attending meetings. Compensation is paid directly from the underlying funds in which each Fund-of-Funds invests. (a) For the period from July 15, 2009 (when shares became publicly available) to Oct. 31, 2009. The funds in the RiverSource Family of Funds, RiverSource Investments, unaffiliated and affiliated subadvisers, and RiverSource Fund Distributors have each adopted a Code of Ethics (collectively, the "Codes") and related procedures reasonably designed to prevent violations of Rule 204A-1 under the Investment Advisers Act of 1940 and Rule 17j-1 under the 1940 Act. The Codes contain provisions reasonably necessary to prevent a fund's access persons from engaging in any conduct prohibited by paragraph (b) of Rule 17j-1, which indicates that it is unlawful for any affiliated person of or principal underwriter for a fund, or any affiliated persons of an investment adviser of or principal underwriter for a fund, in connection with the purchase or sale, directly or indirectly, by the person of a security held or to be acquired by a fund (i) to employ any device, scheme or artifice to defraud a fund; (ii) to make any untrue statement of a material fact to a fund or omit to state a material fact necessary in order to make the statements made to a fund, in light of the circumstance under which they are made, not misleading; (iii) to engage in any act, practice or course of business that operates or would operate as a fraud or deceit on a fund; or (iv) to engage in any manipulative practice with respect to a fund. The Codes prohibit personnel from engaging in personal investment activities that compete with or attempt to take advantage of planned portfolio transactions for the funds. Copies of the Codes are on public file with the SEC and can be reviewed and copied at the SEC's Public Reference Room in Washington, DC. The information on the operation of the SEC's Public Reference Room may be obtained by calling the SEC at 1-202-942-8090. Copies of the Codes are also available on the EDGAR Database on the SEC's Internet site at www.sec.gov. Copies of the Codes may also be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC's Public Reference Section, Washington, DC 20549-0102. Statement of Additional Information - Dec. 30, 2009 Page 190 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES The following table identifies those investors who, as of 30 days after the end of the fund's fiscal period, owned 5% or more of any class of a fund's shares and those investors who owned 25% or more of a fund's shares (all share classes taken together). Investors who own more than 25% of a fund's shares are presumed under securities laws to control the fund and would be able to determine the outcome of most issues that are submitted to shareholders for vote. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 32. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES As of 30 days after the end of the fund's fiscal period:
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 -------------------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Basic Charles Schwab & Co., Inc. (Charles Class A 29.57% -- Income Schwab) a brokerage firm in San Francisco, CA ------------------------------------------------------------------------------------------ RiverSource Investments, LLC Class R4 100.00% -- (RiverSource Investments), Minneapolis, MN -------------------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Enhanced Charles Schwab Class A 34.70% 29.83% Income Class R4 92.71% ------------------------------------------------------------------------------------------ RiverSource Investments Class R4 7.29% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder Moderate Charles Schwab Class A 35.06% 30.11% Income Class R4 47.05% ------------------------------------------------------------------------------------------ RiverSource Investments Class R4 52.95% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Charles Schwab Class R4 90.68% -- Aggressive ------------------------------------------------------------------------------------------ RiverSource Investments Class R4 9.32% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Charles Schwab Class A 6.23% -- Conservative Class R4 59.37% ------------------------------------------------------------------------------------------ RiverSource Investments Class R4 40.63% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Charles Schwab Class R4 90.34% -- Moderate ------------------------------------------------------------------------------------------ RiverSource Investments Class R4 9.66% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Charles Schwab Class R4 84.07% -- Moderate Aggressive ------------------------------------------------------------------------------------------ Fifth Third Bank TTEE, Cincinnati, OH Class R4 14.67% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Charles Schwab Class R4 64.94% -- Moderate Conservative ------------------------------------------------------------------------------------------ RiverSource Investments Class R4 35.06% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Charles Schwab Class R4 91.86% -- Total Equity ------------------------------------------------------------------------------------------ RiverSource Investments Class R4 8.14% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource S&P 500 Index Charles Schwab Class D 100.00% -- Class E 19.56% ------------------------------------------------------------------------------------------ Wachovia Bank NA (Wachovia Bank), Class E 80.41% 65.12% Charlotte, NC -------------------------------------------------------------------------------------------------------------------------------- RiverSource Small Company Index Charles Schwab Class A 6.62% -- Class R4 6.67% ------------------------------------------------------------------------------------------ Wachovia Bank Class R4 90.66% -- --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 191
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- FUNDS WITH FISCAL PERIOD ENDING MARCH 31 -------------------------------------------------------------------------------------------------------------------------------- RiverSource Equity Value Charles Schwab Class A 7.49% -- ------------------------------------------------------------------------------------------ John C. Mullarkey, Willowbrook, IL Class C 5.31% -- ------------------------------------------------------------------------------------------ Merrill Lynch Pierce Fenner & Smith (MLP Class C 5.23% -- Fenner & Smith), Jacksonville, FL ------------------------------------------------------------------------------------------ RiverSource Investments Class I 100.00% -- Class R2 100.00% Class R5 100.00% Class W 100.00% ------------------------------------------------------------------------------------------ John Hancock Life Insurance Company, Class R4 70.10% -- Buffalo, NY ------------------------------------------------------------------------------------------ Wachovia Bank Class R3 97.73% -- Class R4 25.20% -------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Charles Schwab Class A 7.48% -- Small Cap Growth Class R4 98.31% ------------------------------------------------------------------------------------------ RiverSource Investments Class R2 100.00% 36.12%(a) Class R3 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Aggressive Class I 17.44% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 25.22% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 30.71% -- Aggressive Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 6.95% -- Conservative Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Total Class I 17.18% -- Equity Fund -------------------------------------------------------------------------------------------------------------------------------- RiverSource Precious Charles Schwab Class A 12.49% -- Metals and Mining Class R4 98.30% ------------------------------------------------------------------------------------------ RiverSource Investments Class I 100.00% -- ------------------------------------------------------------------------------------------ Richard L. Venable and Susan Angela Class C 6.32% -- Venable, Argyle, TX -------------------------------------------------------------------------------------------------------------------------------- FUNDS WITH FISCAL PERIOD ENDING APRIL 30 -------------------------------------------------------------------------------------------------------------------------------- RiverSource 120/20 RiverSource Investments Class I 100.00% -- Contrarian Equity Class R5 100.00% ------------------------------------------------------------------------------------------ Charles Schwab Class A 47.75% 39.07% -------------------------------------------------------------------------------------------------------------------------------- RiverSource Recovery RiverSource Investments Class I 100.00% -- and Infrastructure Class R2 100.00% Class R3 100.00% Class R4 51.43% Class R5 100.00% ------------------------------------------------------------------------------------------ Charles Schwab Class A 73.21% 64.08% Class R4 48.57% --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 192
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement RiverSource Investments Class R2 100.00% -- Plus 2010 Class R3 100.00% Class R4 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class A 7.59% -- Inc. (American Enterprise Investment Services), Minneapolis, MN ------------------------------------------------------------------------------------------ Charles Schwab Class A 5.52% -- ------------------------------------------------------------------------------------------ Jagdish N. and Madhuri J. Sheth, Class A 10.77% -- Atlanta, GA ------------------------------------------------------------------------------------------ Wachovia Bank Class Y 100.00% 59.76% -------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement RiverSource Investments Class R2 100.00% -- Plus 2015 Class R3 100.00% Class R4 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class A 5.52% -- ------------------------------------------------------------------------------------------ Wachovia Bank Class Y 100.00% 72.74% -------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement RiverSource Investments Class R2 31.88% -- Plus 2020 Class R3 100.00% Class R4 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ David T. Matthiesen, Littleton, CO Class A 9.44% -- ------------------------------------------------------------------------------------------ Matrix Capital Bank MSCS (Matrix Class R2 68.11% -- Capital), Denver, CO ------------------------------------------------------------------------------------------ Wachovia Bank Class Y 100.00% 79.30% -------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement RiverSource Investments Class R2 18.65% -- Plus 2025 Class R3 100.00% Class R4 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ Anthony D. and Rebecca H. Marken, Class A 6.20% -- Lexington, MA ------------------------------------------------------------------------------------------ Matrix Capital Class R2 81.34% -- ------------------------------------------------------------------------------------------ Wachovia Bank Class Y 100.00% 88.61% -------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement RiverSource Investments Class R2 41.48% -- Plus 2030 Class R3 100.00% Class R4 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ Dimitris Bertsimas, Belmont, MA Class A 50.21% -- ------------------------------------------------------------------------------------------ John C. Bukowski, Suffern, NY Class A 5.09% -- ------------------------------------------------------------------------------------------ Applied Reliability Engineering, Denver, Class R2 58.52% -- CO ------------------------------------------------------------------------------------------ Wachovia Bank Class Y 99.99% 79.01% -------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement RiverSource Investments Class R2 100.00% -- Plus 2035 Class R3 100.00% Class R4 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ Gary L. and Karen L. Fournier, Class A 8.32% -- Vicksburg, MS ------------------------------------------------------------------------------------------ Richard and Stefanie A. Nelson, Class A 5.96% -- Hot Springs, SD ------------------------------------------------------------------------------------------ Wachovia Bank Class Y 99.44% 90.38% --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 193
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement RiverSource Investments Class R2 33.50% -- Plus 2040 Class R3 14.05% Class R4 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ Matrix Capital Class R2 66.49% -- ------------------------------------------------------------------------------------------ GWFS Equities Inc. (GWFS Equities), Class R3 85.95% -- Greenwood Village, CO ------------------------------------------------------------------------------------------ Wachovia Bank Class Y 98.75% 85.86% -------------------------------------------------------------------------------------------------------------------------------- RiverSource Retirement RiverSource Investments Class R2 100.00% -- Plus 2045 Class R3 100.00% Class R4 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ Anthony D. and Rebecca H. Marken, Class A 6.45% -- Lexington, MA ------------------------------------------------------------------------------------------ Wachovia Bank Class Y 100.00% 86.84% -------------------------------------------------------------------------------------------------------------------------------- FUNDS WITH FISCAL PERIOD ENDING MAY 31 -------------------------------------------------------------------------------------------------------------------------------- RiverSource High Yield Bond RiverSource Investments Class R2 27.22% -- Class R5 100.00% ------------------------------------------------------------------------------------------ RiverSource Income Builder Basic Income Class I 29.71% -- ------------------------------------------------------------------------------------------ RiverSource Income Builder Enhanced Class I 24.42% -- Income ------------------------------------------------------------------------------------------ RiverSource Income Builder Moderate Class I 39.22% -- Income ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class W 99.82% -- Inc. Minneapolis, MN ------------------------------------------------------------------------------------------ Charles Schwab Class A 12.31% -- Class R4 20.13% ------------------------------------------------------------------------------------------ ING Life Insurance and Annuity, Class R3 91.93% -- Hartford, CT Class R4 79.48% ------------------------------------------------------------------------------------------ Applied Reliability Engineering, Denver, Class R2 72.76% -- CO ------------------------------------------------------------------------------------------ Wachovia Bank Class R3 7.76% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners RiverSource Investments Class R3 20.20% -- Aggressive Growth Class R4 5.34% Class R5 100.00% ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Aggressive Class I 17.76% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 24.95% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 30.59% -- Aggressive Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 6.47% -- Conservative Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Total Class I 17.97% -- Equity Fund ------------------------------------------------------------------------------------------ Charles Schwab Class R4 87.93% -- ------------------------------------------------------------------------------------------ GWFS Equities Inc. Class R2 95.37% -- ------------------------------------------------------------------------------------------ Body Masters, Inc., Denver, CO Class R3 52.41% -- ------------------------------------------------------------------------------------------ Central Jersey Collision, Denver, CO Class R3 29.39% -- --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 194
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Fundamental RiverSource Portfolio Builder Aggressive Class I 17.95% 25.99%(a) Value Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 25.18% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 30.44% -- Aggressive Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 6.45% -- Conservative Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Total Class I 17.77% -- Equity Fund ------------------------------------------------------------------------------------------ Charles Schwab Class A 10.14% -- Class R4 95.38% -------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Select Value RiverSource Investments Class R4 12.91% -- ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Aggressive Class I 17.74% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 24.83% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 31.01% -- Aggressive Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 6.42% -- Conservative Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Total Class I 17.79% -- Equity Fund ------------------------------------------------------------------------------------------ Charles Schwab Class A 5.76% -- Class R4 87.09% -------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Equity RiverSource Investments Class I 100.00% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 5.89% -- Class R4 5.19% ------------------------------------------------------------------------------------------ Wachovia Bank Class R4 94.49% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small Cap Value RiverSource Investments Class R3 8.30% -- ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Aggressive Class I 17.22% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 24.12% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 32.85% -- Aggressive Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 6.31% -- Conservative Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Total Class I 17.33% -- Equity Fund ------------------------------------------------------------------------------------------ Charles Schwab Class A 11.88% -- Class R4 92.22% ------------------------------------------------------------------------------------------ Hartford Life Insurance Company Class R2 99.33% -- (Hartford Life), Weatogue, CT Class R3 91.70% ------------------------------------------------------------------------------------------ JPMorgan Chase Bank, Kansas City, MO Class R5 99.97% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Short Duration U.S. RiverSource Investments Class W 100.00% -- Government ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Class I 59.22% -- Conservative Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 40.78% -- Conservative Fund ------------------------------------------------------------------------------------------ Charles Schwab Class A 11.99% -- ------------------------------------------------------------------------------------------ Wachovia Bank Class R4 97.47% -- --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 195
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- RiverSource U.S. Government Mortgage RiverSource Income Builder Basic Income Class I 33.50% 66.83%(a) ------------------------------------------------------------------------------------------ RiverSource Income Builder Enhanced Class I 17.22% -- Income ------------------------------------------------------------------------------------------ RiverSource Income Builder Moderate Class I 49.28% -- Income ------------------------------------------------------------------------------------------ RiverSource Life Insurance Company, Class R4 14.85% -- Minneapolis, MN ------------------------------------------------------------------------------------------ Charles Schwab Class A 16.85% -- Class R4 44.59% ------------------------------------------------------------------------------------------ Matrix Capital Class R4 20.60% -- ------------------------------------------------------------------------------------------ Ury & Moskow, LLC Retirement Plan, Class R4 19.96% -- Fargo, ND -------------------------------------------------------------------------------------------------------------------------------- FUNDS WITH FISCAL PERIOD ENDING JUNE 30 -------------------------------------------------------------------------------------------------------------------------------- RiverSource Dividend RiverSource Investments Class R2 100.00% -- Opportunity Class R3 100.00% Class R5 56.75% Class W 100.00% ------------------------------------------------------------------------------------------ RiverSource Income Builder Basic Income Class I 10.91% -- ------------------------------------------------------------------------------------------ RiverSource Income Builder Enhanced Class I 9.28% -- Income ------------------------------------------------------------------------------------------ RiverSource Income Builder Moderate Class I 22.66% -- Income ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Aggressive Class I 10.17% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 14.33% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 17.47% -- Aggressive Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Total Class I 10.22% -- Equity Fund ------------------------------------------------------------------------------------------ Charles Schwab Class A 18.63% -- Class R4 100.00% -- ------------------------------------------------------------------------------------------ Securian Financial Services, St. Paul, Class R5 43.25% -- MN -------------------------------------------------------------------------------------------------------------------------------- RiverSource Real Estate RiverSource Investments Class R4 7.19% 65.51%(a) Class W 100.00% ------------------------------------------------------------------------------------------ RiverSource Income Builder Moderate Class I 22.74% -- Income ------------------------------------------------------------------------------------------ RiverSource Income Builder Enhanced Class I 18.62% -- Income ------------------------------------------------------------------------------------------ RiverSource Income Builder Basic Income Class I 5.86% -- ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Aggressive Class I 6.95% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 15.85% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 14.73% -- Aggressive Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 5.92% -- Conservative Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Total Class I 5.80% -- Equity Fund ------------------------------------------------------------------------------------------ Charles Schwab Class A 11.06% -- Class R4 92.81% --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 196
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 -------------------------------------------------------------------------------------------------------------------------------- RiverSource Cash RiverSource Investments Class R2 100.00% -- Management Class R5 100.00% ------------------------------------------------------------------------------------------ RiverSource Income Builder Basic Income Class I 23.30% -- Fund ------------------------------------------------------------------------------------------ RiverSource Income Builder Moderate Class I 15.23% -- Income Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Class I 23.02% -- Conservative Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 20.90% -- Conservative Fund ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class W 99.91% -- ------------------------------------------------------------------------------------------ J. Haley Stephens, Calhoun, GA Class C 8.42% -- ------------------------------------------------------------------------------------------ Wachovia Bank Class Y 96.49% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined RiverSource Investments Class R2 100.00% -- Equity Class R3 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ RiverSource Income Builder Basic Income Class I 5.51% -- Fund ------------------------------------------------------------------------------------------ RiverSource Income Builder Moderate Class I 7.70% -- Income Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Aggressive Class I 9.53% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 13.56% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 16.40% -- Aggressive Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Total Class I 9.55% -- Equity Fund ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class W 99.96% -- ------------------------------------------------------------------------------------------ Wachovia Bank Class R4 99.88% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined RiverSource Investments Class R4 82.97% 13.03%(a) Small and Mid Cap Equity ------------------------------------------------------------------------------------------ Disciplined Asset Allocation Class I 7.49% -- Portfolios - Aggressive ------------------------------------------------------------------------------------------ Disciplined Asset Allocation Class I 19.66% -- Portfolios - Moderate ------------------------------------------------------------------------------------------ Disciplined Asset Allocation Class I 15.96% -- Portfolios - Moderately Aggressive ------------------------------------------------------------------------------------------ Disciplined Asset Allocation Class I 9.78% -- Portfolios - Moderately Conservative ------------------------------------------------------------------------------------------ RiverSource Retirement Plus 2015 Fund Class I 5.45% -- ------------------------------------------------------------------------------------------ RiverSource Retirement Plus 2020 Fund Class I 5.84% -- ------------------------------------------------------------------------------------------ RiverSource Retirement Plus 2025 Fund Class I 7.56% -- ------------------------------------------------------------------------------------------ RiverSource Retirement Plus 2030 Fund Class I 8.07% -- ------------------------------------------------------------------------------------------ RiverSource Retirement Plus 2035 Fund Class I 5.36% -- ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class W 99.98% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 16.28% -- Class R4 17.03% ------------------------------------------------------------------------------------------ Canio A. and Susan A. Petruzzi, Class B 5.89% -- Thomaston, CT ------------------------------------------------------------------------------------------ Lloyd E. Hackman, Fort Meyers, FL Class C 31.33% -- ------------------------------------------------------------------------------------------ Jennifer Woolbright, Reston, VA Class C 8.36% -- ------------------------------------------------------------------------------------------ Carl L. and Vicki L. Ulepich, Frontenac, Class C 6.42% -- KS --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 197
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined RiverSource Investments Class A 62.34% 79.68%(a) Small Cap Value Class C 8.07% Class R2 100.00% Class R3 77.57% Class R4 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ RiverSource Income Builder Basic Income Class I 34.53% -- Fund ------------------------------------------------------------------------------------------ RiverSource Income Builder Enhanced Class I 19.47% -- Income Fund ------------------------------------------------------------------------------------------ RiverSource Income Builder Moderate Class I 45.98% -- Income Fund ------------------------------------------------------------------------------------------ Mary Ann Maloney, Hillsdale, MI Class B 6.31% -- ------------------------------------------------------------------------------------------ Sanford A. Greentree, Westlake Vlg, CA Class C 24.89% -- ------------------------------------------------------------------------------------------ Jill Thompson, Moundsview, MN Class C 11.67% -- ------------------------------------------------------------------------------------------ Bea Vande Merwe, Salt Lake City, UT Class C 11.38% -- ------------------------------------------------------------------------------------------ Richard T. Castiano, Fort Myers, FL Class C 9.81% -- ------------------------------------------------------------------------------------------ Timothy E. Releford, New York, NY Class C 8.29% -- ------------------------------------------------------------------------------------------ Eric C. Stewart, East Dubuque, IL Class C 7.14% -- ------------------------------------------------------------------------------------------ Mary K. Hall, Springport, IN Class C 6.78% -- ------------------------------------------------------------------------------------------ Matthew M. Harrison, Richmond, IN Class C 6.06% -- ------------------------------------------------------------------------------------------ MG Trust Company, Denver, CO Class R3 22.43% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Floating Rate RiverSource Investments Class R4 7.75% 27.06%(a) Class R5 100.00% Class W 100.00% ------------------------------------------------------------------------------------------ RiverSource Income Builder Basic Income Class I 11.90% -- Fund ------------------------------------------------------------------------------------------ RiverSource Income Builder Enhanced Class I 21.50% -- Income Fund ------------------------------------------------------------------------------------------ RiverSource Income Builder Moderate Class I 39.46% -- Income Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 11.27% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 7.12% -- Aggressive Fund ------------------------------------------------------------------------------------------ Charles Schwab Class A 33.73% -- Class R4 92.25% ------------------------------------------------------------------------------------------ Prudential Investment Management Class A 14.75% -- Services LLC, Newark, NJ -------------------------------------------------------------------------------------------------------------------------------- RiverSource Income RiverSource Portfolio Builder Aggressive Class I 9.17% -- Fund ------------------------------------------------------------------------------------------ Opportunities RiverSource Portfolio Builder Moderate Class I 39.99% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 28.96% -- Aggressive Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 6.12% -- Conservative Fund ------------------------------------------------------------------------------------------ RiverSource Income Builder Enhanced Class I 6.30% -- Income Fund ------------------------------------------------------------------------------------------ RiverSource Income Builder Moderate Class I 7.70% -- Income Fund ------------------------------------------------------------------------------------------ Charles Schwab Class A 42.46% -- Class R4 38.02% ------------------------------------------------------------------------------------------ GWFS Equities Class R4 58.43% -- ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class C 16.26% -- --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 198
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- RiverSource Inflation RiverSource Life Insurance Company Class R4 13.67% 28.57%(a) ------------------------------------------------------------------------------------------ Protected Securities RiverSource Portfolio Builder Aggressive Class I 5.17% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Class I 11.99% -- Conservative Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 32.83% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 20.63% -- Aggressive Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 16.29% -- Conservative Fund ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class W 99.96% -- Inc. ------------------------------------------------------------------------------------------ Charles Schwab Class A 24.12% -- Class R4 21.26% ------------------------------------------------------------------------------------------ Citigroup Global Markets (Citigroup Class C 12.04% -- Global Markets), Owings Mills, MD ------------------------------------------------------------------------------------------ Matrix Capital Bank MSCS, Denver, Co Class R4 56.89% -- ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class C 9.23% -- Class R2 67.70% ------------------------------------------------------------------------------------------ Beverly J. Barren, Dickson City, PA Class R2 5.83% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Limited RiverSource Investments Class W 100.00% 42.05%(a) ------------------------------------------------------------------------------------------ Duration Bond RiverSource Portfolio Builder Class I 42.99% -- Conservative Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 12.36% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 6.12% -- Aggressive Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 36.97% -- Conservative Fund ------------------------------------------------------------------------------------------ Charles Schwab Class A 28.37% -- Class R4 95.29% ------------------------------------------------------------------------------------------ Prudential Investment Management Class A 8.71% -- Services ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class C 21.84% -- -------------------------------------------------------------------------------------------------------------------------------- FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 -------------------------------------------------------------------------------------------------------------------------------- RiverSource California Charles Schwab Class A 5.50% -- ------------------------------------------------------------------------------------------ Tax-Exempt Anna M. Hunt Woods, Playa Vista, CA Class B 5.52% -- ------------------------------------------------------------------------------------------ Wells Fargo Investments LLC, Class C 13.62% -- Minneapolis, MN ------------------------------------------------------------------------------------------ Robert W. Baird & Co. Inc., Milwaukee, Class C 6.60% -- WI ------------------------------------------------------------------------------------------ First Clearing, LLC, Buza Family Trust, Class C 5.22% -- Cardiff, CA --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 199
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- RiverSource Diversified Bond RiverSource Investments Class R2 12.90% -- Class R3 100.00% ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class W 99.96% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 7.77% -- ------------------------------------------------------------------------------------------ Citigroup Global Markets Class C 18.12% -- ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class C 8.71% -- Class R2 10.60% ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Class I 6.60% -- Conservative Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 36.40% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 21.02% -- Aggressive Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 13.84% -- Conservative Fund ------------------------------------------------------------------------------------------ Frontier Trust Company (Frontier Trust Class R2 41.37% -- Company) FBO Thomas J. King, Fargo, ND ------------------------------------------------------------------------------------------ MG Trust Company FBO Cardinal Buses Class R2 11.67% -- Inc., Denver, CO ------------------------------------------------------------------------------------------ MG Trust Company FBO Andreini Bros. Class R2 6.59% -- Inc., Denver, CO ------------------------------------------------------------------------------------------ Wachovia Bank Class R4 98.54% -- ------------------------------------------------------------------------------------------ Patricks Plain LLC, Easton, MD Class R5 67.87% -- ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class R5 28.83% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Minnesota None None N/A -- Tax-Exempt -------------------------------------------------------------------------------------------------------------------------------- RiverSource New York Charles Schwab Class A 11.22% -- ------------------------------------------------------------------------------------------ Tax-Exempt Emmanuel and Nina Santos, Johnstown, NY Class B 6.98% -- ------------------------------------------------------------------------------------------ Leroy and Janice M. Clark, Newburgh, NY Class B 5.64% -- ------------------------------------------------------------------------------------------ Thomas W. and Susan M. Noonan, Clifton Class C 13.91% -- Park, NY ------------------------------------------------------------------------------------------ Ena S. Ryan, Brooklyn, NY Class C 6.85% -- -------------------------------------------------------------------------------------------------------------------------------- FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 -------------------------------------------------------------------------------------------------------------------------------- RiverSource Balanced RiverSource Investments Class R5 38.56% -- ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class C 7.66% -- Class R2 80.66% ------------------------------------------------------------------------------------------ Citigroup Global Markets Class C 5.88% -- ------------------------------------------------------------------------------------------ Frontier Trust Company FBO B&L Class R2 14.39% -- Corporation ------------------------------------------------------------------------------------------ Wachovia Bank Class R4 99.98% -- ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class R5 57.76% -- Inc. --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 200
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined RiverSource Investments Class R2 100.00% 29.22%(a) Large Cap Growth Class R3 100.00% Class R4 73.56% Class R5 100.00% ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Aggressive Class I 14.51% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 19.98% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 23.99% -- Aggressive Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 5.01% -- Conservative Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Total Class I 14.91% -- Equity Fund ------------------------------------------------------------------------------------------ Matrix Capital Class R4 26.44% -- ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class C 47.00% -- ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class W 99.99% -- Inc. -------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined RiverSource Investments Class B 13.40% -- Large Cap Value Class C 28.20% Class R2 100.00% Class R3 100.00% Class R4 56.29% Class R5 100.00% ------------------------------------------------------------------------------------------ RiverSource Income Builder Basic Income Class I 18.55% -- ------------------------------------------------------------------------------------------ RiverSource Income Builder Moderate Class I 11.47% -- Income ------------------------------------------------------------------------------------------ RiverSource Disciplined Asset Allocation Class I 17.40% -- Portfolio Moderate ------------------------------------------------------------------------------------------ RiverSource Disciplined Asset Allocation Class I 13.26% -- Portfolio Moderately Aggressive ------------------------------------------------------------------------------------------ RiverSource Disciplined Asset Allocation Class I 7.55% -- Portfolio Moderately Conservative ------------------------------------------------------------------------------------------ RiverSource Disciplined Asset Allocation Class I 6.44% -- Portfolio Aggressive ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class W 99.99% -- Inc. ------------------------------------------------------------------------------------------ Charles Schwab Class A 5.22% -- Class R4 43.71% ------------------------------------------------------------------------------------------ Paul W. Eastman, Dublin, OH Class A 7.20% -- ------------------------------------------------------------------------------------------ Michael G. and Kristine M. Boland, Inver Class A 6.73% -- Grove, MN ------------------------------------------------------------------------------------------ Richard L. and Ann Gail Monnett, Mc Class A 6.44% -- Lean, VA ------------------------------------------------------------------------------------------ Paul D. Mattingly, Brandenburg, KY Class B 25.36% -- ------------------------------------------------------------------------------------------ Tseng-Yen Yen, Fullerton, CA Class B 20.47% -- ------------------------------------------------------------------------------------------ Alan R. and Michael S. Vinacke, Class B 19.00% -- Chuluota, FL ------------------------------------------------------------------------------------------ Jane J. Haash, Milwaukee, WI Class B 6.33% -- ------------------------------------------------------------------------------------------ Joseph M. Aquilar, Denver, CO Class C 19.21% -- ------------------------------------------------------------------------------------------ Charles P. and Judith G. Price, Aurora, Class C 15.16% -- CO ------------------------------------------------------------------------------------------ Gregory L. Norgaard, Aurora, CO Class C 14.00% -- ------------------------------------------------------------------------------------------ Anthony and Jeanne M. Vernell, Athens, Class C 13.16% -- OH ------------------------------------------------------------------------------------------ Dean Gabbert, Dorchester, MA Class C 5.50% -- --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 201
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- RiverSource Diversified RiverSource Investments Class W 100.00% -- ------------------------------------------------------------------------------------------ Equity Income RiverSource Portfolio Builder Aggressive Class I 18.11% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 24.95% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 29.91% -- Aggressive Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 6.26% -- Conservative Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Total Class I 18.60% -- Equity Fund ------------------------------------------------------------------------------------------ Charles Schwab Class A 21.38% -- ------------------------------------------------------------------------------------------ Hartford Life Class R2 61.20% -- ------------------------------------------------------------------------------------------ Hartford Securities Distribution Company Class R2 12.22% -- Inc., Hartford, CT ------------------------------------------------------------------------------------------ GWFS Equities Class R3 80.99% -- Class R4 9.55% ------------------------------------------------------------------------------------------ Wachovia Bank Class R2 17.75% -- Class R3 8.52% Class R4 30.99% Class R5 29.75% ------------------------------------------------------------------------------------------ Wells Fargo Bank Class R4 25.70% -- ------------------------------------------------------------------------------------------ American Century Investments, Kansas Class R4 6.24% -- City, MO ------------------------------------------------------------------------------------------ ING Class R4 12.55% -- Class R5 32.31% ------------------------------------------------------------------------------------------ Ameriprise Trust Company Class R5 7.85% -- ------------------------------------------------------------------------------------------ Taynik & Co., Boston, MA Class R5 7.73% -- ------------------------------------------------------------------------------------------ Mercer Trust Company FBO Johnson Class R5 7.45% -- Outdoors Inc., Norwood, MA --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 202
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Value RiverSource Investments Class W 100.00% -- ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Aggressive Class I 18.14% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 25.01% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 29.79% -- Aggressive Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 6.26% -- Conservative Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Total Class I 18.62% -- Equity Fund ------------------------------------------------------------------------------------------ Charles Schwab Class A 31.64% -- Class R5 6.65% ------------------------------------------------------------------------------------------ Prudential Investment Management Class A 15.08% -- Services LLC, Newark, NJ ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class C 17.57% -- Class R5 5.28% ------------------------------------------------------------------------------------------ Citigroup Global Markets Class C 5.60% -- ------------------------------------------------------------------------------------------ Hartford Life Class R2 75.44% -- Class R3 14.09% ------------------------------------------------------------------------------------------ Hartford Securities Distribution Company Class R2 5.41% -- Inc., Hartford, CT ------------------------------------------------------------------------------------------ JPMorgan Chase Bank, New York, NY Class R3 12.25% -- ------------------------------------------------------------------------------------------ GWFS Equities Class R3 44.59% -- ------------------------------------------------------------------------------------------ Wachovia Bank Class R3 6.31% -- Class R4 16.63% ------------------------------------------------------------------------------------------ ING Class R4 28.31% -- Class R5 12.08% ------------------------------------------------------------------------------------------ John Hancock Life Insurance Company, Class R4 22.85% -- Buffalo, NY ------------------------------------------------------------------------------------------ NFS LLC FEBO, Chicago, IL Class R5 12.73% -- ------------------------------------------------------------------------------------------ PIMS/Prudential Retirement, Greenville, Class R5 9.64% -- SC ------------------------------------------------------------------------------------------ Standard Insurance Company, Portland, OR Class R5 17.20% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Strategic RiverSource Investments Class I 100.00% -- Allocation Class R2 100.00% Class R3 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ Charles Schwab Class A 7.60% -- Class R4 91.62% ------------------------------------------------------------------------------------------ Fifth Third Bank TTEE FBO Speng Nath SE Class R4 8.21% -- PS, Cincinnati, OH -------------------------------------------------------------------------------------------------------------------------------- RiverSource Strategic RiverSource Investments Class R2 100.00% -- Income Allocation Class R3 100.00% Class R4 6.90% Class R5 100.00% ------------------------------------------------------------------------------------------ Charles Schwab Class A 41.85% -- Class R4 93.10% --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 203
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- Seligman California Citigroup Global Markets Class A 5.60% -- Municipal High-Yield Class C 11.36% ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class A 6.44% -- Class C 16.88% ------------------------------------------------------------------------------------------ Morgan Stanley & Co. (Morgan Stanley), Class A 5.86% -- Jersey City, NJ Class C 14.95% ------------------------------------------------------------------------------------------ Christopher Ranch LLC, Gilroy, CA Class C 10.00% -- -------------------------------------------------------------------------------------------------------------------------------- Seligman California MLP Fenner & Smith Class A 5.64% -- Municipal Quality Class C 74.10% ------------------------------------------------------------------------------------------ Morgan Stanley Class A 10.89% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 8.05% -- -------------------------------------------------------------------------------------------------------------------------------- Seligman Minnesota MLP Fenner & Smith Class C 12.78% -- ------------------------------------------------------------------------------------------ Municipal American Enterprise Investment Services Class C 7.46% -- Inc. ------------------------------------------------------------------------------------------ UBS Financial Services Inc. FBO Ethelyn Class C 6.14% -- C. Engel, Cold Spring, MN -------------------------------------------------------------------------------------------------------------------------------- Seligman National Citigroup Global Markets Class A 6.91% -- Municipal Class C 11.91% ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class A 8.50% -- Class C 17.89% ------------------------------------------------------------------------------------------ Morgan Stanley Class C 6.73% -- -------------------------------------------------------------------------------------------------------------------------------- Seligman New York Citigroup Global Markets Class A 5.16% -- Municipal Class C 16.99% ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class C 8.03% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 14.31% -- -------------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2015 MLP Fenner & Smith Class A 20.65% -- Class C 20.29% Class R2 41.53% ------------------------------------------------------------------------------------------ AST Trust Company FBO Jamaica Anesthesia Class A 11.05% -- Assocs., Phoenix, AZ ------------------------------------------------------------------------------------------ Wilmington Trust FBO Medisys Health Class A 7.41% -- Network Inc., Phoenix, AZ ------------------------------------------------------------------------------------------ AST Trust Company FBO Medisys Health Class A 5.72% -- Network Inc.J, Phoenix, AZ ------------------------------------------------------------------------------------------ Frontier Trust Company FBO Andreini Bros Class R2 17.52% -- Inc. Empl. PS Plan ------------------------------------------------------------------------------------------ Frontier Trust Company FBO SGCGJ Class R2 13.90% -- Retirement Plan ------------------------------------------------------------------------------------------ Frontier Trust Company FBO Dearborn Mid Class R2 11.61% -- West Co. 401K ------------------------------------------------------------------------------------------ MG Trust Company FBO Plastic Coating Class R2 10.46% -- Corporation, Denver, CO ------------------------------------------------------------------------------------------ NFS LLC FEBO FMT CO Cust FBO Mark Stuart Class R5 79.44% -- Shulman, Sudbury, MA ------------------------------------------------------------------------------------------ RiverSource Investments Class R5 19.68% -- --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 204
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2025 MLP Fenner & Smith Class A 23.76% -- Class C 28.53% Class R2 85.82% ------------------------------------------------------------------------------------------ AST Trust Company FBO Medisys Health Class A 10.22% -- Network Inc.J, Phoenix, AZ ------------------------------------------------------------------------------------------ Frontier Trust Company FBO S.W.E.A. PC Class A 8.68% -- 401K ------------------------------------------------------------------------------------------ Frontier Trust Company FBO SGCGJ Class R2 8.93% -- Retirement Plan ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class R5 89.81% -- Inc. -------------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2035 RiverSource Investments Class R5 94.33% -- ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class A 23.94% -- Class C 44.56% Class R2 42.36% ------------------------------------------------------------------------------------------ Reliance Trust Co. FBO Time Acquisition Class A 27.12% -- Holding 401K, Atlanta, GA ------------------------------------------------------------------------------------------ Reliance Trust Co. FBO Finn Dixon & Class A 19.02% -- Herling 401K Plan, Atlanta, GA ------------------------------------------------------------------------------------------ New York Life Trust Company, Parsippany, Class A 5.57% -- NJ ------------------------------------------------------------------------------------------ First Clearing, LLC A/C James Drake, Class C 5.92% -- Westville, IN ------------------------------------------------------------------------------------------ Frontier Trust Company FBO Dearborn Mid Class R2 25.67% -- West Co. 401K ------------------------------------------------------------------------------------------ Frontier Trust Company FBO SGCGJ Class R2 19.90% -- Retirement Plan -------------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund 2045 RiverSource Investments Class R5 44.80% -- ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class A 33.51% -- Class C 62.30% Class R2 78.86% ------------------------------------------------------------------------------------------ Reliance Trust Co. FBO Time Acquisition Class A 20.62% -- Holding 401K, Atlanta, GA ------------------------------------------------------------------------------------------ New York Life Trust Company, Parsippany, Class A 9.87% -- NJ ------------------------------------------------------------------------------------------ Frontier Trust Company FBO Wamore, Inc. Class R2 9.01% -- 401K ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class R5 52.51% -- Inc. -------------------------------------------------------------------------------------------------------------------------------- Seligman TargETFund Core RiverSource Investments Class R5 11.58% -- ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class A 21.61% -- Class C 40.42% Class R2 77.82% ------------------------------------------------------------------------------------------ Fifth Third Bank TTEE FBO Bankwest Inc., Class A 7.27% -- Cincinnati, OH ------------------------------------------------------------------------------------------ Frontier Trust Company FBO Dearborn Mid Class R2 11.10% -- West Co. 401K ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class R5 87.88% -- Inc. --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 205
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 -------------------------------------------------------------------------------------------------------------------------------- RiverSource Absolute Return RiverSource Investments Class R4 100.00% -- Currency and Income Class R5 100.00% ------------------------------------------------------------------------------------------ Disciplined Asset Allocation Class I 7.69% -- Conservative Fund ------------------------------------------------------------------------------------------ Disciplined Asset Allocation Moderate Class I 7.28% -- Fund ------------------------------------------------------------------------------------------ Disciplined Asset Allocation Moderately Class I 7.76% -- Conservative Fund ------------------------------------------------------------------------------------------ Income Builder Basic Income Fund Class I 16.00% -- ------------------------------------------------------------------------------------------ Income Builder Enhanced Income Fund Class I 11.65% -- ------------------------------------------------------------------------------------------ Income Builder Moderate Income Fund Class I 43.91% -- ------------------------------------------------------------------------------------------ American Enterprise Class W 99.91% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 60.74% -- ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class C 9.32% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined RiverSource Investments Class R2 100.00% 28.08%(a) International Equity Class R3 100.00% Class R4 8.28% Class R5 100.00% ------------------------------------------------------------------------------------------ Disciplined Asset Allocation Moderate Class I 11.85% -- Fund ------------------------------------------------------------------------------------------ Disciplined Asset Allocation Moderately Class I 7.92% -- Aggressive Fund ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 8.11% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 11.33% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 13.48% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 8.31% -- ------------------------------------------------------------------------------------------ American Enterprise Investment Services, Class W 99.98% -- Inc. ------------------------------------------------------------------------------------------ Charles Schwab Class A 10.66% -- Class R4 91.72% ------------------------------------------------------------------------------------------ Daniel and Linda Miklovic, St. Louis, MO Class C 6.39% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Emerging Disciplined Asset Allocation Moderate Class I 5.28% 40.87%(a) Markets Bond Fund Income Builder Enhanced Income Fund Class I 23.71% ------------------------------------------------------------------------------------------ Income Builder Moderate Income Fund Class I 42.49% -- ------------------------------------------------------------------------------------------ Income Builder Basic Income Fund Class I 11.78% -- ------------------------------------------------------------------------------------------ RiverSource Investments Class R4 44.59% -- ------------------------------------------------------------------------------------------ American Enterprise Investment Services, Class W 99.97% -- Inc. ------------------------------------------------------------------------------------------ Charles Schwab Class A 38.45% -- Class R4 27.29% ------------------------------------------------------------------------------------------ Matrix Capital Class R4 28.12% -- ------------------------------------------------------------------------------------------ Morgan Stanley Class A 12.85% -- ------------------------------------------------------------------------------------------ First Clearing, LLC, Rochester, NY Class C 7.58% -- ------------------------------------------------------------------------------------------ Morgan Stanley Class C 7.30% -- ------------------------------------------------------------------------------------------ American Enterprise Investment Services, Class C 6.12% -- Inc. --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 206
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- RiverSource Global Bond Portfolio Builder Aggressive Fund Class I 7.10% 32.99%(a) ------------------------------------------------------------------------------------------ Portfolio Builder Conservative Fund Class I 7.65% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 30.72% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 26.31% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 13.68% -- Fund ------------------------------------------------------------------------------------------ American Enterprise Investment Services, Class W 99.95% -- Inc. ------------------------------------------------------------------------------------------ Charles Schwab Class A 12.28% -- Class R4 100.00% -------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Charles Schwab Class A 10.95% 47.03%(a) International Select Growth Class R4 82.52% ------------------------------------------------------------------------------------------ New York Life Trust Company Class R4 16.27% -- ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 17.97% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 25.12% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 29.80% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 6.29% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 18.39% -- ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class C 9.08% -- ------------------------------------------------------------------------------------------ Frontier Trust Company FBO U.S. Tank Class R2 38.15% -- Alliance, Inc. ------------------------------------------------------------------------------------------ Frontier Trust Company FBO B&L Class R2 18.63% -- Corporation 401K ------------------------------------------------------------------------------------------ Frontier Trust Company FBO Financial Class R2 13.69% -- Audit, LLC 401K ------------------------------------------------------------------------------------------ Frontier Trust Company FBO C. Anthony Class R2 8.86% -- Phillips Accountants ------------------------------------------------------------------------------------------ MG Trust Company FBO Claudina A. Bonilla Class R2 5.90% -- MD FCCP PA, Denver, CO ------------------------------------------------------------------------------------------ Patricks Plain LLC, Easton, MD Class R5 97.22% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Charles Schwab Class A 12.19% -- International Select Value Class R4 98.90% ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 17.99% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 25.11% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 29.76% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 6.30% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 18.41% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Partners Portfolio Builder Aggressive Fund Class I 17.83% 50.85%(a) ------------------------------------------------------------------------------------------ International Small Cap Portfolio Builder Moderate Fund Class I 25.47% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 30.16% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 6.33% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 17.77% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 9.01% -- Class R4 11.78% ------------------------------------------------------------------------------------------ Morgan Stanley Class C 14.62% -- ------------------------------------------------------------------------------------------ Taynik & Co., Boston, MA Class R4 48.66% -- ------------------------------------------------------------------------------------------ Massachusetts Mutual Life Insurance Co., Class R4 36.89% -- Springfield, MA --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 207
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- Seligman Frontier RiverSource Investments Class R2 9.37% -- Class R3 100.00% -- Class R4 51.23% -- ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 99.50% -- ------------------------------------------------------------------------------------------ Charles Schwab Class R4 48.77% -- ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class A 9.02% -- Class C 21.88% Class R2 63.03% ------------------------------------------------------------------------------------------ Citigroup Global Markets Class B 7.06% -- ------------------------------------------------------------------------------------------ State Street Bank and Trust as Class B 5.48% -- Custodian, Miami, FL ------------------------------------------------------------------------------------------ Frontier Trust Company FBO Class R2 14.43% -- ------------------------------------------------------------------------------------------ Frontier Trust Company FBO Financial Class R2 6.59% -- Network Audit, LLC ------------------------------------------------------------------------------------------ Frontier Trust Company FBO C. Anthony Class R2 6.18% -- Phillps Accountantcy 401 ------------------------------------------------------------------------------------------ Gramma Fisher Foundation, Easton, MD Class R5 67.75% -- ------------------------------------------------------------------------------------------ Patricks Plain LLC, Easton, MD Class R5 29.23% -- -------------------------------------------------------------------------------------------------------------------------------- Seligman Global Technology RiverSource Investments Class R3 100.00% -- Class R5 100.00% ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 18.03% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 25.13% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 29.99% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 6.24% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 18.44% -- ------------------------------------------------------------------------------------------ Charles Schwab Class R4 93.18% -- ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class A 8.81% -- Class B 10.15% Class C 20.21% Class R2 12.22% ------------------------------------------------------------------------------------------ Citigroup Global Markets Class C 5.27% -- ------------------------------------------------------------------------------------------ Hartford Life Insurance Co., Hartford, Class R2 73.45% -- CT ------------------------------------------------------------------------------------------ Frontier Trust Company FBO Deaerborn Mid Class R2 7.17% -- West Conveyor -------------------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Portfolio Builder Aggressive Fund Class I 18.43% -- ------------------------------------------------------------------------------------------ Markets Portfolio Builder Moderate Fund Class I 25.71% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 30.55% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 6.51% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 18.78% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 13.50% -- Class R4 100.00% ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class C 39.64% -- Class R2 88.30% ------------------------------------------------------------------------------------------ RiverSource Investments Class R4 100.00% -- ------------------------------------------------------------------------------------------ Patricks Plain LLC, Easton, MD Class R5 87.00% -- --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 208
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- Threadneedle European RiverSource Investments Class I 100.00% -- Equity Class R4 16.14% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 9.89% -- ------------------------------------------------------------------------------------------ Marilyn O. Matthews, Pasadena, CA Class C 5.48% -- ------------------------------------------------------------------------------------------ MG Trust Company Cust. FBO Class R4 79.53% -- Urologic Surgery, P.C. 401K, Denver, CO -------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity RiverSource Investments Class R2 45.30% -- Class R3 100.00% Class R5 27.38% Class W 100.00% ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 13.68% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 29.50% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 35.14% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 7.43% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 11.65% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 10.22% -- ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class C 7.39% -- ------------------------------------------------------------------------------------------ Frontier Trust Company FBO C. Anthony Class R2 18.43% -- Phillps Accountantcy 401 ------------------------------------------------------------------------------------------ Frontier Trust Company FBO EFK Moen 401K 11.56% -- ------------------------------------------------------------------------------------------ Frontier Trust Company FBO Financial 11.09% -- Network Audit, LLC ------------------------------------------------------------------------------------------ MG Trust Company Cust. FBO Applied 10.24% -- Reliability Engineering, Denver, CO ------------------------------------------------------------------------------------------ Wachovia Bank Class R4 95.89% -- ------------------------------------------------------------------------------------------ American Enterprise Investment Services, Class R5 72.62% -- Inc. -------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity RiverSource Investments Class I 100.00% -- Income Class R2 100.00% Class R3 100.00% Class R4 81.26% Class R5 100.00% ------------------------------------------------------------------------------------------ Charles Schwab Class A 16.66% -- Class R4 18.74% ------------------------------------------------------------------------------------------ Michael A. And Mary N. Brockman, Class C 10.63% -- Fort Madison, IA ------------------------------------------------------------------------------------------ David L. and Diane M Cooper, Prescott, Class C 9.56% -- AZ ------------------------------------------------------------------------------------------ Janet K. Zimmer, Warsaw, IN Class C 7.05% -- --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 209
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global RiverSource Investments Class C 6.99% 58.96%(a) Extended Alpha Class I 100.00% Class R2 100.00% Class R3 100.00% Class R4 12.01% Class R5 100.00% ------------------------------------------------------------------------------------------ Charles Schwab Class A 45.04% -- Class R4 87.99% ------------------------------------------------------------------------------------------ American Enterprise Investment Services, Class B 61.97% -- Inc. ------------------------------------------------------------------------------------------ William F. and Naorma M. Paden, Yuba Class C 21.81% -- City, CA ------------------------------------------------------------------------------------------ Ronald J. Oberdick, Morristown, NJ Class C 18.56% -- ------------------------------------------------------------------------------------------ Pershing LLC, Jersey City, NJ Class C 15.60% -- ------------------------------------------------------------------------------------------ Michael Selig, Arlington, VA Class C 10.77% -- ------------------------------------------------------------------------------------------ Poonam and Pradeep Singh, McLean, VA Class C 10.15% -- ------------------------------------------------------------------------------------------ Jennifer S. Carter, Washington, D.C. Class C 8.29% -- ------------------------------------------------------------------------------------------ Jon Paul and Rachel Colquitt, Clifton, Class C 7.83% -- VA -------------------------------------------------------------------------------------------------------------------------------- Threadneedle International RiverSource Investments Class R2 100.00% 28.96%(a) Opportunity Class R3 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ Charles Schwab Class A 7.77% -- Class R4 80.39% ------------------------------------------------------------------------------------------ Matrix Capital Class R4 19.61% -- ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 18.02% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 25.06% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 29.80% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 6.27% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 18.42% -- ------------------------------------------------------------------------------------------ Frontier Trust Company FBO Ed's Supply Class R2 20.34% -- Co. ------------------------------------------------------------------------------------------ Frontier Trust Company FBO Sales West Class R2 12.03% -- Partners Inc. 401K ------------------------------------------------------------------------------------------ Frontier Trust Company FBO Horne Bros. Class R2 11.09% -- Construction 401K ------------------------------------------------------------------------------------------ Frontier Trust Company FBO Kingchem, Class R2 10.59% -- Inc. 401K ------------------------------------------------------------------------------------------ Frontier Trust Company FBO Natural Class R2 9.91% -- Habitat Adventures ------------------------------------------------------------------------------------------ Frontier Trust Company FBO Tofel Class R2 9.72% -- Employee 401K ------------------------------------------------------------------------------------------ Frontier Trust Company FBO Woburn Daily Class R2 9.04% -- Times, Inc. 401K ------------------------------------------------------------------------------------------ Frontier Trust Company FBO Tremont Class R2 8.06% -- Electric 401K --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - Dec. 30, 2009 Page 210
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) -------------------------------------------------------------------------------------------------------------------------------- FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 -------------------------------------------------------------------------------------------------------------------------------- RiverSource Intermediate Tax Exempt Charles Schwab Class A 7.21% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Growth Portfolio Builder Aggressive Fund Class I 18.26% -- ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 23.37% -- Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 30.84% -- Aggressive Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Moderate Class I 6.00% -- Conservative Fund ------------------------------------------------------------------------------------------ RiverSource Portfolio Builder Total Class I 19.56% -- Equity Fund ------------------------------------------------------------------------------------------ Wachovia Bank Class R4 78.73% -- ------------------------------------------------------------------------------------------ GWFS Equities Class R4 12.28% -- -------------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Bond None N/A N/A N/A -------------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt High Income None N/A N/A N/A -------------------------------------------------------------------------------------------------------------------------------- FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 -------------------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Money Market Lawrence Garner, Woodstock, GA and Class A 6.67% -- Ronald J. Garner, Wyckoff, NJ ------------------------------------------------------------------------------------------ Charles Schwab Class A 6.25% -- --------------------------------------------------------------------------------------------------------------------------------
(a) Combination of all share classes of RiverSource Investments initial capital and affiliated funds-of-funds' investments in Class I shares. A fund may serve as an underlying investment of funds-of-funds that principally invest in shares of other funds in the RiverSource Family of Funds (the underlying funds). The underlying funds and the funds-of-funds share the same officers, Board members, and investment manager, RiverSource Investments. The funds-of-funds do not invest in an underlying fund for the purpose of exercising management or control; however, from time to time, investments by the funds-of- funds in a fund may represent a significant portion of a fund. Because the funds-of-funds may own a substantial portion of the shares of a fund, procedures have been put into place to assure that public shareholders will determine the outcome of all actions taken at underlying fund shareholder meetings. In proxy voting, the funds-of-funds will vote on each proposal in the same proportion that other shareholders vote on the proposal. In addition, RiverSource Investments or an affiliate may own shares of a fund as a result of an initial capital investment at the inception of the fund or class. To the extent RiverSource Investments, as manager of the funds-of-funds, may be deemed a beneficial owner of the shares of an underlying fund held by the funds- of-funds, and such shares, together with any initial capital investment by RiverSource Investments or an affiliate, represent more than 25% of a fund, RiverSource Investments and its affiliated companies may be deemed to control the fund. 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 (now known as RiverSource) 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 Aug. 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and Statement of Additional Information - Dec. 30, 2009 Page 211 remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. 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 Family of 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 was and had 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 paid $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. Statement of Additional Information - Dec. 30, 2009 Page 212 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM For RiverSource funds, the financial statements for the fiscal years ended on or after July 31, 2007, and for Seligman funds, the financial statements for the fiscal years ended on or after Sept. 30, 2009 contained in a fund's Annual Report were audited by the independent registered public accounting firm, Ernst & Young LLP, 220 South 6th Street, Suite 1400, Minneapolis, MN 55402. The independent registered public accounting firm also provides other accounting and tax-related services as requested by the funds. For RiverSource funds, the financial statements for periods ended on or before June 30, 2007 was audited by other auditors. For Seligman funds, the financial statements for periods ended on or before Oct. 31, 2008 were audited by Deloitte & Touche LLP. Statement of Additional Information - Dec. 30, 2009 Page 213 APPENDIX A DESCRIPTION OF RATINGS STANDARD & POOR'S LONG-TERM DEBT RATINGS. A Standard & Poor's corporate or municipal debt rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers, or lessees. The debt rating is not a recommendation to purchase, sell, or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished by the issuer or obtained by S&P from other sources it considers reliable. S&P does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of such information or based on other circumstances. The ratings are based, in varying degrees, on the following considerations: - Likelihood of default capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation. - Nature of and provisions of the obligation. - Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights. INVESTMENT GRADE Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree. Debt rated A has a strong capacity to pay interest and repay principal, although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher-rated categories. Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher-rated categories. SPECULATIVE GRADE Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions. Debt rated BB has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to inadequate capacity to meet timely interest and principal payments. The BB rating category also is used for debt subordinated to senior debt that is assigned an actual or implied BBB- rating. Debt rated B has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The B rating category also is used for debt subordinated to senior debt that is assigned an actual or implied BB or BB- rating. Debt rated CCC has a currently identifiable vulnerability to default and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial, or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The CCC rating category also is used for debt subordinated to senior debt that is assigned an actual or implied B or B- rating. Debt rated CC typically is applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating. Debt rated C typically is applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating. The C rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued. The rating CI is reserved for income bonds on which no interest is being paid. Statement of Additional Information - Dec. 30, 2009 A-1 Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized. MOODY'S LONG-TERM DEBT RATINGS Aaa - Bonds that are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk. Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa - Bonds that are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present that make the long-term risk appear somewhat larger than in Aaa securities. A - Bonds that are rated A possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present that suggest a susceptibility to impairment some time in the future. Baa - Bonds that are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba - Bonds that are rated Ba are judged to have speculative elements - their future cannot be considered as well- assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B - Bonds that are rated B generally lack characteristics of a desirable investment. Assurance of interest and principal payments or maintenance of other terms of the contract over any long period of time may be small. Caa - Bonds that are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca - Bonds that are rated Ca represent obligations that are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C - Bonds that are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. FITCH'S LONG-TERM DEBT RATINGS Fitch's bond ratings provide a guide to investors in determining the credit risk associated with a particular security. The ratings represent Fitch's assessment of the issuer's ability to meet the obligations of a specific debt issue in a timely manner. The rating takes into consideration special features of the issue, its relationship to other obligations of the issuer, the current and prospective financial condition and operating performance of the issuer and any guarantor, as well as the economic and political environment that might affect the issuer's future financial strength and credit quality. Fitch ratings do not reflect any credit enhancement that may be provided by insurance policies or financial guaranties unless otherwise indicated. Fitch ratings are not recommendations to buy, sell or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature of taxability of payments made in respect of any security. Fitch ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch believes to be reliable. Fitch does not audit or verify the truth or accuracy of such information. Ratings may be changed, suspended, or withdrawn as a result of changes in, or the unavailability of, information or for other reasons. INVESTMENT GRADE AAA: Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events. Statement of Additional Information - Dec. 30, 2009 A-2 AA: Bonds considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA categories are not significantly vulnerable to foreseeable future developments, short-term debt of these issuers is generally rated F-1+. A: Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings. BBB: Bonds considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds and, therefore, impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings. SPECULATIVE GRADE BB: Bonds are considered speculative. The obligor's ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified, which could assist the obligor in satisfying its debt service requirements. B: Bonds are considered highly speculative. While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and interest reflects the obligor's limited margin of safety and the need for reasonable business and economic activity throughout the life of the issue. CCC: Bonds have certain identifiable characteristics that, if not remedied, may lead to default. The ability to meet obligations requires an advantageous business and economic environment. CC: Bonds are minimally protected. Default in payment of interest and/or principal seems probable over time. C: Bonds are in imminent default in payment of interest or principal. DDD, DD, and D: Bonds are in default on interest and/or principal payments. Such bonds are extremely speculative and should be valued on the basis of their ultimate recovery value in liquidation or reorganization of the obligor. DDD represents the highest potential for recovery on these bonds, and D represents the lowest potential for recovery. SHORT-TERM RATINGS STANDARD & POOR'S COMMERCIAL PAPER RATINGS A Standard & Poor's commercial paper rating is a current assessment of the likelihood of timely payment of debt considered short-term in the relevant market. Ratings are graded into several categories, ranging from A-1 for the highest quality obligations to D for the lowest. These categories are as follows: A-1 This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2 Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1. A-3 Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations. B Issues are regarded as having only speculative capacity for timely payment. C This rating is assigned to short-term debt obligations with doubtful capacity for payment. D Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. STANDARD & POOR'S MUNI BOND AND NOTE RATINGS An S&P municipal bond or note rating reflects the liquidity factors and market- access risks unique to these instruments. Notes maturing in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. Statement of Additional Information - Dec. 30, 2009 A-3 Note rating symbols and definitions are as follows: SP-1 Strong capacity to pay principal and interest. Issues determined to possess very strong characteristics are given a plus (+) designation. SP-2 Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. SP-3 Speculative capacity to pay principal and interest. Municipal bond rating symbols and definitions are as follows: Standard & Poor's rating SP-1 indicates very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. Standard & Poor's rating SP-2 indicates satisfactory capacity to pay principal and interest. Standard & Poor's rating SP-3 indicates speculative capacity to pay principal and interest. MOODY'S SHORT-TERM RATINGS Moody's short-term debt ratings are opinions of the ability of issuers to repay punctually senior debt obligations. These obligations have an original maturity not exceeding one year, unless explicitly noted. Moody's employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers: Issuers rated Prime-1 (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by many of the following characteristics: (i) leading market positions in well-established industries, (ii) high rates of return on funds employed, (iii) conservative capitalization structure with moderate reliance on debt and ample asset protection, (iv) broad margins in earnings coverage of fixed financial charges and high internal cash generation, and (v) well established access to a range of financial markets and assured sources of alternate liquidity. Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained. Issuers rated Not Prime do not fall within any of the Prime rating categories. MOODY'S SHORT-TERM MUNI BONDS AND NOTES Short-term municipal bonds and notes are rated by Moody's. The ratings reflect the liquidity concerns and market access risks unique to notes. Moody's MIG 1/VMIG 1 indicates the best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing. Moody's MIG 2/VMIG 2 indicates high quality. Margins of protection are ample although not so large as in the preceding group. Moody's MIG 3/VMIG 3 indicates favorable quality. All security elements are accounted for but there is lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established. Moody's MIG 4/VMIG 4 indicates adequate quality. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk. FITCH'S SHORT-TERM RATINGS Fitch's short-term ratings apply to debt obligations that are payable on demand or have original maturities of generally up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes. The Statement of Additional Information - Dec. 30, 2009 A-4 short-term rating places greater emphasis than a long-term rating on the existence of liquidity necessary to meet the issuer's obligations in a timely manner. Fitch short-term ratings are as follows: F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment. F-1: Very Strong Credit Quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated F-1+. F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as for issues assigned F-1+ and F-1 ratings. F-3: Fair Credit Quality. Issues assigned this rating have characteristics suggesting that the degree of assurance for timely payment is adequate, however, near-term adverse changes could cause these securities to be rated below investment grade. F-S: Weak Credit Quality. Issues assigned this rating have characteristics suggesting a minimal degree of assurance for timely payment and are vulnerable to near-term adverse changes in financial and economic conditions. D: Default. Issues assigned this rating are in actual or imminent payment default. Statement of Additional Information - Dec. 30, 2009 A-5 APPENDIX B STATE TAX-EXEMPT FUNDS STATE RISK FACTORS The State Tax-Exempt Funds invest primarily in the municipal securities issued by a single state and political sub-divisions that state. Each Fund will be particularly affected by political and economic conditions and developments in the state in which it invests. This vulnerability to factors affecting the state's tax- exempt investments will be significantly greater than that of more geographically diversified funds, which may result in greater losses and volatility. Because of the relatively small number of issuers of tax-exempt securities, the Fund may invest a higher percentage of assets in a single issuer and, therefore, be more exposed to the risk of loss by investing in a few issuers than a fund that invests more broadly. At times, the Fund and other accounts managed by the investment manager may own all or most of the debt of a particular issuer. This concentration of ownership may make it more difficult to sell, or to determine the fair value of, these investments. In addition, a Fund may concentrate in a segment of the tax-exempt debt market, such as revenue bonds for health care facilities, housing or airports. These investments may cause the value of a fund's shares to change more than the values of funds' shares that invest in more diversified investments. The yields on the securities in which the Fund invests generally are dependent on a variety of factors, including the financial condition of the issuer or other obligor, the revenue source from which the debt service is payable, general economic and monetary conditions, conditions in the relevant market, the size of a particular issue, the maturity of the obligation, and the rating of the issue. In addition to such factors, geographically concentrated securities will experience particular sensitivity to local conditions, including political and economic changes, adverse conditions to an industry significant to the area, and other developments within a particular locality. Because many tax-exempt bonds may be revenue or general obligations of local governments or authorities, ratings on tax-exempt bonds may be different from the ratings given to the general obligation bonds of a particular state. Certain events may adversely affect all investments within a particular market segment of the market. Examples include litigation, legislation or court decisions, concerns about pending or contemplated litigation, legislation or court decisions, or lower demand for the services or products provided by a particular market segment. Investing mostly in state-specific tax-exempt investments makes the Fund more vulnerable to that state's economy and to factors affecting tax-exempt issuers in that state than would be true for more geographically diversified funds. These risks include, among others: - the inability or perceived inability of a government authority to collect sufficient tax or other revenues to meet its payment obligations; - natural disasters and ecological or environmental concerns; - the introduction of constitutional or statutory limits on a tax-exempt issuer's ability to raise revenues or increase taxes; - the inability of an issuer to pay interest on or repay principal or securities in which the funds invest during recessionary periods; and - economic or demographic factors that may cause a decrease in tax or other revenues for a government authority or for private operators of publicly financed facilities. More information about state specific risks may be available from official state resources. Statement of Additional Information - Dec. 30, 2009 B-1 APPENDIX C RIVERSOURCE S&P 500 INDEX FUND ADDITIONAL INFORMATION ABOUT THE S&P 500 INDEX The fund is not sponsored, endorsed, sold or promoted by S&P. S&P makes no representation or warranty, express or implied, to the shareholders of the Fund or any member of the public regarding the advisability of investing in securities generally or in the Fund particularly or the ability of the S&P 500 Index to track general stock market performance. S&P's only relationship to the Fund is the licensing of certain trademarks and trade names of S&P and of the S&P 500 Index, which are determined, composed and calculated by S&P without regard to the Fund. S&P has no obligation to take the needs of the Fund or its shareholders into consideration in determining, composing or calculating the S&P 500 Index. S&P is not responsible for and has not participated in the determination of the prices and amount of the Fund or the timing of the issuance or sale of the Fund or in the determination or calculation of the equation by which the Fund's shares are to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of Fund shares. S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN (THE S&P INDEX) AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUND, ITS SHAREHOLDERS OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. S-6500 CF (12/09) Statement of Additional Information - Dec. 30, 2009 C-1 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- OCT. 31, 2009 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
BONDS (13.6%) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) SUPRANATIONAL (0.8%) Inter-American Development Bank Sr Unsecured 03-16-11 0.50% $2,000,000(c,g) $1,998,670 ------------------------------------------------------------------------------------- ASSET-BACKED (3.8%) Citibank Credit Card Issuance Trust Series 2007-A1 Cl A1 03-22-12 0.28 1,000,000(g) 998,602 Countrywide Home Equity Loan Trust Series 2005-H Cl 2A (FGIC) 12-15-35 0.49 148,793(e,g) 56,457 Keycorp Student Loan Trust Series 2003-A Cl 2A2 (MBIA) 10-25-25 0.59 272,990(e,g) 268,154 Northstar Education Finance Series 2007-1 Cl A2 01-29-46 0.30 750,000(g) 748,008 SLM Student Loan Trust Series 2005-5 Cl A2 10-25-21 0.36 927,177(g) 921,047 SLM Student Loan Trust Series 2005-8 Cl A2 07-25-22 0.37 1,276,179(g) 1,267,898 SLM Student Loan Trust Series 2005-B Cl A1 12-16-19 0.34 220,480(g) 216,152 SLM Student Loan Trust Series 2006-5 Cl A2 07-25-17 0.27 99,401(g) 99,347 SLM Student Loan Trust Series 2006-A Cl A1 03-16-20 0.32 564,676(g) 556,292 SLM Student Loan Trust Series 2006-A Cl A2 12-15-20 0.38 2,000,000(g) 1,880,763 SLM Student Loan Trust Series 2006-C Cl A2 09-15-20 0.35 1,000,000(g) 961,472 SLM Student Loan Trust Series 2007-2 Cl A2 07-25-17 0.28 1,000,000(g) 988,268 --------------- Total 8,962,460 ------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE-BACKED (1.3%)(f) GS Mtge Securities II Series 2007-EOP Cl A2 03-06-20 0.37 1,200,000(d,g) 1,110,923 GS Mtge Securities II Series 2007-EOP Cl A3 03-06-20 0.42 1,770,000(d,g) 1,609,025 Morgan Stanley Dean Witter Capital I Series 2002-TOP7 Cl A1 01-15-39 5.38 421,864 428,016 --------------- Total 3,147,964 ------------------------------------------------------------------------------------- RESIDENTIAL MORTGAGE-BACKED (0.2%)(f) Deutsche Bank Alternate Mtge Loan Trust Collateralized Mtge Obligation Series 2006-AR6 Cl A3 02-25-37 0.33 118,289(g) 110,065 Downey Savings & Loan Assn Mtge Loan Trust Collateralized Mtge Obligation Series 2006-AR2 Cl 2AB1 11-19-37 0.34 203,689(g) 194,046 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2006-12 Cl 2A11 01-19-38 0.34 252,433(g) 240,279 --------------- Total 544,390 ------------------------------------------------------------------------------------- AUTOMOTIVE (1.0%) American Honda Finance Sr Unsecured 02-05-10 0.87 2,500,000(d,g) 2,494,994 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 14 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) BANKING (2.6%) Bank of New York Mellon Sr Unsecured 02-05-10 0.87% $3,000,000(g) $3,003,198 Royal Bank of Scotland Govt Guaranteed 05-11-12 1.16 2,000,000(c,d,g) 2,028,636 US Bancorp Sr Unsecured 02-04-10 0.88 1,250,000(g) 1,251,245 --------------- Total 6,283,079 ------------------------------------------------------------------------------------- BROKERAGE (--%) Lehman Brothers Holdings Sr Unsecured 10-22-09 0.00 640,000(b,g,i) 100,800 ------------------------------------------------------------------------------------- CONSTRUCTION MACHINERY (2.8%) Caterpillar Financial Services Sr Unsecured 02-08-10 0.91 2,000,000(g) 2,002,396 John Deere Capital Sr Unsecured 01-18-11 0.98 4,500,000(g) 4,510,966 --------------- Total 6,513,362 ------------------------------------------------------------------------------------- HEALTH CARE INSURANCE (0.6%) UnitedHealth Group Sr Unsecured 06-21-10 0.47 1,500,000(g) 1,494,455 ------------------------------------------------------------------------------------- LIFE INSURANCE (0.2%) Pricoa Global Funding I Sr Secured 12-15-09 0.35 400,000(d,g) 399,430 ------------------------------------------------------------------------------------- RETAILERS (0.3%) Home Depot Sr Unsecured 12-16-09 0.42 750,000(g) 749,272 ------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $33,626,495) $32,688,876 ------------------------------------------------------------------------------------- FDIC-INSURED DEBT (1.7%) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) U.S. AGENCIES Bank of America FDIC Govt Guaranty 06-22-12 0.49% $2,000,000(g) $2,011,568 General Electric Capital FDIC Govt Guaranty 03-11-11 0.38 2,000,000(g) 2,004,122 ------------------------------------------------------------------------------------- TOTAL FDIC-INSURED DEBT (Cost: $4,000,000) $4,015,690 -------------------------------------------------------------------------------------
MONEY MARKET FUND (84.1%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.25% 201,761,763(h) $201,761,763 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $201,761,763) $201,761,763 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $239,388,258)(j) $238,466,329 =====================================================================================
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- INVESTMENTS IN DERIVATIVES FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT OCT. 31, 2009
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION --------------------------------------------------------------------------------------------- Nov. 12, 2009 38,463,000 57,469,134 $870,908 $-- European Monetary Unit U.S. Dollar --------------------------------------------------------------------------------------------- Nov. 12, 2009 234,727,000 33,745,168 638,654 -- Swedish Krona U.S. Dollar --------------------------------------------------------------------------------------------- Nov. 12, 2009 23,280,000 22,968,547 275,964 -- Swiss Franc U.S. Dollar --------------------------------------------------------------------------------------------- Nov. 12, 2009 56,586,789 62,471,000 -- (425,862) U.S. Dollar Australian Dollar --------------------------------------------------------------------------------------------- Nov. 12, 2009 23,035,496 14,085,000 78,828 -- U.S. Dollar British Pound --------------------------------------------------------------------------------------------- Nov. 12, 2009 31,114,057 179,581,000 249,250 -- U.S. Dollar Norwegian Krone --------------------------------------------------------------------------------------------- Nov. 12, 2009 2,303,408 12,862,000 -- (57,096) U.S. Dollar Norwegian Krone --------------------------------------------------------------------------------------------- Total $2,113,604 $(482,958) ---------------------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 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 Oct. 31, 2009, the value of foreign securities, excluding short- term securities, represented 1.7% 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 transactions exempt from registration, normally to qualified institutional buyers. At Oct. 31, 2009, the value of these securities amounted to $7,643,008 or 3.2% 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
-------------------------------------------------------------------------------- 16 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (f) Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and collateralized mortgage obligations. These securities may be issued or guaranteed by U.S. government agencies or instrumentalities, or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. Unless otherwise noted, the coupon rates presented are fixed rates. (g) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Oct. 31, 2009. (h) Affiliated Money Market Fund -- See Note 7 to the financial statements. The rate shown is the seven-day current annualized yield at Oct. 31, 2009. (i) This position is in bankruptcy. (j) At Oct. 31, 2009, the cost of securities for federal income tax purposes was $239,388,258 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $78,855 Unrealized depreciation (1,000,784) ----------------------------------------------------------- Net unrealized depreciation $(921,929) -----------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. 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 New York Stock Exchange (NYSE) or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as -------------------------------------------------------------------------------- 18 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Oct. 31, 2009:
FAIR VALUE AT OCT. 31, 2009 --------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL -------------------------------------------------------------------------------------------- Bonds Foreign Government Obligations & Agencies $-- $1,998,670 $-- $1,998,670 Asset-Backed Securities -- 8,962,460 -- 8,962,460 Commercial Mortgage- Backed Securities -- 3,147,964 -- 3,147,964 Residential Mortgage- Backed Securities -- 544,390 -- 544,390 Corporate Debt Securities -- 18,035,392 -- 18,035,392 -------------------------------------------------------------------------------------------- Total Bonds -- 32,688,876 -- 32,688,876 -------------------------------------------------------------------------------------------- Other FDIC-Insured Debt Securities -- 4,015,690 -- 4,015,690 Affiliated Money Market Fund 201,761,763 -- -- 201,761,763 -------------------------------------------------------------------------------------------- Total Other 201,761,763 4,015,690 -- 205,777,453 -------------------------------------------------------------------------------------------- Investments in Securities 201,761,763 36,704,566 -- 238,466,329 Other Financial Instruments(a) -- 1,630,646 -- 1,630,646 -------------------------------------------------------------------------------------------- Total $201,761,763 $38,335,212 $-- $240,096,975 --------------------------------------------------------------------------------------------
(a) Other Financial Instruments are derivative instruments, which are valued at the unrealized appreciation (depreciation) on the instrument. Derivative descriptions are located in the Investments in Derivatives section of the Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 19 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. -------------------------------------------------------------------------------- 20 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- OCT. 31, 2009
ASSETS Investments in securities, at value Unaffiliated issuers (identified cost $37,626,495) $ 36,704,566 Affiliated money market fund (identified cost $201,761,763) 201,761,763 ------------------------------------------------------------------------------- Total investments in securities (identified cost $239,388,258) 238,466,329 Cash 52 Capital shares receivable 383,794 Accrued interest receivable 80,933 Receivable for investment securities sold 2,350,288 Unrealized appreciation on forward foreign currency contracts 2,113,604 ------------------------------------------------------------------------------- Total assets 243,395,000 ------------------------------------------------------------------------------- LIABILITIES Capital shares payable 1,072,358 Payable for investment securities purchased 1,925,087 Unrealized depreciation on forward foreign currency contracts 482,958 Accrued investment management services fees 5,884 Accrued distribution fees 1,654 Accrued transfer agency fees 983 Accrued administrative services fees 529 Other accrued expenses 87,753 ------------------------------------------------------------------------------- Total liabilities 3,577,206 ------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $239,817,794 ------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 241,526 Additional paid-in capital 246,451,147 Excess of distributions over net investment income (7,797) Accumulated net realized gain (loss) (7,575,799) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 708,717 ------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $239,817,794 -------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $114,237,775 11,504,415 $9.93(1) Class B $ 2,026,053 205,708 $9.85 Class C $ 7,609,307 773,530 $9.84 Class I $ 28,925,560 2,899,043 $9.98 Class R4 $ 9,944 1,000 $9.94 Class R5 $ 9,397 942 $9.98 Class W $ 86,999,758 8,768,011 $9.92 -----------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $10.24. 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 ANNUAL REPORT 21 STATEMENT OF OPERATIONS -------------------------------------------------------- YEAR ENDED OCT. 31, 2009
INVESTMENT INCOME Income: Interest $ 1,071,471 Income distributions from affiliated money market fund 1,996,999 ------------------------------------------------------------------------------- Total income 3,068,470 ------------------------------------------------------------------------------- Expenses: Investment management services fees 4,698,565 Distribution fees Class A 416,349 Class B 35,353 Class C 98,315 Class W 530,074 Transfer agency fees Class A 205,831 Class B 4,604 Class C 12,557 Class R4 10 Class R5 4 Class W 424,059 Administrative services fees 417,444 Plan administration services fees -- Class R4 52 Compensation of board members 16,224 Custodian fees 12,360 Printing and postage 66,830 Registration fees 50,490 Professional fees 50,899 Other 8,680 ------------------------------------------------------------------------------- Total expenses 7,048,700 Expenses waived/reimbursed by the Investment Manager and its affiliates (13) Earnings and bank fee credits on cash balances (343) ------------------------------------------------------------------------------- Total net expenses 7,048,344 ------------------------------------------------------------------------------- Investment income (loss) -- net (3,979,874) ------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (1,667,418) Foreign currency transactions (10,155,842) ------------------------------------------------------------------------------- Net realized gain (loss) on investments (11,823,260) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 9,397,281 ------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (2,425,979) ------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (6,405,853) -------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 22 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
YEAR ENDED OCT. 31, 2009 2008 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ (3,979,874) $ 7,642,623 Net realized gain (loss) on investments (11,823,260) 8,195,721 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 9,397,281 (8,644,591) ----------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (6,405,853) 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 ANNUAL REPORT 23 STATEMENTS OF CHANGES IN NET ASSETS (continued) --------------------------------
YEAR ENDED OCT. 31, 2009 2008 CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 77,249,711 $ 218,648,148 Class B shares 1,997,878 4,089,168 Class C shares 4,071,796 10,433,303 Class I shares 22,509,441 296,949,913 Class R4 shares 11,804 48,000 Class W shares 37,138,223 339,484,475 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 Conversions from Class B to Class A Class A shares 613,986 269,954 Class B shares (613,986) (269,954) Payments for redemptions Class A shares (138,504,444) (53,765,268) Class B shares (2,582,407) (607,820) Class C shares (5,828,137) (1,255,226) Class I shares (192,632,580) (219,491,271) Class R4 shares (22,927) (64,521) Class W shares (251,615,251) (38,075,600) ----------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (444,420,925) 569,621,484 ----------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (454,643,272) 563,354,953 Net assets at beginning of year 694,461,066 131,106,113 ----------------------------------------------------------------------------------------------- Net assets at end of year $ 239,817,794 $ 694,461,066 ----------------------------------------------------------------------------------------------- Undistributed (excess of distributions over) net investment income $ (7,797) $ 24,074 -----------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 24 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. For periods ended 2007 and after, per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of sales charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED OCT. 31, CLASS A ------------------------------------------ PER SHARE DATA 2009 2008 2007 2006(a) Net asset value, beginning of period $9.97 $10.58 $10.09 $9.98 --------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.08) .15 .41 .12 Net gains (losses) (both realized and unrealized) .09(b) (.22) .57 .11 --------------------------------------------------------------------------------------------- Total from investment operations .01 (.07) .98 .23 --------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.00)(c) (.18) (.39) (.12) Distributions from realized gains (.05) (.36) (.10) -- --------------------------------------------------------------------------------------------- Total distributions (.05) (.54) (.49) (.12) --------------------------------------------------------------------------------------------- Net asset value, end of period $9.93 $9.97 $10.58 $10.09 --------------------------------------------------------------------------------------------- TOTAL RETURN .15% (.57%) 9.96%(d) 2.37% --------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(e) Gross expenses prior to expense waiver/reimbursement 1.38% 1.39% 1.36% 1.59%(f) --------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(g) 1.38% 1.39% 1.36% 1.37%(f) --------------------------------------------------------------------------------------------- Net investment income (loss) (.83%) 1.50% 3.98% 3.89%(f) --------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $114 $176 $9 $10 --------------------------------------------------------------------------------------------- Portfolio turnover rate 16% 39% 36% 12% ---------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 25 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS B ------------------------------------------- PER SHARE DATA 2009 2008 2007 2006(a) Net asset value, beginning of period $9.96 $10.58 $10.09 $9.97 ---------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.16) .04 .34 .09 Net gains (losses) (both realized and unrealized) .10(b) (.18) .59 .12 ---------------------------------------------------------------------------------------------- Total from investment operations (.06) (.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 $9.85 $9.96 $10.58 $10.09 ---------------------------------------------------------------------------------------------- TOTAL RETURN (.56%) (1.35%) 9.38%(d) 2.16% ---------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(e) Gross expenses prior to expense waiver/reimbursement 2.14% 2.16% 2.10% 2.38%(f) ---------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(g) 2.14% 2.16% 2.10% 2.16%(f) ---------------------------------------------------------------------------------------------- Net investment income (loss) (1.59%) .38% 3.26% 3.11%(f) ---------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $3 $-- $-- ---------------------------------------------------------------------------------------------- Portfolio turnover rate 16% 39% 36% 12% ----------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 26 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS C ------------------------------------------- PER SHARE DATA 2009 2008 2007 2006(a) Net asset value, beginning of period $9.95 $10.57 $10.09 $9.97 ---------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.16) .06 .34 .09 Net gains (losses) (both realized and unrealized) .10(b) (.20) .58 .12 ---------------------------------------------------------------------------------------------- Total from investment operations (.06) (.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 $9.84 $9.95 $10.57 $10.09 ---------------------------------------------------------------------------------------------- TOTAL RETURN (.56%) (1.31%) 9.37%(d) 2.16% ---------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(e) Gross expenses prior to expense waiver/reimbursement 2.14% 2.15% 2.12% 2.38%(f) ---------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(g) 2.14% 2.15% 2.12% 2.16%(f) ---------------------------------------------------------------------------------------------- Net investment income (loss) (1.60%) .66% 3.42% 3.11%(f) ---------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $8 $9 $-- $-- ---------------------------------------------------------------------------------------------- Portfolio turnover rate 16% 39% 36% 12% ----------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 27 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS I ------------------------------------------ PER SHARE DATA 2009 2008 2007 2006(a) Net asset value, beginning of period $9.98 $10.59 $10.10 $9.98 --------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.04) .21 .44 .13 Net gains (losses) (both realized and unrealized) .10(b) (.24) .59 .12 --------------------------------------------------------------------------------------------- Total from investment operations .06 (.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 $9.98 $9.98 $10.59 $10.10 --------------------------------------------------------------------------------------------- TOTAL RETURN .56% (.25%) 10.49%(d) 2.56% --------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(e) Gross expenses prior to expense waiver/reimbursement 1.01% 1.03% 1.07% 1.34%(f) --------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(g) 1.01% 1.03% 1.07% 1.12%(f) --------------------------------------------------------------------------------------------- Net investment income (loss) (.40%) 2.10% 4.30% 4.37%(f) --------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $29 $202 $122 $68 --------------------------------------------------------------------------------------------- Portfolio turnover rate 16% 39% 36% 12% ---------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 28 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R4 ------------------------------------------ PER SHARE DATA 2009 2008 2007 2006(a) Net asset value, beginning of period $9.97 $10.58 $10.09 $9.98 --------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.07) .22 .42 .13 Net gains (losses) (both realized and unrealized) .09(b) (.26) .59 .11 --------------------------------------------------------------------------------------------- Total from investment operations .02 (.04) 1.01 .24 --------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.00)(c) (.21) (.42) (.13) Distributions from realized gains (.05) (.36) (.10) -- --------------------------------------------------------------------------------------------- Total distributions (.05) (.57) (.52) (.13) --------------------------------------------------------------------------------------------- Net asset value, end of period $9.94 $9.97 $10.58 $10.09 --------------------------------------------------------------------------------------------- TOTAL RETURN .25% (.26%) 10.27%(d) 2.42% --------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(e) Gross expenses prior to expense waiver/reimbursement 1.31% 1.34% 1.36% 1.45%(f) --------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(g) 1.25% 1.09% 1.31% 1.23%(f) --------------------------------------------------------------------------------------------- Net investment income (loss) (.69%) 2.27% 4.13% 4.04%(f) --------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- --------------------------------------------------------------------------------------------- Portfolio turnover rate 16% 39% 36% 12% ---------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 29 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS R5 ------------------------------ PER SHARE DATA 2009 2008 2007(h) Net asset value, beginning of period $9.98 $10.59 $10.58 --------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.05) .22 .02 Net gains (losses) (both realized and unrealized) .10(b) (.26) .03 --------------------------------------------------------------------------------- Total from investment operations .05 (.04) .05 --------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.00)(c) (.21) (.04) Distributions from realized gains (.05) (.36) -- --------------------------------------------------------------------------------- Total distributions (.05) (.57) (.04) --------------------------------------------------------------------------------- Net asset value, end of period $9.98 $9.98 $10.59 --------------------------------------------------------------------------------- TOTAL RETURN .56% (.30%) .44%(d) --------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(e) Total expenses 1.06% 1.07% 1.06%(f) --------------------------------------------------------------------------------- Net investment income (loss) (.54%) 2.23% 4.43%(f) --------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- --------------------------------------------------------------------------------- Portfolio turnover rate 16% 39% 36% ---------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 30 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS W ------------------------------ PER SHARE DATA 2009 2008 2007(i) Net asset value, beginning of period $9.97 $10.58 $10.13 --------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.08) .11 .36 Net gains (losses) (both realized and unrealized) .08(b) (.19) .55 --------------------------------------------------------------------------------- Total from investment operations .00 (.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 $9.92 $9.97 $10.58 --------------------------------------------------------------------------------- TOTAL RETURN .04% (.66%) 9.21%(d) --------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(e) Total expenses 1.46% 1.50% 1.54%(f) --------------------------------------------------------------------------------- Net investment income (loss) (.86%) 1.09% 3.88%(f) --------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $87 $304 $-- --------------------------------------------------------------------------------- Portfolio turnover rate 16% 39% 36% ---------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For the period from June 15, 2006 (when shares became publicly available) to Oct. 31, 2006. (b) Calculation of the net gain per share (both realized and unrealized) does not correlate to the aggregate realized and unrealized losses presented in the Statement of Operations due to the timing of sales and repurchases of Fund shares in relation to fluctuations in the market value of the portfolio. (c) Rounds to zero. (d) 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, total return figures would have been lower by 0.05%. (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 reported expense ratios. (f) Annualized. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) For the period from Oct. 18, 2007 (when shares became publicly available) to Oct. 31, 2007. (i) For the period from Dec. 1, 2006 (when shares became publicly available) to Oct. 31, 2007. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. ORGANIZATION 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 (the 1940 Act) 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 Fund's 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 offered with a front-end sales charge, which may be waived under certain circumstances. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares one month after the completion of the eighth year of ownership if originally purchased in a RiverSource fund on or after May 21, 2005 or originally purchased in a Seligman fund on or after June 13, 2009. Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund prior to June 13, 2009 will convert to Class A shares in the month prior to the ninth year of ownership. - Class C shares may be subject to a CDSC. - Class I, Class R4 and Class R5 shares are offered without a front-end sales charge or CDSC to qualifying institutional investors. - Class W shares are offered without a front-end sales charge or CDSC and are offered through qualifying discretionary accounts. At Oct. 31, 2009, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) and affiliated funds-of-funds in the RiverSource Family of Funds owned 100% of Class I shares, and the Investment Manager owned 100% of Class R4 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. -------------------------------------------------------------------------------- 32 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF A NEW ACCOUNTING STANDARD In June 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification(TM )(Codification) as the single source of authoritative accounting principles recognized by the FASB in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP). The Codification supersedes existing non-grandfathered, non- SEC accounting and reporting standards. The Codification did not change GAAP but rather organized it into a hierarchy where all guidance within the Codification carries an equal level of authority. The Codification became effective for financial statements issued for interim and annual periods ending after Sept. 15, 2009. The Codification did not have a material effect on the Fund's financial statements. 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 business of the New York Stock Exchange (NYSE). 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 by an independent pricing service using an evaluated bid. 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 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 -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. FOREIGN CURRENCY TRANSLATIONS 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. 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 -------------------------------------------------------------------------------- 34 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- of its taxable income (which includes net short-term capital gains) 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. DIVIDENDS TO SHAREHOLDERS Dividends from net investment income, declared 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. 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. FORWARD FOREIGN CURRENCY CONTRACTS The Fund may enter into forward foreign currency contracts in connection with settling purchases or sales of securities, to hedge the currency exposure associated with some or all of the Fund's securities or as part of its investment strategy. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked to market daily based upon foreign currency exchange rates from an independent pricing service and the change in value is recorded as unrealized appreciation or -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 35 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- depreciation. The Fund will record a realized gain or loss when the forward foreign currency contract is closed. The risks of forward foreign currency contracts include movement in the values of the foreign currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that the counterparty will not complete its contractual obligation, which may be in excess of the amount, if any, reflected in the Statement of Assets and Liabilities. EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS The following tables are intended to provide additional information about the effect of derivatives on the financial statements of the Fund including: the fair value of derivatives by risk category and the location of those fair values in the Statement of Assets and Liabilities; the impact of derivative transactions on the Fund's operations over the period including realized gains or losses and unrealized gains or losses. The derivative schedules following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any. FAIR VALUES OF DERIVATIVE INSTRUMENTS AT OCT. 31, 2009
ASSET DERIVATIVES LIABILITY DERIVATIVES ------------------------------- ------------------------------------- STATEMENT OF ASSETS STATEMENT OF ASSETS RISK EXPOSURE AND LIABILITIES AND LIABILITIES CATEGORY LOCATION FAIR VALUE LOCATION FAIR VALUE ------------------------------------------------------------------------------------------- Foreign exchange Unrealized Unrealized contracts appreciation on depreciation on forward foreign forward foreign currency contracts $2,113,604 currency contracts $482,958 ------------------------------------------------------------------------------------------- Total $2,113,604 $482,958 -------------------------------------------------------------------------------------------
EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCT. 31, 2009
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME ------------------------------------------------------------------------- FORWARD FOREIGN CURRENCY RISK EXPOSURE CATEGORY CONTRACTS ------------------------------------------------------------------------- Foreign exchange contracts $(10,155,842) ------------------------------------------------------------------------- Total $(10,155,842) -------------------------------------------------------------------------
-------------------------------------------------------------------------------- 36 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME ---------------------------------------------------------------------- FORWARD FOREIGN RISK EXPOSURE CATEGORY CURRENCY CONTRACTS ---------------------------------------------------------------------- Foreign exchange contracts $5,887,538 ---------------------------------------------------------------------- TOTAL $5,887,538 ----------------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY FORWARD FOREIGN CURRENCY CONTRACTS The gross notional amount of contracts outstanding was $227.2 million at Oct. 31, 2009. The monthly average gross notional amount for these contracts was $503.4 million for the year ended Oct. 31, 2009. The fair value of these contracts on Oct. 31, 2009 is set forth in the table above. 4. 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 an annual fee that is equal to a percentage of the Fund's average daily net assets that declines from 0.89% to 0.70% as the Fund's net assets increase. The management fee for the year ended Oct. 31, 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 an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% as the Fund's net assets increase. The fee for the year ended Oct. 31, 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 year ended Oct. 31, 2009, other expenses paid to this company were $4,939. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act 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 funds in the RiverSource Family -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains Fund shareholder accounts and records and provides Fund shareholder services. 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 Transfer Agent also charges an annual fee of $3 per account serviced directly by the Fund or its designated agent for Class A, Class B and Class C shares. 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 the 12 month period 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 an agreement with RiverSource Fund Distributors, Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate 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, of the 1.00% fee, up to 0.75% is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $158,000 and $36,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of July 31, 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. -------------------------------------------------------------------------------- 38 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- SALES CHARGES Sales charges, including front-end and CDSCs, received by the Distributor for distributing Fund shares were $107,406 for Class A, $1,406 for Class B and $9,444 for Class C for the year ended Oct. 31, 2009. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended Oct. 31, 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............................................ 1.25%
The waived/reimbursed fees and expenses for the plan administration services fees at the class level were as follows: Class R4............................................ $13
Under an agreement which was effective until Oct. 31, 2009, the Investment Manager and its affiliates contractually agreed to waive certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), would 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 year ended Oct. 31, 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. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $8,000,000 and $42,460,480, respectively, for the year ended Oct. 31, 2009. Realized gains and losses are determined on an identified cost basis. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
YEAR ENDED OCT. 31, 2009 2008* ------------------------------------------------------------------- CLASS A Sold 7,828,875 21,929,377 Converted from Class B** 62,397 27,802 Reinvested distributions 103,312 315,740 Redeemed (14,115,766) (5,483,597) ------------------------------------------------------------------- Net increase (decrease) (6,121,182) 16,789,322 ------------------------------------------------------------------- CLASS B Sold 202,702 416,595 Reinvested distributions 2,280 671 Converted to Class A** (62,780) (27,830) Redeemed (264,660) (62,270) ------------------------------------------------------------------- Net increase (decrease) (122,458) 327,166 ------------------------------------------------------------------- CLASS C Sold 414,719 1,050,240 Reinvested distributions 4,936 8,774 Redeemed (597,391) (128,574) ------------------------------------------------------------------- Net increase (decrease) (177,736) 930,440 ------------------------------------------------------------------- CLASS I Sold 2,280,706 30,071,137 Reinvested distributions 113,149 837,081 Redeemed (19,747,663) (22,170,858) ------------------------------------------------------------------- Net increase (decrease) (17,353,808) 8,737,360 ------------------------------------------------------------------- CLASS R4 Sold 1,202 4,723 Reinvested distributions 6 256 Redeemed (2,336) (6,584) ------------------------------------------------------------------- Net increase (decrease) (1,128) (1,605) ------------------------------------------------------------------- CLASS W Sold 3,773,483 34,206,023 Reinvested distributions 160,817 168,788 Redeemed (25,660,216) (3,881,378) ------------------------------------------------------------------- Net increase (decrease) (21,725,916) 30,493,433 -------------------------------------------------------------------
* Certain line items from the prior year have been renamed to conform to the current year presentation. ** Automatic conversion of Class B shares to Class A shares based on the original purchase date. -------------------------------------------------------------------------------- 40 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 7. 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 funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $147,152,761 and $527,902,478, respectively, for the year ended Oct. 31, 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 Oct. 31, 2009, can be found in the Portfolio of Investments. 8. 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 became effective on Oct. 15, 2009, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other funds in the RiverSource Family of Funds, severally and not jointly, permits collective borrowings up to $300 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $200 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 $500 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 sum of the federal funds rate plus (A) 1.25% per annum plus (B) if one-month LIBOR exceeds the federal funds rate, the amount of such excess. 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 0.10% per annum, in addition to an upfront fee equal to its pro rata share of 0.04% of the amount of the credit facility. Prior to Oct. 15, 2009, the credit facility agreement, which was a collective agreement between the Fund and certain other funds in the RiverSource Family of Funds, severally and not jointly, permitted collective borrowings up to $475 million. Interest was charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. The Fund also paid 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 year ended Oct. 31, 2009. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 9. 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 year ended Oct. 31, 2009, the Fund closed its only remaining SIV position which was in WhistleJacket Capital LLC (WJC). As of Oct. 31, 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. 10. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of foreign currency transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. In the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, excess of distributions over net investment income has been decreased by $3,990,304 and accumulated net realized loss has been increased by $8,758 resulting in a net reclassification adjustment to decrease paid-in capital by $3,981,546. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED OCT. 31, 2009 2008 ------------------------------------------------------------------ Ordinary income.......................... $1,060,104 $10,023,779 Long-term capital gain................... 2,756,390 3,436,505
-------------------------------------------------------------------------------- 42 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- At Oct. 31, 2009, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income.................... $ -- Undistributed accumulated long-term gain......... $ -- Accumulated realized loss........................ $(5,945,153) Unrealized appreciation (depreciation)........... $ (929,726)
For federal income tax purposes, the Fund had a capital loss carry-over of $5,945,153 at Oct. 31, 2009, that if not offset by capital gains will expire in 2017. 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. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 11. RISKS RELATING TO CERTAIN INVESTMENTS 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 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 -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 43 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- investment grade, or, if unrated, determined to be of comparable quality by the Investment Manager. 12. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Dec. 21, 2009, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 13. 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 (now known as RiverSource) 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. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. 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 -------------------------------------------------------------------------------- 44 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 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. Incorporated (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. (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 was and had 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 paid $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 -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 45 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of RiverSource Absolute Return Currency and Income Fund (the Fund) (one of the portfolios constituting the RiverSource Global Series, Inc.) as of October 31, 2009, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of the Fund for the periods presented through October 31, 2006, were audited by other auditors whose report dated December 20, 2006, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2009, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 47 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued) ------------ In our opinion, the financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of RiverSource Absolute Return Currency and Income Fund of the RiverSource Global Series, Inc. at October 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota December 21, 2009 -------------------------------------------------------------------------------- 48 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- OCT. 31, 2009 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
BONDS (92.6%)(c) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) ARGENTINA (2.5%) Banco Hipotecario Sr Unsecured 04-27-16 9.75% $975,000(d) $788,580 Republic of Argentina Sr Unsecured 09-12-13 7.00 5,700,000 4,674,000 12-15-35 0.00 12,950,000(g) 971,250 ----------- Total 6,433,830 ------------------------------------------------------------------------------------------------ BRAZIL (10.5%) Banco Nacional de Desenvolvimento Economico e Social 06-10-19 6.50 1,300,000(d) 1,373,296 Banco Nacional de Desenvolvimento Economico e Social Sr Unsecured 06-16-18 6.37 3,650,000(d) 3,850,750 Bertin Ltda Sr Unsecured 10-05-16 10.25 580,000(d) 576,375 Centrais Eletricas Brasileiras Sr Unsecured 07-30-19 6.88 1,500,000(d) 1,601,570 CSN Islands XI 09-21-19 6.88 1,000,000(d) 978,020 Federative Republic of Brazil 01-20-34 8.25 600,000 771,000 Federative Republic of Brazil (Brazilian Real) 01-05-16 12.50 350,000 224,652 Federative Republic of Brazil Sr Unsecured 01-17-17 6.00 1,500,000 1,603,500 01-15-19 5.88 1,800,000 1,903,500 10-14-19 8.88 1,358,000 1,728,055 01-07-41 5.63 1,000,000 952,518 Marfrig Overseas 11-16-16 9.63 1,130,000(d) 1,130,000 Morgan Stanley (Brazilian Real) Sr Unsecured 05-03-17 10.09 4,600,000(d) 2,351,866 Nota do Tesouro Nacional (Brazilian Real) Series F 01-01-12 10.00 489,500 2,801,007 01-01-13 10.00 706,100 3,923,772 Petrobras Intl Finance 01-20-20 5.75 1,500,000(e) 1,495,500 ----------- Total 27,265,381 ------------------------------------------------------------------------------------------------ CAYMAN ISLANDS (2.0%) Peru Enhanced Pass-Thru Sr Secured Zero Coupon 05-31-18 4.27 6,887,497(b,d,j) 5,251,716 ------------------------------------------------------------------------------------------------ CHILE (0.5%) Empresa Nacional Del Petroleo Sr Unsecured 07-08-19 6.25 1,200,000(d) 1,267,788 ------------------------------------------------------------------------------------------------ COLOMBIA (6.2%) Ecopetrol Sr Unsecured 07-23-19 7.63 1,900,000(f) 2,071,000 Empresas Publicas de Medellin Sr Unsecured 07-29-19 7.63 900,000(d) 972,266 Republic of Colombia 09-18-37 7.38 4,450,000(f) 4,928,374 01-18-41 6.13 2,600,000 2,395,352 Republic of Colombia (Colombian Peso) 10-22-15 12.00 2,693,000,000 1,629,783 06-28-27 9.85 1,000,000,000 559,023 Republic of Colombia Sr Unsecured 03-18-19 7.38 2,200,000 2,488,199 05-21-24 8.13 400,000(f) 474,000
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) COLOMBIA (CONT.) Santa Fe de Bogota (Colombian Peso) Sr Unsecured 07-26-28 9.75% 1,377,000,000(d) $639,890 ----------- Total 16,157,887 ------------------------------------------------------------------------------------------------ CROATIA (0.4%) Republic of Croatia 11-05-19 6.75% 1,000,000(d,e) 989,720 ------------------------------------------------------------------------------------------------ DOMINICAN REPUBLIC (0.9%) Aes Dominicana Energia Finance 12-13-15 11.00 1,050,000(d) 1,018,500 Cerveceria Nacional Dominicana 03-27-12 16.00 1,450,000(d) 1,316,020 ----------- Total 2,334,520 ------------------------------------------------------------------------------------------------ EL SALVADOR (2.3%) Republic of El Salvador 04-10-32 8.25 2,050,000(d) 2,091,000 06-15-35 7.65 2,310,000(d) 2,310,000 Republic of El Salvador Sr Unsecured 01-24-23 7.75 1,460,000(d) 1,533,000 ----------- Total 5,934,000 ------------------------------------------------------------------------------------------------ GABON (0.4%) Republic of Gabonese 12-12-17 8.20 1,000,000(d) 1,031,250 ------------------------------------------------------------------------------------------------ INDONESIA (7.9%) Govt of Indonesia (Indonesian Rupiah) 05-15-16 10.75 4,470,000,000 487,813 Govt of Indonesia (Indonesian Rupiah) Series FR26 10-15-14 11.00 6,000,000,000 663,075 Govt of Indonesia (Indonesian Rupiah) Series FR28 07-15-17 10.00 10,000,000,000 1,046,946 Govt of Indonesia (Indonesian Rupiah) Series FR34 06-15-21 12.80 5,800,000,000 701,805 Govt of Indonesia (Indonesian Rupiah) Series FR36 09-15-19 11.50 23,500,000,000 $ 2,645,744 Govt of Indonesia (Indonesian Rupiah) Series FR43 07-15-22 10.25 29,000,000,000 2,974,497 Perusahaan Penerbit SBSN 04-23-14 8.80 1,900,000(d) 2,151,891 Republic of Indonesia Sr Unsecured 01-17-18 6.88 1,820,000(d) 1,920,100 10-12-35 8.50 2,100,000(d) 2,488,500 02-17-37 6.63 1,950,000(d) 1,872,000 01-17-38 7.75 3,300,000(d) 3,564,000 ----------- Total 20,516,371 ------------------------------------------------------------------------------------------------ IRAQ (0.3%) Republic of Iraq 01-15-28 5.80 1,100,000(d) 844,250 ------------------------------------------------------------------------------------------------ KAZAKHSTAN (1.3%) KazMunaiGaz Finance 07-02-18 9.13 2,995,000(d) 3,301,618 ------------------------------------------------------------------------------------------------ LUXEMBOURG (4.6%) Gaz Capital Secured 11-22-16 6.21 4,350,000(d) 4,154,251 08-16-37 7.29 2,950,000(d) 2,743,500 Gaz Capital Sr Nts 07-31-14 8.13 1,000,000(d) 1,067,667 MHP Sr Secured 11-30-11 10.25 1,250,000(d) 1,150,000 TNK-BP Finance 03-20-17 6.63 300,000(d) 286,500 03-13-18 7.88 2,625,000(d) 2,638,125 ----------- Total 12,040,043 ------------------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 18 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) MEXICO (9.5%) Mexican Fixed Rate Bonds (Mexican Peso) Series M-10 12-17-15 8.00% 19,400,000 1,495,479 12-15-16 7.25 33,010,000 2,429,827 12-14-17 7.75 27,100,000 2,026,214 Mexican Fixed Rate Bonds (Mexican Peso) Series MI-10 12-19-13 8.00 6,330,000 492,658 Pemex Project Funding Master Trust 03-01-18 5.75 7,450,000 7,375,501 06-15-35 6.63 5,304,000(f) 5,181,552 06-15-38 6.63 2,000,000(f) 1,940,260 Pemex Project Funding Master Trust 03-15-15 4.88 2,000,000(d) 1,988,411 Petroleos Mexicano 05-03-19 8.00 1,600,000 1,836,000 ----------- Total 24,765,902 ------------------------------------------------------------------------------------------------ NETHERLANDS (5.1%) Intergas Finance 05-14-17 6.38 300,000(d) 285,203 KazMunaiGaz Finance 01-23-15 11.75 1,800,000(d) 2,137,189 Lukoil Intl Finance 11-05-19 7.25 2,200,000(d,e) 2,180,794 Majapahit Holding 10-17-16 7.75 2,030,000(d) 2,108,764 06-28-17 7.25 1,150,000(d) 1,194,563 08-07-19 8.00 2,100,000(d) 2,142,000 01-20-20 7.75 2,900,000(d,e) 2,875,408 06-29-37 7.88 200,000(d) 206,000 ----------- Total 13,129,921 ------------------------------------------------------------------------------------------------ PERU (2.6%) Banco de Credito del Peru 10-15-22 7.17 4,000,000(d) 1,387,208 Republic of Peru Sr Unsecured 03-30-19 7.13 1,600,000(f) 1,813,600 07-21-25 7.35 500,000 573,750 03-14-37 6.55 2,900,000(f) 3,016,000 ----------- Total 6,790,558 ------------------------------------------------------------------------------------------------ PHILIPPINE ISLANDS (3.3%) Natl Power 11-02-16 6.88 900,000(d) 952,180 Power Sector Assets & Liabilities 05-27-19 7.25 2,750,000(d) 2,949,375 Republic of Philippines 01-14-31 7.75 500,000 563,750 Republic of Philippines Sr Unsecured 06-17-19 8.38 1,850,000 2,238,500 01-20-20 6.50 1,100,000 1,167,375 01-15-32 6.38 600,000 585,000 ----------- Total 8,456,180 ------------------------------------------------------------------------------------------------ QATAR (1.1%) Qtel Intl Finance 06-10-19 7.88 1,000,000(d) 1,127,921 Ras Laffan Liquefied Natural Gas Sr Secured 09-30-14 5.50 800,000(d) 852,463 State of Qatar Sr Nts 04-09-19 6.55 800,000(d) 897,222 ----------- Total 2,877,606 ------------------------------------------------------------------------------------------------ RUSSIA (7.6%) Gaz Capital Sr Secured 04-11-18 8.15 550,000(d) 580,250 Gazstream 07-22-13 5.63 370,208(d,f) 376,686 Russian Federation 03-31-30 7.50 8,919,560(d) 9,972,068 TransCapitalInvest for Transneft Secured 08-07-18 8.70 7,780,000(d) 8,713,600 ----------- Total 19,642,604 ------------------------------------------------------------------------------------------------ SOUTH KOREA (1.1%) Export-Import Bank of Korea Sr Nts 01-21-14 8.13 700,000 808,340 Export-Import Bank of Korea Sr Unsecured 01-14-15 5.88 1,650,000 1,733,518
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 19 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) SOUTH KOREA (CONT.) POSCO Sr Unsecured 03-26-14 8.75% 300,000(d) 350,318 ----------- Total 2,892,176 ------------------------------------------------------------------------------------------------ SUPRA-NATIONAL (2.3%) Central American Bank Sr Nts 09-24-14 5.38 2,000,000(d) 2,050,525 Corp Andina de Fomento Sr Unsecured 06-04-19 8.13 3,400,000 4,022,853 ----------- Total 6,073,378 ------------------------------------------------------------------------------------------------ TRINIDAD AND TOBAGO (0.8%) Petro Trinidad/Tabago Sr Unsecured 08-14-19 9.75 1,800,000(d,f) 2,053,497 ------------------------------------------------------------------------------------------------ TURKEY (7.5%) Republic of Turkey 03-15-15 7.25 1,500,000 1,672,500 04-03-18 6.75 1,550,000 1,654,625 06-05-20 7.00 1,800,000 1,932,750 03-17-36 6.88 5,450,000 5,490,874 03-05-38 7.25 600,000 619,500 Republic of Turkey Sr Unsecured 07-14-17 7.50 1,300,000 1,451,125 03-11-19 7.00 2,700,000 2,905,875 11-07-19 7.50 3,375,000 3,754,688 ----------- Total 19,481,937 ------------------------------------------------------------------------------------------------ UKRAINE (0.3%) Govt of Ukraine 06-26-12 6.39 850,000(d) 748,000 ------------------------------------------------------------------------------------------------ UNITED ARAB EMIRATES (0.8%) TDIC Finance 07-02-14 6.50 1,800,000(d) 1,953,093 ------------------------------------------------------------------------------------------------ UNITED KINGDOM (0.7%) Vedanta Resources Sr Unsecured 07-18-18 9.50 1,700,000(d,f) 1,704,637 ------------------------------------------------------------------------------------------------ URUGUAY (2.8%) Republic of Uruguay 05-17-17 9.25 400,000(f) 495,000 Republic of Uruguay Pay-in-kind 01-15-33 7.88 198,500(i) 215,869 Republica Orient Uruguay (Uruguay Peso) 04-05-27 4.25 82,561,452(h) 3,868,822 06-26-37 3.70 16,851,015(h) 724,512 Republica Orient Uruguay Sr Unsecured 03-21-36 7.63 1,783,939 1,922,194 ----------- Total 7,226,397 ------------------------------------------------------------------------------------------------ VENEZUELA (7.3%) Petroleos de Venezuela 04-12-17 5.25 11,100,000 6,504,600 Republic of Venezuela 02-26-16 5.75 6,189,500 4,162,439 03-31-38 7.00 1,800,000 999,000 Republic of Venezuela Sr Unsecured 10-08-14 8.50 1,594,000(f) 1,358,885 05-07-23 9.00 8,150,000(f) 5,846,810 ----------- Total 18,871,734 ------------------------------------------------------------------------------------------------ TOTAL BONDS (Cost: $226,570,795) $240,035,994 ------------------------------------------------------------------------------------------------
MONEY MARKET FUND (9.4%) ISSUER SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.25% 24,305,531(k) $24,305,531 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $24,305,531) $24,305,531 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 20 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (2.8%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 7,255,355 $7,255,355 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $7,255,355) $7,255,355 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $258,131,681)(l) $271,596,880 =====================================================================================
INVESTMENTS IN DERIVATIVES CREDIT DEFAULT SWAP CONTRACTS OUTSTANDING AT OCT. 31, 2009 -- BUY PROTECTION
UNAMORTIZED PERIODIC PREMIUM PAYMENTS REFERENCE EXPIRATION PAY FIXED NOTIONAL (PAID) RECEIVABLE UNREALIZED COUNTERPARTY ENTITY DATE RATE AMOUNT VALUE RECEIVED (PAYABLE) DEPRECIATION --------------------------------------------------------------------------------------------------------------------------------- JPMorgan Chase CDX Emerging Markets Index Dec. 20, 2013 2.65% $2,000,000 $43,702 $(307,391) $(19,581) $(283,270) Bank --------------------------------------------------------------------------------------------------------------------------------- Total $(283,270) ---------------------------------------------------------------------------------------------------------------------------------
CREDIT DEFAULT SWAP CONTRACTS OUTSTANDING AT OCT. 31, 2009 -- SELL PROTECTION
UNAMORTIZED PERIODIC PREMIUM PAYMENTS REFERENCE EXPIRATION RECEIVE FIXED NOTIONAL (PAID) RECEIVABLE COUNTERPARTY ENTITY DATE RATE AMOUNT VALUE RECEIVED (PAYABLE) ----------------------------------------------------------------------------------------------------------------------- Merril Lynch CDX Emerging Markets Index June 20, 2013 2.65% $2,000,000 $(37,570) $-- $19,581 Intl ----------------------------------------------------------------------------------------------------------------------- Total ----------------------------------------------------------------------------------------------------------------------- UNREALIZED COUNTERPARTY DEPRECIATION ---------------------------- Merril Lynch $(17,989) Intl ---------------------------- Total $(17,989) ----------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 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 ANNUAL REPORT 21 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 Oct. 31, 2009, the value of these securities amounted to $111,041,384 or 42.8% of net assets. (e) At Oct. 31, 2009, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $7,523,736. See Note 2 to the financial statements. (f) At Oct. 31, 2009, security was partially or fully on loan. See Note 7 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 8 to the financial statements. The rate shown is the seven-day current annualized yield at Oct. 31, 2009. (l) At Oct. 31, 2009, the cost of securities for federal income tax purposes was $258,967,680 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $16,811,351 Unrealized depreciation (4,182,151) ----------------------------------------------------------- Net unrealized appreciation $12,629,200 -----------------------------------------------------------
-------------------------------------------------------------------------------- 22 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 23 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Oct. 31, 2009:
FAIR VALUE AT OCT. 31, 2009 ---------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL --------------------------------------------------------------------------------------------- Bonds Foreign Government Obligations & Agencies $-- $178,219,599 $5,251,716 $183,471,315 Corporate Debt Securities -- 53,861,451 2,703,228 56,564,679 --------------------------------------------------------------------------------------------- Total Bonds -- 232,081,050 7,954,944 240,035,994 --------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(a) 24,305,531 -- -- 24,305,531 Investments of Cash Collateral Received for Securities on Loan 7,255,355 -- -- 7,255,355 --------------------------------------------------------------------------------------------- Total Other 31,560,886 -- -- 31,560,886 --------------------------------------------------------------------------------------------- Investments in Securities 31,560,886 232,081,050 7,954,944 271,596,880 Other Financial Instruments(b) -- (301,259) -- (301,259) --------------------------------------------------------------------------------------------- Total $31,560,886 $231,779,791 $7,954,944 $271,295,621 ---------------------------------------------------------------------------------------------
(a) Money market fund that is a sweep investment for cash balances in the Fund at Oct. 31, 2009. (b) Other Financial Instruments are derivative instruments, which are valued at the unrealized appreciation (depreciation) on the instrument. Derivative descriptions are located in the Investments in Derivatives section of the Portfolio of Investments. -------------------------------------------------------------------------------- 24 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) The following table is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.
FOREIGN GOVERNMENT OBLIGATIONS CORPORATE DEBT OTHER FINANCIAL & AGENCIES SECURITIES INSTRUMENTS TOTAL ------------------------------------------------------------------------------------------ Balance as of Oct. 31, 2008 $3,289,446 $1,065,605 $257,106 $4,612,157 Accrued discounts/premiums 133,002 (3,353) -- 129,649 Realized gain (loss) 55,485 -- * 55,485 Change in unrealized appreciation (depreciation)** 937,363 250,947 (257,106) 931,204 Net purchases (sales) 2,361,820 1,390,029 -- 3,751,849 Transfers in and/or out of Level 3 (1,525,400) -- -- (1,525,400) ------------------------------------------------------------------------------------------ Balance as of Oct. 31, 2009 $5,251,716 $2,703,228 $-- $7,954,944 ------------------------------------------------------------------------------------------
* The realized gain (loss) earned during the period from Nov. 1, 2008 to Oct. 31, 2009 for Other Financial Instruments was $1,196,000. ** Change in unrealized appreciation (depreciation) relating to securities held at Oct. 31, 2009 was $1,957,103. 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 RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 25 STATEMENT OF ASSETS AND LIABILITIES ------------------------------------------- OCT. 31, 2009
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $226,570,795) $240,035,994 Affiliated money market fund (identified cost $24,305,531) 24,305,531 Investments of cash collateral received for securities on loan (identified cost $7,255,355) 7,255,355 -------------------------------------------------------------------------------------- Total investments in securities (identified cost $258,131,681) 271,596,880 Foreign currency holdings (identified cost $597) 615 Capital shares receivable 580,530 Premiums paid on outstanding credit default swap contracts 307,391 Dividends and accrued interest receivable 3,706,164 Receivable for investment securities sold 2,525,178 Cash deposits and collateral held at broker 90,000 -------------------------------------------------------------------------------------- Total assets 278,806,758 -------------------------------------------------------------------------------------- LIABILITIES Disbursements in excess of cash 178,794 Capital shares payable 1,178,121 Payable for investment securities purchased 10,526,809 Payable upon return of securities loaned 7,255,355 Unrealized net depreciation on swap contracts 301,259 Accrued investment management services fees 5,095 Accrued distribution fees 1,109 Accrued transfer agency fees 811 Accrued administrative services fees 567 Other accrued expenses 71,312 -------------------------------------------------------------------------------------- Total liabilities 19,519,232 -------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $259,287,526 -------------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 250,609 Additional paid-in capital 263,063,391 Undistributed net investment income 781,377 Accumulated net realized gain (loss) (17,988,860) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 13,181,009 -------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $259,287,526 -------------------------------------------------------------------------------------- *Including securities on loan, at value $ 6,542,238 --------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 26 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $ 32,726,471 3,161,305 $10.35(1) Class B $ 2,419,853 234,037 $10.34 Class C $ 722,068 69,939 $10.32 Class I $106,358,547 10,273,954 $10.35 Class R4 $ 23,156 2,238 $10.35 Class W $117,037,431 11,319,382 $10.34 -----------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $10.87. 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 EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 27 STATEMENT OF OPERATIONS ------------------------------------------------------- YEAR ENDED OCT. 31, 2009
INVESTMENT INCOME Income: Interest $ 13,685,994 Income distributions from affiliated money market fund 67,892 Income from securities lending -- net 8,194 Less foreign taxes withheld (121,733) ------------------------------------------------------------------------------- Total income 13,640,347 ------------------------------------------------------------------------------- Expenses: Investment management services fees 1,320,292 Distribution fees Class A 35,486 Class B 15,974 Class C 3,265 Class W 254,174 Transfer agency fees Class A 32,935 Class B 4,308 Class C 799 Class R4 9 Class W 203,339 Administrative services fees 146,703 Plan administration services fees -- Class R4 47 Compensation of board members 5,566 Custodian fees 23,020 Printing and postage 32,137 Registration fees 37,819 Professional fees 39,317 Other 11,608 ------------------------------------------------------------------------------- Total expenses 2,166,798 Expenses waived/reimbursed by the Investment Manager and its affiliates (67,266) ------------------------------------------------------------------------------- Total net expenses 2,099,532 ------------------------------------------------------------------------------- Investment income (loss) -- net 11,540,815 ------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (16,816,251) Foreign currency transactions (68,975) Swap transactions (965,355) ------------------------------------------------------------------------------- Net realized gain (loss) on investments (17,850,581) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 83,465,430 ------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 65,614,849 ------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 77,155,664 -------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 28 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS -------------------------------------------
YEAR ENDED OCT. 31, 2009 2008 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 11,540,815 $ 10,826,078 Net realized gain (loss) on investments (17,850,581) (1,897,585) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 83,465,430 (75,049,499) --------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 77,155,664 (66,121,006) --------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (713,409) (513,077) Class B (70,961) (77,784) Class C (14,643) (12,305) Class I (3,796,231) (6,894,152) Class R4 (1,021) (1,280) Class W (5,505,562) (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 (10,101,827) (11,742,841) ---------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 29 STATEMENTS OF CHANGES IN NET ASSETS (continued) -------------------------------
YEAR ENDED OCT. 31, 2009 2008 CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 29,094,965 $ 11,751,345 Class B shares 1,423,379 1,305,864 Class C shares 476,438 219,661 Class I shares 50,883,356 30,579,666 Class R4 shares 454 7,982 Class W shares 37,492,530 146,655,956 Reinvestment of distributions at net asset value Class A shares 683,747 534,907 Class B shares 67,114 77,569 Class C shares 12,821 11,620 Class I shares 3,795,741 8,214,784 Class R4 shares 553 692 Class W shares 5,505,342 2,862,056 Conversions from Class B to Class A Class A shares 305,470 126,592 Class B shares (305,470) (126,592) Payments for redemptions Class A shares (11,853,498) (3,149,341) Class B shares (536,960) (648,167) Class C shares (74,221) (117,014) Class I shares (37,808,587) (89,988,110) Class R4 shares (33) (2,694) Class W shares (67,652,580) (40,766,868) --------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 11,510,561 67,549,908 --------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 78,564,398 (10,313,939) Net assets at beginning of year 180,723,128 191,037,067 --------------------------------------------------------------------------------------------- Net assets at end of year $259,287,526 $180,723,128 --------------------------------------------------------------------------------------------- Undistributed net investment income $ 781,377 $ 2,028,313 ---------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 30 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. For periods ended 2007 and after, per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of sales charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED OCT. 31, CLASS A -------------------------------------------- PER SHARE DATA 2009 2008 2007 2006(a) Net asset value, beginning of period $7.05 $10.57 $10.16 $9.98 ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .53 .61 .59 .33 Net gains (losses) (both realized and unrealized) 3.22 (3.43) .39 .18 ----------------------------------------------------------------------------------------------- Total from investment operations 3.75 (2.82) .98 .51 ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.45) (.61) (.55) (.33) Distributions from realized gains -- (.09) (.02) -- ----------------------------------------------------------------------------------------------- Total distributions (.45) (.70) (.57) (.33) ----------------------------------------------------------------------------------------------- Net asset value, end of period $10.35 $7.05 $10.57 $10.16 ----------------------------------------------------------------------------------------------- TOTAL RETURN 54.87% (28.44%) 9.94% 5.25% ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(B) Gross expenses prior to expense waiver/reimbursement 1.37% 1.41% 1.33% 1.81%(c) ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 1.27% 1.40% 1.33% 1.39%(c) ----------------------------------------------------------------------------------------------- Net investment income (loss) 5.85% 6.31% 5.61% 5.20%(c) ----------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $33 $10 $5 $12 ----------------------------------------------------------------------------------------------- Portfolio turnover rate 62% 82% 41% 32% -----------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 31 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS B -------------------------------------------- PER SHARE DATA 2009 2008 2007 2006(a) Net asset value, beginning of period $7.05 $10.55 $10.16 $9.97 ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .46 .55 .52 .28 Net gains (losses) (both realized and unrealized) 3.22 (3.42) .37 .19 ----------------------------------------------------------------------------------------------- Total from investment operations 3.68 (2.87) .89 .47 ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.39) (.54) (.48) (.28) Distributions from realized gains -- (.09) (.02) -- ----------------------------------------------------------------------------------------------- Total distributions (.39) (.63) (.50) (.28) ----------------------------------------------------------------------------------------------- Net asset value, end of period $10.34 $7.05 $10.55 $10.16 ----------------------------------------------------------------------------------------------- TOTAL RETURN 53.60% (28.85%) 8.94% 4.80% ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(B) Gross expenses prior to expense waiver/reimbursement 2.15% 2.19% 2.13% 2.62%(c) ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 2.04% 2.17% 2.13% 2.20%(c) ----------------------------------------------------------------------------------------------- Net investment income (loss) 5.28% 5.61% 4.90% 4.51%(c) ----------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $1 $1 $1 ----------------------------------------------------------------------------------------------- Portfolio turnover rate 62% 82% 41% 32% -----------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 32 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS C -------------------------------------------- PER SHARE DATA 2009 2008 2007 2006(a) Net asset value, beginning of period $7.04 $10.54 $10.15 $9.97 ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .45 .55 .53 .28 Net gains (losses) (both realized and unrealized) 3.22 (3.42) .36 .18 ----------------------------------------------------------------------------------------------- Total from investment operations 3.67 (2.87) .89 .46 ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.39) (.54) (.48) (.28) Distributions from realized gains -- (.09) (.02) -- ----------------------------------------------------------------------------------------------- Total distributions (.39) (.63) (.50) (.28) ----------------------------------------------------------------------------------------------- Net asset value, end of period $10.32 $7.04 $10.54 $10.15 ----------------------------------------------------------------------------------------------- TOTAL RETURN 53.57% (28.88%) 8.94% 4.75% ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(B) Gross expenses prior to expense waiver/reimbursement 2.13% 2.18% 2.13% 2.61%(c) ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 2.03% 2.16% 2.13% 2.19%(c) ----------------------------------------------------------------------------------------------- Net investment income (loss) 5.06% 5.64% 5.00% 4.46%(c) ----------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $-- $-- $-- ----------------------------------------------------------------------------------------------- Portfolio turnover rate 62% 82% 41% 32% -----------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 33 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS I -------------------------------------------- PER SHARE DATA 2009 2008 2007 2006(a) Net asset value, beginning of period $7.05 $10.57 $10.16 $9.98 ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .57 .69 .65 .35 Net gains (losses) (both realized and unrealized) 3.22 (3.46) .38 .17 ----------------------------------------------------------------------------------------------- Total from investment operations 3.79 (2.77) 1.03 .52 ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.49) (.66) (.60) (.34) Distributions from realized gains -- (.09) (.02) -- ----------------------------------------------------------------------------------------------- Total distributions (.49) (.75) (.62) (.34) ----------------------------------------------------------------------------------------------- Net asset value, end of period $10.35 $7.05 $10.57 $10.16 ----------------------------------------------------------------------------------------------- TOTAL RETURN 55.52% (28.08%) 10.38% 5.44% ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(B) Gross expenses prior to expense waiver/reimbursement .88% .91% .93% 1.52%(c) ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) .85% .91% .93% 1.10%(c) ----------------------------------------------------------------------------------------------- Net investment income (loss) 6.59% 6.89% 6.14% 5.70%(c) ----------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $106 $65 $147 $47 ----------------------------------------------------------------------------------------------- Portfolio turnover rate 62% 82% 41% 32% -----------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 34 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R4 -------------------------------------------- PER SHARE DATA 2009 2008 2007 2006(a) Net asset value, beginning of period $7.05 $10.56 $10.16 $9.98 ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .54 .67 .60 .34 Net gains (losses) (both realized and unrealized) 3.23 (3.43) .39 .18 ----------------------------------------------------------------------------------------------- Total from investment operations 3.77 (2.76) .99 .52 ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.47) (.66) (.57) (.34) Distributions from realized gains -- (.09) (.02) -- ----------------------------------------------------------------------------------------------- Total distributions (.47) (.75) (.59) (.34) ----------------------------------------------------------------------------------------------- Net asset value, end of period $10.35 $7.05 $10.56 $10.16 ----------------------------------------------------------------------------------------------- TOTAL RETURN 55.14% (27.98%) 9.97% 5.36% ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(B) Gross expenses prior to expense waiver/reimbursement 1.18% 1.22% 1.24% 1.67%(c) ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 1.11% .97% 1.24% 1.25%(c) ----------------------------------------------------------------------------------------------- Net investment income (loss) 6.31% 6.82% 5.75% 5.37%(c) ----------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- ----------------------------------------------------------------------------------------------- Portfolio turnover rate 62% 82% 41% 32% -----------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 35 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS W -------------------------------- PER SHARE DATA 2009 2008 2007(e) Net asset value, beginning of period $7.05 $10.55 $10.24 ----------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .53 .56 .57 Net gains (losses) (both realized and unrealized) 3.21 (3.36) .28 ----------------------------------------------------------------------------------- Total from investment operations 3.74 (2.80) .85 ----------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.45) (.61) (.52) Distributions from realized gains -- (.09) (.02) ----------------------------------------------------------------------------------- Total distributions (.45) (.70) (.54) ----------------------------------------------------------------------------------- Net asset value, end of period $10.34 $7.05 $10.55 ----------------------------------------------------------------------------------- TOTAL RETURN 54.69% (28.29%) 8.49% ----------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(B) Gross expenses prior to expense waiver/reimbursement 1.33% 1.35% 1.33%(c) ----------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 1.30% 1.35% 1.33%(c) ----------------------------------------------------------------------------------- Net investment income (loss) 6.18% 6.08% 5.86%(c) ----------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $117 $104 $38 ----------------------------------------------------------------------------------- Portfolio turnover rate 62% 82% 41% -----------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For the period from Feb. 16, 2006 (when shares became publicly available) to Oct. 31, 2006. (b) 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 reported expense ratios. (c) Annualized. (d) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (e) For the period from Dec. 1, 2006 (when shares became publicly available) to Oct. 31, 2007. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 36 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS ------------------------------------------------- 1. ORGANIZATION 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 (the 1940 Act) 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 Fund's 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 offered with a front-end sales charge, which may be waived under certain circumstances. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares one month after the completion of the eighth year of ownership if originally purchased in a RiverSource fund on or after May 21, 2005 or originally purchased in a Seligman fund on or after June 13, 2009. Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund prior to June 13, 2009 will convert to Class A shares in the month prior to the ninth year of ownership. - Class C shares may be subject to a CDSC. - Class I and Class R4 shares are offered without a front-end sales charge or CDSC to qualifying institutional investors. - Class W shares are offered without a front-end sales charge or CDSC and are offered through qualifying discretionary accounts. At Oct. 31, 2009, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) and affiliated funds-of-funds in the RiverSource Family of Funds owned 100% of Class I shares. At Oct. 31, 2009, the Investment Manager and affiliated funds-of-funds in the RiverSource Family of Funds owned approximately 41% 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. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF NEW ACCOUNTING STANDARD In June 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification(TM) (Codification) as the single source of authoritative accounting principles recognized by the FASB in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP). The Codification supersedes existing non-grandfathered, non- SEC accounting and reporting standards. The Codification did not change GAAP but rather organized it into a hierarchy where all guidance within the Codification carries an equal level of authority. The Codification became effective for financial statements issued for interim and annual periods ending after Sept. 15, 2009. The Codification did not have a material effect on the Fund's financial statements. 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 business of the New York Stock Exchange (NYSE). 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 by an independent pricing service using an evaluated bid. 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 NYSE and therefore the closing prices for securities in such markets or on -------------------------------------------------------------------------------- 38 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 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. 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. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. FOREIGN CURRENCY TRANSLATIONS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At Oct. 31, 2009, foreign currency holdings consisted of Brazilian real and Mexican pesos. 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- -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- commitments. At Oct. 31, 2009, the Fund had outstanding when-issued securities of $7,523,736. 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 (which includes net short-term capital gains) 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. DIVIDENDS TO SHAREHOLDERS Dividends from net investment income, declared 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. 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to -------------------------------------------------------------------------------- 40 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. FORWARD FOREIGN CURRENCY CONTRACTS The Fund may enter into forward foreign currency contracts in connection with settling purchases or sales of securities, to hedge the currency exposure associated with some or all of the Fund's securities or as part of its investment strategy. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked to market daily based upon foreign currency exchange rates from an independent pricing service and the change in value is recorded as unrealized appreciation or depreciation. The Fund will record a realized gain or loss when the forward foreign currency contract is closed. The risks of forward foreign currency contracts include movement in the values of the foreign currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that the counterparty will not complete its contractual obligation, which may be in excess of the amount, if any, reflected in the Statement of Assets and Liabilities. At Oct. 31, 2009, the Fund had no outstanding forward foreign currency contracts. CREDIT DEFAULT SWAP TRANSACTIONS The Fund may enter into credit default swap transactions to increase or decrease its credit exposure to an issuer of debt securities, a specific debt security, or an index of issuers or debt securities. Additionally, credit default swaps may be used to hedge the Fund's exposure on a debt security that it owns or in lieu of selling such debt security. 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 reference 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 or cash 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. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 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 reference 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 or cash received and the notional amount paid will be recorded as a realized gain (loss). The maximum potential amount of undiscounted future payments the Fund could be required to make as the seller of protection under a credit default swap contract is equal to the notional amount of the reference obligation. Notional amounts of all credit default swap contracts outstanding for which the Fund is the seller of protection are disclosed in the Credit Default Swap Contracts Outstanding schedule following the Portfolio of Investments. These potential amounts may be partially offset by any recovery values of the respective reference obligations or premiums received upon entering into the agreement. As a protection seller, the Fund bears the risk of loss from the credit events specified in the contract. Although specified events are contract specific, credit events are generally defined as bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium. For credit default swap contracts on credit indices, quoted market prices and resulting market values serve as an indicator of the current status of the payment/performance risk. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity's credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract. Market values for credit default swap contracts in which the Fund is the seller of protection are disclosed in the Credit Default Swap Contracts Outstanding schedule following the Portfolio of Investments. The notional amounts and market values 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) in 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 reference 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 -------------------------------------------------------------------------------- 42 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- transactions only with counterparties that meet certain standards of creditworthiness. INTEREST RATE SWAP TRANSACTIONS The Fund may enter into interest rate swap transactions to produce incremental earnings, or to gain exposure to or protect itself from market rate changes, or to synthetically add or subtract principal exposure to a 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 interest rate swaps include a lack of correlation between the swaps and the portfolio of bonds the swaps are designed to hedge or replicate. A lack of correlation may cause the interest rate swaps 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 taken. The Fund's maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from/paid to the counterparty over the contract's remaining life to the extent that such amount is positive, plus the cost of entering into a similar transaction with another counterparty. This risk is mitigated by having a master netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund's exposure to the counterparty. At Oct. 31, 2009, the Fund had no outstanding interest rate swap contracts. EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS The following tables are intended to provide additional information about the effect of derivatives on the financial statements of the Fund including: the fair value of derivatives by risk category and the location of those fair values in the Statement of Assets and Liabilities; the impact of derivative transactions on the Fund's operations over the period including realized gains or losses and -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 43 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- unrealized gains or losses. The derivative schedules following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any. FAIR VALUES OF DERIVATIVE INSTRUMENTS AT OCT. 31, 2009
ASSET DERIVATIVES LIABILITY DERIVATIVES ------------------------------- ------------------------------------- STATEMENT OF ASSETS STATEMENT OF ASSETS RISK EXPOSURE AND LIABILITIES AND LIABILITIES CATEGORY LOCATION FAIR VALUE LOCATION FAIR VALUE ------------------------------------------------------------------------------------------- Credit contracts Premium paid on outstanding credit default swap contracts $ 307,391 ------------------------------------------------------------------------------------------- Unrealized net Unrealized net depreciation on depreciation on swap transactions (283,270) swap transactions $17,989 ------------------------------------------------------------------------------------------- Total $ 24,121 $17,989 -------------------------------------------------------------------------------------------
EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCT. 31, 2009
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME ----------------------------------------------------------------------- FORWARD FOREIGN CURRENCY RISK EXPOSURE CATEGORY CONTRACTS SWAPS TOTAL ----------------------------------------------------------------------------- Credit contracts $ -- $(2,161,355) $(2,161,355) ----------------------------------------------------------------------------- Foreign exchange contracts 46,893 -- $ 46,893 ----------------------------------------------------------------------------- Interest rate contracts -- 1,196,000 $ 1,196,000 ----------------------------------------------------------------------------- Total $46,893 $ (965,355) $ (918,462) -----------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME ---------------------------------------------------------------------- FORWARD FOREIGN CURRENCY RISK EXPOSURE CATEGORY CONTRACTS SWAPS TOTAL ---------------------------------------------------------------------------- Credit contracts $-- $1,701,297 $1,701,297 ---------------------------------------------------------------------------- Foreign exchange contracts -- -- $ -- ---------------------------------------------------------------------------- Interest rate contracts -- (257,106) $ (257,106) ---------------------------------------------------------------------------- Total $-- $1,444,191 $1,444,191 ----------------------------------------------------------------------------
-------------------------------------------------------------------------------- 44 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- VOLUME OF DERIVATIVE ACTIVITY FORWARD FOREIGN CURRENCY CONTRACTS At Oct. 31, 2009, the Fund had no outstanding forward foreign currency contracts. The monthly average gross notional amount for these contracts was $100,000 for the year ended Oct. 31, 2009. SWAPS The gross notional amount of contracts outstanding was $4.0 million at Oct. 31, 2009. The monthly average gross notional amount for these contracts was $12.4 million for the year ended Oct. 31, 2009. The fair value of such contracts on Oct. 31, 2009 is set forth in the table above. 4. 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 an annual fee that is equal to a percentage of the Fund's average daily net assets that declines from 0.72% to 0.52% as the Fund's net assets increase. The management fee for the year ended Oct. 31, 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 an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% as the Fund's net assets increase. The fee for the year ended Oct. 31, 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 year ended Oct. 31, 2009, other expenses paid to this company were $1,141. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act 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 funds in the RiverSource Family -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 45 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains Fund shareholder accounts and records and provides Fund shareholder services. 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 Transfer Agent also charges an annual fee of $3 per account serviced directly by the Fund or its designated agent for Class A, Class B and Class C shares. 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 the 12 month period 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 an agreement with RiverSource Fund Distributors, Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate 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, of the 1.00% fee, up to 0.75% is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $81,000 and $44,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of July 31, 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. -------------------------------------------------------------------------------- 46 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- SALES CHARGES Sales charges, including front-end and CDSCs, received by the Distributor for distributing Fund shares were $69,829 for Class A and $941 for Class B for the year ended Oct. 31, 2009. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended Oct. 31, 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............................................ 1.11 Class W............................................. 1.30
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class A........................................... $8,786 Class B........................................... 1,267 Class C........................................... 210
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 $56,996. Under an agreement which was effective until Oct. 31, 2009, the Investment Manager and its affiliates contractually agreed to waive certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), would 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
Effective Nov. 1, 2009, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Dec. 31, 2010, unless sooner terminated at the discretion of the Board, such that net expenses -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 47 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- (excluding fees and expenses of acquired funds*), will not exceed the following percentage of the class' average daily net assets: Class A............................................. 1.31% Class B............................................. 2.08 Class C............................................. 2.07 Class I............................................. 0.92 Class R4............................................ 1.22 Class W............................................. 1.37
* 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 $2,446 to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $131,951,002 and $103,069,180, respectively, for the year ended Oct. 31, 2009. Realized gains and losses are determined on an identified cost basis. 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
YEAR ENDED OCT. 31, 2009 2008* ------------------------------------------------------------------ CLASS A Sold 3,173,284 1,193,673 Converted from Class B** 31,953 13,064 Reinvested distributions 76,058 54,556 Redeemed (1,490,957) (332,734) ------------------------------------------------------------------ Net increase (decrease) 1,790,338 928,559 ------------------------------------------------------------------
-------------------------------------------------------------------------------- 48 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, 2009 2008* ------------------------------------------------------------------ CLASS B Sold 153,167 131,117 Reinvested distributions 7,818 7,815 Converted to Class A** (31,986) (13,091) Redeemed (62,140) (67,333) ------------------------------------------------------------------ Net increase (decrease) 66,859 58,508 ------------------------------------------------------------------ CLASS C Sold 49,606 21,942 Reinvested distributions 1,458 1,173 Redeemed (8,248) (12,061) ------------------------------------------------------------------ Net increase (decrease) 42,816 11,054 ------------------------------------------------------------------ CLASS I Sold 5,204,021 3,444,578 Reinvested distributions 449,432 822,959 Redeemed (4,633,781) (8,936,995) ------------------------------------------------------------------ Net increase (decrease) 1,019,672 (4,669,458) ------------------------------------------------------------------ CLASS R4 Sold 55 781 Reinvested distributions 65 70 Redeemed (4) (264) ------------------------------------------------------------------ Net increase (decrease) 116 587 ------------------------------------------------------------------ CLASS W Sold 4,123,883 15,118,235 Reinvested distributions 659,389 298,553 Redeemed (8,276,964) (4,196,818) ------------------------------------------------------------------ Net increase (decrease) (3,493,692) 11,219,970 ------------------------------------------------------------------
* Certain line items from the prior year have been renamed to conform to the current year presentation. ** Automatic conversion of Class B shares to Class A shares based on the original purchase date. 7. 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 -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 49 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 univested 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 collateral upon the return of the securities loaned. At Oct. 31, 2009, securities valued at $6,542,238 were on loan, secured by cash collateral of $7,255,355 invested in short-term securities or in cash equivalents. 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. 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. Net income of $8,194 earned from securities lending from Dec. 1, 2008 through Oct. 31, 2009, is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 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. 8. 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 funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $127,416,168 and $137,122,895, respectively, for the year ended Oct. 31, 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 Oct. 31, 2009, can be found in the Portfolio of Investments. -------------------------------------------------------------------------------- 50 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 9. 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 became effective on Oct. 15, 2009, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other funds in the RiverSource Family of Funds, severally and not jointly, permits collective borrowings up to $300 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $200 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 $500 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 sum of the federal funds rate plus (A) 1.25% per annum plus (B) if one-month LIBOR exceeds the federal funds rate, the amount of such excess. 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 0.10% per annum, in addition to an upfront fee equal to its pro rata share of 0.04% of the amount of the credit facility. Prior to Oct. 15, 2009, the credit facility agreement, which was a collective agreement between the Fund and certain other funds in the RiverSource Family of Funds, severally and not jointly, permitted collective borrowings up to $475 million. Interest was charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. The Fund also paid 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 year ended Oct. 31, 2009. 10. FEDERAL TAX INFORMATION 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, foreign tax credits 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. -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 51 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- In the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $2,685,924 and accumulated net realized loss has been decreased by $2,685,924. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED OCT. 31, 2009 2008 ------------------------------------------------------------------ Ordinary income......................... $10,101,827 $11,119,127 Long-term capital gain.................. -- 623,714
At Oct. 31, 2009, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income.................. $ 488,651 Undistributed accumulated long-term gain....... $ -- Accumulated realized loss...................... $(17,157,025) Unrealized appreciation (depreciation)......... $ 12,641,900
For federal income tax purposes, the Fund had a capital loss carry-over of $17,157,025 at Oct. 31, 2009, that if not offset by capital gains will expire as follows:
2016 2017 2,399,388 14,757,637
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. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 11. 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. -------------------------------------------------------------------------------- 52 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 12. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Dec. 21, 2009, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 13. 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 (now known as RiverSource) 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. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. 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 -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 53 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 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. Incorporated (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. (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 was and had 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 paid $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 -------------------------------------------------------------------------------- 54 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 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 EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 55 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF RIVERSOURCE EMERGING MARKETS BOND FUND: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of RiverSource Emerging Markets Bond Fund (the Fund) (one of the portfolios constituting the RiverSource Global Series, Inc.) as of October 31, 2009, and the related statement of operations for the year then ended, and the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of the Fund for the periods presented through October 31, 2006, were audited by other auditors whose report dated December 20, 2006, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2009, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. -------------------------------------------------------------------------------- 56 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- In our opinion, the financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of RiverSource Emerging Markets Bond Fund of the RiverSource Global Series, Inc. at October 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota December 21, 2009 -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 57 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- OCT. 31, 2009 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
BONDS (95.9%)(c) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) ARGENTINA (0.2%) Republic of Argentina Sr Unsecured 09-12-13 7.00% $1,033,000 $847,060 12-15-35 0.00 2,900,000(h) 217,500 --------------- Total 1,064,560 ------------------------------------------------------------------------------------- AUSTRALIA (1.5%) Australia & New Zealand Banking Group (Australian Dollar) 11-08-11 6.50 420,000 382,485 Commonwealth Bank of Australia (European Monetary Unit) Sr Unsub 11-12-09 3.38 745,000 1,096,984 New South Wales Treasury (Australian Dollar) 05-01-12 6.00 5,750,000 5,249,413 Telstra Sr Unsecured 04-01-12 6.38 500,000(n) 545,120 Westpac Banking (Australian Dollar) Sr Unsub 09-24-12 7.25 600,000 554,131 --------------- Total 7,828,133 ------------------------------------------------------------------------------------- AUSTRIA (1.6%) Republic of Austria (European Monetary Unit) 07-15-14 4.30 5,245,000 8,291,153 ------------------------------------------------------------------------------------- BELGIUM (1.7%) Fortis Bank (European Monetary Unit) Sr Unsecured 05-30-14 4.50 420,000 639,139 Kingdom of Belgium (European Monetary Unit) 03-28-10 3.00 3,965,000 5,888,755 09-28-12 5.00 1,385,000 2,216,395 --------------- Total 8,744,289 ------------------------------------------------------------------------------------- BRAZIL (2.0%) Banco Nacional de Desenvolvimento Economico e Social 06-10-19 6.50 $910,000(d) 961,307 Banco Nacional de Desenvolvimento Economico e Social Sr Unsecured 06-16-18 6.37 535,000(d) 564,425 Centrais Eletricas Brasileiras Sr Unsecured 07-30-19 6.88 375,000(d) 400,393 Federative Republic of Brazil 01-15-18 8.00 282,389 322,629 Federative Republic of Brazil Sr Unsecured 01-17-17 6.00 307,000 328,183 10-14-19 8.88 115,000 146,338 Nota do Tesouro Nacional (Brazilian Real) Series F 01-01-12 10.00 640,500 3,665,056 01-01-13 10.00 700,000 3,889,874 --------------- Total 10,278,205 ------------------------------------------------------------------------------------- CANADA (2.6%) Canadian Pacific Railway (Canadian Dollar) Sr Unsecured 06-15-10 4.90 380,000(d) 358,647 Govt of Canada (Canadian Dollar) 06-01-18 4.25 1,730,000 1,713,226 Nexen Sr Unsecured 05-15-37 6.40 200,000 197,800 Nova Chemicals Sr Unsecured 11-01-16 8.38 225,000(d) 227,813 11-01-19 8.63 190,000(d,n) 192,375 Province of British Columbia (Canadian Dollar) 06-18-14 5.30 1,790,000 1,824,762
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 16 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) CANADA (CONT.) Province of Ontario (Canadian Dollar) 03-08-14 5.00% 3,385,000 $3,401,692 Province of Quebec (Canadian Dollar) 12-01-17 4.50 1,683,000 1,625,481 Royal Bank of Canada (European Monetary Unit) Sr Unsecured 01-18-13 3.25 630,000 942,997 TELUS Sr Unsecured 06-01-11 8.00 980,000 1,068,274 Thomson Reuters 10-01-14 5.70 1,080,000 1,191,951 Toronto-Dominion Bank (European Monetary Unit) Sr Unsecured 05-14-15 5.38 600,000 960,985 --------------- Total 13,706,003 ------------------------------------------------------------------------------------- COLOMBIA (0.3%) Ecopetrol Sr Unsecured 07-23-19 7.63 300,000 327,000 Republic of Colombia 01-27-17 7.38 230,000(n) 256,450 09-18-37 7.38 260,000(n) 287,950 01-18-41 6.13 235,000(n) 216,503 Republic of Colombia Sr Unsecured 03-18-19 7.38 250,000(n) 282,750 --------------- Total 1,370,653 ------------------------------------------------------------------------------------- CZECH REPUBLIC (0.1%) Czech Republic (Czech Koruna) 06-16-13 3.70 11,530,000 653,238 ------------------------------------------------------------------------------------- DENMARK (0.8%) Danske Bank (European Monetary Unit) 03-16-10 0.82 750,000(i) 1,103,868 Nykredit Realkredit (Danish Krone) 04-01-28 5.00 10,260,772 2,060,678 Nykredit Realkredit (European Monetary Unit) 01-01-10 5.00 750,000 1,110,201 --------------- Total 4,274,747 ------------------------------------------------------------------------------------- EL SALVADOR (--%) Republic of El Salvador Sr Unsecured 01-24-23 7.75 245,000(d) 257,250 ------------------------------------------------------------------------------------- FRANCE (4.7%) BNP Paribas (European Monetary Unit) Sr Sub Nts 12-17-12 5.25 555,000 877,977 Caisse Refinance Hypothe (European Monetary Unit) 10-11-10 4.38 700,000 1,059,855 Credit Agricole (European Monetary Unit) Sr Unsecured 06-24-13 6.00 550,000 895,411 Electricite de France (European Monetary Unit) Sr Unsecured 02-05-18 5.00 750,000 1,172,263 France Telecom (European Monetary Unit) Sr Unsecured 02-21-17 4.75 1,180,000 1,825,219 Govt of France (European Monetary Unit) 04-25-12 5.00 2,365,000 3,763,132 04-25-13 4.00 6,020,000 9,419,872 10-25-16 5.00 2,880,000 4,763,208 Veolia Environnement (European Monetary Unit) 01-16-17 4.38 315,000 464,157 --------------- Total 24,241,094 ------------------------------------------------------------------------------------- GERMANY (6.1%) Bayerische Landesbank (Japanese Yen) 04-22-13 1.40 170,000,000 1,900,891
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) GERMANY (CONT.) Bundesrepublik Deutschland (European Monetary Unit) 07-04-10 5.25% 2,165,000 $3,282,708 07-04-19 3.50 1,500,000 2,253,778 07-04-27 6.50 4,650,000 8,959,806 07-04-28 4.75 1,975,000 3,171,781 07-04-34 4.75 4,585,000 7,415,097 Deutsche Pfandbriefbank (European Monetary Unit) Series G6 01-15-10 5.50 1,375,000 2,041,045 Landwirtschaftliche Rentenbank (Australian Dollar) 06-15-11 5.75 1,250,000 1,130,349 Rheinische Hypothekenbank (European Monetary Unit) Series 803 07-05-10 5.75 1,305,000(d) 1,976,931 --------------- Total 32,132,386 ------------------------------------------------------------------------------------- GREECE (1.5%) Hellenic Republic (European Monetary Unit) 08-20-12 4.10 2,820,000 4,326,402 Hellenic Republic (European Monetary Unit) Sr Unsub 10-22-22 5.90 2,010,000 3,266,321 --------------- Total 7,592,723 ------------------------------------------------------------------------------------- INDONESIA (0.9%) Govt of Indonesia (Indonesian Rupiah) 05-15-16 10.75 9,320,000,000 1,017,095 Govt of Indonesia (Indonesian Rupiah) Series FR43 07-15-22 10.25 21,944,000,000 2,250,771 Perusahaan Penerbit SBSN 04-23-14 8.80 160,000(d) 181,212 Republic of Indonesia Sr Unsecured 01-17-18 6.88 500,000(d) 527,500 10-12-35 8.50 190,000(d) 225,150 02-17-37 6.63 205,000(d) 196,800 01-17-38 7.75 140,000(d) 151,200 --------------- Total 4,549,728 ------------------------------------------------------------------------------------- IRELAND (0.1%) GE Capital UK Funding (British Pound) 04-26-10 5.88 275,000 457,731 ------------------------------------------------------------------------------------- ITALY (4.3%) Buoni Poliennali Del Tesoro (European Monetary Unit) 01-15-10 3.00 2,290,000 3,385,436 04-15-12 4.00 1,970,000 3,045,796 02-01-19 4.25 2,620,000 4,009,734 11-01-26 7.25 3,486,283 6,700,325 11-01-27 6.50 1,025,000 1,833,805 Intesa Sanpaolo (European Monetary Unit) Sr Unsecured 12-19-13 5.38 400,000 635,791 Italy Buoni Poliennali Del Tesoro (European Monetary Unit) 07-01-12 2.50 1,850,000 2,750,136 Telecom Italia Capital 11-15-13 5.25 120,000(n) 126,266 --------------- Total 22,487,289 ------------------------------------------------------------------------------------- JAPAN (10.9%) Bayer Holding (Japanese Yen) 06-28-12 1.96 40,000,000 440,466 Development Bank of Japan (Japanese Yen) 06-20-12 1.40 417,000,000 4,737,734 Govt of Japan CPI Linked (Japanese Yen) 03-10-18 1.40 463,264,000(m) 4,817,256 Govt of Japan (Japanese Yen) 09-20-17 1.70 811,000,000 9,396,059 12-20-22 1.40 411,000,000 4,377,902 12-20-26 2.10 884,000,000 9,931,325 09-20-29 2.10 300,000,000 3,319,088 12-20-34 2.40 203,000,000 2,328,551 03-20-39 2.30 123,000,000 1,375,974 Govt of Japan (Japanese Yen) Series 239 06-20-12 1.40 315,000,000 3,596,614
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 18 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) JAPAN (CONT.) Govt of Japan (Japanese Yen) Series 244 12-20-12 1.00% 913,000,000 $10,329,053 Govt of Japan (Japanese Yen) Series 267 12-20-14 1.30 200,000,000 2,284,640 --------------- Total 56,934,662 ------------------------------------------------------------------------------------- KAZAKHSTAN (0.1%) KazMunaiGaz Finance 07-02-18 9.13 250,000(d) 275,594 ------------------------------------------------------------------------------------- LUXEMBOURG (0.1%) Gaz Capital Secured 11-22-16 6.21 100,000(d) 95,500 08-16-37 7.29 230,000(d) 213,900 --------------- Total 309,400 ------------------------------------------------------------------------------------- MALAYSIA (0.5%) Petronas Capital 05-22-12 7.00 500,000(d,n) 551,313 08-12-19 5.25 1,980,000(d,n) 1,995,803 --------------- Total 2,547,116 ------------------------------------------------------------------------------------- MEXICO (1.4%) Mexican Fixed Rate Bonds (Mexican Peso) Series M-10 12-17-15 8.00 60,280,000 4,646,777 Mexican Fixed Rate Bonds (Mexican Peso) Series MI-10 12-19-13 8.00 24,940,000 1,941,058 Pemex Project Funding Master Trust 03-01-18 5.75 617,000 610,830 United Mexican States Sr Unsecured 09-27-34 6.75 270,000 292,950 --------------- Total 7,491,615 ------------------------------------------------------------------------------------- NETHERLANDS (4.1%) Allianz Finance II (European Monetary Unit) 11-23-16 4.00 400,000 596,129 BMW Finance (European Monetary Unit) 09-19-13 8.88 650,000 1,133,270 Deutsche Telekom Intl Finance (British Pound) 12-09-10 6.25 415,000 711,237 Deutsche Telekom Intl Finance (European Monetary Unit) 01-19-15 4.00 1,335,000(n) 1,984,919 E.ON Intl Finance (European Monetary Unit) 10-02-17 5.50 535,000 858,755 Govt of Netherlands (European Monetary Unit) 07-15-12 5.00 2,880,000 4,595,768 07-15-13 4.25 2,545,000 4,016,176 07-15-16 4.00 1,900,000 2,959,965 ING Groep (European Monetary Unit) Sr Unsecured 05-31-17 4.75 1,205,000 1,799,091 Nederlandse Waterschapsbank (British Pound) Sr Unsub 06-07-10 5.38 850,000 1,429,327 Rabobank Nederland (European Monetary Unit) Sr Unsub 04-04-12 4.13 600,000 926,170 --------------- Total 21,010,807 ------------------------------------------------------------------------------------- NEW ZEALAND (0.5%) Govt of New Zealand (New Zealand Dollar) 04-15-13 6.50 3,700,000 2,767,802 ------------------------------------------------------------------------------------- NORWAY (1.8%) Eksportfinans (British Pound) Sr Unsecured 09-06-10 6.00 930,000 1,572,774 Govt of Norway (Norwegian Krone) 05-16-11 6.00 31,150,000 5,726,211 Kommunalbanken (British Pound) Sr Unsecured 01-28-10 4.75 1,300,000 2,153,779 --------------- Total 9,452,764 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 19 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) PHILIPPINE ISLANDS (0.3%) Power Sector Assets & Liabilities 05-27-19 7.25% $790,000(d) $847,275 Republic of Philippines 01-15-16 8.00 100,000 115,750 01-14-31 7.75 405,000(n) 456,638 --------------- Total 1,419,663 ------------------------------------------------------------------------------------- POLAND (1.2%) Govt of Poland (Polish Zloty) 04-25-13 5.25 6,400,000 2,207,345 Govt of Poland (Polish Zloty) Series 1017 10-25-17 5.25 7,160,000 2,359,376 Govt of Poland (Polish Zloty) Series 310 03-24-10 5.75 5,340,000 1,858,609 --------------- Total 6,425,330 ------------------------------------------------------------------------------------- QATAR (0.2%) Ras Laffan Liquefied Natural Gas Sr Secured 09-30-14 5.50 310,000(d,n) 330,330 State of Qatar Sr Nts 04-09-19 6.55 550,000(d) 616,840 --------------- Total 947,170 ------------------------------------------------------------------------------------- RUSSIA (0.3%) Russian Federation 03-31-30 7.50 1,217,300(d,n) 1,360,941 TransCapitalInvest for Transneft Secured 03-05-14 5.67 200,000(d) 196,750 08-07-18 8.70 100,000(d,n) 112,000 --------------- Total 1,669,691 ------------------------------------------------------------------------------------- SOUTH AFRICA (0.4%) Republic of South Africa (South African Rand) Sr Unsecured 12-21-14 8.75 14,625,000 1,884,878 ------------------------------------------------------------------------------------- SOUTH KOREA (0.7%) Export-Import Bank of Korea Sr Nts 01-21-14 8.13 $810,000 935,366 Export-Import Bank of Korea Sr Unsecured 01-14-15 5.88 450,000 472,777 Korea Development Bank (Japanese Yen) Sr Unsecured 06-28-10 0.87 200,000,000 2,191,408 --------------- Total 3,599,551 ------------------------------------------------------------------------------------- SPAIN (2.4%) AyT Cedulas Cajas Global (European Monetary Unit) 06-14-18 4.25 1,500,000 2,147,596 Caja de Ahorros y Monte de Piedad de Madrid (European Monetary Unit) 03-25-11 3.50 1,800,000 2,703,905 Govt of Spain (European Monetary Unit) 07-30-17 5.50 2,050,000 3,451,051 Instituto de Credito Oficial (Australian Dollar) 03-08-11 5.50 1,360,000 1,223,581 Santander Intl Debt (European Monetary Unit) Bank Guaranteed 04-11-11 5.13 1,200,000 1,838,015 Telefonica Emisiones SAU (European Monetary Unit) 02-02-16 4.38 550,000 827,462 --------------- Total 12,191,610 ------------------------------------------------------------------------------------- SUPRA-NATIONAL (0.7%) Corp Andina de Fomento Sr Unsecured 06-04-19 8.13 730,000 863,730 European Investment Bank (British Pound) Sr Unsecured 12-07-11 5.50 1,695,000 2,992,586 --------------- Total 3,856,316 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 20 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) SWEDEN (1.7%) Govt of Sweden (Swedish Krona) 05-05-14 6.75% 37,570,000 $6,229,048 Govt of Sweden (Swedish Krona) Series 1045 03-15-11 5.25 17,000,000 2,546,836 --------------- Total 8,775,884 ------------------------------------------------------------------------------------- TUNISIA (0.4%) Banque Centrale de Tunisie (Japanese Yen) 08-02-10 3.30 190,000,000 2,102,047 ------------------------------------------------------------------------------------- TURKEY (0.3%) Republic of Turkey 04-03-18 6.75 204,000 217,770 06-05-20 7.00 235,000 252,331 03-17-36 6.88 540,000 544,050 Republic of Turkey Sr Unsecured 07-14-17 7.50 350,000 390,688 --------------- Total 1,404,839 ------------------------------------------------------------------------------------- UNITED KINGDOM (3.3%) BT Group Sr Unsecured 12-15-10 9.13 550,000 592,290 SABMiller 01-15-14 5.70 1,275,000(d) 1,378,881 United Kingdom Treasury (British Pound) 03-07-19 4.50 2,600,000 4,560,393 03-07-25 5.00 660,000 1,199,891 12-07-27 4.25 1,750,000 2,932,936 03-07-36 4.25 1,480,000 2,461,238 12-07-38 4.75 1,690,000 3,057,859 12-07-49 4.25 485,000 818,414 --------------- Total 17,001,902 ------------------------------------------------------------------------------------- UNITED STATES (35.6%) Allied Waste North America 04-15-13 7.88 405,000 417,656 AmeriCredit Automobile Receivables Trust Series 2007-DF Cl A3A (FSA) 07-06-12 5.49 $532,586(l) 538,981 Anadarko Petroleum Sr Unsecured 09-15-16 5.95 970,000 1,040,322 Anheuser-Busch InBev Worldwide 01-15-14 7.20 1,370,000(d) 1,543,373 Ashland 06-01-17 9.13 180,000(d,n) 194,400 AT&T Sr Unsecured 02-15-39 6.55 1,605,000 1,736,172 Ball 09-01-16 7.13 30,000(n) 30,675 09-01-19 7.38 35,000(n) 35,788 Bank of America (British Pound) Sr Unsecured 02-02-11 0.97 950,000(i) 1,523,434 Bank of America Sr Unsecured 05-01-18 5.65 2,190,000 2,215,890 Bear Stearns Commercial Mtge Securities Series 2003-T10 Cl A1 03-13-40 4.00 235,061(f) 237,337 BMW Vehicle Lease Trust Series 2009-1 Cl A2 04-15-11 2.04 1,500,000 1,511,110 CC Holdings GS V LLC/Crown Castle GS III Sr Secured 05-01-17 7.75 820,000(d) 860,999 CenterPoint Energy Houston Electric LLC Series U 03-01-14 7.00 605,000 689,347 CenterPoint Energy Resources Sr Unsecured 02-15-11 7.75 1,230,000 1,312,412 Charter Communications Operating LLC/Capital Secured 04-30-12 10.00 430,000(d) 436,450 Chesapeake Energy 01-15-16 6.63 250,000 240,313
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 21 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) UNITED STATES (CONT.) Citibank Credit Card Issuance Trust (European Monetary Unit) Series 2001-A4 Cl A4 04-10-13 5.38% 1,160,000 $1,750,898 Citibank Omni Master Trust Series 2007-A9A Cl A9 12-23-13 1.35 1,825,000(d,i) 1,824,185 CitiFinancial Auto Issuance Trust Series 2009-1 Cl A2 11-15-12 1.83 5,050,000(d) 5,038,162 Citigroup Commercial Mtge Trust Series 2006-C5 Cl A4 10-15-49 5.43 1,700,000(f) 1,581,548 Citigroup (European Monetary Unit) Sr Unsecured 08-02-19 5.00 595,000 831,343 Citigroup Sr Unsecured 05-15-18 6.13 170,000 172,049 Cleveland Electric Illuminating 1st Mtge 11-15-18 8.88 750,000 944,012 Colorado Interstate Gas Sr Unsecured 11-15-15 6.80 3,170,000 3,509,168 Comcast 07-01-39 6.55 1,340,000(n) 1,396,407 Commercial Mtge Pass-Through Ctfs Series 2006-CN2A Cl BFL 02-05-19 0.56 400,000(d,f,i) 292,100 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2006-22R Cl 1A2 05-25-36 6.00 1,028,997(f) 778,679 CPS Auto Trust Series 2007-A Cl A3 (MBIA) 09-15-11 5.04 415,562(d,l) 419,263 CS First Boston Mtge Securities Series 2004-C2 Cl A1 05-15-36 3.82 598,033(f) 595,440 Cricket Communications Sr Secured 05-15-16 7.75 317,000(d,n) 316,208 CSC Holdings Sr Unsecured 04-15-14 8.50 $285,000(d,n) 301,744 02-15-19 8.63 100,000(d,n) 107,000 DaVita 03-15-13 6.63 365,000 359,525 Del Monte Sr Sub Nts 10-15-19 7.50 370,000(d) 375,550 Denbury Resources 03-01-16 9.75 310,000 332,475 DISH DBS 10-01-14 6.63 365,000 355,875 Dow Chemical (European Monetary Unit) Sr Unsecured 05-27-11 4.63 520,000 777,240 Dow Chemical Sr Unsecured 05-15-19 8.55 650,000 742,055 DTE Energy Sr Unsecured 05-15-14 7.63 1,540,000 1,699,490 Duke Energy Indiana 1st Mtge 08-15-38 6.35 940,000 1,087,260 Dunkin Securitization Series 2006-1 Cl A2 (AMBAC) 06-20-31 5.78 1,600,000(d,l) 1,491,440 El Paso Sr Unsecured 12-12-13 12.00 555,000 635,475 Erac USA Finance 10-15-17 6.38 1,745,000(d) 1,797,582 Exelon Sr Unsecured 06-15-10 4.45 1,000,000 1,019,496 Federal Home Loan Mtge Corp #A11799 08-01-33 6.50 133,697(f) 144,458 Federal Home Loan Mtge Corp #A15881 11-01-33 5.00 1,016,178(f) 1,063,232 Federal Home Loan Mtge Corp #E91486 09-01-17 6.50 107,013(f) 115,247 Federal Home Loan Mtge Corp #E99684 10-01-18 5.00 424,877(f) 455,917
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 22 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) UNITED STATES (CONT.) Federal Home Loan Mtge Corp #G01960 12-01-35 5.00% $4,228,141(f) $4,392,550 Federal Natl Mtge Assn 10-15-14 4.63 3,880,000(n) 4,242,958 11-15-30 6.63 2,300,000(n) 2,886,824 Federal Natl Mtge Assn #545874 08-01-32 6.50 161,584(f) 176,651 Federal Natl Mtge Assn #555528 04-01-33 6.00 722,411(f) 775,502 Federal Natl Mtge Assn #555734 07-01-23 5.00 684,533(f) 719,068 Federal Natl Mtge Assn #555740 08-01-18 4.50 921,543(f) 973,524 Federal Natl Mtge Assn #555851 01-01-33 6.50 851,159(f) 922,856 Federal Natl Mtge Assn #575487 04-01-17 6.50 393,769(f) 426,957 Federal Natl Mtge Assn #621581 12-01-31 6.50 208,678(f) 228,381 Federal Natl Mtge Assn #633966 03-01-17 6.00 87,679(f) 94,693 Federal Natl Mtge Assn #634749 03-01-17 5.50 442,992(f) 477,222 Federal Natl Mtge Assn #640996 05-01-32 7.50 388,234(f) 438,514 Federal Natl Mtge Assn #643381 06-01-17 6.00 191,807(f) 207,149 Federal Natl Mtge Assn #645053 05-01-32 7.00 633,059(f) 697,997 Federal Natl Mtge Assn #646147 06-01-32 7.00 290,234(f) 324,785 Federal Natl Mtge Assn #652284 08-01-32 6.50 311,276(f) 337,301 Federal Natl Mtge Assn #653145 07-01-17 6.00 152,286(f) 165,092 Federal Natl Mtge Assn #653730 09-01-32 6.50 142,431(f) 155,644 Federal Natl Mtge Assn #655589 08-01-32 6.50 1,123,099(f) 1,231,751 Federal Natl Mtge Assn #666424 08-01-32 6.50 191,881(f) 207,924 Federal Natl Mtge Assn #670461 11-01-32 7.50 144,624(f) 163,354 Federal Natl Mtge Assn #677333 01-01-33 6.00 $3,200,710(f) 3,435,935 Federal Natl Mtge Assn #688034 03-01-33 5.50 357,096(f) 381,698 Federal Natl Mtge Assn #688691 03-01-33 5.50 536,321(f) 567,419 Federal Natl Mtge Assn #711503 06-01-33 5.50 727,778(f) 773,735 Federal Natl Mtge Assn #720576 06-01-33 5.00 1,810,181(f) 1,883,963 Federal Natl Mtge Assn #735029 09-01-13 5.32 612,767(f) 655,856 Federal Natl Mtge Assn #741850 09-01-33 5.50 1,500,860(f) 1,587,888 Federal Natl Mtge Assn #753507 12-01-18 5.00 1,605,806(f) 1,719,684 Federal Natl Mtge Assn #755498 11-01-18 5.50 708,371(f) 762,135 Federal Natl Mtge Assn #756788 11-01-33 6.50 213,117(f) 230,696 Federal Natl Mtge Assn #928019 01-01-37 5.50 1,708,122(f,k) 1,801,296 FirstEnergy Sr Unsecured Series B 11-15-11 6.45 38,000 41,064 Forest Oil Sr Nts 02-15-14 8.50 320,000(d,n) 324,800 Frontier Communications Sr Unsecured 05-01-14 8.25 400,000 410,000 10-01-18 8.13 245,000 245,919 General Electric Capital Assurance Series 2003-1 Cl A4 05-12-35 5.25 438,601(d,f) 446,374 General Electric Capital (New Zealand Dollar) Sr Unsecured 02-04-10 6.63 3,450,000 2,488,751 General Electric Capital Sr Unsecured 01-10-39 6.88 615,000 662,736 Georgia-Pacific LLC 05-01-16 8.25 230,000(d) 243,800
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 23 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) UNITED STATES (CONT.) Goldman Sachs Group (European Monetary Unit) Sr Unsecured 05-02-18 6.38% 350,000 $568,431 Goldman Sachs Group Sr Unsecured 02-15-19 7.50 530,000 619,892 Govt Natl Mtge Assn #604708 10-15-33 5.50 785,869(f) 835,096 Govt Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2002-80 Cl CI 01-20-32 45.73 247,846(e,f) 6,300 Greenwich Capital Commercial Funding Series 2003-C1 Cl A3 07-05-35 3.86 725,000(f) 733,635 Greenwich Capital Commercial Funding Series 2004-GG1 Cl A5 06-10-36 4.88 500,000(f) 502,502 GS Mtge Securities II Series 2007-EOP Cl J 03-06-20 1.09 1,250,000(d,f,i) 1,010,568 GS Mtge Securities II Series 2007-GG10 Cl F 08-10-45 6.00 775,000(f,n) 91,758 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2004-1 Cl A4 04-19-34 4.78 1,935,858(f,i) 1,789,031 HCA Secured 02-15-17 9.88 325,000(d,n) 349,375 Hertz Vehicle Financing LLC Series 2009-2A Cl A1 03-25-14 4.26 1,350,000(d) 1,354,878 HJ Heinz Finance 08-01-39 7.13 470,000(d) 540,701 HSBC Finance (British Pound) Sr Unsecured 01-22-10 6.13 210,000 347,510 Indiana Michigan Power Sr Unsecured 03-15-19 7.00 1,915,000 2,168,735 03-15-37 6.05 85,000 86,877 INVISTA Sr Unsecured 05-01-12 9.25 $465,000(d) 471,975 Jarden 05-01-16 8.00 300,000 309,000 JPMorgan Chase & Co Sr Unsecured 01-15-18 6.00 720,000 770,873 JPMorgan Chase Commercial Mtge Securities Series 2003-LN1 Cl A1 10-15-37 4.13 196,284(f) 200,096 JPMorgan Chase Commercial Mtge Securities Series 2003-ML1A Cl A1 03-12-39 3.97 137,450(f) 139,617 JPMorgan Chase Commercial Mtge Securities Series 2003-ML1A Cl A2 03-12-39 4.77 1,200,000(f) 1,178,204 JPMorgan Chase Commercial Mtge Securities Series 2007-CB20 Cl E 02-12-51 6.20 675,000(d,f) 184,178 K Hovnanian Enterprises Sr Secured 10-15-16 10.63 470,000(d) 467,650 Kraft Foods Sr Unsecured 02-11-13 6.00 150,000 161,612 02-01-18 6.13 155,000 164,284 01-26-39 6.88 450,000 485,957 L-3 Communications 06-15-12 7.63 545,000 551,927 07-15-13 6.13 320,000 322,400 Lamar Media 04-01-14 9.75 255,000 280,500 08-15-15 6.63 270,000 257,850 LB-UBS Commercial Mtge Trust Series 2004-C2 Cl A3 03-15-29 3.97 750,000(f) 728,965 LB-UBS Commercial Mtge Trust Series 2006-C4 Cl AAB 06-15-32 5.86 750,000(f) 772,945 Lehman Brothers Holdings Sr Unsecured 05-02-18 6.88 1,320,000(b,o) 212,850
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 24 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) UNITED STATES (CONT.) Liberty Media LLC Sr Unsecured 05-15-13 5.70% $202,000 $189,880 Mellon Funding (British Pound) 11-08-11 6.38 370,000 652,167 Merrill Lynch & Co (British Pound) Sr Unsub 09-24-10 5.13 221,000 366,682 MGM MIRAGE Sr Secured 11-15-17 11.13 290,000(d) 318,275 MGM MIRAGE Sr Unsecured 03-01-18 11.38 470,000(d,n) 423,000 Morgan Stanley Capital I Series 2003-T11 Cl A2 06-13-41 4.34 1,991(f) 1,990 Morgan Stanley Capital I Series 2004-HQ4 Cl A5 04-14-40 4.59 750,000(f) 723,457 Morgan Stanley Capital I Series 2006-T23 Cl AAB 08-12-41 5.80 575,000(f) 609,507 Morgan Stanley (British Pound) Sr Unsecured 04-11-11 7.50 470,000 811,312 Morgan Stanley (European Monetary Unit) Sr Unsecured 10-02-17 5.50 625,000 933,612 Morgan Stanley Sr Unsecured 04-01-18 6.63 205,000 219,727 Nalco Sr Nts 05-15-17 8.25 220,000(d) 232,650 Natl Collegiate Student Loan Trust Collateralized Mtge Obligation Interest Only Series 2006-3 Cl AIO 01-25-12 5.88 2,400,000(e) 313,614 Nevada Power Series L 01-15-15 5.88 1,000,000 1,085,230 NewPage Sr Secured 12-31-14 11.38 $370,000(d) 369,075 News America 11-15-37 6.65 1,080,000 1,127,962 Nextel Communications Series D 08-01-15 7.38 595,000 527,319 Nielsen Finance LLC 08-01-14 10.00 200,000(n) 206,000 NiSource Finance 09-15-17 5.25 250,000 240,260 01-15-19 6.80 700,000 738,955 Northern States Power 1st Mtge Series B 08-28-12 8.00 515,000 597,604 Northwest Pipeline Sr Unsecured 04-15-17 5.95 1,085,000 1,155,757 NRG Energy 02-01-16 7.38 770,000 765,188 Omnicare 12-15-13 6.75 405,000 392,850 Petrohawk Energy 08-01-14 10.50 480,000 520,800 PPL Electric Utilities 1st Mtge 11-30-13 7.13 2,850,000 3,285,969 Quicksilver Resources 08-01-15 8.25 245,000(n) 239,181 Qwest Sr Unsecured 10-01-14 7.50 175,000 176,750 Range Resources 05-15-19 8.00 515,000 534,313 Regal Cinemas 07-15-19 8.63 200,000(d,n) 207,000 Renaissance Home Equity Loan Trust Series 2005-4 Cl A3 02-25-36 5.57 435,469 419,253 Reynolds Group DL Escrow/LLC Sr Secured 10-15-16 7.75 460,000(d,g) 453,997
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 25 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) UNITED STATES (CONT.) RR Donnelley & Sons Sr Unsecured 01-15-17 6.13% $2,190,000 $2,146,767 SandRidge Energy 06-01-18 8.00 370,000(d) 367,225 Santander Drive Auto Receivables Trust Series 2007-1 Cl A4 (FGIC) 09-15-14 0.30 1,364,785(i,l) 1,333,673 SBA Telecommunications 08-15-16 8.00 85,000(d) 87,975 08-15-19 8.25 85,000(d,n) 88,825 Select Medical 02-01-15 7.63 490,000 461,825 Sierra Pacific Power Series M 05-15-16 6.00 2,935,000 3,148,744 Southern California Gas 1st Mtge 03-15-14 5.50 845,000 931,172 Southern Natural Gas Sr Unsecured 04-01-17 5.90 2,131,000(d) 2,176,714 Speedway Motorsports Sr Unsecured 06-01-16 8.75 435,000(d) 453,488 Sprint Nextel Sr Unsecured 08-15-17 8.38 150,000 144,750 Structured Asset Securities Collateralized Mtge Obligation Series 2003-33H Cl 1A1 10-25-33 5.50 1,176,228(f) 1,194,239 Tampa Electric Sr Unsecured 05-15-18 6.10 620,000 671,714 Toledo Edison Sr Secured 05-15-37 6.15 450,000 456,834 Toyota Motor Credit (European Monetary Unit) 02-12-10 4.00 150,000 222,143 Transcontinental Gas Pipe Line LLC Sr Unsecured 04-15-16 6.40 3,590,000 3,955,925 TransDigm Group 07-15-14 7.75 $200,000(d) 202,000 U.S. Treasury 06-30-11 1.13 7,000,000(n) 7,051,135 09-30-11 1.00 670,000(n) 671,884 07-15-12 1.50 2,130,000 2,143,645 04-30-14 1.88 2,400,000(n) 2,374,313 05-31-14 2.25 510,000 512,191 06-30-14 2.63 1,190,000 1,212,778 07-31-14 2.63 935,000(n) 951,801 09-30-14 2.38 1,880,000 1,887,564 02-15-15 4.00 2,115,000(n) 2,283,208 06-30-16 3.25 800,000 818,250 08-15-19 3.63 885,000(n) 902,009 08-15-23 6.25 8,300,000 10,293,295 05-15-39 4.25 1,650,000 1,653,868 US Cellular Sr Unsecured 12-15-33 6.70 165,000 159,518 Verizon New York Sr Unsecured Series A 04-01-12 6.88 2,380,000 2,597,869 Verizon New York Sr Unsecured Series B 04-01-32 7.38 855,000 922,849 Volkswagen Auto Lease Trust Series 2009-A Cl A3 04-16-12 3.41 725,000 746,580 Wachovia Bank Commercial Mtge Trust Series 2005-C20 Cl A5 07-15-42 5.09 800,000(f) 822,841 Wachovia Bank Commercial Mtge Trust Series 2006-C24 Cl APB 03-15-45 5.58 500,000(f) 504,203 Wachovia Bank Commercial Mtge Trust Series 2006-C27 Cl APB 07-15-45 5.73 900,000(f) 910,395 Wells Fargo & Co (British Pound) Sr Unsecured 11-30-10 4.75 1,300,000 2,179,983 Wells Fargo & Co (European Monetary Unit) Sr Unsecured 11-03-16 4.13 330,000 482,226
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 26 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) UNITED STATES (CONT.) Wells Fargo & Co Sr Unsecured 12-11-17 5.63% $720,000 $748,873 Windstream 08-01-16 8.63 315,000 323,663 03-15-19 7.00 40,000(n) 37,950 --------------- Total 184,528,040 ------------------------------------------------------------------------------------- URUGUAY (0.2%) Republic of Uruguay 11-18-22 8.00 450,000(n) 508,500 Republica Orient Uruguay Sr Unsecured 03-21-36 7.63 275,000(n) 296,313 --------------- Total 804,813 ------------------------------------------------------------------------------------- VENEZUELA (0.4%) Petroleos de Venezuela 04-12-17 5.25 1,190,000 697,340 Republic of Venezuela 02-26-16 5.75 620,000 416,950 Republic of Venezuela Sr Unsecured 10-08-14 8.50 160,000 136,400 05-07-23 9.00 931,000(n) 667,899 --------------- Total 1,918,589 ------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $464,995,621) $497,249,265 ------------------------------------------------------------------------------------- SENIOR LOANS (0.1%)(j) COUPON PRINCIPAL BORROWER RATE AMOUNT VALUE(a) UNITED STATES Charter Communications Operating LLC Term Loan 03-06-14 6.25% $104,419 $94,923 Fairpoint Communications Tranche B Term Loan 03-31-15 5.00 558,658(b) 448,636 ------------------------------------------------------------------------------------- TOTAL SENIOR LOANS (Cost: $405,806) $543,559 -------------------------------------------------------------------------------------
MONEY MARKET FUND (2.4%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.25% 12,266,930(p) $12,266,930 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $12,266,930) $12,266,930 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (5.3%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 27,373,804 $27,373,804 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $27,373,804) $27,373,804 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $505,042,161)(q) $537,433,558 =====================================================================================
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 27 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- INVESTMENTS IN DERIVATIVES FUTURES CONTRACTS OUTSTANDING AT OCT. 31, 2009
NUMBER OF UNREALIZED CONTRACTS NOTIONAL EXPIRATION APPRECIATION CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION) ------------------------------------------------------------------------------------- Euro-Bobl, 5-year 58 $9,867,815 Dec. 2009 $30,504 Euro-Bund, 10-year 23 4,125,643 Dec. 2009 8,934 Japanese Govt Bond, 10- year 6 9,198,313 Dec. 2009 (66,776) U.S. Treasury Note, 5- year (27) (3,144,235) Jan. 2010 (21,134) ------------------------------------------------------------------------------------- Total $(48,472) -------------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT OCT. 31, 2009
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION ----------------------------------------------------------------------------------------------- Nov. 16, 2009 229,621 400,000 $-- $(3,077) U.S. Dollar Brazilian Real ----------------------------------------------------------------------------------------------- Nov. 17, 2009 89,000 131,666 702 -- European Monetary Unit U.S. Dollar ----------------------------------------------------------------------------------------------- Nov. 19, 2009 2,935,869 3,025,000 -- (142,616) U.S. Dollar Canadian Dollar ----------------------------------------------------------------------------------------------- Dec. 3, 2009 1,880,000 1,734,958 47,958 -- Australian Dollar U.S. Dollar ----------------------------------------------------------------------------------------------- Dec. 3, 2009 2,300,000 1,736,270 89,565 -- New Zealand Dollar U.S. Dollar ----------------------------------------------------------------------------------------------- Dec. 4, 2009 17,394,372 1,591,585,000 288,716 -- U.S. Dollar Japanese Yen ----------------------------------------------------------------------------------------------- Dec. 8, 2009 1,050,000 1,742,628 19,637 -- British Pound U.S. Dollar ----------------------------------------------------------------------------------------------- Dec. 8, 2009 1,742,628 1,175,154 -- (13,431) U.S. Dollar European Monetary Unit ----------------------------------------------------------------------------------------------- Dec. 8, 2009 2,583,598 34,150,000 -- (8,886) U.S. Dollar Mexican Peso ----------------------------------------------------------------------------------------------- Dec. 10, 2009 1,394,451 1,950,000 -- (3,584) U.S. Dollar Singapore Dollar ----------------------------------------------------------------------------------------------- Total $446,578 $(171,594) -----------------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 28 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 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 Oct. 31, 2009, the value of these securities amounted to $39,969,109 or 7.7% of net assets. (e) Interest only represents securities that entitle holders to receive only interest payments on the underlying mortgages. The yield to maturity of an interest only security 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 Oct. 31, 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) At Oct. 31, 2009, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $453,997. See Note 2 to the financial statements. (h) 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. (i) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Oct. 31, 2009. (j) 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. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 29 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (k) At Oct. 31, 2009, investments in securities included securities valued at $322,792 that were partially pledged as collateral to cover initial margin deposits on open interest rate futures contracts. (l) The following abbreviations are used in the portfolio security descriptions to identify the insurer of the issue: AMBAC -- Ambac Assurance Corporation FGIC -- Financial Guaranty Insurance Company FSA -- Financial Security Assurance MBIA -- MBIA Insurance Corporation
(m) Inflation-indexed bonds are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. (n) At Oct. 31, 2009, security was partially or fully on loan. See Note 7 to the financial statements. (o) This position is in bankruptcy. (p) Affiliated Money Market Fund -- See Note 8 to the financial statements. The rate shown is the seven-day current annualized yield at Oct. 31, 2009. (q) At Oct. 31, 2009, the cost of securities for federal income tax purposes was $512,644,015 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $30,302,200 Unrealized depreciation (5,512,657) ----------------------------------------------------------- Net unrealized appreciation $24,789,543 -----------------------------------------------------------
-------------------------------------------------------------------------------- 30 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 31 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Oct. 31, 2009:
FAIR VALUE AT OCT. 31, 2009 ---------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL --------------------------------------------------------------------------------------------- Bonds Foreign Government Obligations & Agencies $-- $268,239,653 $-- $268,239,653 U.S. Government Obligations & Agencies 32,755,940 7,129,783 -- 39,885,723 Asset-Backed Securities -- 16,742,037 2,060,678 18,802,715 Commercial Mortgage- Backed Securities -- 12,923,516 -- 12,923,516 Residential Mortgage- Backed Securities -- 38,554,919 -- 38,554,919 Corporate Debt Securities -- 118,842,739 -- 118,842,739 --------------------------------------------------------------------------------------------- Total Bonds 32,755,940 462,432,647 2,060,678 497,249,265 --------------------------------------------------------------------------------------------- Other Senior Loans -- 543,559 -- 543,559 Affiliated Money Market Fund(a) 12,266,930 -- -- 12,266,930 Investments of Cash Collateral Received for Securities on Loan 27,373,804 -- -- 27,373,804 --------------------------------------------------------------------------------------------- Total Other 39,640,734 543,559 -- 40,184,293 --------------------------------------------------------------------------------------------- Investments in Securities 72,396,674 462,976,206 2,060,678 537,433,558 Other Financial Instruments(b) (48,472) 274,984 -- 226,512 --------------------------------------------------------------------------------------------- Total $72,348,202 $463,251,190 $2,060,678 $537,660,070 ---------------------------------------------------------------------------------------------
(a) Money market fund that is a sweep investment for cash balances in the Fund at Oct. 31, 2009. (b) Other Financial Instruments are derivative instruments, which are valued at the unrealized appreciation (depreciation) on the instrument. Derivative descriptions are located in the Investments in Derivatives section of the Portfolio of Investments. -------------------------------------------------------------------------------- 32 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) The following table is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.
RESIDENTIAL OTHER ASSET-BACKED MORTGAGE-BACKED FINANCIAL SECURITIES SECURITIES INSTRUMENTS TOTAL ---------------------------------------------------------------------------------------- Balance as of Oct. 31, 2008 $2,673,757 $1,962,556 $28,672 $4,664,985 Accrued discounts/premiums 698 (22,473) -- (21,775) Realized gain (loss) 7,748 (63,026) * (55,278) Change in unrealized appreciation (depreciation)** 508,423 130,832 (28,672) 610,583 Net purchases (sales) (1,129,948) (135,844) -- (1,265,792) Transfers in and/or out of Level 3 -- (1,872,045) -- (1,872,045) ---------------------------------------------------------------------------------------- Balance as of Oct. 31, 2009 $2,060,678 $-- $-- $2,060,678 ----------------------------------------------------------------------------------------
* The realized gain (loss) earned during the period from Nov. 1, 2008 to Oct. 31, 2009 for Other Financial Instruments was $159,716. ** Change in unrealized appreciation (depreciation) relating to securities held at Oct. 31, 2009 was $449,829. 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 ANNUAL REPORT 33 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- OCT. 31, 2009
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $465,401,427) $497,792,824 Affiliated money market fund (identified cost $12,266,930) 12,266,930 Investments of cash collateral received for securities on loan (identified cost $27,373,804) 27,373,804 ------------------------------------------------------------------------------- Total investments in securities (identified cost $505,042,161) 537,433,558 Cash 23,043 Foreign currency holdings (identified cost $1,226,392) 1,209,646 Capital shares receivable 670,414 Dividends and accrued interest receivable 6,820,579 Receivable for investment securities sold 1,217,507 Variation margin receivable on futures contracts 39,518 Unrealized appreciation on forward foreign currency contracts 446,578 ------------------------------------------------------------------------------- Total assets 547,860,843 ------------------------------------------------------------------------------- LIABILITIES Capital shares payable 576,437 Payable for investment securities purchased 1,132,258 Payable upon return of securities loaned 27,373,804 Unrealized depreciation on forward foreign currency contracts 171,594 Accrued investment management services fees 10,023 Accrued distribution fees 3,114 Accrued transfer agency fees 2,209 Accrued administrative services fees 1,133 Accrued plan administration services fees 1 Other accrued expenses 119,887 ------------------------------------------------------------------------------- Total liabilities 29,390,460 ------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $518,470,383 -------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 34 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
REPRESENTED BY Capital stock -- $.01 par value $ 729,980 Additional paid-in capital 504,021,025 Excess of distributions over net investment income (1,411,247) Accumulated net realized gain (loss) (17,619,182) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 32,749,807 ------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $518,470,383 ------------------------------------------------------------------------------- *Including securities on loan, at value $ 37,354,966 -------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $252,772,959 35,605,039 $7.10(1) Class B $ 29,976,819 4,198,213 $7.14 Class C $ 5,556,941 784,634 $7.08 Class I $169,716,515 23,886,385 $7.11 Class R4 $ 168,713 23,740 $7.11 Class W $ 60,278,436 8,500,017 $7.09 -----------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $7.45. 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 ANNUAL REPORT 35 STATEMENT OF OPERATIONS -------------------------------------------------------- YEAR ENDED OCT. 31, 2009
INVESTMENT INCOME Income: Interest $ 19,934,295 Income distributions from affiliated money market fund 28,837 Income from securities lending -- net 47,978 Less foreign taxes withheld (20,187) ------------------------------------------------------------------------------- Total income 19,990,923 ------------------------------------------------------------------------------- Expenses: Investment management services fees 3,551,274 Distribution fees Class A 593,225 Class B 367,588 Class C 44,351 Class W 147,100 Transfer agency fees Class A 605,574 Class B 99,898 Class C 11,587 Class R4 66 Class W 117,680 Administrative services fees 401,109 Plan administration services fees -- Class R4 332 Compensation of board members 15,416 Custodian fees 113,625 Printing and postage 84,000 Registration fees 55,597 Professional fees 47,065 Other 48,391 ------------------------------------------------------------------------------- Total expenses 6,303,878 Expenses waived/reimbursed by the Investment Manager and its affiliates (397,927) Earnings and bank fee credits on cash balances (3) ------------------------------------------------------------------------------- Total net expenses 5,905,948 ------------------------------------------------------------------------------- Investment income (loss) -- net 14,084,975 ------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (11,739,111) Foreign currency transactions 4,219,323 Futures contracts 590,290 ------------------------------------------------------------------------------- Net realized gain (loss) on investments (6,929,498) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 96,312,630 ------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 89,383,132 ------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $103,468,107 -------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 36 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
YEAR ENDED OCT. 31, 2009 2008 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 14,084,975 $ 24,285,681 Net realized gain (loss) on investments (6,929,498) 9,721,813 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 96,312,630 (100,650,487) ----------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 103,468,107 (66,642,993) ----------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (14,451,166) (8,771,172) Class B (2,363,547) (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 (34,499,468) (22,448,956) -----------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 37 STATEMENTS OF CHANGES IN NET ASSETS (continued) --------------------------------
YEAR ENDED OCT. 31, 2009 2008 CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 34,656,103 $ 96,488,332 Class B shares 4,760,950 26,745,270 Class C shares 1,892,530 4,044,562 Class I shares 44,757,560 171,903,867 Class R4 shares 42,421 95,770 Class W shares 47,318,890 259,629,317 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 Conversions from Class B to Class A Class A shares 6,603,705 7,205,956 Class B shares (6,603,705) (7,205,956) Payments for redemptions Class A shares (83,721,233) (90,849,153) Class B shares (17,508,600) (19,987,187) Class C shares (1,461,886) (1,808,860) Class I shares (115,655,803) (106,857,080) Class R4 shares (18,796) (79,105) Class W shares (135,568,998) (155,446,712) ----------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (187,014,159) 205,711,572 ----------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (118,045,520) 116,619,623 Net assets at beginning of year 636,515,903 519,896,280 ----------------------------------------------------------------------------------------------- Net assets at end of year $ 518,470,383 $ 636,515,903 ----------------------------------------------------------------------------------------------- Undistributed (excess of distributions over) net investment income $ (1,411,247) $ 18,465,762 -----------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 38 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. For periods ended 2007 and after, per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of sales charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED OCT. 31, CLASS A ---------------------------------------------------- PER SHARE DATA 2009 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) .17 .22 .20 .19 .16 Net gains (losses) (both realized and unrealized) 1.15 (.73) .35 .14 (.23) ------------------------------------------------------------------------------------------------------- Total from investment operations 1.32 (.51) .55 .33 (.07) ------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.38) (.22) (.26) (.32) (.36) ------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.10 $6.16 $6.89 $6.60 $6.59 ------------------------------------------------------------------------------------------------------- TOTAL RETURN 22.12% (7.66%) 8.63% 5.17% (1.18%) ------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 1.36% 1.32% 1.37% 1.39% 1.37% ------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(b) 1.25% 1.25% 1.25% 1.25% 1.35% ------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.72% 3.26% 3.08% 2.77% 2.42% ------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $253 $249 $259 $276 $353 ------------------------------------------------------------------------------------------------------- Portfolio turnover rate 69% 75% 77% 68% 73% -------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 39 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS B ---------------------------------------------------- PER SHARE DATA 2009 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) .13 .17 .15 .13 .10 Net gains (losses) (both realized and unrealized) 1.15 (.73) .35 .16 (.23) ------------------------------------------------------------------------------------------------------- Total from investment operations 1.28 (.56) .50 .29 (.13) ------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.37) (.17) (.21) (.21) (.30) ------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.14 $6.23 $6.96 $6.67 $6.59 ------------------------------------------------------------------------------------------------------- TOTAL RETURN 21.14% (8.28%) 7.68% 4.45% (1.98%) ------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 2.13% 2.09% 2.13% 2.16% 2.13% ------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(b) 2.01% 2.01% 2.01% 2.02% 2.12% ------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.00% 2.49% 2.30% 1.98% 1.65% ------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $30 $42 $47 $63 $111 ------------------------------------------------------------------------------------------------------- Portfolio turnover rate 69% 75% 77% 68% 73% -------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 40 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS C ---------------------------------------------------- PER SHARE DATA 2009 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) .13 .17 .15 .14 .11 Net gains (losses) (both realized and unrealized) 1.14 (.73) .35 .13 (.22) ------------------------------------------------------------------------------------------------------- Total from investment operations 1.27 (.56) .50 .27 (.11) ------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.37) (.17) (.21) (.22) (.31) ------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.08 $6.18 $6.91 $6.62 $6.57 ------------------------------------------------------------------------------------------------------- TOTAL RETURN 21.15% (8.27%) 7.75% 4.25% (1.83%) ------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 2.12% 2.08% 2.13% 2.16% 2.14% ------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(b) 2.01% 2.01% 2.01% 2.02% 2.12% ------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.94% 2.51% 2.32% 2.00% 1.65% ------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $6 $4 $3 $3 $4 ------------------------------------------------------------------------------------------------------- Portfolio turnover rate 69% 75% 77% 68% 73% -------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 41 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS I --------------------------------------------------- PER SHARE DATA 2009 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) .20 .25 .23 .21 .19 Net gains (losses) (both realized and unrealized) 1.15 (.73) .34 .14 (.22) ------------------------------------------------------------------------------------------------------ Total from investment operations 1.35 (.48) .57 .35 (.03) ------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.38) (.25) (.29) (.37) (.39) ------------------------------------------------------------------------------------------------------ Net asset value, end of period $7.11 $6.14 $6.87 $6.59 $6.61 ------------------------------------------------------------------------------------------------------ TOTAL RETURN 22.83% (7.30%) 8.91% 5.52% (.56%) ------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement .86% .85% .87% .88% .91% ------------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement(b) .82% .82% .87% .88% .91% ------------------------------------------------------------------------------------------------------ Net investment income (loss) 3.16% 3.68% 3.47% 3.18% 2.87% ------------------------------------------------------------------------------------------------------ SUPPLEMENTAL DATA Net assets, end of period (in millions) $170 $206 $157 $145 $89 ------------------------------------------------------------------------------------------------------ Portfolio turnover rate 69% 75% 77% 68% 73% ------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 42 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R4 ---------------------------------------------------- PER SHARE DATA 2009 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) .18 .25 .22 .20 .16 Net gains (losses) (both realized and unrealized) 1.15 (.72) .35 .13 (.22) ------------------------------------------------------------------------------------------------------- Total from investment operations 1.33 (.47) .57 .33 (.06) ------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.38) (.26) (.28) (.34) (.37) ------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.11 $6.16 $6.89 $6.60 $6.61 ------------------------------------------------------------------------------------------------------- TOTAL RETURN 22.42% (7.19%) 8.84% 5.29% (1.00%) ------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 1.16% 1.14% 1.17% 1.20% 1.20% ------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(b) 1.06% .87% 1.08% 1.08% 1.18% ------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.86% 3.64% 3.27% 2.95% 2.60% ------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- $-- ------------------------------------------------------------------------------------------------------- Portfolio turnover rate 69% 75% 77% 68% 73% -------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 43 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS W ------------------------------- PER SHARE DATA 2009 2008 2007(c) Net asset value, beginning of period $6.15 $6.88 $6.79 ---------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .17 .22 .20 Net gains (losses) (both realized and unrealized) 1.14 (.73) .17 ---------------------------------------------------------------------------------- Total from investment operations 1.31 (.51) .37 ---------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.37) (.22) (.28) ---------------------------------------------------------------------------------- Net asset value, end of period $7.09 $6.15 $6.88 ---------------------------------------------------------------------------------- TOTAL RETURN 22.04% (7.62%) 5.71% ---------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 1.30% 1.30% 1.35%(d) ---------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(b) 1.27% 1.27% 1.26%(d) ---------------------------------------------------------------------------------- Net investment income (loss) 2.70% 3.27% 3.34%(d) ---------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $60 $135 $54 ---------------------------------------------------------------------------------- Portfolio turnover rate 69% 75% 77% ----------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) 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 reported expense ratios. (b) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (c) For the period from Dec. 1, 2006 (inception date) to Oct. 31, 2007. (d) Annualized. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 44 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. ORGANIZATION 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 (the 1940 Act) 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 Fund's 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 offered with a front-end sales charge, which may be waived under certain circumstances. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares one month after the completion of the eighth year of ownership if originally purchased in a RiverSource fund on or after May 21, 2005 or originally purchased in a Seligman fund on or after June 13, 2009. Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund prior to June 13, 2009 will convert to Class A shares in the month prior to the ninth year of ownership. - Class C shares may be subject to a CDSC. - Class I and Class R4 shares are offered without a front-end sales charge or CDSC to qualifying institutional investors. - Class W shares are offered without a front-end sales charge or CDSC and are offered through qualifying discretionary accounts. At Oct. 31, 2009, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) and affiliated funds-of-funds in the RiverSource Family of Funds owned 100% of Class I shares and approximately 33% 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. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 45 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF NEW ACCOUNTING STANDARD In June 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification(TM )(Codification) as the single source of authoritative accounting principles recognized by the FASB in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP). The Codification supersedes existing non-grandfathered, non- SEC accounting and reporting standards. The Codification did not change GAAP but rather organized it into a hierarchy where all guidance within the Codification carries an equal level of authority. The Codification became effective for financial statements issued for interim and annual periods ending after Sept. 15, 2009. The Codification did not have a material effect on the Fund's financial statements. 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 business of the New York Stock Exchange (NYSE). 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 by an independent pricing service using an evaluated bid. 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 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 -------------------------------------------------------------------------------- 46 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 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. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. FOREIGN CURRENCY TRANSLATIONS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At Oct. 31, 2009, foreign currency holdings consisted of multiple denominations, primarily European monetary units. 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 Oct. 31, 2009, the Fund has outstanding when-issued securities of $453,997. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 47 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 (which includes net short-term capital gains) 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. 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. 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. -------------------------------------------------------------------------------- 48 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FORWARD FOREIGN CURRENCY CONTRACTS The Fund may enter into forward foreign currency contracts in connection with settling purchases or sales of securities, to hedge the currency exposure associated with some or all of the Fund's securities or as part of its investment strategy. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked to market daily based upon foreign currency exchange rates from an independent pricing service and the change in value is recorded as unrealized appreciation or depreciation. The Fund will record a realized gain or loss when the forward foreign currency contract is closed. The risks of forward foreign currency contracts include movement in the values of the foreign currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that the counterparty will not complete its contractual obligation, which may be in excess of the amount, if any, reflected in the Statement of Assets and Liabilities. FUTURES TRANSACTIONS The Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange to produce incremental earnings, hedge existing positions or protect against market changes in the value of equities, interest rates or foreign currencies. The Fund may also buy and write put and call options on these futures contracts. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date. 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. Upon entering into futures contracts, the Fund bears the risk of interest rates, exchange rates or securities prices moving unexpectedly, in which case, the Fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, 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. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 49 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS The following tables are intended to provide additional information about the effect of derivatives on the financial statements of the Fund including: the fair value of derivatives by risk category and the location of those fair values in the Statement of Assets and Liabilities; the impact of derivative transactions on the Fund's operations over the period including realized gains or losses and unrealized gains or losses. The derivative schedules following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any. FAIR VALUES OF DERIVATIVE INSTRUMENTS AT OCT. 31, 2009
ASSET DERIVATIVES LIABILITY DERIVATIVES ------------------------------- ------------------------------- STATEMENT OF ASSETS STATEMENT OF ASSETS RISK EXPOSURE AND LIABILITIES AND LIABILITIES CATEGORY LOCATION FAIR VALUE LOCATION FAIR VALUE ------------------------------------------------------------------------------------------- Foreign exchange Unrealized Unrealized contracts appreciation on depreciation on forward foreign forward foreign currency contracts $446,578 currency contracts $171,594 ------------------------------------------------------------------------------------------- Interest rate Net Net contracts assets -- unrealiz- assets -- unrealiz- ed appreciation N/A ed depreciation 48,472* ------------------------------------------------------------------------------------------- TOTAL $446,578 $220,066 -------------------------------------------------------------------------------------------
* Includes cumulative appreciation (depreciation) of futures contracts as reported in the Futures Contracts Outstanding table following the Portfolio of Investments. Only the current day's variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. EFFECT OF DERIVATIVE INSTRUMENTS ON THE STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCT. 31, 2009
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME ------------------------------------------------------------------------------ RISK EXPOSURE FORWARD CURRENCY CATEGORY CONTRACTS FUTURES TOTAL ------------------------------------------------------------------------------ Foreign exchange contracts $6,108,962 $ -- $6,108,962 ------------------------------------------------------------------------------ Interest rate contracts -- 590,290 $ 590,290 ------------------------------------------------------------------------------ Total $6,108,962 $590,290 $6,699,252 ------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 50 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME ------------------------------------------------------------------------------- RISK EXPOSURE FORWARD CURRENCY CATEGORY CONTRACTS FUTURES TOTAL ------------------------------------------------------------------------------- Foreign exchange contracts $(1,045,299) $ -- $(1,045,299) ------------------------------------------------------------------------------- Interest rate contracts -- (526,691) $ (526,691) ------------------------------------------------------------------------------- TOTAL $(1,045,299) $(526,691) $(1,571,990) -------------------------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY FORWARD FOREIGN CURRENCY CONTRACTS The gross notional amount of contracts outstanding was $31.6 million at Oct. 31, 2009. The monthly average gross notional amount for these contracts was $41.1 million for the year ended Oct. 31, 2009. The fair value of these contracts on Oct. 31, 2009 is set forth in the table above. FUTURES The gross notional amount of long and short contracts outstanding was $23.2 million and $3.1 million, respectively, at Oct. 31, 2009. The monthly average gross notional contract amounts for long and short contracts was $35.1 million and $13.8 million, respectively, for the year ended Oct. 31, 2009. The fair value of such contracts on Oct. 31, 2009 is set forth in the table above. 4. 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 an annual fee that is equal to a percentage of the Fund's average daily net assets that declines from 0.72% to 0.52% as the Fund's net assets increase. The management fee for the year ended Oct. 31, 2009 was 0.71% of the Fund's average daily net assets. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% as the Fund's net assets increase. The fee for the year ended Oct. 31, 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 -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 51 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- administrative services to the Fund and the Board. For the year ended Oct. 31, 2009, other expenses paid to this company were $4,332. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act 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 funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains Fund shareholder accounts and records and provides Fund shareholder services. 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 Transfer Agent also charges an annual fee of $3 per account serviced directly by the Fund or its designated agent for Class A, Class B and Class C shares. 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 the 12 month period 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 an agreement with RiverSource Fund Distributors, Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate 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, of the 1.00% fee, up to 0.75% is reimbursed for distribution expenses. -------------------------------------------------------------------------------- 52 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- The amount of distribution expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $1,158,000 and $52,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of July 31, 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, including front-end and CDSCs, received by the Distributor for distributing Fund shares were $194,251 for Class A, $23,342 for Class B and $819 for Class C for the year ended Oct. 31, 2009. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended Oct. 31, 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............................................ 1.06 Class W............................................. 1.27
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class A.......................................... $177,967 Class B.......................................... 29,828 Class C.......................................... 3,326
The waived/reimbursed fees and expenses for plan administration services fees at the class level were as follows: Class R4............................................ $77
The management fees waived/reimbursed at the Fund level were $186,729. Under an agreement which was effective until Oct. 31, 2009, the Investment Manager and its affiliates contractually agreed to waive certain fees and expenses -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 53 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- such that net expenses (excluding fees and expenses of acquired funds*), would 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
Effective Nov. 1, 2009, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Dec. 31, 2010, 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............................................. 2.02 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. EARNINGS CREDITS AND CUSTODIAN FEES During the year ended Oct. 31, 2009, the Fund's custodian fees were reduced by $3 as a result of earnings 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 $13,048 to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $340,069,492 and $544,906,565, respectively, for the year ended Oct. 31, 2009. Realized gains and losses are determined on an identified cost basis. -------------------------------------------------------------------------------- 54 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
YEAR ENDED YEAR ENDED OCT. 31, 2009 OCT. 31, 2008* --------------------------------------------------------------------- CLASS A Sold 5,231,964 13,942,439 Converted from Class B shares** 969,818 1,036,828 Reinvested distributions 2,146,170 1,211,499 Redeemed (13,137,526) (13,367,693) --------------------------------------------------------------------- Net increase (decrease) (4,789,574) 2,823,073 --------------------------------------------------------------------- CLASS B Sold 725,964 3,822,733 Reinvested distributions 349,934 168,457 Converted to Class A shares** (962,748) (1,025,029) Redeemed (2,725,361) (2,901,312) --------------------------------------------------------------------- Net increase (decrease) (2,612,211) 64,849 --------------------------------------------------------------------- CLASS C Sold 281,159 583,922 Reinvested distributions 35,905 11,530 Redeemed (227,718) (267,833) --------------------------------------------------------------------- Net increase (decrease) 89,346 327,619 --------------------------------------------------------------------- CLASS I Sold 6,812,712 25,302,709 Reinvested distributions 1,933,079 1,145,677 Redeemed (18,357,075) (15,862,285) --------------------------------------------------------------------- Net increase (decrease) (9,611,284) 10,586,101 --------------------------------------------------------------------- CLASS R4 Sold 6,358 13,757 Reinvested distributions 1,165 706 Redeemed (3,012) (11,545) --------------------------------------------------------------------- Net increase (decrease) 4,511 2,918 --------------------------------------------------------------------- CLASS W Sold 7,283,695 37,609,351 Reinvested distributions 826,368 674,090 Redeemed (21,598,586) (24,172,875) --------------------------------------------------------------------- Net increase (decrease) (13,488,523) 14,110,566 ---------------------------------------------------------------------
* Certain line items from the prior year have been renamed to conform to the current year presentation. ** Automatic conversion of Class B shares to Class A shares based on the original purchase date. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 55 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 7. 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 Oct. 31, 2009, securities valued at $37,354,966 were on loan, secured by U.S. government securities valued at $11,157,582 and by cash collateral of $27,373,804 invested in short-term securities or in cash equivalents. 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. 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. Net income of $47,978 earned from securities lending from Dec. 1, 2008 through Oct. 31, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 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. -------------------------------------------------------------------------------- 56 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 8. 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 funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $209,516,997 and $204,173,170, respectively, for the year ended Oct. 31, 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 Oct. 31, 2009, can be found in the Portfolio of Investments. 9. 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 became effective on Oct. 15, 2009, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other funds in the RiverSource Family of Funds, severally and not jointly, permits collective borrowings up to $300 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $200 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 $500 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 sum of the federal funds rate plus (A) 1.25% per annum plus (B) if one-month LIBOR exceeds the federal funds rate, the amount of such excess. 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 0.10% per annum, in addition to an upfront fee equal to its pro rata share of 0.04% of the amount of the credit facility. Prior to Oct. 15, 2009, the credit facility agreement, which was a collective agreement between the Fund and certain other funds in the RiverSource Family of Funds, severally and not jointly, permitted collective borrowings up to $475 million. Interest was charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. The Fund also paid 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 year ended Oct. 31, 2009. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 57 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 10. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of futures contracts, foreign currency transactions, foreign tax credits 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. In the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, excess of distributions over net investment income has been decreased by $537,484 and accumulated net realized loss has been increased by $537,484. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED OCT. 31, 2009 2008 ------------------------------------------------------------------ Ordinary income......................... $34,499,468 $22,448,956 Long-term capital gain.................. -- --
At Oct. 31, 2009, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income.................. $ 3,905,407 Undistributed accumulated long-term gain....... $ -- Accumulated realized loss...................... $(15,099,745) Unrealized appreciation (depreciation)......... $ 24,913,716
For federal income tax purposes, the Fund had a capital loss carry-over of $15,099,745 at Oct. 31, 2009, that if not offset by capital gains will expire as follows:
2010 2014 2016 2017 $3,665,049 $498,771 $2,328,738 $8,607,187
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. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. -------------------------------------------------------------------------------- 58 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 11. 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. 12. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Dec. 21, 2009, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 13. 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 (now known as RiverSource) 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. On -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 59 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. 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. Incorporated (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. (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 -------------------------------------------------------------------------------- 60 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- managed by Seligman was and had 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 paid $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. -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 61 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF RIVERSOURCE GLOBAL BOND FUND: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of RiverSource Global Bond Fund (the Fund) (one of the portfolios constituting the RiverSource Global Series, Inc.) as of October 31, 2009, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of the Fund for the periods presented through October 31, 2006, were audited by other auditors whose report dated December 20, 2006, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2009, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. -------------------------------------------------------------------------------- 62 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- In our opinion, the financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of RiverSource Global Fund of the RiverSource Global Series, Inc. at October 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota December 21, 2009 -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 63 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- OCT. 31, 2009 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (97.0%)(c) ISSUER SHARES VALUE(a) BRAZIL (19.6%) Banco Bradesco 303,600 $5,942,662 Companhia Siderurgica Nacional ADR 286,556 9,502,197 Cyrela Brazil Realty 803,300 10,198,100 Itau Unibanco Holding 622,160 11,842,420 Itau Unibanco Holding ADR 82,267 1,574,590 Lojas Renner 564,500 10,004,203 Multiplan Empreendimentos Imobiliarios 395,388 5,989,774 OGX Petroleo e Gas Participacoes 11,300 9,114,456 PDG Realty 391,200 3,266,481 Petroleo Brasileiro ADR 457,503 21,145,788 Vale ADR 910,420 23,206,606 --------------- Total 111,787,277 ------------------------------------------------------------------------------------- CHINA (10.6%) Bank of China Series H 13,447,000(f) 7,800,587 China Construction Bank Series H 12,086,000 10,419,857 China Life Insurance Series H 2,644,000 12,156,836 China Natl Building Material Series H 1,606,000(f) 3,448,203 China Petroleum & Chemical Series H 4,726,000(f) 4,008,040 China Shenhua Energy Series H 979,000 4,391,950 Industrial & Commercial Bank of China 10,906,000 8,677,089 Series H Tencent Holdings 158,700(f) 2,763,413 Tingyi (Cayman Islands) Holding 1,260,000 2,811,393 ZTE Series H 711,200 3,940,961 --------------- Total 60,418,329 ------------------------------------------------------------------------------------- EGYPT (0.7%) Orascom Construction Inds GDR 83,064(d,e) 3,973,807 ------------------------------------------------------------------------------------- HONG KONG (7.5%) China Mobile 1,360,500(f) 12,754,074 China Overseas Land & Investment 3,735,797(f) 8,054,142 China Resources Cement Holdings 2,290,000(b) 1,102,141 China Resources Land 1,794,000 4,330,696 CNOOC ADR 66,998 9,978,682 Hengan Intl Group 601,000 3,868,800 Li & Fung 690,000 2,869,718 --------------- Total 42,958,253 ------------------------------------------------------------------------------------- HUNGARY (0.8%) OTP Bank 164,161(b) 4,623,161 ------------------------------------------------------------------------------------- INDIA (6.3%) Bharat Heavy Electricals 120,394 5,629,955 Cairn India 531,574(b) 2,943,574 Housing Development Finance 111,628 6,245,648 Infosys Technologies 123,307 5,725,829 Larsen & Toubro 81,972 2,705,516 Reliance Inds 196,384 7,944,414 State Bank of India 107,604 4,964,393 --------------- Total 36,159,329 ------------------------------------------------------------------------------------- INDONESIA (2.8%) Bank Central Asia 5,920,000 2,781,913 Bank Rakyat Indonesia 5,300,500 3,849,098 Bumi Resources 6,358,500 1,527,531 PT Astra Intl 1,492,000 4,790,175 Telekomunikasi Indonesia 3,256,000 2,797,928 --------------- Total 15,746,645 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) ISRAEL (0.7%) Israel Chemicals 341,335 $3,990,930 ------------------------------------------------------------------------------------- LUXEMBOURG (0.6%) Ternium ADR 147,045(b) 3,695,241 ------------------------------------------------------------------------------------- MALAYSIA (1.4%) CIMB Group Holdings 1,215,500 4,412,989 Genting Group 1,678,300 3,530,602 --------------- Total 7,943,591 ------------------------------------------------------------------------------------- MEXICO (3.8%) America Movil ADR Series L 205,753 9,079,880 Fresnillo 340,276 4,123,086 Grupo Financiero Banorte Series O 911,600 2,914,766 Wal-Mart de Mexico Series V 1,647,000(f) 5,747,837 --------------- Total 21,865,569 ------------------------------------------------------------------------------------- PANAMA (0.8%) Copa Holdings Cl A 113,085 4,775,580 ------------------------------------------------------------------------------------- POLAND (0.4%) Bank Pekao 39,835(b) 2,140,184 ------------------------------------------------------------------------------------- RUSSIA (10.2%) CTC Media 210,073(b) 3,377,974 Eurasia Drilling GDR 236,717(d,e) 3,905,831 Evraz Group GDR 214,038(d,e) 5,185,951 Gazprom ADR 206,493 4,898,014 LUKOIL ADR 103,988 6,032,516 Pharmstandard 49,844(b) 2,365,259 Rosneft Oil GDR 1,090,650(d) 8,398,005 Rosneft Oil GDR 164,010 1,247,104 Sberbank Cl S 3,335,116 7,390,130 Vimpel-Communications ADR 419,611(b) 7,523,626 Wimm-Bill-Dann Foods ADR 22,712(b) 1,534,877 X5 Retail Group GDR 256,529(b,d,e) 6,127,308 --------------- Total 57,986,595 ------------------------------------------------------------------------------------- SINGAPORE (0.9%) Wilmar Intl 1,198,000 5,283,067 ------------------------------------------------------------------------------------- SOUTH AFRICA (5.6%) AngloGold Ashanti 85,521 3,196,863 Impala Platinum Holdings 153,997 3,391,360 MTN Group 330,987 4,932,344 Murray & Roberts Holdings 589,576 4,211,877 Naspers Series N 122,386 4,421,711 Shoprite Holdings 369,891 3,016,785 Standard Bank Group 435,978 5,446,071 Truworths Intl 529,442 3,032,924 --------------- Total 31,649,935 ------------------------------------------------------------------------------------- SOUTH KOREA (10.6%) Doosan Infracore 117,610 1,674,312 Hyundai Development 75,370 2,231,717 Hyundai Engineering & Construction 51,219 2,829,060 Hyundai Mobis 38,396 5,122,234 Hyundai Motor 61,281 5,561,048 KB Financial Group 117,191(b) 5,639,499 LG Electronics 30,033 2,793,181 LG Household & Health Care 21,063 4,376,649 Samsung Electronics 37,374 19,627,004 Samsung Fire & Marine Insurance 10,836 1,973,873 Shinhan Financial Group 222,930(b) 8,462,113 --------------- Total 60,290,690 ------------------------------------------------------------------------------------- TAIWAN (8.0%) Asustek Computer 1,324,000 2,431,807 Chunghwa Telecom ADR 2,546 44,249 Far Eastern New Century 2,719,840 3,207,382 Hon Hai Precision Industry 2,980,283 11,673,619 MediaTek 495,990 6,942,087 Synnex Technology Intl 1,071,400 2,027,120 Taiwan Semiconductor Mfg 4,655,858 8,445,982 Tripod Technology 1,741,766 4,358,497
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 18 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) TAIWAN (CONT.) U-Ming Marine Transport 1,770,000 $3,210,469 Yuanta Financial Holding 5,137,000 3,390,157 --------------- Total 45,731,369 ------------------------------------------------------------------------------------- THAILAND (1.7%) Bangkok Bank 1,521,875 5,061,374 Siam Commercial Bank 1,943,700 4,459,157 --------------- Total 9,520,531 ------------------------------------------------------------------------------------- TURKEY (1.8%) BIM Birlesik Magazalar 67,068 2,432,028 Tofas Turk Otomobil Fabrikasi 1,032,157 2,593,580 Turkiye Garanti Bankasi 1,414,599 5,138,034 --------------- Total 10,163,642 ------------------------------------------------------------------------------------- UNITED KINGDOM (1.4%) Standard Chartered 321,596 7,888,621 ------------------------------------------------------------------------------------- UNITED STATES (0.8%) Southern Copper 151,470 4,771,305 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $450,695,425) $553,363,651 ------------------------------------------------------------------------------------- OTHER (0.1%) ISSUER SHARES VALUE(a) INDIA (0.1%) Lanco Infratec Warrants 31,761(b,e) $331,585 ------------------------------------------------------------------------------------- SINGAPORE (--%) Golden Agri-Resources Warrants 1(b,e,g) -- ------------------------------------------------------------------------------------- TOTAL OTHER (Cost: $264,646) $331,585 ------------------------------------------------------------------------------------- MONEY MARKET FUND (2.2%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.25% 12,486,312(h) $12,486,312 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $12,486,312) $12,486,312 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (3.8%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 22,071,023 $22,071,023 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $22,071,023) $22,071,023 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $485,517,406)(i) $588,252,571 =====================================================================================
SUMMARY OF INVESTMENTS IN SECURITIES BY INDUSTRY The following table represents the portfolio investments of the Fund by industry classifications as a percentage of net assets at Oct. 31, 2009:
PERCENTAGE OF INDUSTRY NET ASSETS VALUE ----------------------------------------------------------------------- Airlines 0.8% $4,775,580 Auto Components 0.9 5,122,234 Automobiles 2.3 12,944,803 Building Products 0.2 1,102,141 Capital Markets 0.6 3,390,157 Chemicals 0.7 3,990,930
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 19 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
PERCENTAGE OF INDUSTRY NET ASSETS VALUE ----------------------------------------------------------------------- Commercial Banks 21.3% $121,428,708 Communications Equipment 0.7 3,940,961 Computers & Peripherals 0.4 2,431,807 Construction & Engineering 2.9 16,283,562 Construction Materials 0.6 3,448,203 Distributors 0.5 2,869,718 Diversified Telecommunication 10,365,803 Services 1.8 Electrical Equipment 1.0 5,629,955 Electronic Equipment, Instruments & 18,059,236 Components 3.2 Energy Equipment & Services 0.7 3,905,831 Food & Staples Retailing 3.0 17,323,958 Food Products 1.7 9,629,337 Hotels, Restaurants & Leisure 0.6 3,530,602 Household Durables 2.8 16,257,762 Household Products 0.8 4,376,649 Industrial Conglomerates 0.6 3,207,382 Insurance 2.5 14,130,709 Internet Software & Services 0.5 2,763,413 IT Services 1.0 5,725,829 Machinery 0.3 1,674,312 Marine 0.6 3,210,469 Media 1.4 7,799,685 Metals & Mining 10.0 57,072,609 Multiline Retail 1.7 10,004,203 Oil, Gas & Consumable Fuels 14.3 81,630,074 Personal Products 0.7 3,868,800 Pharmaceuticals 0.4 2,365,259 Real Estate Management & Development 3.2 18,374,612 Semiconductors & Semiconductor 35,015,073 Equipment 6.1 Specialty Retail 0.5 3,032,924 Thrifts & Mortgage Finance 1.1 6,245,648 Wireless Telecommunication Services 4.7 26,766,298 Other(1) 6.0 34,557,335 ----------------------------------------------------------------------- Total $588,252,571 -----------------------------------------------------------------------
(1) Cash & Cash Equivalents. See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 20 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 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 Oct. 31, 2009, the value of these securities amounted to $27,590,902 or 4.8% of net assets. (e) Identifies issues considered to be illiquid as to their marketability (see Note 2 to the financial statements). The aggregate value of such securities at Oct. 31, 2009 was $19,524,482, representing 3.4% of net assets. Information concerning such security holdings at Oct. 31, 2009 is as follows:
ACQUISITION SECURITY DATES COST --------------------------------------------------------------------------- Eurasia Drilling GDR 11-02-07 thru 04-15-08 $5,578,172 Evraz Group GDR 05-06-09 thru 08-18-09 3,779,157 Orascom Construction Ind GDR 12-06-06 thru 07-13-09 2,944,005 X5 Retail Group GDR 12-18-08 thru 08-18-09 2,985,557 Golden Agri-Resources Warrants 09-23-09 -- Lanco Infratec Warrants 08-04-09 264,646
(f) At Oct. 31, 2009, security was partially or fully on loan. See Note 7 to the financial statements. (g) Negligible market value. (h) Affiliated Money Market Fund -- See Note 8 to the financial statements. The rate shown is the seven-day current annualized yield at Oct. 31, 2009. (i) At Oct. 31, 2009, the cost of securities for federal income tax purposes was $511,989,504 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $86,945,265 Unrealized depreciation (10,682,198) ----------------------------------------------------------- Net unrealized appreciation $76,263,067 -----------------------------------------------------------
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 ANNUAL REPORT 21 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. 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 New York Stock Exchange (NYSE) or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. -------------------------------------------------------------------------------- 22 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Oct. 31, 2009:
FAIR VALUE AT OCT. 31, 2009 ---------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL --------------------------------------------------------------------------------------------- Equity Securities Common Stocks Construction & Engineering $11,978,170 $3,973,807 $-- $15,951,977 Oil, Gas & Consumable Fuels 73,232,069 8,398,005 -- 81,630,074 All Other Industries(a) 21,129,481 434,652,119(b) -- 455,781,600 Other Construction & Engineering -- 331,585 -- 331,585 --------------------------------------------------------------------------------------------- Total Equity Securities 106,339,720 447,355,516 -- 553,695,236 --------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(c) 12,486,312 -- -- 12,486,312 Investments of Cash Collateral Received for Securities on Loan 22,071,023 -- -- 22,071,023 --------------------------------------------------------------------------------------------- Total Other 34,557,335 -- -- 34,557,335 --------------------------------------------------------------------------------------------- Total $140,897,055 $447,355,516 $-- $588,252,571 ---------------------------------------------------------------------------------------------
(a) All industry classifications are identified in the Portfolio of Investments. (b) Includes certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading. Therefore, these investment securities were classified as Level 2 instead of Level 1. (c) Money market fund that is a sweep investment for cash balances in the Fund at Oct. 31, 2009. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 23 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. -------------------------------------------------------------------------------- 24 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- OCT. 31, 2009
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $450,960,071) $ 553,695,236 Affiliated money market fund (identified cost $12,486,312) 12,486,312 Investments of cash collateral received for securities on loan (identified cost $22,071,023) 22,071,023 -------------------------------------------------------------------------------- Total investments in securities (identified cost $485,517,406) 588,252,571 Foreign currency holdings (identified cost $11,182,140) 11,120,599 Capital shares receivable 1,511,068 Dividends and accrued interest receivable 663,591 Receivable for investment securities sold 7,279,008 -------------------------------------------------------------------------------- Total assets 608,826,837 -------------------------------------------------------------------------------- LIABILITIES Capital shares payable 1,175,836 Payable for investment securities purchased 14,643,177 Payable upon return of securities loaned 22,071,023 Accrued investment management services fees 17,519 Accrued distribution fees 5,138 Accrued transfer agency fees 3,844 Accrued administrative services fees 1,279 Accrued plan administration services fees 96 Other accrued expenses 427,594 -------------------------------------------------------------------------------- Total liabilities 38,345,506 -------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 570,481,331 -------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 745,039 Additional paid-in capital 586,845,473 Undistributed net investment income 582,060 Accumulated net realized gain (loss) (120,272,925) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 102,581,684 -------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 570,481,331 -------------------------------------------------------------------------------- *Including securities on loan, at value $ 21,096,355 --------------------------------------------------------------------------------
-------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 25 STATEMENT OF ASSETS AND LIABILITIES (continued) -------------------------------- OCT. 31, 2009
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $416,296,725 53,776,169 $7.74(1) Class B $ 38,489,191 5,601,155 $6.87 Class C $ 32,757,231 4,756,330 $6.89 Class I $ 68,977,761 8,575,621 $8.04 Class R2 $ 12,235,711 1,580,451 $7.74 Class R4 $ 1,186,515 147,397 $8.05 Class R5 $ 538,197 66,743 $8.06 -----------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $8.21. 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. -------------------------------------------------------------------------------- 26 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- YEAR ENDED OCT. 31, 2009
INVESTMENT INCOME Income: Dividends $ 8,662,738 Interest 19,712 Income distributions from affiliated money market fund 30,324 Income from securities lending -- net 110,322 Less foreign taxes withheld (901,448) ------------------------------------------------------------------------------- Total income 7,921,648 ------------------------------------------------------------------------------- Expenses: Investment management services fees 3,791,476 Distribution fees Class A 715,248 Class B 302,533 Class C 99,973 Class R2 13,518 Transfer agency fees Class A 967,197 Class B 110,181 Class C 31,984 Class R2 1,352 Class R4 409 Class R5 57 Administrative services fees 280,656 Plan administration services fees Class R2 6,759 Class R4 2,039 Compensation of board members 10,552 Custodian fees 211,200 Printing and postage 138,290 Registration fees 65,280 Professional fees 55,346 Other 44,085 ------------------------------------------------------------------------------- Total expenses 6,848,135 Expenses waived/reimbursed by the Investment Manager and its affiliates (426) ------------------------------------------------------------------------------- Total net expenses 6,847,709 ------------------------------------------------------------------------------- Investment income (loss) -- net 1,073,939 -------------------------------------------------------------------------------
-------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 27 STATEMENT OF OPERATIONS (continued) -------------------------------------------- YEAR ENDED OCT. 31, 2009
REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $(78,295,149) Foreign currency transactions (874,109) ------------------------------------------------------------------------------- Net realized gain (loss) on investments (79,169,258) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 239,320,659 ------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 160,151,401 ------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $161,225,340 -------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 28 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
YEAR ENDED OCT. 31, 2009 2008 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 1,073,939 $ 4,436,377 Net realized gain (loss) on investments (79,169,258) (19,657,824) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 239,320,659 (421,981,869) ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 161,225,340 (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 ANNUAL REPORT 29 STATEMENTS OF CHANGES IN NET ASSETS (continued) --------------------------------
YEAR ENDED OCT. 31, 2009 2008 CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 80,251,128 $ 97,862,568 Class B shares 9,019,008 12,474,577 Class C shares 4,625,001 2,616,649 Class I shares 63,017,867 30,164,283 Class R2 shares 765,806 -- Class R4 shares 436,563 642,913 Class R5 shares 668 5,000 Fund merger (Note 11) Class A shares 45,280,067 -- Class B shares 2,387,255 -- Class C shares 25,077,963 -- Class R2 shares 12,517,198 -- Class R5 shares 496,500 -- 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 Conversions from Class B to Class A Class A shares 6,661,382 11,962,805 Class B shares (6,661,382) (11,962,805) Payments for redemptions Class A shares (95,511,753) (148,388,977) Class B shares (8,184,934) (19,310,010) Class C shares (4,011,594) (2,462,810) Class I shares (7,237,209) (72,065,208) Class R2 shares (1,958,447) -- Class R4 shares (397,068) (921,454) ---------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 126,574,019 56,102,399 ---------------------------------------------------------------------------------------------- Proceeds from regulatory settlement (Note 10) 458,466 -- Total increase (decrease) in net assets 288,257,825 (538,353,211) Net assets at beginning of year 282,223,506 820,576,717 ---------------------------------------------------------------------------------------------- Net assets at end of year $570,481,331 $ 282,223,506 ---------------------------------------------------------------------------------------------- Undistributed (excess of distributions over) net investment income $ 582,060 $ (5,170) ----------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 30 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for periods shown. For periods ended 2007 and after, per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of sales charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED OCT. 31, CLASS A ------------------------------------------------------- PER SHARE DATA 2009 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) .02 .08 .04 .01 .04 Net gains (losses) (both realized and unrealized) 2.75 (7.24) 6.27 3.10 1.95 ---------------------------------------------------------------------------------------------------------- Total from investment operations 2.77 (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) ---------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlement (Note 10) .01 -- -- -- -- ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.74 $4.96 $14.99 $11.32 $8.23 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 56.05%(a) (57.79%) 68.21% 37.85% 31.83% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses 1.90% 1.87% 1.83% 1.81% 1.79% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) .38% .78% .31% .19% .54% ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $416 $250 $661 $425 $295 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 149% 133% 125% 145% 124% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 31 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS B ------------------------------------------------------- PER SHARE DATA 2009 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) (.02) .00(c) (.05) (.05) (.01) Net gains (losses) (both realized and unrealized) 2.45 (6.53) 5.79 2.91 1.83 ---------------------------------------------------------------------------------------------------------- Total from investment operations 2.43 (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) -- -- Proceeds from regulatory settlement (Note 10) .01 -- -- -- -- ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.87 $4.43 $13.73 $10.63 $7.77 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 55.08%(a) (58.08%) 66.95% 36.81% 30.59% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses 2.68% 2.62% 2.58% 2.57% 2.55% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) (.36%) .02% (.48%) (.55%) (.24%) ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $38 $28 $94 $77 $74 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 149% 133% 125% 145% 124% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 32 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS C ------------------------------------------------------- PER SHARE DATA 2009 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) (.04) .00(c) (.05) (.06) -- Net gains (losses) (both realized and unrealized) 2.48 (6.54) 5.81 2.93 1.82 ---------------------------------------------------------------------------------------------------------- Total from investment operations 2.44 (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) -- -- ---------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlement (Note 10) .01 -- -- -- -- ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.89 $4.44 $13.78 $10.66 $7.79 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 55.18%(a) (58.15%) 67.03% 36.84% 30.54% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses 2.60% 2.63% 2.59% 2.58% 2.56% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) (.65%) .03% (.48%) (.57%) (.19%) ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $33 $3 $8 $5 $3 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 149% 133% 125% 145% 124% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 33 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS I ------------------------------------------------------- PER SHARE DATA 2009 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) .06 .11 .09 .03 .06 Net gains (losses) (both realized and unrealized) 2.85 (7.45) 6.43 3.16 1.98 ---------------------------------------------------------------------------------------------------------- Total from investment operations 2.91 (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) ---------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlement (Note 10) .01 -- -- -- -- ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.04 $5.12 $15.38 $11.50 $8.35 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 57.03%(a) (57.63%) 69.07% 38.36% 32.32% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses 1.26% 1.42% 1.39% 1.35% 1.30% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) .77% .97% .75% .63% .97% ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $69 $-- $56 $41 $19 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 149% 133% 125% 145% 124% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 34 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
CLASS R2 YEAR ENDED OCT. 31, PER SHARE DATA 2009(d) Net asset value, beginning of period $7.42 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01) Net gains (losses) (both realized and unrealized) .33 ---------------------------------------------------------------------- Total from investment operations .32 ---------------------------------------------------------------------- Net asset value, end of period $7.74 ---------------------------------------------------------------------- TOTAL RETURN 4.31% ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses 2.06%(e) ---------------------------------------------------------------------- Net investment income (loss) (.36%)(e) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $12 ---------------------------------------------------------------------- Portfolio turnover rate 149% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 35 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS R4 ------------------------------------------------------- PER SHARE DATA 2009 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) .04 .11 .05 .03 .05 Net gains (losses) (both realized and unrealized) 2.86 (7.45) 6.41 3.14 1.97 ---------------------------------------------------------------------------------------------------------- Total from investment operations 2.90 (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) ---------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlement (Note 10) .01 -- -- -- -- ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.05 $5.14 $15.32 $11.50 $8.33 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 56.62%(a) (57.58%) 68.51% 38.06% 31.87% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.62% 1.73% 1.65% 1.63% 1.59% ---------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f) 1.56% 1.47% 1.65% 1.63% 1.59% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) .72% 1.12% .45% .41% .81% ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $1 $2 $6 $2 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 149% 133% 125% 145% 124% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 36 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R5 ------------------- PER SHARE DATA 2009 2008(g) Net asset value, beginning of period $5.13 $9.32 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .05 .03 Net gains (losses) (both realized and unrealized) 2.87 (4.22) ---------------------------------------------------------------------- Total from investment operations 2.92 (4.19) ---------------------------------------------------------------------- Proceeds from regulatory settlement (Note 10) .01 -- ---------------------------------------------------------------------- Net asset value, end of period $8.06 $5.13 ---------------------------------------------------------------------- TOTAL RETURN 57.12%(a) (44.96%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses 1.31% 1.47%(e) ---------------------------------------------------------------------- Net investment income (loss) .68% 1.57%(e) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $-- ---------------------------------------------------------------------- Portfolio turnover rate 149% 133% ----------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) During the year ended Oct. 31, 2009 the fund received proceeds from regulatory settlements (see Note 10 to the financial statements). Had the fund not received these proceeds, the total returns would have been lower by 0.12%. (b) Expense ratios include the impact of a performance incentive adjustment, if any. 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 expense ratios. (c) Rounds to zero. (d) For the period from Aug. 3, 2009 (inception date) to Oct. 31, 2009. (e) Annualized. (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) For the period from Aug. 1, 2008 (inception date) to Oct. 31, 2008. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. ORGANIZATION 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 (the 1940 Act) 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 Fund's 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 R2, Class R4 and Class R5 shares. - Class A shares are offered with a front-end sales charge, which may be waived under certain circumstances. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares one month after the completion of the eighth year of ownership if originally purchased in a RiverSource fund on or after May 21, 2005 or originally purchased in a Seligman fund on or after June 13, 2009. Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund prior to June 13, 2009 will convert to Class A shares in the month prior to the ninth year of ownership. - Class C shares may be subject to a CDSC. - Class I, Class R2, Class R4 and Class R5 shares are offered without a front- end sales charge or CDSC to qualifying institutional investors. Class R2 became available effective Aug. 3, 2009. At Oct. 31, 2009, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) and affiliated funds-of-funds in the RiverSource Family 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. -------------------------------------------------------------------------------- 38 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF NEW ACCOUNTING STANDARD In June 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification(TM) (Codification) as the single source of authoritative accounting principles recognized by the FASB in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP). The Codification supersedes existing non-grandfathered, non- SEC accounting and reporting standards. The Codification did not change GAAP but rather organized it into a hierarchy where all guidance within the Codification carries an equal level of authority. The Codification became effective for financial statements issued for interim and annual periods ending after Sept. 15, 2009. The Codification did not have a material effect on the Fund's financial statements. 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 business of the New York Stock Exchange (NYSE). 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 by an independent pricing service using an evaluated bid. 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 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 -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. FOREIGN CURRENCY TRANSLATIONS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At Oct. 31, 2009, foreign currency holdings consisted of multiple denominations, primarily Brazilian real. ILLIQUID SECURITIES At Oct. 31, 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 Oct. 31, 2009 was $19,524,482 representing 3.42% of net assets. Certain illiquid securities may be valued, in good faith, by management at fair value according to procedures approved 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 -------------------------------------------------------------------------------- 40 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. 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 (which includes net short-term capital gains) 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. 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. On Aug. 12, 2009, an additional dividend was paid by Seligman Emerging Markets Fund before the merger (see Note 11) to ensure that current shareholders of Threadneedle Emerging Markets Fund would not experience a dilution in their share of the Fund's income or capital gains. 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. 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. FORWARD FOREIGN CURRENCY CONTRACTS The Fund may enter into forward foreign currency contracts in connection with settling purchases or sales of securities, to hedge the currency exposure associated with some or all of the Fund's securities or as part of its investment strategy. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked to market daily based upon foreign currency exchange rates from an independent pricing service and the change in value is recorded as unrealized appreciation or depreciation. The Fund will record a realized gain or loss when the forward foreign currency contract is closed. The risks of forward foreign currency contracts include movement in the values of the foreign currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that the counterparty will not complete its contractual obligation, which may be in excess of the amount, if any, reflected in the Statement of Assets and Liabilities. At Oct. 31, 2009, the Fund had no outstanding forward foreign currency contracts. EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS The following tables are intended to provide additional information about the effect of derivatives on the financial statements of the Fund including: the fair value of derivatives by risk category and the location of those fair values in the Statement of Assets and Liabilities; the impact of derivative transactions on the Fund's operations over the period including realized gains or losses and unrealized gains or losses. FAIR VALUES OF DERIVATIVE INSTRUMENTS AT OCT. 31, 2009 At Oct. 31, 2009, the Fund had no outstanding investments in derivatives. -------------------------------------------------------------------------------- 42 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- EFFECT OF DERIVATIVE INSTRUMENTS ON THE STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCT. 31, 2009
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME ------------------------------------------------------------------------------ RISK EXPOSURE CATEGORY FORWARD FOREIGN CURRENCY CONTRACTS ------------------------------------------------------------------------------ Foreign exchange contracts $294,797 ------------------------------------------------------------------------------ Total $294,797 ------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME ------------------------------------------------------------------------------ RISK EXPOSURE CATEGORY FORWARD FOREIGN CURRENCY CONTRACTS ------------------------------------------------------------------------------ Foreign exchange contracts $-- ------------------------------------------------------------------------------ Total $-- ------------------------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY FORWARD FOREIGN CURRENCY CONTRACTS At Oct. 31, 2009, the Fund had no forward foreign currency contracts outstanding. The monthly average gross notional amount for these contracts was $1.2 million for the year ended Oct. 31, 2009. 4. 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 an annual fee that is equal to a percentage of the Fund's average daily net assets that declines from 1.10% to 0.90% as the Fund's net 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 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 $54,050 for the year ended Oct. 31, 2009. The management fee for the year ended Oct. 31, 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 -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 43 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% as the Fund's net assets increase. The fee for the year ended Oct. 31, 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 year ended Oct. 31, 2009, other expenses paid to this company were $298. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act 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 funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains Fund shareholder accounts and records and provides Fund shareholder services. 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 Transfer Agent also charges an annual fee of $3 per account serviced directly by the Fund or its designated agent for Class A, Class B and Class C shares. 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 R4 and Class R5 shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for the 12 month period from the date the account becomes inactive. These fees are included in the transfer agency fees in the Statement of Operations. In connection with the acquisition of Seligman Emerging Markets Fund (see Note 11), the Fund assumed the obligations of Seligman Emerging Markets Fund, which, together with certain other associated investment companies (together, the Guarantors), has severally, but not jointly, guaranteed the -------------------------------------------------------------------------------- 44 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- performance and observance of all terms and conditions of a lease entered into by Seligman Data Corp. (SDC), the former transfer agent of Seligman Emerging Markets Fund, including the payment of rent by SDC (the Guaranty). The lease and the Guaranty expire in January 2019. As of Oct. 31, 2009, the Fund's total potential future obligation over the life of the Guaranty is $126,788. Seligman Emerging Markets Fund expensed $64,979 related to the Guaranty prior to acquisition by the Fund. This amount is included within other accrued expenses in the Fund's Statement of Assets and Liabilities. 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 and Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. DISTRIBUTION FEES The Fund has an agreement with RiverSource Fund Distributors, Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class A, 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, of the 1.00% fee, up to 0.75% is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $1,091,000 and $46,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of July 31, 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, including front-end and CDSCs, received by the Distributor for distributing Fund shares were $531,551 for Class A, $24,324 for Class B and $2,630 for Class C for the year ended Oct. 31, 2009. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended Oct. 31, 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............................................. 1.56%
-------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 45 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............................................. $426
Under an agreement which was effective until Oct. 31, 2009, the Investment Manager and its affiliates contractually agreed to waive certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any performance incentive adjustment, would 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. 5. SECURITIES TRANSACTIONS Cost of purchases (other than short-term obligations) aggregated $668,627,958 for the year ended Oct. 31, 2009, including $56,669,863* from Seligman Emerging Markets Fund that was acquired in the fund merger as described in Note 11 and $45,962,428* of purchases done to realign the Fund's portfolio following the merger. Proceeds from sales of securities (other than short-term obligations) aggregated $563,731,080 for year ended Oct. 31, 2009, including $45,169,849* of sales done to realign the Fund's portfolio following the merger. Realized gains and losses are determined on an identified cost basis. * Amounts are excluded for purposes of calculating the Fund's portfolio turnover rate. -------------------------------------------------------------------------------- 46 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
YEAR ENDED OCT. 31, 2009(a) 2008(b),(c) ------------------------------------------------------------------- CLASS A Sold 12,649,748 9,782,470 Fund merger 6,283,578 -- Converted from Class B shares(d) 927,466 1,300,305 Reinvested distributions -- 11,944,431 Redeemed (16,538,001) (16,677,659) ------------------------------------------------------------------- Net increase (decrease) 3,322,791 6,349,547 ------------------------------------------------------------------- CLASS B Sold 1,590,019 1,336,871 Fund merger 372,602 -- Reinvested distributions -- 2,007,193 Converted to Class A shares(d) (1,042,154) (1,450,037) Redeemed (1,673,824) (2,368,668) ------------------------------------------------------------------- Net increase (decrease) (753,357) (474,641) ------------------------------------------------------------------- CLASS C Sold 779,191 296,342 Fund merger 3,905,413 -- Reinvested distributions -- 163,281 Redeemed (640,121) (305,438) ------------------------------------------------------------------- Net increase (decrease) 4,044,483 154,185 ------------------------------------------------------------------- CLASS I Sold 9,487,877 2,894,086 Reinvested distributions -- 993,810 Redeemed (913,814) (7,495,922) ------------------------------------------------------------------- Net increase (decrease) 8,574,063 (3,608,026) ------------------------------------------------------------------- CLASS R2 Sold 100,396 -- Fund merger 1,735,811 -- Reinvested distributions -- -- Redeemed (255,756) -- ------------------------------------------------------------------- Net increase (decrease) 1,580,451 -- ------------------------------------------------------------------- CLASS R4 Sold 63,248 56,860 Reinvested distributions -- 40,967 Redeemed (68,066) (95,990) ------------------------------------------------------------------- Net increase (decrease) (4,818) 1,837 -------------------------------------------------------------------
-------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 47 NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
YEAR ENDED OCT. 31, 2009(a) 2008(b),(c) ------------------------------------------------------------------- CLASS R5 Sold -- 535 Fund merger 66,208 -- ------------------------------------------------------------------- Net increase (decrease) 66,208 535 -------------------------------------------------------------------
(a) Class R2 is for the period from Aug. 3, 2009 (inception date) to Oct. 31, 2009. (b) Class R5 is for the period from Aug. 1, 2008 (inception date) to Oct. 31, 2008. (c) Certain line items from the prior year have been renamed to conform to the current year presentation. (d) Automatic conversion of Class B shares to Class A shares based on the original purchase date. 7. 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 Oct. 31, 2009, securities valued at $20,960,570 were on loan, secured by cash collateral of $22,071,023 invested in short-term securities or in cash equivalents. 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. 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. Net income of -------------------------------------------------------------------------------- 48 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- $110,322 earned from securities lending from Dec. 1, 2008 through Oct. 31, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 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. 8. 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 funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $275,293,526 and $276,328,575, respectively, for the year ended Oct. 31, 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 Oct. 31, 2009, can be found in the Portfolio of Investments. 9. 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 became effective on Oct. 15, 2009, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other funds in the RiverSource Family of Funds, severally and not jointly, permits collective borrowings up to $300 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $200 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 $500 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 sum of the federal funds rate plus (A) 1.25% per annum plus (B) if one-month LIBOR exceeds the federal funds rate, the amount of such excess. 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 0.10% per annum, in addition to an upfront fee equal to its pro rata share of 0.04% of the amount of the credit facility. Prior to Oct. 15, 2009, the credit facility agreement, which was a collective agreement between the Fund and certain other -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 49 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- funds in the RiverSource Family of Funds, severally and not jointly, permitted collective borrowings up to $475 million. Interest was charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. The Fund also paid 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 year ended Oct. 31, 2009. 10. PROCEEDS FROM REGULATORY SETTLEMENT During the year ended Oct. 31, 2009, as a result of a settlement of an administrative proceeding brought by the Securities and Exchange Commission against an unaffiliated third party relating to market timing and/or late trading of mutual funds, the Fund received $458,466, which represented the Fund's portion of the proceeds from the settlement (the Fund was not a party to the proceeding). The proceeds received by the Fund were recorded as an increase to additional paid-in capital. 11. FUND MERGER At the close of business on Aug. 14, 2009, Threadneedle Emerging Markets Fund acquired the assets and assumed the identified liabilities of Seligman Emerging Markets Fund. The reorganization was completed after shareholders approved the plan on June 29, 2009. The aggregate net assets of Threadneedle Emerging Markets Fund immediately before the acquisition were $457,623,309 and the combined net assets immediately after the acquisition were $543,382,292. The merger was accomplished by a tax-free exchange of 9,437,758 shares of Seligman Emerging Markets Fund valued at $85,758,983. In exchange for the Seligman Emerging Markets Fund shares and net assets, Threadneedle Emerging Markets Fund issued the following number of shares:
SHARES ------------------------------------------------------------- Class A........................................... 6,283,578 Class B........................................... 372,602 Class C........................................... 3,905,413 Class R2.......................................... 1,735,811 Class R5.......................................... 66,208
-------------------------------------------------------------------------------- 50 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- The components of Seligman Emerging Markets Fund's net assets after adjustments for any permanent book-to-tax differences at the merger date were as follows:
EXCESS OF ACCUMULATED DISTRIBUTIONS OVER TOTAL CAPITAL UNREALIZED NET NET INVESTMENT NET ASSETS STOCK APPRECIATION REALIZED LOSS INCOME ----------------------------------------------------------------------------------------- Seligman Emerging Markets Fund $85,758,983 $89,533,507 $17,108,032 $(20,882,556) $--
12. FEDERAL TAX INFORMATION 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, foreign tax credits 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. In the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $486,709 and accumulated net realized loss has been decreased by $486,709. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED OCT. 31, 2009 2008 --------------------------------------------------------------- Ordinary income............................. $-- $96,003,258 Long-term capital gain...................... -- 61,249,036
At Oct. 31, 2009, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income................... $ 5,464,830 Undistributed accumulated long-term gain........ $ -- Accumulated realized loss....................... $(98,672,638) Unrealized appreciation (depreciation).......... $ 76,098,627
-------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 51 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- For federal income tax purposes, the Fund had a capital loss carry-over of $98,672,638 at Oct. 31, 2009, that if not offset by capital gains will expire as follows:
2016 2017 $28,498,591 $70,174,047
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. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 13. 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. 14. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Dec. 21, 2009, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 15. 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 (now known as RiverSource) 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 -------------------------------------------------------------------------------- 52 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 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. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. 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. Incorporated (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 -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 53 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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. (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 was and had 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 paid $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. -------------------------------------------------------------------------------- 54 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 55 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THREADNEEDLE EMERGING MARKETS FUND: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Threadneedle Emerging Markets Fund (the Fund) (one of the portfolios constituting the RiverSource Global Series, Inc.) as of October 31, 2009, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of the Fund for the periods presented through October 31, 2006, were audited by other auditors whose report dated December 20, 2006 expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2009, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. -------------------------------------------------------------------------------- 56 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- In our opinion, the financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of Threadneedle Emerging Markets Fund of the RiverSource Global Series, Inc. at October 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota December 21, 2009 -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 57 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- OCT. 31, 2009 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (100.0%)(c) ISSUER SHARES VALUE(a) AUSTRALIA (1.1%) CSL 184,567 $5,179,630 ------------------------------------------------------------------------------------- BELGIUM (1.2%) Fortis 1,370,269(b) 5,923,792 ------------------------------------------------------------------------------------- BERMUDA (0.5%) PartnerRe 34,197 2,615,387 ------------------------------------------------------------------------------------- BRAZIL (2.4%) Companhia Brasileira de Meios de Pagamento 204,952 1,887,118 Multiplan Empreendimentos Imobiliarios 197,000 2,984,374 Natura Cosmeticos 165,400 2,974,475 Redecard 237,500 3,488,640 --------------- Total 11,334,607 ------------------------------------------------------------------------------------- CANADA (1.7%) Barrick Gold 121,544 4,367,076 Nexen 177,900 3,824,464 --------------- Total 8,191,540 ------------------------------------------------------------------------------------- CHINA (1.0%) Industrial & Commercial Bank of China Series H 6,206,000 4,937,650 ------------------------------------------------------------------------------------- DENMARK (0.8%) Vestas Wind Systems 57,204(b,d) 4,012,685 ------------------------------------------------------------------------------------- FINLAND (0.4%) Talvivaara Mining 364,317(b) 2,140,899 ------------------------------------------------------------------------------------- FRANCE (2.4%) Euler Hermes 32,540 2,582,983 France Telecom 164,391 4,072,990 Renault 106,960(b) 4,786,054 --------------- Total 11,442,027 ------------------------------------------------------------------------------------- GERMANY (3.8%) E.ON 99,472 3,800,177 K+S 43,631(d) 2,362,208 Linde 65,664 6,825,537 MTU Aero Engines Holding 62,441 2,827,934 Siemens 25,790 2,321,985 --------------- Total 18,137,841 ------------------------------------------------------------------------------------- HONG KONG (3.2%) Champion REIT 3,714,770(d) 1,563,485 Great Eagle Holdings 1,903,377 5,020,951 Hongkong & Shanghai Hotels 2,025,500 2,883,269 Sun Hung Kai Properties 378,000 5,726,965 --------------- Total 15,194,670 ------------------------------------------------------------------------------------- INDIA (0.9%) State Bank of India GDR 45,078 4,117,183 ------------------------------------------------------------------------------------- INDONESIA (1.4%) Bank Rakyat Indonesia 5,150,000 3,739,809 Perusahaan Gas Negara 8,416,500 3,125,099 --------------- Total 6,864,908 ------------------------------------------------------------------------------------- IRELAND (0.9%) Accenture Cl A 111,403 4,130,823 ------------------------------------------------------------------------------------- JAPAN (6.6%) Asahi Breweries 192,900 3,410,404 Canon 101,100 3,811,970 Honda Motor 75,200 2,322,808 KDDI 585 3,105,051 Makita 81,100 2,687,807 Mitsubishi Estate 307,000(d) 4,637,467 Nintendo 13,400(d) 3,361,237 Osaka Securities Exchange 355 1,703,683
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) JAPAN (CONT.) Shin-Etsu Chemical 41,749 $2,214,127 Sony Financial Holdings 1,242 3,564,272 --------------- Total 30,818,826 ------------------------------------------------------------------------------------- LUXEMBOURG (0.7%) Millicom Intl Cellular 56,485(b) 3,539,350 ------------------------------------------------------------------------------------- MEXICO (2.3%) America Movil ADR Series L 181,490 8,009,154 Grupo Mexico Series B 1,514,600(b) 3,041,100 --------------- Total 11,050,254 ------------------------------------------------------------------------------------- NETHERLANDS (1.8%) Fugro 45,386 2,527,677 ING Groep 459,565(b) 5,980,002 --------------- Total 8,507,679 ------------------------------------------------------------------------------------- PORTUGAL (0.8%) Galp Energia Series B 226,483(d) 3,814,285 ------------------------------------------------------------------------------------- SINGAPORE (0.8%) DBS Group Holdings 423,000 3,874,485 ------------------------------------------------------------------------------------- SOUTH KOREA (2.9%) KB Financial Group 76,652(b) 3,688,669 NHN 24,384(b) 3,598,069 Samsung Electronics 11,228 6,759,403 --------------- Total 14,046,141 ------------------------------------------------------------------------------------- SPAIN (1.7%) Banco Santander 331,232 5,329,728 Inditex 49,139(d) 2,884,126 --------------- Total 8,213,854 ------------------------------------------------------------------------------------- SWITZERLAND (6.2%) Credit Suisse Group 44,000 2,352,116 Nestle 209,948 9,762,912 Novartis 143,120 7,452,853 Roche Holding 36,865 5,904,407 Syngenta 17,824 4,220,389 --------------- Total 29,692,677 ------------------------------------------------------------------------------------- TAIWAN (1.1%) Hon Hai Precision Industry 629,000 2,463,761 Taiwan Semiconductor Mfg 1,426,000 2,586,843 Taiwan Semiconductor Mfg ADR 18,297 174,553 --------------- Total 5,225,157 ------------------------------------------------------------------------------------- UNITED KINGDOM (11.7%) 3i Group 861,105 3,705,976 Aggreko 232,254 2,886,464 Autonomy 103,051(b) 2,265,526 BG Group 445,560 7,668,799 Chemring Group 67,331 2,915,389 HSBC Holdings 803,102 8,873,490 Intl Power 817,617 3,394,150 Rio Tinto 79,680 3,522,293 Standard Chartered 118 2,894 Tesco 684,185 4,561,489 Tullow Oil 429,334 8,316,221 Vodafone Group 2,137,657 4,710,570 Weir Group 225,684 2,586,104 --------------- Total 55,409,365 ------------------------------------------------------------------------------------- UNITED STATES (41.7%) Aetna 86,577 2,253,599 American Tower Cl A 85,055(b) 3,131,725 Apple 41,212(b) 7,768,462 Arch Coal 139,535 3,022,328 Bank of America 333,651 4,864,632 Cisco Systems 218,521(b) 4,993,205 Citigroup 1,643,433 6,721,641 Cliffs Natural Resources 88,454 3,146,309 Coca-Cola 89,436 4,767,834 CVS Caremark 66,817 2,358,640 Dell 510,593(b) 7,398,493 Devon Energy 33,289 2,154,131 DIRECTV Group 197,526(b) 5,194,934 eBay 180,767(b) 4,025,681 ENSCO Intl 108,600 4,972,794 Gilead Sciences 112,861(b) 4,802,236 Goldman Sachs Group 29,614 5,039,414 Google Cl A 16,000(b) 8,577,920
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 18 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) UNITED STATES (CONT.) Hartford Financial Services Group 256,189 $6,281,753 Humana 85,771(b) 3,223,274 IBM 78,564 9,475,604 Johnson & Johnson 133,521 7,884,415 JPMorgan Chase & Co 237,616 9,925,220 Laboratory Corp of America Holdings 63,875(b) 4,400,349 Lockheed Martin 78,459 5,397,195 Lowe's Companies 184,695 3,614,482 Merck & Co 137,100 4,240,503 Microsoft 228,000 6,322,440 Norfolk Southern 142,964 6,664,982 Oracle 300,000 6,330,000 QUALCOMM 86,515 3,582,586 Republic Services 190,446 4,934,456 SL Green Realty 85,016 3,295,220 Thermo Fisher Scientific 87,181(b) 3,923,145 Travelers Companies 83,319 4,148,453 Ultra Petroleum 73,720(b) 3,579,106 Walgreen 188,736 7,139,883 Wal-Mart Stores 50,548 2,511,225 Walt Disney 141,209 3,864,890 WESCO Intl 92,118(b) 2,354,536 --------------- Total 198,287,695 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $453,762,471) $476,703,410 ------------------------------------------------------------------------------------- OTHER (--%) ISSUER SHARES VALUE(a) SPAIN Banco Santander Rights 32(b) $6 ------------------------------------------------------------------------------------- TOTAL OTHER (Cost: $--) $6 ------------------------------------------------------------------------------------- MONEY MARKET FUND (0.5%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.25% 2,414,933(e) $2,414,933 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $2,414,933) $2,414,933 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (3.5%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 16,554,594 $16,554,594 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $16,554,594) $16,554,594 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $472,731,998)(f) $495,672,943 =====================================================================================
SUMMARY OF INVESTMENTS IN SECURITIES BY INDUSTRY The following table represents the portfolio investments of the Fund by industry classifications as a percentage of net assets at Oct. 31, 2009:
PERCENTAGE OF INDUSTRY NET ASSETS VALUE ----------------------------------------------------------------------- Aerospace & Defense 2.3% $11,140,518 Automobiles 1.5 7,108,862 Beverages 1.7 8,178,238 Biotechnology 2.1 9,981,866 Capital Markets 2.3 11,097,506 Chemicals 3.3 15,622,261
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 19 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
PERCENTAGE OF INDUSTRY NET ASSETS VALUE ----------------------------------------------------------------------- Commercial Banks 7.3% $34,563,914 Commercial Services & Supplies 1.6 7,820,920 Communications Equipment 1.8 8,575,791 Computers & Peripherals 5.2 24,642,559 Diversified Financial Services 6.1 29,195,178 Diversified Telecommunication Services 0.9 4,072,990 Electric Utilities 0.8 3,800,177 Electrical Equipment 0.8 4,012,685 Electronic Equipment, Instruments & Components 0.5 2,463,761 Energy Equipment & Services 1.6 7,500,471 Food & Staples Retailing 3.5 16,571,237 Food Products 2.0 9,762,912 Gas Utilities 0.7 3,125,099 Health Care Providers & Services 2.1 9,877,222 Hotels, Restaurants & Leisure 0.6 2,883,269 Household Durables 0.6 2,687,807 Independent Power Producers & Energy Traders 0.7 3,394,150 Industrial Conglomerates 0.5 2,321,985 Insurance 5.3 25,116,640 Internet Software & Services 3.4 16,201,670 IT Services 2.0 9,506,581 Life Sciences Tools & Services 0.8 3,923,145 Machinery 0.5 2,586,104 Media 1.9 9,059,824 Metals & Mining 3.4 16,217,677 Office Electronics 0.8 3,811,970 Oil, Gas & Consumable Fuels 6.8 32,379,334 Personal Products 0.6 2,974,475 Pharmaceuticals 5.3 25,482,178 Real Estate Investment Trusts (REITs) 1.0 4,858,705 Real Estate Management & Development 3.9 18,369,757 Road & Rail 1.4 6,664,982 Semiconductors & Semiconductor Equipment 2.0 9,520,799 Software 3.8 18,279,203 Specialty Retail 1.4 6,498,608 Trading Companies & Distributors 0.5 2,354,536 Wireless Telecommunication Services 4.7 22,495,850 Other(1) 4.0 18,969,527 ----------------------------------------------------------------------- Total $495,672,943 -----------------------------------------------------------------------
(1) Cash & Cash Equivalents. See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 20 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. (d) At Oct. 31, 2009, security was partially or fully on loan. See Note 7 to the financial statements. (e) Affiliated Money Market Fund -- See Note 8 to the financial statements. The rate shown is the seven-day current annualized yield at Oct. 31, 2009. (f) At Oct. 31, 2009, the cost of securities for federal income tax purposes was $485,348,443 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $33,193,694 Unrealized depreciation (22,869,194) ----------------------------------------------------------- Net unrealized appreciation $10,324,500 -----------------------------------------------------------
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 ANNUAL REPORT 21 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. 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 New York Stock Exchange (NYSE) or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. -------------------------------------------------------------------------------- 22 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Oct. 31, 2009:
FAIR VALUE AT OCT. 31, 2009 ---------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL --------------------------------------------------------------------------------------------- Equity Securities Common Stocks(a) $224,948,500 $251,754,910(b) $-- $476,703,410 Other(a) 6(b) -- 6 --------------------------------------------------------------------------------------------- Total Equity Securities 224,948,500 251,754,916 -- 476,703,416 --------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(c) 2,414,933 -- -- 2,414,933 Investments of Cash Collateral Received for Securities on Loan 16,554,594 -- -- 16,554,594 --------------------------------------------------------------------------------------------- Total Other 18,969,527 -- -- 18,969,527 --------------------------------------------------------------------------------------------- Total $243,918,027 $251,754,916 $-- $495,672,943 ---------------------------------------------------------------------------------------------
(a) All industry classifications are identified in the Portfolio of Investments. (b) Includes certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading. Therefore, these investment securities were classified as Level 2 instead of Level 1. (c) Money market fund that is a sweep investment for cash balances in the Fund at Oct. 31, 2009. 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 ANNUAL REPORT 23 STATEMENT OF ASSETS AND LIABILITIES ------------------------------------------- OCT. 31, 2009
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $453,762,471) $ 476,703,416 Affiliated money market fund (identified cost $2,414,933) 2,414,933 Investments of cash collateral received for securities on loan (identified cost $16,554,594) 16,554,594 -------------------------------------------------------------------------------- Total investments in securities (identified cost $472,731,998) 495,672,943 Foreign currency holdings (identified cost $487,150) 483,814 Capital shares receivable 332,150 Dividends and accrued interest receivable 404,718 Receivable for investment securities sold 9,907,463 Reclaims receivable 504,675 Other receivable 214,186 -------------------------------------------------------------------------------- Total assets 507,519,949 -------------------------------------------------------------------------------- LIABILITIES Capital shares payable 702,666 Payable for investment securities purchased 13,249,432 Payable upon return of securities loaned 16,554,594 Accrued investment management services fees 10,598 Accrued distribution fees 4,014 Accrued transfer agency fees 3,659 Accrued administrative services fees 1,076 Accrued plan administration services fees 43 Other accrued expenses 177,775 -------------------------------------------------------------------------------- Total liabilities 30,703,857 -------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 476,816,092 -------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 782,045 Additional paid-in capital 803,601,398 Undistributed net investment income 356,736 Accumulated net realized gain (loss) (350,983,586) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 23,059,499 -------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 476,816,092 -------------------------------------------------------------------------------- * Including securities on loan, at value $ 15,343,376 --------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 24 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $394,510,625 64,353,725 $6.13(1) Class B $ 33,008,877 5,717,899 $5.77 Class C $ 10,570,042 1,851,492 $5.71 Class I $ 32,596,470 5,289,556 $6.16 Class R2 $ 46,070 7,498 $6.14 Class R3 $ 3,897 634 $6.15 Class R4 $ 6,058,555 980,165 $6.18 Class R5 $ 17,622 2,861 $6.16 Class W $ 3,934 639 $6.16 -----------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $6.50. 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 ANNUAL REPORT 25 STATEMENT OF OPERATIONS ------------------------------------------------------- YEAR ENDED OCT. 31, 2009
INVESTMENT INCOME Income: Dividends $ 10,432,415 Interest 262 Income distributions from affiliated money market fund 14,769 Income from securities lending -- net 215,469 Less foreign taxes withheld (579,353) -------------------------------------------------------------------------------- Total income 10,083,562 -------------------------------------------------------------------------------- Expenses: Investment management services fees 2,918,784 Distribution fees Class A 884,744 Class B 362,565 Class C 57,394 Class R2 192 Class R3 8 Class W 8 Transfer agency fees Class A 1,206,293 Class B 132,762 Class C 19,641 Class R2 19 Class R3 1 Class R4 2,552 Class R5 2 Class W 7 Administrative services fees 340,869 Plan administration services fees Class R2 96 Class R3 8 Class R4 12,740 Compensation of board members 13,079 Custodian fees 58,680 Printing and postage 126,520 Registration fees 66,570 Professional fees 60,961 Other 24,675 -------------------------------------------------------------------------------- Total expenses 6,289,170 Expenses waived/reimbursed by the Investment Manager and its affiliates (129) Earnings and bank fee credits on cash balances (80) -------------------------------------------------------------------------------- Total net expenses 6,288,961 -------------------------------------------------------------------------------- Investment income (loss) -- net 3,794,601 --------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 26 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $(107,406,047) Foreign currency transactions (92,764) -------------------------------------------------------------------------------- Net realized gain (loss) on investments (107,498,811) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 183,214,646 -------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 75,715,835 -------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 79,510,436 --------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 27 STATEMENTS OF CHANGES IN NET ASSETS -------------------------------------------
YEAR ENDED OCT. 31, 2009 2008 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 3,794,601 $ 3,912,229 Net realized gain (loss) on investments (107,498,811) (64,341,389) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 183,214,646 (324,354,761) ----------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 79,510,436 (384,783,921) ----------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (5,343,305) (2,895,413) Class C (7,366) -- Class I (409,801) -- Class R2 (81) (16) Class R3 (64) (28) Class R4 (95,325) (51,464) Class R5 (82) (43) Class W (56) (24) ----------------------------------------------------------------------------------------------- Total distributions (5,856,080) (2,946,988) -----------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 28 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, 2009 2008 CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 38,201,079 $ 104,990,779 Class B shares 3,574,996 19,744,662 Class C shares 1,451,876 2,778,659 Class I shares 39,064,193 5,000 Class R2 shares 9,763 -- Class R4 shares 1,403,150 2,142,353 Class R5 shares 1 -- Fund merger Class A shares 11,920,114 N/A Class B shares 968,653 N/A Class C shares 5,405,143 N/A Class R2 shares 143,426 N/A Class R5 shares 13,250 N/A Reinvestment of distributions at net asset value Class A shares 5,231,241 2,842,402 Class C shares 7,156 -- Class I shares 409,715 -- Class R2 shares 31 -- Class R4 shares 95,325 51,464 Conversions from Class B to Class A Class A shares 8,590,859 17,227,753 Class B shares (8,590,859) (17,227,753) Payments for redemptions Class A shares (105,412,307) (144,969,040) Class B shares (10,894,724) (21,618,553) Class C shares (1,994,833) (2,137,746) Class I shares (17,447,359) -- Class R2 shares (121,102) -- Class R4 shares (1,395,358) (2,469,638) ----------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (29,366,571) (38,639,658) ----------------------------------------------------------------------------------------------- Proceeds from regulatory settlement (Note 10) 93,216 N/A ----------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 44,381,001 (426,370,567) Net assets at beginning of year 432,435,091 858,805,658 ----------------------------------------------------------------------------------------------- Net assets at end of year $ 476,816,092 $ 432,435,091 ----------------------------------------------------------------------------------------------- Undistributed net investment income $ 356,736 $ 2,536,752 -----------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 29 FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. For the periods ended 2007 and after, per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of sales charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED OCT. 31, CLASS A ------------------------------------------------------- PER SHARE DATA 2009 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) .05 .05 .02 .01 .02 Net gains (losses) (both realized and unrealized) .95 (4.41) 2.13 1.30 1.08 ---------------------------------------------------------------------------------------------------------- Total from investment operations 1.00 (4.36) 2.15 1.31 1.10 ---------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) (.04) (.06) (.02) (.03) ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.13 $5.21 $9.61 $7.52 $6.23 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 19.39%(a) (45.55%) 28.82% 21.01% 21.48% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses 1.44% 1.46% 1.39% 1.51% 1.57% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) .92% .65% .28% .23% .33% ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $395 $380 $737 $608 $446 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 81% 97% 100% 112% 93% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 30 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS B ------------------------------------------------------- PER SHARE DATA 2009 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 (.01) (.04) (.01) (.02) Net gains (losses) (both realized and unrealized) .89 (4.14) 2.00 1.19 1.03 ---------------------------------------------------------------------------------------------------------- Total from investment operations .90 (4.15) 1.96 1.18 1.01 ---------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- -- .00(c) -- -- ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.77 $4.87 $9.02 $7.06 $5.88 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 18.48%(a) (46.01%) 27.81% 20.07% 20.74% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses 2.21% 2.23% 2.15% 2.28% 2.34% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) .22% (.11%) (.45%) (.54%) (.41%) ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $33 $42 $104 $110 $102 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 81% 97% 100% 112% 93% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 31 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS C ------------------------------------------------------- PER SHARE DATA 2009 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) .00(c) (.01) (.04) (.01) (.02) Net gains (losses) (both realized and unrealized) .89 (4.09) 1.98 1.18 1.03 ---------------------------------------------------------------------------------------------------------- Total from investment operations .89 (4.10) 1.94 1.17 1.01 ---------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.01) -- (.03) -- (.01) ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.71 $4.83 $8.93 $7.02 $5.85 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 18.39%(a) (45.91%) 27.76% 20.03% 20.89% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses 2.20% 2.22% 2.15% 2.27% 2.33% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) (.08%) (.09%) (.48%) (.50%) (.53%) ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $11 $5 $8 $6 $2 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 81% 97% 100% 112% 93% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 32 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS I ------------------- PER SHARE DATA 2009 2008(d) Net asset value, beginning of period $5.25 $7.47 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09 .03 Net gains (losses) (both realized and unrealized) .95 (2.25) ---------------------------------------------------------------------- Total from investment operations 1.04 (2.22) ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.13) -- ---------------------------------------------------------------------- Net asset value, end of period $6.16 $5.25 ---------------------------------------------------------------------- TOTAL RETURN 20.21%(a) (29.72%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses .84% .85%(e) ---------------------------------------------------------------------- Net investment income (loss) 1.56% 1.55%(e) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $33 $-- ---------------------------------------------------------------------- Portfolio turnover rate 81% 97% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 33 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS R2 -------------------------------- PER SHARE DATA 2009 2008 2007(f) Net asset value, beginning of period $5.23 $9.62 $7.89 ----------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01) .05 (.01) Net gains (losses) (both realized and unrealized) 1.00 (4.42) 1.84 ----------------------------------------------------------------------------------- Total from investment operations .99 (4.37) 1.83 ----------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) (.02) (.10) ----------------------------------------------------------------------------------- Net asset value, end of period $6.14 $5.23 $9.62 ----------------------------------------------------------------------------------- TOTAL RETURN 19.13%(a) (45.48%) 23.41% ----------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.69% 1.79% 1.74%(e) ----------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(g) 1.69% 1.54% 1.74%(e) ----------------------------------------------------------------------------------- Net investment income (loss) (.16%) .57% (.13%)(e) ----------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- ----------------------------------------------------------------------------------- Portfolio turnover rate 81% 97% 100% -----------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 34 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R3 -------------------------------- PER SHARE DATA 2009 2008 2007(f) Net asset value, beginning of period $5.24 $9.65 $7.89 ----------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .05 .06 .01 Net gains (losses) (both realized and unrealized) .96 (4.43) 1.85 ----------------------------------------------------------------------------------- Total from investment operations 1.01 (4.37) 1.86 ----------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.10) (.04) (.10) ----------------------------------------------------------------------------------- Net asset value, end of period $6.15 $5.24 $9.65 ----------------------------------------------------------------------------------- TOTAL RETURN 19.63%(a) (45.43%) 23.80% ----------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.38% 1.54% 1.49%(e) ----------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(g) 1.32% 1.29% 1.49%(e) ----------------------------------------------------------------------------------- Net investment income (loss) 1.03% .82% .12%(e) ----------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- ----------------------------------------------------------------------------------- Portfolio turnover rate 81% 97% 100% -----------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 35 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS R4 ------------------------------------------------------- PER SHARE DATA 2009 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) .06 .07 .04 .02 .04 Net gains (losses) (both realized and unrealized) .96 (4.46) 2.13 1.31 1.09 ---------------------------------------------------------------------------------------------------------- Total from investment operations 1.02 (4.39) 2.17 1.33 1.13 ---------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.10) (.05) (.07) (.02) (.04) ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.18 $5.26 $9.70 $7.60 $6.29 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 19.72%(a) (45.47%) 28.85% 21.26% 21.90% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.15% 1.29% 1.23% 1.32% 1.38% ---------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(g) 1.15% 1.28% 1.23% 1.32% 1.38% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.22% .83% .45% .44% .49% ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $6 $5 $10 $9 $6 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 81% 97% 100% 112% 93% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 36 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R5 -------------------------------- PER SHARE DATA 2009 2008 2007(f) Net asset value, beginning of period $5.25 $9.69 $7.89 ----------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .08 .08 .05 Net gains (losses) (both realized and unrealized) .96 (4.45) 1.85 ----------------------------------------------------------------------------------- Total from investment operations 1.04 (4.37) 1.90 ----------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.13) (.07) (.10) ----------------------------------------------------------------------------------- Net asset value, end of period $6.16 $5.25 $9.69 ----------------------------------------------------------------------------------- TOTAL RETURN 20.20%(a) (45.40%) 24.33% ----------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses .90% 1.04% .99%(e) ----------------------------------------------------------------------------------- Net investment income (loss) 1.39% 1.07% .62%(e) ----------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- ----------------------------------------------------------------------------------- Portfolio turnover rate 81% 97% 100% -----------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 37 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS W -------------------------------- PER SHARE DATA 2009 2008 2007(h) Net asset value, beginning of period $5.23 $9.66 $7.83 ----------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .06 .05 .02 Net gains (losses) (both realized and unrealized) .96 (4.44) 1.91 ----------------------------------------------------------------------------------- Total from investment operations 1.02 (4.39) 1.93 ----------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.09) (.04) (.10) ----------------------------------------------------------------------------------- Net asset value, end of period $6.16 $5.23 $9.66 ----------------------------------------------------------------------------------- TOTAL RETURN 19.70%(a) (45.62%) 24.87% ----------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Total expenses 1.30% 1.43% 1.39%(e) ----------------------------------------------------------------------------------- Net investment income (loss) 1.05% .68% .20%(e) ----------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- ----------------------------------------------------------------------------------- Portfolio turnover rate 81% 97% 100% -----------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) During the year ended Oct. 31, 2009, the Fund received proceeds from regulatory settlement (see Note 10 to the Financial Statements). Had the Fund not received these proceeds, the total return would have been lower by 0.02% (b) Expense ratios include the impact of a performance incentive adjustment, if any. 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 reported expense ratios. (c) Rounds to zero. (d) For the period from Aug. 1, 2008 (when shares became public available) to Oct. 31, 2008. (e) Annualized. (f) For the period from Dec. 11, 2006 (when shares became public available) to Oct. 31, 2007. (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) For the period from Dec. 1, 2006 (when shares became public available) to Oct. 31, 2007. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 38 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS ------------------------------------------------- 1. ORGANIZATION 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 (the 1940 Act) 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 Fund's 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 offered with a front-end sales charge, which may be waived under certain circumstances. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares one month after the completion of the eighth year of ownership if originally purchased in a RiverSource fund on or after May 21, 2005 or originally purchased in a Seligman fund on or after June 13, 2009. Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund prior to June 13, 2009 will convert to Class A shares in the month prior to 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 offered without a front-end sales charge or CDSC to qualifying institutional investors. - Class W shares are offered without a front-end sales charge or CDSC and are offered through qualifying discretionary accounts. At Oct. 31, 2009, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) and affiliated funds-of-funds in the RiverSource Family of Funds owned 100% of Class I shares, and the Investment Manager owned 100% of Class R3 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. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF NEW ACCOUNTING STANDARD In June 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification(TM) (Codification) as the single source of authoritative accounting principles recognized by the FASB in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP). The Codification supersedes existing non-grandfathered, non- SEC accounting and reporting standards. The Codification did not change GAAP but rather organized it into a hierarchy where all guidance within the Codification carries an equal level of authority. The Codification became effective for financial statements issued for interim and annual periods ending after Sept. 15, 2009. The Codification did not have a material effect on the Fund's financial statements. 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 business of the New York Stock Exchange (NYSE). 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 by an independent pricing service using an evaluated bid. 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 NYSE and therefore the closing prices for securities in such markets or on -------------------------------------------------------------------------------- 40 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 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. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. FOREIGN CURRENCY TRANSLATIONS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At Oct. 31, 2009, foreign currency holdings consisted of multiple denominations, primarily Taiwan dollars. 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 ANNUAL REPORT 41 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 (which includes net short-term capital gains) 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. 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. On Aug. 12, 2009, an additional dividend was paid before the merger (see Note 11) to ensure that the current shareholders of Threadneedle Global Equity Fund would not experience a dilution in their shares of the Fund's income or capital gains. 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. 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. FORWARD FOREIGN CURRENCY CONTRACTS The Fund may enter into forward foreign currency contracts in connection with settling purchases or sales of securities, to hedge the currency exposure associated with some or all of the Fund's securities or as part of its investment -------------------------------------------------------------------------------- 42 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- strategy. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked to market daily based upon foreign currency exchange rates from an independent pricing service and the change in value is recorded as unrealized appreciation or depreciation. The Fund will record a realized gain or loss when the forward foreign currency contract is closed. The risks of forward foreign currency contracts include movement in the values of the foreign currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that the counterparty will not complete its contractual obligation, which may be in excess of the amount reflected, if any, in the Statement of Assets and Liabilities. At Oct. 31, 2009, the Fund had no outstanding forward foreign currency contracts. EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS The following tables are intended to provide additional information about the effect of derivatives on the financial statements of the Fund including: the fair value of derivatives by risk category and the location of those fair values in the Statement of Assets and Liabilities; the impact of derivative transactions on the Fund's operations over the period including realized gains or losses and unrealized gains or losses. The derivative schedules following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any. FAIR VALUES OF DERIVATIVE INSTRUMENTS AT OCT. 31, 2009 At Oct. 31, 2009, the Fund had no outstanding derivatives. EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCT. 31, 2009
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME ------------------------------------------------------------------------------ RISK EXPOSURE CATEGORY FORWARD FOREIGN CURRENCY CONTRACTS ------------------------------------------------------------------------------ Foreign exchange contracts $100,625 ------------------------------------------------------------------------------ Total $100,625 ------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME ------------------------------------------------------------------------------ RISK EXPOSURE CATEGORY FORWARD FOREIGN CURRENCY CONTRACTS ------------------------------------------------------------------------------ Foreign exchange contracts $-- ------------------------------------------------------------------------------ Total $-- ------------------------------------------------------------------------------
-------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 43 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- VOLUME OF DERIVATIVE ACTIVITY FORWARD FOREIGN CURRENCY CONTRACTS At Oct. 31, 2009, the Fund had no forward foreign currency contracts outstanding. The monthly average gross notional amount for these contracts was $300,000 for the year ended Oct. 31, 2009. 4. 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 an annual fee that is equal to a percentage of the Fund's average daily net assets that declines from 0.80% to 0.57% as the Fund's net 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 zero. The adjustment decreased the management fee by $446,000 for the year ended Oct. 31, 2009. The management fee for the year ended Oct. 31, 2009 was 0.68% 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 an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% as the Fund's net assets increase. The fee for the year ended Oct. 31, 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 -------------------------------------------------------------------------------- 44 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the year ended Oct. 31, 2009, other expenses paid to this company were $2,741. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act 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 funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains Fund shareholder accounts and records and provides Fund shareholder services. 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 Transfer Agent also charges an annual fee of $3 per account serviced directly by the Fund or its designated agent for Class A, Class B and Class C shares. 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 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 the 12 month period from the date the account becomes inactive. These fees are included in the transfer agency fees in the Statement of Operations. In connection with the acquisition of Seligman Global Growth Fund (see Note 11), the Fund assumed the obligations of Seligman Global Growth Fund, which, together with certain other associated investment companies (together, the Guarantors), has severally, but not jointly, guaranteed the performance and observance of all terms and conditions of a lease entered into by Seligman Data Corp. (SDC), the former transfer agent of Seligman Global Growth Fund, including the payment of rent by SDC (the Guaranty). The lease and the Guaranty expire in January 2019. At Oct. 31, 2009, the Fund's total potential future obligation under the Guaranty over the life of the Guaranty is $26,342. Seligman Global Growth Fund expensed $13,520 related to the Guaranty prior to acquisition by the Fund. This amount is included within other accrued expenses in the Fund's Statement of Assets and Liabilities. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 45 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 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 an agreement with RiverSource Fund Distributors, Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate 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, of the 1.00% fee, up to 0.75% is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $1,466,000 and $63,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as July 31, 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, including front-end and CDSCs, received by the Distributor for distributing Fund shares were $325,719 for Class A, $33,636 for Class B and $1,652 for Class C for the year ended Oct. 31, 2009. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended Oct. 31, 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 R2............................................ 1.69% Class R3............................................ 1.32 Class R4............................................ 1.15
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
-------------------------------------------------------------------------------- 46 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- Under an agreement which was effective until Oct. 31, 2009, the Investment Manager and its affiliates contractually agreed to waive certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any performance incentive adjustment, would 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. BANK FEE CREDITS During the year ended Oct. 31, 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. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $361,593,741 (including $17,582,246* from Seligman Global Growth Fund that was acquired in the fund merger as described in Note 11) and $388,084,094, respectively, for the year ended Oct. 31, 2009. Realized gains and losses are determined on an identified cost basis. * This purchase amount is excluded for purposes of calculating the Fund's portfolio turnover rate. 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
YEAR ENDED OCT. 31, 2009 2008* ------------------------------------------------------------------- CLASS A Sold 7,500,867 13,186,460 Fund merger 2,011,033 -- Converted from Class B shares** 1,463,400 2,293,975 Reinvested distributions 983,464 328,601 Redeemed (20,645,429) (19,420,602) ------------------------------------------------------------------- Net increase (decrease) (8,686,665) (3,611,566) -------------------------------------------------------------------
-------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 47 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
YEAR ENDED OCT. 31, 2009 2008* ------------------------------------------------------------------- CLASS B Sold 745,833 2,606,662 Fund merger 173,293 -- Converted to Class A shares** (1,561,833) (2,447,124) Redeemed (2,294,056) (3,014,161) ------------------------------------------------------------------- Net increase (decrease) (2,936,763) (2,854,623) ------------------------------------------------------------------- CLASS C Sold 298,410 381,563 Fund merger 977,635 -- Reinvested distributions 1,304 -- Redeemed (411,308) (318,939) ------------------------------------------------------------------- Net increase (decrease) 866,041 62,624 ------------------------------------------------------------------- CLASS I Sold 8,069,029 666 Reinvested distributions 69,326 -- Redeemed (2,849,465) -- ------------------------------------------------------------------- Net increase (decrease) 5,288,890 666 ------------------------------------------------------------------- CLASS R2 Sold 1,844 -- Fund merger 24,131 -- Reinvested distributions 5 -- Redeemed (19,116) -- ------------------------------------------------------------------- Net increase (decrease) 6,864 -- ------------------------------------------------------------------- CLASS R4 Sold 265,435 264,404 Reinvested distributions 17,716 5,909 Redeemed (266,560) (319,876) ------------------------------------------------------------------- Net increase (decrease) 16,591 (49,563) ------------------------------------------------------------------- CLASS R5 Sold -- -- Fund merger 2,227 -- Reinvested distributions -- -- Redeemed -- -- ------------------------------------------------------------------- Net increase (decrease) 2,227 -- -------------------------------------------------------------------
* Certain line items from the prior year have been renamed to conform to the current year presentation. ** Automatic conversion of Class B shares to Class A shares based on the original purchase date. -------------------------------------------------------------------------------- 48 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 7. 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 Oct. 31, 2009, securities valued at $15,343,376 were on loan, secured by cash collateral of $16,554,594 invested in short-term securities or in cash equivalents. 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. 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. Net income of $215,469 earned from securities lending from Dec. 1, 2008 through Oct. 31, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 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. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 49 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 8. 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 funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $177,620,306 and $181,828,932, respectively, for the year ended Oct. 31, 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 Oct. 31, 2009, can be found in the Portfolio of Investments. 9. 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 became effective on Oct. 15, 2009, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other funds in the RiverSource Family of Funds, severally and not jointly, permits collective borrowings up to $300 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $200 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 $500 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 sum of the federal funds rate plus (A) 1.25% per annum plus (B) if one-month LIBOR exceeds the federal funds rate, the amount of such excess. 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 0.10% per annum, in addition to an upfront fee equal to its pro rata share of 0.04% of the amount of the credit facility. Prior to Oct. 15, 2009, the credit facility agreement, which was a collective agreement between the Fund and certain other funds in the RiverSource Family of Funds, severally and not jointly, permitted collective borrowings up to $475 million. Interest was charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. The Fund also paid 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 -------------------------------------------------------------------------------- 50 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- its pro rata share of 0.02% of the amount of the credit facility. The Fund had no borrowings during the year ended Oct. 31, 2009. 10. PROCEEDS FROM REGULATORY SETTLEMENT During the year ended Oct. 31, 2009, as a result of a settlement of an administrative proceeding brought by the Securities and Exchange Commission against an unaffiliated third party relating to market timing and/or late trading of mutual funds, the Fund received $93,216, which represented the Fund's portion of the proceeds from the settlement (the Fund was not a party to the proceeding). The proceeds received by the Fund were recorded as an increase to additional paid-in capital. 11. FUND MERGER At the close of business on Aug. 14, 2009, Threadneedle Global Equity Fund acquired the assets and assumed the identified liabilities of Seligman Global Growth Fund. The reorganization was completed after shareholders approved the plan on June 29, 2009. The aggregate net assets of Threadneedle Global Equity Fund immediately before the acquisition were $475,267,886 and the combined net assets immediately after the acquisition were $493,718,472. The merger was accomplished by a tax-free exchange of 3,038,152 shares of Seligman Global Growth Fund valued at $18,450,586. In exchange for the Seligman Global Growth Fund shares and net assets, Threadneedle Global Equity Fund issued the following number of shares:
SHARES ------------------------------------------------------------ Class A.......................................... 2,011,033 Class B.......................................... 173,293 Class C.......................................... 977,635 Class R2......................................... 24,131 Class R5......................................... 2,227
The components of Seligman Global Growth Fund's net assets after adjustments for any permanent book-to-tax differences at the merger date were as follows:
EXCESS OF ACCUMULATED DISTRIBUTIONS OVER TOTAL CAPITAL UNREALIZED NET NET INVESTMENT NET ASSETS STOCK APPRECIATION REALIZED LOSS INCOME ------------------------------------------------------------------------------------------- Seligman Global Growth Fund $18,450,586 $52,704,193 $320,343 $(34,572,254) $(1,696)
-------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 51 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 12. FEDERAL TAX INFORMATION 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 real estate investment trust (REIT) distributions, foreign tax credits 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. In the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $116,841 and accumulated net realized loss has been decreased by $199,374,530 resulting in a net reclassification adjustment to decrease paid-in capital by $199,257,689. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED OCT. 31, 2009 2008 ------------------------------------------------------------------ Ordinary income........................... $5,856,080 $2,946,988 Long-term capital gain.................... -- --
At Oct. 31, 2009, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income................... $1,519,019 Undistributed accumulated long-term gain........ $-- Accumulated realized loss....................... $(339,519,748) Unrealized appreciation (depreciation).......... $10,433,378
For federal income tax purposes, the Fund had a capital loss carry-over of $339,519,748 at Oct. 31, 2009, that if not offset by capital gains will expire as follows:
2010 2011 2015 2016 2017 $143,688,441 $30,509,951 $2,715,902 $62,625,028 $99,980,426
Threadneedle Global Equity Fund acquired $5,786,102 of capital loss carry-overs in connection with the Seligman Global Growth Fund merger (Note 11). The yearly utilization of the acquired capital losses is limited by the Internal Revenue Code. For the year ended Oct. 31, 2009, $199,257,689 of capital loss carry-over expired unused. 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 -------------------------------------------------------------------------------- 52 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 13. 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. 14. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Dec. 21, 2009, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 15. 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 (now known as RiverSource) 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. On -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 53 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. 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. Incorporated (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. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman -------------------------------------------------------------------------------- 54 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 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 was and had 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 paid $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 -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 55 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 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. -------------------------------------------------------------------------------- 56 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THREADNEEDLE GLOBAL EQUITY FUND: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Threadneedle Global Equity Fund (the Fund) (one of the portfolios constituting the RiverSource Global Series, Inc.) as of October 31, 2009, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of the Fund for the periods presented through October 31, 2006, were audited by other auditors whose report dated December 20, 2006 expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2009, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 57 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued) ------------ In our opinion, the financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of Threadneedle Global Equity Fund of the RiverSource Global Series, Inc. at October 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota December 21, 2009 -------------------------------------------------------------------------------- 58 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- OCT. 31, 2009 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (94.6%)(c) ISSUER SHARES VALUE(a) AUSTRALIA (4.6%) Coca-Cola Amatil 41,096 $390,518 Foster's Group 43,123 211,382 Natl Australia Bank 13,837 365,415 Telstra 101,667 301,966 --------------- Total 1,269,281 ------------------------------------------------------------------------------------- BRAZIL (3.1%) Cia de Bebidas das Americas 3,700 336,163 Companhia Brasileira de Meios de Pagamento 11,400 104,967 Natura Cosmeticos 13,400 240,979 Redecard 11,500 168,923 --------------- Total 851,032 ------------------------------------------------------------------------------------- CANADA (1.2%) Baytex Energy Trust Units 13,509 330,430 ------------------------------------------------------------------------------------- CHINA (0.9%) CNOOC 170,000 254,601 ------------------------------------------------------------------------------------- DENMARK (0.4%) TrygVesta 1,687(d) 121,575 ------------------------------------------------------------------------------------- FINLAND (3.9%) Fortum 9,826(d) 232,546 Nokia 13,647 172,361 Sampo Series A 18,987 454,412 Wartsila 6,295(d) 227,860 --------------- Total 1,087,179 ------------------------------------------------------------------------------------- FRANCE (5.2%) France Telecom 8,548 211,787 Sanofi-Aventis 3,614 264,887 Total 7,590 454,142 Vivendi 19,091 529,575 --------------- Total 1,460,391 ------------------------------------------------------------------------------------- GERMANY (5.5%) Allianz 1,327 151,993 BASF 7,810 420,317 Bayer 4,162(d) 287,631 Deutsche Telekom 13,917(d) 189,445 E.ON 7,177 274,187 K+S 3,643(d) 197,234 --------------- Total 1,520,807 ------------------------------------------------------------------------------------- GREECE (0.8%) OPAP 8,529 217,081 ------------------------------------------------------------------------------------- HONG KONG (5.5%) Champion REIT 1,092,000(d) 459,605 Great Eagle Holdings 121,209(d) 319,740 Hang Lung Properties 60,000(d) 226,753 Hang Seng Bank 18,300 258,530 Sun Hung Kai Properties 18,000 272,713 --------------- Total 1,537,341 ------------------------------------------------------------------------------------- INDONESIA (0.7%) Perusahaan Gas Negara 519,500 192,894 ------------------------------------------------------------------------------------- ITALY (2.8%) Eni 18,091 448,010 Snam Rete Gas 24,069(d) 116,728 Telecom Italia 136,667 217,092 --------------- Total 781,830 ------------------------------------------------------------------------------------- JAPAN (4.1%) Nintendo 1,400(d) 351,174 Ono Pharmaceutical 11,400 541,277 Oracle Japan 5,500(d) 242,376 --------------- Total 1,134,827 ------------------------------------------------------------------------------------- MEXICO (1.0%) Grupo Continental 124,300 291,016 ------------------------------------------------------------------------------------- NETHERLANDS (0.9%) Royal Dutch Shell Series B 8,731 251,319 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) NORWAY (0.8%) Statoil 9,100 $214,543 ------------------------------------------------------------------------------------- SINGAPORE (1.7%) DBS Group Holdings 52,500 480,876 ------------------------------------------------------------------------------------- SPAIN (4.0%) Banco Santander 31,416 505,502 Inditex 4,901 287,656 Telefonica 11,115 310,371 --------------- Total 1,103,529 ------------------------------------------------------------------------------------- SWEDEN (1.7%) Holmen Series B 6,474 174,794 Skanska Series B 20,313(d) 298,215 --------------- Total 473,009 ------------------------------------------------------------------------------------- TAIWAN (3.9%) Chunghwa Telecom ADR 15,914 276,585 Delta Electronics 104,040 288,900 Hung Poo Real Estate Development 182,000 262,621 Taiwan Semiconductor Mfg 144,000 261,224 --------------- Total 1,089,330 ------------------------------------------------------------------------------------- UNITED KINGDOM (19.1%) Admiral Group 25,892 435,196 AstraZeneca 8,386 376,423 BAE Systems 56,710 291,578 BP 76,969 721,148 British American Tobacco 12,648 403,001 GlaxoSmithKline 19,626 402,543 Intl Power 63,895 265,245 Man Group 56,542 285,915 Natl Grid 31,152 308,557 Northern Foods 260,213 269,229 Pearson 44,473 604,452 RSA Insurance Group 58,508 115,930 Vodafone Group 203,975 449,482 Wincanton 106,124 384,105 --------------- Total 5,312,804 ------------------------------------------------------------------------------------- UNITED STATES (22.8%) AllianceBernstein Holding LP 12,957 349,580 Altria Group 20,371 368,919 AT&T 12,212 313,482 BP Prudhoe Bay Royalty Trust 7,827 600,722 Bristol-Myers Squibb 20,924 456,143 CenturyTel 12,462 404,518 Diamond Offshore Drilling 4,693 447,008 EI du Pont de Nemours & Co 4,467 142,140 Home Depot 9,946 249,545 Kinder Morgan Energy Partners LP 8,329 449,766 Merck & Co 11,002 340,292 Packaging Corp of America 22,531 411,867 Parkway Properties 6,566 115,890 Pfizer 18,214 310,184 Philip Morris Intl 8,405 398,061 Plum Creek Timber 8,501 265,996 Reynolds American 6,741 326,804 Southern 6,317 197,027 Verizon Communications 6,475 191,595 --------------- Total 6,339,539 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $23,042,813) $26,315,234 ------------------------------------------------------------------------------------- OTHER (--%)(c) ISSUER SHARES VALUE(a) SPAIN Banco Santander Rights 44(b) $8 ------------------------------------------------------------------------------------- TOTAL OTHER (Cost: $--) $8 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 18 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
BONDS (3.6%)(c) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) FINLAND (2.2%) Talvivaara Mining Sr Unsecured (European Monetary Unit) Cv 05-20-13 5.25% 500,000 $618,029 ------------------------------------------------------------------------------------- JERSEY (1.4%) Intl Power Finance III (European Monetary Unit) Cv 06-05-15 4.75 300,000 392,670 ------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $553,426) $1,010,699 -------------------------------------------------------------------------------------
MONEY MARKET FUND (1.2%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.25% 343,789(e) $343,789 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $343,789) $343,789 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (9.2%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 2,565,681 $2,565,681 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $2,565,681) $2,565,681 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $26,505,709)(f) $30,235,411 =====================================================================================
SUMMARY OF INVESTMENTS IN SECURITIES BY INDUSTRY The following table represents the portfolio investments of the Fund by industry classifications as a percentage of net assets at Oct. 31, 2009:
PERCENTAGE OF INDUSTRY NET ASSETS VALUE ----------------------------------------------------------------------- Aerospace & Defense 1.0% $291,578 Air Freight & Logistics 1.4 384,105 Beverages 4.4 1,229,079 Capital Markets 2.3 635,495 Chemicals 2.7 759,691 Commercial Banks 5.8 1,610,331 Communications Equipment 0.6 172,361 Construction & Engineering 1.1 298,215 Containers & Packaging 1.5 411,867 Diversified Telecommunication Services 8.7 2,416,841 Electric 1.4 392,670 Electric Utilities 2.5 703,760 Electronic Equipment, Instruments & Components 1.0 288,900 Energy Equipment & Services 1.6 447,008 Food Products 1.0 269,229 Gas Utilities 1.1 309,622 Hotels, Restaurants & Leisure 0.8 217,081 Independent Power Producers & Energy Traders 1.0 265,245 Insurance 4.6 1,279,106
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 19 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
PERCENTAGE OF INDUSTRY NET ASSETS VALUE ----------------------------------------------------------------------- IT Services 1.0% $273,890 Machinery 0.8 227,860 Media 4.1 1,134,027 Metals 2.2 618,029 Multi-Utilities 1.1 308,557 Oil, Gas & Consumable Fuels 13.5 3,724,681 Paper & Forest Products 0.6 174,794 Personal Products 0.9 240,979 Pharmaceuticals 10.8 2,979,380 Real Estate Investment Trusts (REITs) 3.0 841,491 Real Estate Management & Development 3.9 1,081,827 Semiconductors & Semiconductor Equipment 0.9 261,224 Software 2.1 593,550 Specialty Retail 1.9 537,201 Tobacco 5.4 1,496,785 Wireless Telecommunication Services 1.6 449,482 Other(1) 10.4 2,909,470 ----------------------------------------------------------------------- Total $30,235,411 -----------------------------------------------------------------------
(1) Cash & Cash Equivalents. NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 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) At Oct. 31, 2009, security was partially or fully on loan. See Note 7 to the financial statements. (e) Affiliated Money Market Fund -- See Note 8 to the financial statements. The rate shown is the seven-day current annualized yield at Oct. 31, 2009. (f) At Oct. 31, 2009, the cost of securities for federal income tax purposes was $26,631,575 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $4,151,642 Unrealized depreciation (547,806) ---------------------------------------------------------- Net unrealized appreciation $3,603,836 ----------------------------------------------------------
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. -------------------------------------------------------------------------------- 20 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. 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 New York Stock Exchange (NYSE) or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 21 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Oct. 31, 2009:
FAIR VALUE AT OCT. 31, 2009 -------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL -------------------------------------------------------------------------------------------- Equity Securities Common Stocks(a) $6,946,554 $19,368,680(b) $-- $26,315,234 Other(a) -- 8(b) -- 8 -------------------------------------------------------------------------------------------- Total Equity Securities 6,946,554 19,368,688 -- 26,315,242 -------------------------------------------------------------------------------------------- Bonds Corporate Debt Securities -- 392,670 618,029 1,010,699 -------------------------------------------------------------------------------------------- Total Bonds -- 392,670 618,029 1,010,699 -------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(c) 343,789 -- -- 343,789 Investments of Cash Collateral Received for Securities on Loan 2,565,681 -- -- 2,565,681 -------------------------------------------------------------------------------------------- Total Other 2,909,470 -- -- 2,909,470 -------------------------------------------------------------------------------------------- Total $9,856,024 $19,761,358 $618,029 $30,235,411 --------------------------------------------------------------------------------------------
(a) All industry classifications are identified in the Portfolio of Investments. (b) Includes certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading. Therefore, these investment securities were classified as Level 2 instead of Level 1. (c) Money market fund that is a sweep investment for cash balances in the Fund at Oct. 31, 2009. -------------------------------------------------------------------------------- 22 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) The following table is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.
CORPORATE DEBT SECURITIES ----------------------------------------------------------------- Balance as of Oct. 31, 2008 $-- Accrued discounts/premiums 42,934 Realized gain (loss) -- Change in unrealized appreciation (depreciation)* 322,768 Net purchases (sales) 252,327 Transfers in and/or out of Level 3 -- ----------------------------------------------------------------- Balance as of Oct. 31, 2009 $618,029 -----------------------------------------------------------------
* Change in unrealized appreciation (depreciation) relating to securities held at Oct. 31, 2009 was $285,402. 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 ANNUAL REPORT 23 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- OCT. 31, 2009
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $23,596,239) $27,325,941 Affiliated money market fund (identified cost $343,789) 343,789 Investments of cash collateral received for securities on loan (identified cost $2,565,681) 2,565,681 ------------------------------------------------------------------------------ Total investments in securities (identified cost $26,505,709) 30,235,411 Foreign currency holdings (identified cost $156,420) 159,611 Capital shares receivable 23,006 Dividends and accrued interest receivable 99,606 ------------------------------------------------------------------------------ Total assets 30,517,634 ------------------------------------------------------------------------------ LIABILITIES Capital shares payable 54,877 Payable upon return of securities loaned 2,565,681 Accrued investment management services fees 624 Accrued distribution fees 218 Accrued transfer agency fees 123 Accrued administrative services fees 62 Other accrued expenses 74,274 ------------------------------------------------------------------------------ Total liabilities 2,695,859 ------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $27,821,775 ------------------------------------------------------------------------------ REPRESENTED BY Capital stock -- $.01 par value $ 32,778 Additional paid-in capital 25,340,076 Undistributed net investment income 281,180 Accumulated net realized gain (loss) (1,566,223) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 3,733,964 ------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $27,821,775 ------------------------------------------------------------------------------ *Including securities on loan, at value $ 2,403,907 ------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $21,078,520 2,483,415 $8.49(1) Class B $ 2,067,434 244,105 $8.47 Class C $ 449,282 53,062 $8.47 Class I $ 4,190,596 493,000 $8.50 Class R2 $ 8,493 1,000 $8.49 Class R3 $ 8,495 1,000 $8.50 Class R4 $ 10,456 1,230 $8.50 Class R5 $ 8,499 1,000 $8.50 ----------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $9.01. 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. -------------------------------------------------------------------------------- 24 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT STATEMENT OF OPERATIONS --------------------------------------------------------
YEAR ENDED OCT. 31, 2009 INVESTMENT INCOME Income: Dividends $ 1,148,786 Interest 117,722 Income distributions from affiliated money market fund 1,963 Income from securities lending -- net 27,324 Less foreign taxes withheld (102,054) ------------------------------------------------------------------------------ Total income 1,193,741 ------------------------------------------------------------------------------ Expenses: Investment management services fees 177,834 Distribution fees Class A 38,589 Class B 17,080 Class C 2,551 Class R2 36 Class R3 18 Transfer agency fees Class A 32,403 Class B 3,839 Class C 548 Class R2 4 Class R3 4 Class R4 4 Class R5 4 Administrative services fees 16,780 Plan administration services fees Class R2 18 Class R3 18 Class R4 23 Compensation of board members 650 Custodian fees 54,677 Printing and postage 46,050 Registration fees 53,188 Professional fees 41,858 Other 5,484 ------------------------------------------------------------------------------ Total expenses 491,660 Expenses waived/reimbursed by the Investment Manager and its affiliates (176,707) ------------------------------------------------------------------------------ Total net expenses 314,953 ------------------------------------------------------------------------------ Investment income (loss) -- net 878,788 ------------------------------------------------------------------------------
-------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 25 STATEMENT OF OPERATIONS (continued) --------------------------------------------
YEAR ENDED OCT. 31, 2009 REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $(1,375,982) Foreign currency transactions (2,978) ------------------------------------------------------------------------------ Net realized gain (loss) on investments (1,378,960) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 6,134,900 ------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 4,755,940 ------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ 5,634,728 ------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 26 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
FOR THE PERIOD FROM YEAR ENDED AUG. 1, 2008* OCT. 31, 2009 TO OCT. 31, 2008 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 878,788 $ 73,347 Net realized gain (loss) on investments (1,378,960) (267,462) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 6,134,900 (2,378,855) ----------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 5,634,728 (2,572,970) ----------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (424,203) (10,316) Class B (34,776) (993) Class C (5,653) (166) Class I (104,698) (12,568) Class R2 (165) (13) Class R3 (182) (17) Class R4 (207) (25) Class R5 (209) (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 (570,093) (25,259) -----------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 27 STATEMENTS OF CHANGES IN NET ASSETS (continued) --------------------------------
FOR THE PERIOD FROM YEAR ENDED AUG. 1, 2008* OCT. 31, 2009 TO OCT. 31, 2008 CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $15,276,944 $ 6,965,441 Class B shares 1,551,236 763,341 Class C shares 352,555 96,736 Class R4 shares 8,500 2,000 Reinvestment of distributions at net asset value Class A shares 416,219 10,418 Class B shares 34,203 1,033 Class C shares 5,149 161 Class R4 shares 11 4 Conversions from Class B to Class A Class A shares 359,240 -- Class B shares (359,240) -- Payments for redemptions Class A shares (4,280,739) (459,003) Class B shares (303,100) -- Class C shares (35,779) (22,899) Class R4 shares (7,133) -- ----------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 13,018,066 7,357,232 ----------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 18,082,701 4,759,003 Net assets at beginning of year 9,739,074 4,980,071** ----------------------------------------------------------------------------------------------------- Net assets at end of year $27,821,775 $ 9,739,074 ----------------------------------------------------------------------------------------------------- Undistributed (excess of distributions over) net investment income $ 281,180 $ (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. -------------------------------------------------------------------------------- 28 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of sales charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED OCT. 31, CLASS A ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $7.24 $9.96 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .30 .07 Net gains (losses) (both realized and unrealized) 1.14 (2.77) ---------------------------------------------------------------------- Total from investment operations 1.44 (2.70) ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.19) (.02) Tax return of capital -- (.00)(b) ---------------------------------------------------------------------- Total distributions (.19) (.02) ---------------------------------------------------------------------- Net asset value, end of period $8.49 $7.24 ---------------------------------------------------------------------- TOTAL RETURN 20.16% (27.12%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 2.35% 4.71%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.50% 1.45%(d) ---------------------------------------------------------------------- Net investment income (loss) 4.19% 3.78%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $21 $5 ---------------------------------------------------------------------- Portfolio turnover rate 45% 10% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 29 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS B ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $7.24 $9.96 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .26 .06 Net gains (losses) (both realized and unrealized) 1.11 (2.76) ---------------------------------------------------------------------- Total from investment operations 1.37 (2.70) ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.14) (.02) Tax return of capital -- (.00)(b) ---------------------------------------------------------------------- Total distributions (.14) (.02) ---------------------------------------------------------------------- Net asset value, end of period $8.47 $7.24 ---------------------------------------------------------------------- TOTAL RETURN 19.14% (27.15%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 3.18% 5.48%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 2.26% 2.21%(d) ---------------------------------------------------------------------- Net investment income (loss) 3.64% 3.11%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $1 ---------------------------------------------------------------------- Portfolio turnover rate 45% 10% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 30 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS C ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $7.24 $9.96 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .25 .07 Net gains (losses) (both realized and unrealized) 1.13 (2.77) ---------------------------------------------------------------------- Total from investment operations 1.38 (2.70) ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.15) (.02) Tax return of capital -- (.00)(b) ---------------------------------------------------------------------- Total distributions (.15) (.02) ---------------------------------------------------------------------- Net asset value, end of period $8.47 $7.24 ---------------------------------------------------------------------- TOTAL RETURN 19.21% (27.18%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 3.05% 5.15%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 2.25% 2.21%(d) ---------------------------------------------------------------------- Net investment income (loss) 3.44% 3.31%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 45% 10% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 31 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS I ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $7.25 $9.96 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .33 .09 Net gains (losses) (both realized and unrealized) 1.13 (2.77) ---------------------------------------------------------------------- Total from investment operations 1.46 (2.68) ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.21) (.03) Tax return of capital -- (.00)(b) ---------------------------------------------------------------------- Total distributions (.21) (.03) ---------------------------------------------------------------------- Net asset value, end of period $8.50 $7.25 ---------------------------------------------------------------------- TOTAL RETURN 20.53% (27.00%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.88% 4.12%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.09% 1.07%(d) ---------------------------------------------------------------------- Net investment income (loss) 4.52% 3.95%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $4 $4 ---------------------------------------------------------------------- Portfolio turnover rate 45% 10% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 32 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R2 ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $7.25 $9.96 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .27 .07 Net gains (losses) (both realized and unrealized) 1.13 (2.77) ---------------------------------------------------------------------- Total from investment operations 1.40 (2.70) ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.16) (.01) Tax return of capital -- (.00)(b) ---------------------------------------------------------------------- Total distributions (.16) (.01) ---------------------------------------------------------------------- Net asset value, end of period $8.49 $7.25 ---------------------------------------------------------------------- TOTAL RETURN 19.63% (27.10%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 2.68% 4.92%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.83% 1.72%(d) ---------------------------------------------------------------------- Net investment income (loss) 3.78% 3.36%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 45% 10% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 33 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS R3 ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $7.25 $9.96 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .29 .08 Net gains (losses) (both realized and unrealized) 1.14 (2.77) ---------------------------------------------------------------------- Total from investment operations 1.43 (2.69) ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.18) (.02) Tax return of capital -- (.00)(b) ---------------------------------------------------------------------- Total distributions (.18) (.02) ---------------------------------------------------------------------- Net asset value, end of period $8.50 $7.25 ---------------------------------------------------------------------- TOTAL RETURN 20.04% (27.07%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 2.43% 4.68%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.58% 1.47%(d) ---------------------------------------------------------------------- Net investment income (loss) 4.03% 3.61%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 45% 10% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 34 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R4 ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $7.25 $9.96 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .28 .08 Net gains (losses) (both realized and unrealized) 1.17 (2.77) ---------------------------------------------------------------------- Total from investment operations 1.45 (2.69) ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.20) (.02) Tax return of capital -- (.00)(b) ---------------------------------------------------------------------- Total distributions (.20) (.02) ---------------------------------------------------------------------- Net asset value, end of period $8.50 $7.25 ---------------------------------------------------------------------- TOTAL RETURN 20.26% (27.04%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 2.20% 4.42%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.33% 1.24%(d) ---------------------------------------------------------------------- Net investment income (loss) 4.02% 3.89%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 45% 10% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 35 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS R5 ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $7.25 $9.96 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .32 .09 Net gains (losses) (both realized and unrealized) 1.14 (2.77) ---------------------------------------------------------------------- Total from investment operations 1.46 (2.68) ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.21) (.03) Tax return of capital -- (.00)(b) ---------------------------------------------------------------------- Total distributions (.21) (.03) ---------------------------------------------------------------------- Net asset value, end of period $8.50 $7.25 ---------------------------------------------------------------------- TOTAL RETURN 20.47% (27.00%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.93% 4.17%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.14% 1.12%(d) ---------------------------------------------------------------------- Net investment income (loss) 4.47% 3.91%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 45% 10% ----------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (b) Rounds to zero. (c) Expense ratios include the impact of a performance incentive adjustment, if any. 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 reported expense ratios. (d) Annualized. (e) 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. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 36 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. ORGANIZATION 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 (the 1940 Act) 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 Fund's 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 offered with a front-end sales charge, which may be waived under certain circumstances. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares one month after the completion of the eighth year of ownership if originally purchased in a RiverSource fund on or after May 21, 2005 or originally purchased in a Seligman fund on or after June 13, 2009. Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund prior to June 13, 2009 will convert to Class A shares in the month prior to 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 offered without a front-end sales charge or CDSC to qualifying institutional investors. At Oct. 31, 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 -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF NEW ACCOUNTING STANDARD In June 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification(TM) (Codification) as the single source of authoritative accounting principles recognized by the FASB in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP). The Codification supersedes existing non-grandfathered, non- SEC accounting and reporting standards. The Codification did not change GAAP but rather organized it into a hierarchy where all guidance within the Codification carries an equal level of authority. The Codification became effective for financial statements issued for interim and annual periods ending after Sept. 15, 2009. The Codification did not have a material effect on the Fund's financial statements. 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 business of the New York Stock Exchange (NYSE). 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 by an independent pricing service using an evaluated bid. 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 -------------------------------------------------------------------------------- 38 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 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 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, 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. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. FOREIGN CURRENCY TRANSLATIONS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At Oct. 31, 2009, foreign currency holdings consisted of multiple denominations. 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 -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 (which includes net short-term capital gains) 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. 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. 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. FORWARD FOREIGN CURRENCY CONTRACTS The Fund may enter into forward foreign currency contracts in connection with settling purchases or sales of securities, to hedge the currency exposure associated with some or all of the Fund's securities or as part of its investment strategy. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market -------------------------------------------------------------------------------- 40 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked to market daily based upon foreign currency exchange rates from an independent pricing service and the change in value is recorded as unrealized appreciation or depreciation. The Fund will record a realized gain or loss when the forward foreign currency contract is closed. The risks of forward foreign currency contracts include movement in the values of the foreign currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that the counterparty will not complete its contractual obligation, which may be in excess of the amount, if any, reflected in the Statement of Assets and Liabilities. EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS The following tables are intended to provide additional information about the effect of derivatives on the financial statements of the Fund including: the fair value of derivatives by risk category and the location of those fair values in the Statement of Assets and Liabilities; the impact of derivative transactions on the Fund's operations over the period including realized gains or losses and unrealized gains or losses. The derivative schedules following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any. FAIR VALUES OF DERIVATIVE INSTRUMENTS AT OCT. 31, 2009 At Oct. 31, 2009, the Fund had no outstanding derivatives. EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCT. 31, 2009
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME ------------------------------------------------------------------------------ RISK EXPOSURE CATEGORY FORWARD FOREIGN CURRENCY CONTRACTS ------------------------------------------------------------------------------ Foreign exchange contracts $974 ------------------------------------------------------------------------------ Total $974 ------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME ------------------------------------------------------------------------------ RISK EXPOSURE CATEGORY FORWARD FOREIGN CURRENCY CONTRACTS ------------------------------------------------------------------------------ Foreign exchange contracts $-- ------------------------------------------------------------------------------ Total $-- ------------------------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY FORWARD FOREIGN CURRENCY CONTRACTS At Oct. 31, 2009, the Fund had no outstanding forward foreign currency contracts. The monthly average gross notional amount for these contracts was $1,000 for the year ended Oct. 31, 2009. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 4. 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 an annual fee that is equal to a percentage of the Fund's average daily net assets that declines from 0.80% to 0.57% as the Fund's net 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 $10,034 for the year ended Oct. 31, 2009. The management fee for the year ended Oct. 31, 2009 was 0.85% 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 an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% as the Fund's net assets increase. The fee for the year ended Oct. 31, 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 year ended Oct. 31, 2009, other expenses paid to this company were $32. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts -------------------------------------------------------------------------------- 42 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- had been invested in shares of the Fund or other funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains Fund shareholder accounts and records and provides Fund shareholder services. 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 Transfer Agent also charges an annual fee of $3 per account serviced directly by the Fund or its designated agent for Class A, Class B and Class C shares. 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 the 12 month period 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 an agreement with RiverSource Fund Distributors, Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate 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, of the 1.00% fee, up to 0.75% is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $101,000 and $5,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of July 31, 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. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 43 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- SALES CHARGES Sales charges, including front-end and CDSCs, received by the Distributor for distributing Fund shares were $38,352 for Class A, $136 for Class B and $76 for Class C for the year ended Oct. 31, 2009. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended Oct. 31, 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 A............................................. 1.50% Class B............................................. 2.26 Class C............................................. 2.25 Class I............................................. 1.09 Class R2............................................ 1.83 Class R3............................................ 1.58 Class R4............................................ 1.33 Class R5............................................ 1.14
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class A........................................... $9,235 Class B........................................... 1,101 Class C........................................... 165
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 waived/reimbursed at the Fund level were $166,193. Under an agreement which was effective until Oct. 31, 2009, the Investment Manager and its affiliates contractually agreed to waive certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), before -------------------------------------------------------------------------------- 44 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- giving effect to any performance incentive adjustment, would 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
Effective Nov. 1, 2009, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Dec. 31, 2010, 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............................................. 2.21 Class I............................................. 1.06 Class R2............................................ 1.86 Class R3............................................ 1.61 Class R4............................................ 1.36 Class R5............................................ 1.11
* 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. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $22,517,916 and $9,114,218, respectively, for the year ended Oct. 31, 2009. Realized gains and losses are determined on an identified cost basis. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 45 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
YEAR ENDED OCT. 31, 2009 2008* ---------------------------------------------------------------- CLASS A Sold 2,236,131 806,221 Converted from Class B** 44,959 -- Reinvested distributions 54,237 1,124 Redeemed (601,493) (58,764) ---------------------------------------------------------------- Net increase (decrease) 1,733,834 748,581 ---------------------------------------------------------------- CLASS B Sold 235,158 88,519 Reinvested distributions 4,436 111 Converted to Class A** (45,070) -- Redeemed (40,049) -- ---------------------------------------------------------------- Net increase (decrease) 154,475 88,630 ---------------------------------------------------------------- CLASS C Sold 49,579 10,230 Reinvested distributions 660 17 Redeemed (5,153) (3,271) ---------------------------------------------------------------- Net increase (decrease) 45,086 6,976 ---------------------------------------------------------------- CLASS R4 Sold 1,151 199 Reinvested distributions 2 -- Redeemed (1,122) -- ---------------------------------------------------------------- Net increase (decrease) 31 199 ----------------------------------------------------------------
* For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. ** Automatic conversion of Class B shares to Class A shares based on the original purchase date. 7. 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 -------------------------------------------------------------------------------- 46 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 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 Oct. 31, 2009, securities valued at $2,403,907 were on loan, secured by cash collateral of $2,565,681 invested in short-term securities or in cash equivalents. 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. 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. Net income of $27,324 earned from securities lending from Dec. 1, 2008 through Oct. 31, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 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. 8. 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 funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $11,507,728 and $11,163,939, respectively, for the year ended Oct. 31, 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 Oct. 31, 2009, can be found in the Portfolio of Investments. 9. 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 -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 47 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective on Oct. 15, 2009, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other funds in the RiverSource Family of Funds, severally and not jointly, permits collective borrowings up to $300 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $200 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 $500 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 sum of the federal funds rate plus (A) 1.25% per annum plus (B) if one-month LIBOR exceeds the federal funds rate, the amount of such excess. 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 0.10% per annum, in addition to an upfront fee equal to its pro rata share of 0.04% of the amount of the credit facility. Prior to Oct. 15, 2009, the credit facility agreement, which was a collective agreement between the Fund and certain other funds in the RiverSource Family of Funds, severally and not jointly, permitted collective borrowings up to $475 million. Interest was charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. The Fund also paid 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 year ended Oct. 31, 2009. 10. FEDERAL TAX INFORMATION 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 real estate investment trust (REIT) distributions, investments in partnerships, foreign tax credits 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. In the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $26,581 and accumulated net realized loss has been decreased by $26,581. -------------------------------------------------------------------------------- 48 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED OCT. 31, 2009 2008* --------------------------------------------------------------- Ordinary income............................. $570,093 $24,123 Long-term capital gain...................... -- -- Tax return of capital....................... -- 1,136
* For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. At Oct. 31, 2009, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income.................. $ 318,623 Undistributed accumulated long-term gain....... $ -- Accumulated realized loss...................... $(1,477,274) Unrealized appreciation (depreciation)......... $ 3,607,572
For federal income tax purposes, the Fund had a capital loss carry-over of $1,477,274 at Oct. 31, 2009, that if not offset by capital gains will expire as follows:
2016 2017 $182,867 $1,294,407
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. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 11. 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. 12. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Dec. 21, 2009, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 49 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 13. 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 (now known as RiverSource) 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. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. 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. -------------------------------------------------------------------------------- 50 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (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. (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 was and had 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 paid $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 -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 51 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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. -------------------------------------------------------------------------------- 52 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THREADNEEDLE GLOBAL EQUITY INCOME FUND: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Threadneedle Global Equity Income Fund (the Fund) (one of the portfolios constituting the RiverSource Global Series, Inc.) as of October 31, 2009, and the related statement of operations for the year then ended, the statements of changes in net assets and the financial highlights for the year then ended and for the period from August 1, 2008 (when shares became publicly available) to October 31, 2008. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2009, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 53 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued) ------------ In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Threadneedle Global Equity Income Fund of the RiverSource Global Series, Inc. at October 31, 2009, the results of its operations for the year then ended, and changes in its net assets and the financial highlights for the year then ended, and for the period from August 1, 2008 (when shares became publicly available) to October 31, 2008, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota December 21, 2009 -------------------------------------------------------------------------------- 54 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- OCT. 31, 2009 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (95.9%)(c) ISSUER SHARES VALUE(a) BELGIUM (1.0%) Fortis 18,000(b) $77,816 ------------------------------------------------------------------------------------- BERMUDA (1.1%) PartnerRe 1,075 82,216 ------------------------------------------------------------------------------------- BRAZIL (2.4%) Companhia Brasileira de Meios de Pagamento 6,080 55,982 Natura Cosmeticos 4,400 79,128 Redecard 3,300 48,474 --------------- Total 183,584 ------------------------------------------------------------------------------------- CANADA (0.9%) Nexen 3,000 64,410 ------------------------------------------------------------------------------------- FRANCE (3.7%) Euler Hermes 800 63,503 France Telecom 4,185 103,689 Renault 2,400(b) 107,391 --------------- Total 274,583 ------------------------------------------------------------------------------------- GERMANY (2.5%) Linde 1,090 113,301 Siemens 817(d) 73,558 --------------- Total 186,859 ------------------------------------------------------------------------------------- HONG KONG (2.8%) Great Eagle Holdings 16,359(d) 43,154 Hongkong & Shanghai Hotels 55,000 78,292 KWG Property Holding 65,000 46,628 Sun Hung Kai Properties 3,000 45,452 --------------- Total 213,526 ------------------------------------------------------------------------------------- INDIA (1.2%) State Bank of India GDR 960 87,681 ------------------------------------------------------------------------------------- INDONESIA (0.9%) Bank Rakyat Indonesia 95,000 68,987 ------------------------------------------------------------------------------------- IRELAND (2.0%) Accenture Cl A 3,946 146,318 ------------------------------------------------------------------------------------- JAPAN (1.7%) Asahi Breweries 3,900 68,951 Osaka Securities Exchange 12 57,589 --------------- Total 126,540 ------------------------------------------------------------------------------------- LUXEMBOURG (0.7%) Millicom Intl Cellular 810(b) 50,755 ------------------------------------------------------------------------------------- MEXICO (2.1%) America Movil ADR Series L 3,525 155,558 ------------------------------------------------------------------------------------- NETHERLANDS (1.4%) Fugro 1,880 104,703 ------------------------------------------------------------------------------------- SINGAPORE (0.7%) DBS Group Holdings 6,000 54,957 ------------------------------------------------------------------------------------- SOUTH KOREA (2.8%) NHN 850(b) 125,425 Samsung Electronics 140 84,282 --------------- Total 209,707 ------------------------------------------------------------------------------------- SPAIN (2.0%) Banco Santander 9,098 146,392 ------------------------------------------------------------------------------------- SWITZERLAND (7.8%) Mettler Toledo Intl 1,600(b) 156,000 Nestle 3,250 151,130 Noble 1,100 44,814 Novartis 1,610 83,840 Roche Holding 500 80,081 Syngenta 283 67,009 --------------- Total 582,874 ------------------------------------------------------------------------------------- TAIWAN (1.0%) Hon Hai Precision Industry 20,000 78,339 ------------------------------------------------------------------------------------- TURKEY (0.8%) Turkiye Garanti Bankasi 17,000 61,747 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) UNITED KINGDOM (11.1%) Aggreko 5,000 $62,140 Autonomy 3,850(b) 84,640 BG Group 9,000 154,904 Chemring Group 2,000 86,599 Tesco 9,600 64,004 Tullow Oil 8,000 154,960 Vodafone Group 71,200 156,896 Weir Group 5,800 66,462 --------------- Total 830,605 ------------------------------------------------------------------------------------- UNITED STATES (45.3%) Altria Group 4,500 81,495 American Tower Cl A 3,300(b) 121,506 Bank of America 10,800 157,465 CF Inds Holdings 650 54,113 Cisco Systems 4,500(b) 102,825 Citigroup 15,827 64,732 Cliffs Natural Resources 2,850 101,375 Coca-Cola 1,750 93,292 Colgate-Palmolive 1,230 96,715 CommScope 4,300(b) 116,186 Dell 5,255(b) 76,145 DIRECTV Group 4,200(b) 110,460 ENSCO Intl 2,050 93,869 Goldman Sachs Group 700 119,119 Hartford Financial Services Group 5,045 123,703 Humana 2,400(b) 90,192 IBM 2,050 247,250 Jones Lang LaSalle 2,201 103,117 Laboratory Corp of America Holdings 2,610(b) 179,803 Lowe's Companies 3,000 58,710 Merck & Co 3,300 102,069 Oracle 7,000 147,700 Republic Services 4,700 121,777 SL Green Realty 1,852 71,784 Thermo Fisher Scientific 2,990(b) 134,550 Travelers Companies 3,530 175,758 Ultra Petroleum 850(b) 41,268 Union Pacific 2,000 110,280 Walgreen 3,700 139,971 WESCO Intl 2,500(b) 63,900 Western Union 4,900 89,033 --------------- Total 3,390,162 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $6,342,444) $7,178,319 ------------------------------------------------------------------------------------- OTHER (--%)(c) ISSUER SHARES VALUE(a) SPAIN Banco Santander Rights 82(b) $14 ------------------------------------------------------------------------------------- TOTAL OTHER (Cost: $--) $14 ------------------------------------------------------------------------------------- MONEY MARKET FUND (3.9%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.25% 291,310(e) $291,310 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $291,310) $291,310 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (1.6%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 123,174 $123,174 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $123,174) $123,174 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $6,756,928)(f) $7,592,817 =====================================================================================
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 18 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL 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 net assets at Oct. 31, 2009:
PERCENTAGE OF INDUSTRY NET ASSETS VALUE ----------------------------------------------------------------------- Aerospace & Defense 1.2% $86,599 Automobiles 1.4 107,391 Beverages 2.2 162,243 Capital Markets 1.6 119,119 Chemicals 3.1 234,423 Commercial Banks 5.6 419,778 Commercial Services & Supplies 2.5 183,917 Communications Equipment 2.9 219,011 Computers & Peripherals 4.3 323,395 Diversified Financial Services 3.7 279,786 Diversified Telecommunication Services 1.4 103,689 Electronic Equipment, Instruments & 78,339 Components 1.0 Energy Equipment & Services 3.3 243,386 Floating Rate Notes 3.9 291,310 Food & Staples Retailing 2.7 203,975 Food Products 2.0 151,130 Health Care Providers & Services 3.6 269,995 Hotels, Restaurants & Leisure 1.0 78,292 Household Products 1.3 96,715 Industrial Conglomerates 1.0 73,558 Insurance 6.9 522,996 Internet Software & Services 1.7 125,425 IT Services 4.5 339,807 Life Sciences Tools & Services 3.9 290,550 Machinery 0.9 66,462 Media 1.5 110,460 Metals & Mining 1.4 101,375 Oil, Gas & Consumable Fuels 5.6 415,542 Personal Products 1.1 79,128 Pharmaceuticals 3.6 265,990 Real Estate Investment Trusts (REITs) 1.0 71,784 Real Estate Management & Development 3.2 238,351 Road & Rail 1.5 110,280 Semiconductors & Semiconductor 84,282 Equipment 1.1 Software 3.1 232,340 Specialty Retail 0.8 58,710 Tobacco 1.1 81,495 Trading Companies & Distributors 0.9 63,900 Wireless Telecommunication Services 6.4 484,715 Other(1) 1.6 123,174 ----------------------------------------------------------------------- Total $7,592,817 -----------------------------------------------------------------------
(1) Cash & Cash Equivalents. See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 19 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- INVESTMENTS IN DERIVATIVES PORTFOLIO SWAP(1) OUTSTANDING AT OCT. 31, 2009
NEXT NET UNREALIZED COUNTERPARTY DESCRIPTION RESET DATE APPRECIATION ------------------------------------------------------------------------------- UBS The Fund receives (pays) the total Nov. 9, 2009 $3,972 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 $3,972 -------------------------------------------------------------------------------
SUMMARY OF PORTFOLIO SWAP EXPOSURE BY INDUSTRY The following table represents the exposure of the custom basket of equity securities underlying the portfolio swap by industry classifications as a percentage of net assets at Oct. 31, 2009:
VALUE PERCENTAGE OF ---------------------------------------- NET ASSETS LONG SHORT NET ------------------------------------------------------------------------------------- Air Freight & Logistics (0.6)% $-- $(48,330) $(48,330) Automobiles (0.7) -- (51,779) (51,779) Capital Markets (1.3) -- (97,460) (97,460) Chemicals (1.9) -- (143,190) (143,190) Commercial Banks 0.5 110,383 (69,660) 40,723 Computers & Peripherals 3.7 273,325 -- 273,325 Construction & Engineering (1.6) -- (116,600) (116,600) Diversified Financial 217,041 -- 217,041 Services 2.9 Electronic Equipment, -- (74,760) (74,760) Instruments & Components (1.0) Health Care Equipment & 80,730 (65,253) 15,477 Supplies 0.2 Health Care Providers & 95,094 -- 95,094 Services 1.3 Hotels, Restaurants & -- (133,560) (133,560) Leisure (1.8) Machinery 1.3 228,705 (129,692) 99,013 Oil, Gas & Consumable 73,428 (118,583) (45,155) Fuels (0.6) Real Estate Investment -- (59,620) (59,620) Trusts (REITs) (0.8) Road & Rail 1.9 203,241 (60,120) 143,121 Semiconductor & -- (128,037) (128,037) Semiconductor Equipment (1.7) Textiles, Apparel & Luxury -- (83,431) (83,431) Goods (1.1) Water Utilities (1.3) -- (97,335) (97,335) Other(2) 2.7 200,662 (1,227) 199,435 ------------------------------------------------------------------------------------- Total 0.1% $1,482,609 $(1,478,637) $3,972 -------------------------------------------------------------------------------------
(1) See Note 3 to the financial statements. (2) Cash equivalents See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 20 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. (d) At Oct. 31, 2009, security was partially or fully on loan. See Note 7 to the financial statements. (e) Affiliated Money Market Fund -- See Note 8 to the financial statements. The rate shown is the seven-day current annualized yield at Oct. 31, 2009. (f) At Oct. 31, 2009, the cost of securities for federal income tax purposes was $6,865,777 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $809,869 Unrealized depreciation (82,829) --------------------------------------------------------- Net unrealized appreciation $727,040 ---------------------------------------------------------
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 ANNUAL REPORT 21 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. 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 New York Stock Exchange (NYSE) or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as -------------------------------------------------------------------------------- 22 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Oct. 31, 2009:
FAIR VALUE AT OCT. 31, 2009 ------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL -------------------------------------------------------------------------------------------- Equity Securities Common Stocks(a) $4,090,232 $3,088,087(b) $-- $7,178,319 Other(a) -- 14(b) -- 14 -------------------------------------------------------------------------------------------- Total Equity Securities 4,090,232 3,088,101 -- 7,178,333 -------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(c) 291,310 -- -- 291,310 Investments of Cash Collateral Received for Securities on Loan 123,174 -- -- 123,174 -------------------------------------------------------------------------------------------- Total Other 414,484 -- -- 414,484 -------------------------------------------------------------------------------------------- Investments in Securities 4,504,716 3,088,101 -- 7,592,817 Other Financial Instruments(d) -- 3,972 -- 3,972 -------------------------------------------------------------------------------------------- Total $4,504,716 $3,092,073 $-- $7,596,789 --------------------------------------------------------------------------------------------
(a) All industry classifications are identified in the Portfolio of Investments. (b) Includes certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading. Therefore, these investment securities were classified as Level 2 instead of Level 1. (c) Money market fund that is a sweep investment for cash balances in the Fund at Oct. 31, 2009. (d) Other Financial Instruments are derivative instruments, which are valued at the unrealized appreciation (depreciation) on the instrument. Derivative descriptions are located in the Investments in Derivatives section of the Portfolio of Investments. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 23 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. -------------------------------------------------------------------------------- 24 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- OCT. 31, 2009
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $6,342,444) $ 7,178,333 Affiliated money market fund (identified cost $291,310) 291,310 Investments of cash collateral received for securities on loan (identified cost $123,174) 123,174 ------------------------------------------------------------------------------ Total investments in securities (identified cost $6,756,928) 7,592,817 Foreign currency holdings (identified cost $24,869) 25,019 Capital shares receivable 37,679 Dividends and accrued interest receivable 5,433 Reclaims receivable 3,491 Unrealized appreciation on swap contracts 3,972 ------------------------------------------------------------------------------ Total assets 7,668,411 ------------------------------------------------------------------------------ LIABILITIES Payable upon return of securities loaned 123,174 Accrued investment management services fees 220 Accrued distribution fees 29 Accrued transfer agency fees 10 Accrued administrative services fees 17 Accrued plan administration services fees 1 Other accrued expenses 61,490 ------------------------------------------------------------------------------ Total liabilities 184,941 ------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $ 7,483,470 ------------------------------------------------------------------------------ REPRESENTED BY Capital stock -- $.01 par value $ 4,233 Additional paid-in capital 7,953,157 Undistributed net investment income 202,524 Accumulated net realized gain (loss) (1,516,792) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 840,348 ------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $ 7,483,470 ------------------------------------------------------------------------------ *Including securities on loan, at value $ 112,583 ------------------------------------------------------------------------------
-------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 25 STATEMENT OF ASSETS AND LIABILITIES (continued) -------------------------------- OCT. 31, 2009
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $2,647,582 150,018 $17.65(1) Class B $ 258,403 14,788 $17.47 Class C $ 125,035 7,154 $17.48 Class I $4,366,888 246,500 $17.72 Class R2 $ 8,780 500 $17.56 Class R3 $ 8,808 500 $17.62 Class R4 $ 59,122 3,345 $17.67 Class R5 $ 8,852 500 $17.70 ---------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $18.73. 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. -------------------------------------------------------------------------------- 26 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- YEAR ENDED OCT. 31, 2009
INVESTMENT INCOME Income: Dividends $ 136,767 Interest 1,034 Income distributions from affiliated money market fund 513 Income from securities lending -- net 1,655 Less foreign taxes withheld (7,840) ----------------------------------------------------------------------------- Total income 132,129 ----------------------------------------------------------------------------- Expenses: Investment management services fees 64,424 Distribution fees Class A 5,199 Class B 2,820 Class C 1,035 Class R2 36 Class R3 18 Transfer agency fees Class A 2,757 Class B 399 Class C 142 Class R2 4 Class R3 4 Class R4 14 Class R5 4 Administrative services fees 4,908 Plan administration services fees Class R2 18 Class R3 18 Class R4 72 Compensation of board members 188 Custodian fees 14,823 Printing and postage 29,490 Registration fees 46,770 Professional fees 43,745 Other 4,971 ----------------------------------------------------------------------------- Total expenses 221,859 Expenses waived/reimbursed by the Investment Manager and its affiliates (135,753) ----------------------------------------------------------------------------- Total net expenses 86,106 ----------------------------------------------------------------------------- Investment income (loss) -- net 46,023 -----------------------------------------------------------------------------
-------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 27 STATEMENT OF OPERATIONS (continued) -------------------------------------------- YEAR ENDED OCT. 31, 2009
REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $ (791,815) Foreign currency transactions 4,294 Swap transactions (52,176) ----------------------------------------------------------------------------- Net realized gain (loss) on investments (839,697) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 2,246,014 ----------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 1,406,317 ----------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $1,452,340 -----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 28 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
FOR THE PERIOD FROM YEAR ENDED AUG. 1, 2008* TO OCT. 31, 2009 OCT. 31, 2008 OPERATIONS Investment income (loss) -- net $ 46,023 $ 5,911 Net realized gain (loss) on investments (839,697) (971,237) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 2,246,014 (1,410,405) ----------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 1,452,340 (2,375,731) ----------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares 1,183,549 3,082,069 Class B shares 152,947 482,927 Class C shares 65,424 117,476 Class R4 shares 31,011 22,000 Conversions from Class B to Class A Class A shares 49,083 -- Class B shares (49,083) -- Payments for redemptions Class A shares (1,216,964) (157,519) Class B shares (155,807) (141,999) Class C shares (56,896) -- Class R4 shares (1,985) -- ----------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 1,279 3,404,954 ----------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 1,453,619 1,029,223 Net assets at beginning of period 6,029,851 5,000,628** ----------------------------------------------------------------------------------------------------- Net assets at end of period $ 7,483,470 $ 6,029,851 ----------------------------------------------------------------------------------------------------- Undistributed net investment income $ 202,524 $ 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. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 29 FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for periods shown. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of sales charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED OCT. 31, CLASS A ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $13.97 $20.00 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09 .00(b) Net gains (losses) (both realized and unrealized) 3.59 (6.03) ---------------------------------------------------------------------- Total from investment operations 3.68 (6.03) ---------------------------------------------------------------------- Net asset value, end of period $17.65 $13.97 ---------------------------------------------------------------------- TOTAL RETURN 26.34% (30.15%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 3.78% 5.55%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.55% 1.55%(d) ---------------------------------------------------------------------- Net investment income (loss) .59% (.07%)(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $3 $2 ---------------------------------------------------------------------- Portfolio turnover rate 133% 36% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 30 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS B ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $13.94 $20.00 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01) (.02) Net gains (losses) (both realized and unrealized) 3.54 (6.04) ---------------------------------------------------------------------- Total from investment operations 3.53 (6.06) ---------------------------------------------------------------------- Net asset value, end of period $17.47 $13.94 ---------------------------------------------------------------------- TOTAL RETURN 25.32% (30.30%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 4.52% 6.33%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 2.31% 2.31%(d) ---------------------------------------------------------------------- Net investment income (loss) (.05%) (.55%)(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 133% 36% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 31 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS C ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $13.94 $20.00 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.02) (.03) Net gains (losses) (both realized and unrealized) 3.56 (6.03) ---------------------------------------------------------------------- Total from investment operations 3.54 (6.06) ---------------------------------------------------------------------- Net asset value, end of period $17.48 $13.94 ---------------------------------------------------------------------- TOTAL RETURN 25.39% (30.30%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 4.58% 6.22%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 2.30% 2.30%(d) ---------------------------------------------------------------------- Net investment income (loss) (.12%) (.79%)(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 133% 36% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 32 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS I ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $13.98 $20.00 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .14 .03 Net gains (losses) (both realized and unrealized) 3.60 (6.05) ---------------------------------------------------------------------- Total from investment operations 3.74 (6.02) ---------------------------------------------------------------------- Net asset value, end of period $17.72 $13.98 ---------------------------------------------------------------------- TOTAL RETURN 26.75% (30.10%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 3.42% 4.94%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.22% 1.21%(d) ---------------------------------------------------------------------- Net investment income (loss) .94% .63%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $4 $3 ---------------------------------------------------------------------- Portfolio turnover rate 133% 36% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 33 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS R2 ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $13.96 $20.00 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03 .00(b) Net gains (losses) (both realized and unrealized) 3.57 (6.04) ---------------------------------------------------------------------- Total from investment operations 3.60 (6.04) ---------------------------------------------------------------------- Net asset value, end of period $17.56 $13.96 ---------------------------------------------------------------------- TOTAL RETURN 25.79% (30.20%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 4.22% 5.74%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.96% 1.81%(d) ---------------------------------------------------------------------- Net investment income (loss) .19% .03%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 133% 36% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 34 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R3 ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $13.97 $20.00 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .06 .01 Net gains (losses) (both realized and unrealized) 3.59 (6.04) ---------------------------------------------------------------------- Total from investment operations 3.65 (6.03) ---------------------------------------------------------------------- Net asset value, end of period $17.62 $13.97 ---------------------------------------------------------------------- TOTAL RETURN 26.13% (30.15%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 3.97% 5.49%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.71% 1.56%(d) ---------------------------------------------------------------------- Net investment income (loss) .44% .28%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 133% 36% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 35 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS R4 ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $13.98 $20.00 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .08 .01 Net gains (losses) (both realized and unrealized) 3.61 (6.03) ---------------------------------------------------------------------- Total from investment operations 3.69 (6.02) ---------------------------------------------------------------------- Net asset value, end of period $17.67 $13.98 ---------------------------------------------------------------------- TOTAL RETURN 26.40% (30.10%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 3.92% 5.38%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.47% 1.36%(d) ---------------------------------------------------------------------- Net investment income (loss) .52% .30%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 133% 36% ----------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 36 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R5 ------------------- PER SHARE DATA 2009 2008(a) Net asset value, beginning of period $13.98 $20.00 ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .13 .02 Net gains (losses) (both realized and unrealized) 3.59 (6.04) ---------------------------------------------------------------------- Total from investment operations 3.72 (6.02) ---------------------------------------------------------------------- Net asset value, end of period $17.70 $13.98 ---------------------------------------------------------------------- TOTAL RETURN 26.61% (30.10%) ---------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 3.47% 4.99%(d) ---------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.27% 1.26%(d) ---------------------------------------------------------------------- Net investment income (loss) .88% .58%(d) ---------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- ---------------------------------------------------------------------- Portfolio turnover rate 133% 36% ----------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (b) Rounds to zero. (c) Expense ratios include the impact of a performance incentive adjustment, if any. 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 reported expense ratios. (d) Annualized. (e) 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. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. ORGANIZATION 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 (the 1940 Act) 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 Fund's 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 offered with a front-end sales charge, which may be waived under certain circumstances. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares one month after the completion of the eighth year of ownership if originally purchased in a RiverSource fund on or after May 21, 2005 or originally purchased in a Seligman fund on or after June 13, 2009. Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund prior to June 13, 2009 will convert to Class A shares in the month prior to 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 offered without a front-end sales charge or CDSC to qualifying institutional investors. At Oct. 31, 2009, the Investment Manager owned 100% of Class I, Class R2, Class R3 and Class R5 shares and owned approximately 59% of the total outstanding Fund shares. -------------------------------------------------------------------------------- 38 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 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. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF NEW ACCOUNTING STANDARD In June 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification(TM) (Codification) as the single source of authoritative accounting principles recognized by the FASB in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP). The Codification supersedes existing non-grandfathered, non- SEC accounting and reporting standards. The Codification did not change GAAP but rather organized it into a hierarchy where all guidance within the Codification carries an equal level of authority. The Codification became effective for financial statements issued for interim and annual periods ending after Sept. 15, 2009. The Codification did not have a material effect on the Fund's financial statements. 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 business of the New York Stock Exchange (NYSE). 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 by an independent pricing service using an evaluated bid. 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 -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 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, 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. 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. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. FOREIGN CURRENCY TRANSLATIONS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At Oct. 31, 2009, foreign currency holdings consisted of multiple denominations, primarily Taiwan dollar. -------------------------------------------------------------------------------- 40 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 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 borrowed for the short sale at the lender's demand. A realized gain, limited to the price at which the Fund sold the security short, or a realized 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 Oct. 31, 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 year ended Oct. 31, 2009, the Fund had no dividend or interest expense related to securities sold short in the Statement of Operations. 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 (which includes net short-term capital gains) 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. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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. 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. FORWARD FOREIGN CURRENCY CONTRACTS The Fund may enter into forward foreign currency contracts in connection with settling purchases or sales of securities, to hedge the currency exposure associated with some or all of the Fund's securities or as part of its investment strategy. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked to market daily based upon foreign currency exchange rates from an independent pricing service and the change in value is recorded as unrealized appreciation or depreciation. The Fund will record a realized gain or loss when the forward foreign currency contract is closed. The risks of forward foreign currency contracts include movement in the values of the foreign currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that the counterparty will not complete its contractual obligation, which may be in excess of the amount, if any, reflected in the -------------------------------------------------------------------------------- 42 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- Statement of Assets and Liabilities. At Oct. 31, 2009, the Fund had no outstanding forward foreign currency contracts. PORTFOLIO SWAP TRANSACTIONS The Fund has entered into a portfolio swap transaction. 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 contract, payments made by the Fund or the counterparty are based on the total return of the reference assets within the basket in return for a specified interest rate. The contract allows the Investment Manager of the Fund to alter the composition of the custom basket by trading in and out of the notional reference security positions at its discretion. The notional amounts of the swap transactions 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) by the Fund are recorded as realized gains (losses). See the Portfolio Swap Outstanding table following the Portfolio of Investments for additional information. Portfolio swap transactions 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. Portfolio swaps are subject to the risk associated with the investment in the reference securities within the basket. The risk in the case of short portfolio swap transactions is unlimited based on the potential for unlimited increases in the market value of the reference securities in the basket. This risk may be offset if the Fund holds any of the reference securities. The risk in the case of long portfolio swap transactions is limited to the current notional amount of the portfolio swap. Portfolio swaps are also subject to the risk of the counterparty not fulfilling its obligations under the contract. The counterparty risk may be offset by any collateral held by the Fund related to the swap transactions. EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS The following tables are intended to provide additional information about the effect of derivatives on the financial statements of the Fund including: the fair value of derivatives by risk category and the location of those fair values in the Statement of Assets and Liabilities; the impact of derivative transactions on the Fund's operations over the period including realized gains or losses and unrealized gains or losses. The derivative schedules following the Portfolio of -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 43 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Investments present additional information regarding derivative instruments outstanding at the end of the period, if any. FAIR VALUES OF DERIVATIVE INSTRUMENTS AT OCT. 31, 2009
ASSET DERIVATIVES LIABILITY DERIVATIVES ------------------------------- ------------------------------------- STATEMENT OF ASSETS STATEMENT OF ASSETS RISK EXPOSURE AND LIABILITIES AND LIABILITIES CATEGORY LOCATION FAIR VALUE LOCATION FAIR VALUE ------------------------------------------------------------------------------------------- Equity contracts Unrealized Unrealized appreciation on depreciation on swap transactions $3,972 swap transactions N/A ------------------------------------------------------------------------------------------- Total $3,972 $ -- -------------------------------------------------------------------------------------------
EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCT. 31, 2009
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME ---------------------------------------------------------------------------------- FORWARD FOREIGN CURRENCY RISK EXPOSURE CATEGORY CONTRACTS SWAPS TOTAL ---------------------------------------------------------------------------------- Equity contracts $ -- $(52,176) $(52,176) ---------------------------------------------------------------------------------- Foreign exchange contracts (5,496) $ (5,496) ---------------------------------------------------------------------------------- Total $(5,496) $(52,176) $(57,672) ----------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME --------------------------------------------------------------------------------- FORWARD FOREIGN CURRENCY RISK EXPOSURE CATEGORY CONTRACTS SWAPS TOTAL --------------------------------------------------------------------------------- Equity contracts $ -- $205,925 $205,925 --------------------------------------------------------------------------------- Foreign exchange contracts 3,052 $ 3,052 --------------------------------------------------------------------------------- Total $3,052 $205,925 $208,977 ---------------------------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY FORWARD FOREIGN CURRENCY CONTRACTS At Oct. 31, 2009, the Fund had no outstanding forward foreign currency contracts. The monthly average gross notional amount for these contracts was $100,000 for the year ended Oct. 31, 2009. PORTFOLIO SWAP CONTRACT At Oct. 31, 2009, the value of long and short securities underlying the portfolio swap contract were $1,482,609 and 1,478,637 respectively. The monthly average value of long and short securities underlying the portfolio swap contract were $879,000 and $884,000, respectively for the year ended Oct. 31, 2009. -------------------------------------------------------------------------------- 44 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 4. 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 an annual fee that is equal to a percentage of the Fund's average daily net assets that declines from 1.05% to 0.99% as the Fund's net 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 year ended Oct. 31, 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 an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% as the Fund's net assets increase. The fee for the year ended Oct. 31, 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 year ended Oct. 31, 2009, other expenses paid to this company were $14. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 45 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- had been invested in shares of the Fund or other funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains Fund shareholder accounts and records and provides Fund shareholder services. 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 Transfer Agent also charges an annual fee of $3 per account serviced directly by the Fund or its designated agent for Class A, Class B and Class C shares. 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 the 12 month period 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 an agreement with RiverSource Fund Distributors, Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate 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, of the 1.00% fee, up to 0.75% is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $24,000 and $1,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of July 31, 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. -------------------------------------------------------------------------------- 46 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- SALES CHARGES Sales charges, including front-end and CDSCs, received by the Distributor for distributing Fund shares were $7,875 for Class A, $698 for Class B and $101 for Class C for the year ended Oct. 31, 2009. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended Oct. 31, 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............................................. 1.96 Class R3............................................. 1.71 Class R4............................................. 1.47 Class R5............................................. 1.27
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class A............................................. $1,090 Class B............................................. 148 Class C............................................. 59
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 $134,433. Under an agreement which was effective until Oct. 31, 2009, the Investment Manager and its affiliates contractually agreed to waive certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), before -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 47 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- giving effect to any performance incentive adjustment, would 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
Effective Nov. 1, 2009, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Dec. 31, 2010, 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.............................................. 1.55% Class B.............................................. 2.31 Class C.............................................. 2.30 Class I.............................................. 1.21 Class R2............................................. 2.01 Class R3............................................. 1.76 Class R4............................................. 1.51 Class R5............................................. 1.26
* 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. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $8,228,291 and $7,922,254, respectively, for the year ended Oct. 31, 2009. Realized gains and losses are determined on an identified cost basis. 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows: -------------------------------------------------------------------------------- 48 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, 2009 2008* --------------------------------------------------------------- Class A Sold 77,358 166,961 Converted from Class B** 2,995 -- Redeemed (88,344) (9,452) --------------------------------------------------------------- Net increase (decrease) (7,991) 157,509 --------------------------------------------------------------- Class B Sold 10,919 26,996 Converted to Class A** (3,019) -- Redeemed (10,228) (10,380) --------------------------------------------------------------- Net increase (decrease) (2,328) 16,616 --------------------------------------------------------------- Class C Sold 4,412 6,224 Redeemed (3,982) -- --------------------------------------------------------------- Net increase (decrease) 430 6,224 --------------------------------------------------------------- Class R4 Sold 1,836 1,163 Redeemed (154) -- --------------------------------------------------------------- Net increase (decrease) 1,682 1,163 ---------------------------------------------------------------
* For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. ** Automatic conversion of Class B shares to Class A shares based on the original purchase date. 7. 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 Oct. 31, 2009, securities valued at $112,583 were on loan, secured by cash collateral of $123,174 invested in short-term securities or in cash equivalents. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 49 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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. 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. Net income of $1,655 earned from securities lending from Dec. 1, 2008 through Oct. 31, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 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. 8. 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 funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $3,937,961 and $3,646,651, respectively, for the year ended Oct. 31, 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 Oct. 31, 2009, can be found in the Portfolio of Investments. 9. 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 became effective on Oct. 15, 2009, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other funds in the -------------------------------------------------------------------------------- 50 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- RiverSource Family of Funds, severally and not jointly, permits collective borrowings up to $300 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $200 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 $500 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 sum of the federal funds rate plus (A) 1.25% per annum plus (B) if one-month LIBOR exceeds the federal funds rate, the amount of such excess. 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 0.10% per annum, in addition to an upfront fee equal to its pro rata share of 0.04% of the amount of the credit facility. Prior to Oct. 15, 2009, the credit facility agreement, which was a collective agreement between the Fund and certain other funds in the RiverSource Family of Funds, severally and not jointly, permitted collective borrowings up to $475 million. Interest was charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. The Fund also paid 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 year ended Oct. 31, 2009. 10. FEDERAL TAX INFORMATION 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. In the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $47,882 and accumulated net realized loss has been decreased by $47,882. The tax character of distributions paid for the years indicated is as follows: For the periods ended Oct. 31, 2009 and 2008, there were no distributions. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 51 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- At Oct. 31, 2009, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income.................... $ 206,636 Undistributed accumulated long-term gain......... $ -- Accumulated realized loss........................ $(1,407,944) Unrealized appreciation (depreciation)........... $ 727,388
For federal income tax purposes, the Fund had a capital loss carry-over of $1,407,944 at Oct. 31, 2009, that if not offset by capital gains will expire as follows:
2016 2017 $577,229 $830,715
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. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 11. 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. -------------------------------------------------------------------------------- 52 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 12. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Dec. 21, 2009, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 13. 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 (now known as RiverSource) 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. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. 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 -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 53 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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. Incorporated (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. (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 was and had 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 paid $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 -------------------------------------------------------------------------------- 54 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 55 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THREADNEEDLE GLOBAL EXTENDED ALPHA FUND: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Threadneedle Global Extended Alpha Fund (the Fund) (one of the portfolios constituting the RiverSource Global Series, Inc.) as of October 31, 2009, and the related statement of operations for the year then ended, the statements of changes in net assets and the financial highlights for the year then ended and for the period from August 1, 2008 (when shares became publicly available) to October 31, 2008. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2009, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. -------------------------------------------------------------------------------- 56 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Threadneedle Global Extended Alpha Fund of the RiverSource Global Series, Inc. at October 31, 2009, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for the year then ended and for the period from August 1, 2008 (when shares became publicly available) to October 31, 2008, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota December 21, 2009 -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 57 PART C. OTHER INFORMATION Item 23. Exhibits (a)(1) Articles of Incorporation, dated October 28, 1988, filed as Exhibit 1 to Registration Statement No. 33-25824, are incorporated by reference. (a)(2) Articles of Amendment, dated October 10, 1990, filed as Exhibit 1 to Registrant's Post Effective Amendment No. 9 to Registration Statement No. 33-25824, are incorporated by reference. (a)(3) Articles of Amendment, dated June 16, 1999, filed electronically as Exhibit (a)(3) to Registrant's Post-Effective Amendment No. 35 to Registration Statement No. 33-25824 filed on or about Dec. 21, 2000, are incorporated by reference. (a)(4) Articles of Amendment of AXP Global Series, Inc., dated November 14, 2002, filed electronically as Exhibit (a)(4) to Registration Statement No. 33-25824 on or about Dec. 20, 2002, are incorporated by reference. (a)(5) Articles of Amendment, dated April 21, 2006, filed electronically on or about June 2, 2006 as Exhibit (a)(5) to Registrant's Post-Effective Amendment No. 49 to Registration Statement No. 33-25824 are incorporated by reference. (a)(6) Certificate of Designation, dated April 8, 2008 filed electronically on or about April 17, 2008 as Exhibit (a)(6) to Registrant's Post-Effective Amendment No. 54 to Registration Statement No. 33-25824 is incorporated by reference. (a)(7) Certificate of Designation, dated April 10, 2008 filed electronically on or about April 17, 2008 as Exhibit (a)(7) to Registrant's Post-Effective Amendment No. 54 to Registration Statement No. 33-25824 is incorporated by reference. (a)(8) Certificate of Designation reflecting the addition of Class R2 shares to Threadneedle Emerging Markets Fund, dated Feb. 23, 2009, is filed electronically herewith as Exhibit (a)(8) to Registrant's Post-Effective Amendment No. 60 to Registration Statement No. 33-25824. (b) By-laws, as amended April 13, 2006, filed electronically on or about April 17, 2008 as Exhibit (b) to Registrant's Post-Effective Amendment No. 54 to Registration Statement No. 33-25824 are incorporated by reference. (c) Instruments Defining Rights of Security Holders: Not Applicable. (d)(1) Investment Management Services Agreement, dated May 1, 2006, amended and restated Sept. 14, 2009, between Registrant and RiverSource Investments, LLC is filed electronically herewith as Exhibit (d)(1) to Registrant's Post-Effective Amendment No. 60 to Registration Statement No. 33-25824. (d)(2) Subadvisory Agreement, dated June 11, 2008 between RiverSource Investments, LLC and Threadneedle International Limited, filed electronically on or about Oct. 29, 2008 as Exhibit (d)(2) to Registrant's Post-Effective Amendment No. 57 to Registration Statement No. 33-25824 is incorporated by reference. (d)(3) Amendment One to Amended and Restated Subadvisory Agreement, dated July 13, 2009, between RiverSource Investments, LLC and Threadneedle International Limited filed electronically on or about Dec. 29. 2009 as Exhibit (d)(3) to RiverSource International Series, Inc. Post-Effective Amendment No. 52 to Registration Statement No. 2-92309 is incorporated by reference. (e)(1) Distribution Agreement, effective Nov. 7, 2008, amended and restated Sept. 14, 2009, between Registrant and RiverSource Fund Distributors, Inc. filed electronically on or about Sept. 25, 2009 as Exhibit (e)(1) to RiverSource Large Cap Series, Inc. Post-Effective Amendment No. 86 to Registration Statement No. 2-38355 is incorporated by reference. (e)(2) Form of Service Agreement filed electronically on or about Aug. 27, 2007 as Exhibit (e)(3) to RiverSource Sector Series, Inc. Post-Effective Amendment No. 39 to Registration Statement No. 33-20872 is incorporated by reference. (e)(3) Form of RiverSource Funds Dealer Agreement filed electronically on or about Aug. 27, 2007 as Exhibit (e)(4) to RiverSource Sector Series, Inc. Post-Effective Amendment No. 39 to Registration Statement No. 33-20872 is incorporated by reference. (f) Deferred Compensation Plan, amended and restated Jan. 1, 2009, filed electronically on or about Jan. 27, 2009 as Exhibit (f) to RiverSource Equity Series, Inc. Post-Effective Amendment No. 105 to Registration Statement No. 2-13188 is incorporated by reference. (g) Form of Master Global Custody Agreement with JPMorgan Chase Bank, N.A. filed electronically on or about Dec. 23, 2008 as Exhibit (g) to RiverSource International Managers Series, Inc. Post-Effective Amendment No. 18 to Registration Statement No. 333-64010 is incorporated by reference. (h)(1) Administrative Services Agreement, dated Oct. 1, 2005, amended and restated Sept. 14, 2009, between Registrant and Ameriprise Financial, Inc. filed electronically on or about Sept. 25, 2009 as Exhibit (h)(1) to RiverSource Large Cap Series, Inc. Post-Effective Amendment No. 86 to Registration Statement No. 2-38355 is incorporated by reference. (h)(2) Transfer Agency Agreement, dated Oct. 1, 2005, amended and restated Sept. 14, 2009, between Registrant and RiverSource Service Corporation filed electronically on or about Sept. 25, 2009 as Exhibit (h)(2) to RiverSource Large Cap Series, Inc. Post-Effective Amendment No. 86 to Registration Statement No. 2-38355 is incorporated by reference. (h)(3) Plan Administration Services Agreement, dated Dec. 1, 2006, amended and restated Sept. 14, 2009, between Registrant and RiverSource Service Corporation filed electronically on or about Sept. 25, 2009 as Exhibit (h)(3) to RiverSource Large Cap Series, Inc. Post-Effective Amendment No. 86 to Registration Statement No. 2-38355 is incorporated by reference. (h)(4) Master Fee Cap/Fee Waiver Agreement, dated Oct. 1, 2005, amended and restated Sept. 14, 2009 between RiverSource Investments, LLC, Ameriprise Financial, Inc., RiverSource Service Corporation, RiverSource Fund Distributors, Inc. and the Registrant filed electronically on or about Sept. 25, 2009 as Exhibit (h)(11) to RiverSource Large Cap Series, Inc. Post-Effective Amendment No. 86 to Registration Statement No. 2-38355 is incorporated by reference. (h)(5) License Agreement, effective May 1, 2006, amended and restated as of Nov. 12, 2008, between Ameriprise Financial, Inc. and RiverSource Family of Funds filed electronically on or about Feb. 27, 2009 as Exhibit (h)(4) to RiverSource Variable Series Trust Post-Effective Amendment No. 4 to Registration Statement No. 333-146374 is incorporated by reference. (h)(6) Form of License Agreement, dated July 10, 2004, between Threadneedle Asset Management Holdings Limited and the Registrant filed electronically on or about Dec. 24, 2008 as Exhibit (h)(10) to Registrant's Post-Effective Amendment No. 58 to Registration Statement No. 33-25824 is incorporated by reference. (h)(7) Form of License Agreement Amendment, dated May 15, 2008, between Threadneedle Asset Management Holdings Limited and RiverSource Global Series, Inc., RiverSource International Series, Inc. and RiverSource Variable Series Trust filed electronically on or about June 30, 2008 as Exhibit (h)(10) to Registrant's Post-Effective Amendment No. 56 to Registration Statement No. 33-25824 is incorporated by reference. (h)(8) Form of License Agreement Amendment between Threadneedle Asset Management Holdings Limited and RiverSource Global Series, Inc., RiverSource International Series, Inc. and RiverSource Variable Series Trust filed electronically on or about July 8, 2009 as Exhibit (h)(10) to RiverSource International Series, Inc. Post-Effective Amendment No. 51 to Registration Statement No. 2-92309 is incorporated by reference. (h)(9) Agreement and Plan of Reorganization between AXP Global Series, Inc., on behalf of AXP Emerging Markets Fund, and Strategist World Fund, Inc., on behalf of Strategist Emerging Markets Fund, dated March 10, 2000, filed electronically as Exhibit (h)(7) to Registrant's Post-Effective Amendment No. 35 to Registration Statement No. 33-25824 filed on or about Dec. 21, 2000, is incorporated by reference. (h)(10) Agreement and Plan of Reorganization between AXP Global Series, Inc., on behalf of AXP Global Bond Fund, and Strategist World Fund, Inc., on behalf of Strategist World Income Fund, dated March 10, 2000, filed electronically as Exhibit (h)(8) to Registrant's Post-Effective Amendment No. 35 to Registration Statement No. 33-25824 filed on or about Dec. 21, 2000, is incorporated by reference. (h)(11) Agreement and Plan of Reorganization between AXP Global Series, Inc., on behalf of AXP Global Growth Fund, and Strategist World Fund, Inc., on behalf of Strategist World Growth Fund, dated March 10, 2000, filed electronically as Exhibit (h)(9) to Registrant's Post-Effective Amendment No. 35 to Registration Statement No. 33-25824 filed on or about Dec. 21, 2000, is incorporated by reference. (h)(12) Agreement and Plan of Reorganization, dated Jan. 10, 2009, between Seligman Global Fund Series, Inc., on behalf of Seligman Emerging Markets Fund, and RiverSource Global Series, Inc., on behalf of Threadneedle Emerging Markets Fund, and Seligman Global Fund Series, Inc., on behalf of Seligman Global Growth Fund and RiverSource Global Series, Inc., on behalf of Threadneedle Global Equity Fund, is filed electronically herewith as Exhibit (h)(12) to Registrant's Post-Effective Amendment No. 60 to Registration Statement No. 33-25824. (i) Opinion and consent of counsel as to the legality of the securities being registered is filed electronically herewith. (j) Consent of Independent Registered Public Accounting Firm (Ernst & Young LLP) is filed electronically herewith. (k) Omitted Financial Statements: Not Applicable. (l) Initial Capital Agreement: Not Applicable. (m) Plan of Distribution and Agreement of Distribution, effective Nov. 7, 2008, amended and restated Sept. 14, 2009, between Registrant and RiverSource Fund Distributors, Inc. filed electronically on or about Sept. 25, 2009 as Exhibit (m) to RiverSource Large Cap Series, Inc. Post-Effective Amendment No. 86 to Registration Statement No. 2-38355 is incorporated by reference. (n) Rule 18f - 3(d) Plan, amended and restated as of Sept. 14, 2009, filed electronically on or about Sept. 25, 2009 as Exhibit (n) to RiverSource Large Cap Series, Inc. Post-Effective Amendment No. 86 to Registration Statement No. 2-38355 is incorporated by reference. (o) Reserved. (p)(1) Code of Ethics adopted under Rule 17j-1 for Registrant filed electronically on or about Feb. 27, 2009 as Exhibit (p)(1) to RiverSource Variable Series Trust Post-Effective Amendment No. 4 to Registration Statement No. 333-146374 is incorporated by reference. (p)(2) Code of Ethics adopted under Rule 17j-1 for Registrant's principal underwriter, dated April 2008, filed electronically on or about April 25, 2008 as Exhibit (p)(2) to RiverSource Variable Series Trust Post-Effective Amendment No. 3 to Registration Statement No. 333-146374 is incorporated by reference. (p)(3) Code of Ethics adopted under Rule 17j-1 for Registrant's investment adviser, dated Nov. 15, 2009, filed electronically on or about Nov. 30, 2009 as Exhibit (p)(3) to RiverSource Tax-Exempt Income Series, Inc. Post-Effective Amendment No. 51 to Registration Statement No. 2-63552 is incorporated by reference. (p)(4) Code of Ethics, dated March 2006, adopted under Rule 17j-1, for Threadneedle Asia Pacific Fund's, Threadneedle European Equity Fund's and Threadneedle International Opportunity Fund's Subadviser, Threadneedle International Ltd., filed electronically on or about June 30, 2008, as Exhibit (p)(3) to Registrant's Post-Effective Amendment No. 56 to Registration Statement No. 33-25824 is incorporated by reference. (q) Directors/Trustees Power of Attorney to sign Amendments to this Registration Statement, dated Jan. 8, 2009, filed electronically on or about Feb. 20, 2009 as Exhibit (q) to Registrant's Post-Effective Amendment No. 59 to Registration Statement No. 33-25824 is incorporated by reference. Item 24. Persons Controlled by or Under Common Control with Registrant: RiverSource Investments, LLC, as sponsor of the RiverSource Funds, may make initial capital investments in RiverSource funds (seed accounts). RiverSource Investments also serves as investment manager of certain RiverSource funds-of-funds that invest primarily in Class I shares of affiliated RiverSource funds (the "underlying funds"). RiverSource Investments does not make initial capital investments or invest in underlying funds for the purpose of exercising control. However, since these ownership interests may be significant, in excess of 25%, such that RiverSource Investments may be deemed to control certain RiverSource funds, procedures have been put in place to assure that public shareholders determine the outcome of all actions taken at shareholder meetings. Specifically, RiverSource Investments (which votes proxies for the seed accounts) and the Boards of Directors or Trustees of the RiverSource funds-of-funds (which votes proxies for the RiverSource funds-of-funds) vote on each proposal in the same proportion that other shareholders vote on the proposal. Item 25. Indemnification The Articles of Incorporation of the registrant provide that the Fund shall indemnify any person who was or is a party or is threatened to be made a party, by reason of the fact that she or he is or was a director, officer, employee or agent of the Fund, or is or was serving at the request of the Fund as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, to any threatened, pending or completed action, suit or proceeding, wherever brought, and the Fund may purchase liability insurance and advance legal expenses, all to the fullest extent permitted by the laws of the State of Minnesota, as now existing or hereafter amended. The By-laws of the registrant provide that present or former directors or officers of the Fund made or threatened to be made a party to or involved (including as a witness) in an actual or threatened action, suit or proceeding shall be indemnified by the Fund to the full extent authorized by the Minnesota Business Corporation Act, all as more fully set forth in the By-laws filed as an exhibit to this registration statement. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Any indemnification hereunder shall not be exclusive of any other rights of indemnification to which the directors, officers, employees or agents might otherwise be entitled. No indemnification shall be made in violation of the Investment Company Act of 1940. Item 26. Business and Other Connections of the Investment Adviser (RiverSource Investments, LLC) The following are directors and principal officers of RiverSource Investments, LLC who are directors and/or officers of one or more other companies:
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------- --------------------------------- -------------------------------------- Neysa M. Alecu, American Enterprise Investment 70400 AXP Financial Center, Anti-Money Laundering Officer and Anti-Money Laundering Services Inc. Minneapolis, MN 55474 Identity Theft Prevention Officer Officer Ameriprise Auto & Home 3500 Packerland Drive Anti-Money Laundering Officer and Insurance Agency, Inc. De Pere, WI 54115 Identity Theft Prevention Officer Ameriprise Bank, FSB 7 World Trade Center Bank Secrecy Act/Anti-Money 250 Greenwich Street, Laundering Officer Suite 3900 New York, NY 10007 Ameriprise Financial, Inc. 200 Ameriprise Financial Center, Anti-Money Laundering Officer and Minneapolis, MN 55474 Identity Theft Prevention Officer Ameriprise Financial Services, 5221 Ameriprise Financial Anti-Money Laundering Officer and Inc. Center, Minneapolis, MN 55474 Identity Theft Prevention Officer Ameriprise Trust Company 200 Ameriprise Financial Center, Anti-Money Laundering Officer Minneapolis, MN 55474 IDS Capital Holdings Inc. Anti-Money Laundering Officer IDS Management Corporation Anti-Money Laundering Officer Kenwood Capital Management LLC 333 S. 7th Street, Suite 2330, Anti-Money Laundering Officer Minneapolis, MN 55402 RiverSource Distributors, Inc. 50611 Ameriprise Financial Anti-Money Laundering Officer and Center, Minneapolis, MN 55474 Identity Theft Prevention Officer RiverSource Life Insurance 829 Ameriprise Financial Center, Anti-Money Laundering Officer and Company Minneapolis, MN 55474 Identity Theft Prevention Officer RiverSource Life Insurance 20 Madison Ave. Ext. Identity Theft Prevention Officer Company of New York Albany, NY 12005 RiverSource Service 734 Ameriprise Financial Center, Anti-Money Laundering Officer and Corporation Minneapolis, MN 55474 Identity Theft Prevention Officer
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------- --------------------------------- -------------------------------------- Patrick Thomas Ameriprise Trust Company 200 Ameriprise Financial Center, Director, Senior Vice President Bannigan, Minneapolis, MN 55474 Director and Senior Vice President - Asset Management, Products and Marketing J. & W. Seligman & Co. 100 Park Avenue Director, Senior Vice President - Incorporated New York, NY 10017 Asset Management, Products & Marketing Group RiverSource Distributors, Inc. 50611 Ameriprise Financial Director and Vice President Center, Minneapolis, MN 55474 RiverSource Fund Distributors, Director and Vice President Inc. RiverSource Service Corporation 734 Ameriprise Financial Center, Director Minneapolis, MN 55474 RiverSource Services, Inc. Director and Vice President
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------- --------------------------------- -------------------------------------- Walter S. Berman, Advisory Capital Strategies Treasurer Treasurer Group Inc. American Enterprise Investment 70400 AXP Financial Center, Treasurer Services Inc. Minneapolis, MN 55474 Ameriprise Auto & Home 3500 Packerland Drive Treasurer Insurance Agency Inc. De Pere, WI 54115 Ameriprise Bank, FSB 9393 Ameriprise Financial Treasurer Center, Minneapolis, MN 55474 Ameriprise Captive Insurance Director and Treasurer Company Ameriprise Financial, Inc. 200 Ameriprise Financial Center, Director, Executive Vice President, Minneapolis, MN 55474 Chief Financial Officer and Treasurer Ameriprise Financial Services, 5221 Ameriprise Financial Director and Treasurer Inc. Center, Minneapolis, MN 55474 Ameriprise Holdings, Inc. Chief Financial Officer Ameriprise Insurance Company 3500 Packerland Drive Treasurer De Pere, WI 54115 IDS Capital Holdings Inc. Treasurer IDS Management Corporation Treasurer IDS Property Casualty 3500 Packerland Drive Treasurer Insurance Company De Pere, WI 54115 Investors Syndicate Vice President and Treasurer Development Corporation J. & W. Seligman & Co. 100 Park Avenue Treasurer Incorporated New York, NY 10017 RiverSource CDO Seed Treasurer Investments, LLC RiverSource Distributors, Inc. 50611 Ameriprise Financial Treasurer Center, Minneapolis, MN 55474 RiverSource Fund Distributors, Treasurer Inc. RiverSource Fund Distributors 60 St. Mary Axe, London EC3A 8JQ Treasurer Ltd RiverSource Life Insurance 20 Madison Ave. Extension, Vice President and Treasurer Company of New York Albany, NY 12005 RiverSource Life Insurance 829 Ameriprise Financial Center, Vice President and Treasurer Company Minneapolis, MN 55474 RiverSource Service 734 Ameriprise Financial Center, Treasurer Corporation Minneapolis, MN 55474 RiverSource Services, Inc. Treasurer RiverSource Tax Advantaged Treasurer Investments, Inc. Securities America Advisors 12325 Port Grace Blvd., Lavista, Director Inc. NE68128-8204 Securities America Financial 7100 W. Center Rd., Ste. 500, Director Corporation Omaha, NE 68106-2716 Securities America, Inc. 12325 Port Grace Blvd., Lavista, Director NE68128 Threadneedle Asset Management 60 St. Mary Axe, London EC3A 8JQ Director Holdings Ltd. Threadneedle Asset Management 60 St. Mary Axe, London EC3A 8JQ Director Holdings Sarl
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------ -------------------------------- ------------------------------------- Amy K. Johnson J. & W. Seligman & Co. 100 Park Avenue, Chief Administrative Officer Chief Administrative Incorporated New York, NY 10017 Officer Ameriprise Trust Company 200 Ameriprise Financial Center, President Minneapolis, MN 55474 Ameriprise Financial Inc. 200 Ameriprise Financial Center, Vice President - Asset Management Minneapolis, MN 55474 and Trust Services
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------- --------------------------------- -------------------------------------- Christopher Paul Advisory Capital Strategies Vice President Keating, Director and Group, Inc. Head of Institutional Sales, Client Service and Consultant Relationships Ameriprise Trust Company 200 Ameriprise Financial Center, Director and Vice President Minneapolis, MN 55474 Boston Equity General Partner Vice President LLC J. & W. Seligman & Co. 100 Park Avenue Head of Institutional Sales, Client Incorporated New York, NY 10017 Service and Consultant Relationships RiverSource Fund Distributors, Vice President Inc. RiverSource Services, Inc. Vice President Seligman Focus Partners LLC 100 Park Avenue Vice President New York, NY 10017 Seligman Health Partners LLC 100 Park Avenue Vice President New York, NY 10017 Seligman Health Plus Partners 100 Park Avenue Vice President LLC New York, NY 10017 Seligman Partners LLC 100 Park Avenue Vice President New York, NY 10017
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------- ---------------------------------- -------------------------------------- Michelle Marie Ameriprise Bank, FSB 9393 Ameriprise Financial Director Keeley, Director and Center, Minneapolis, MN 55474 Executive Vice President - Equity and Fixed Income Ameriprise Certificate Company 70100 Ameriprise Financial Vice President - Investments Center, Minneapolis, MN 55474 Ameriprise Financial, Inc. 200 Ameriprise Financial Center, Executive Vice President - Equity and Minneapolis, MN 55474 Fixed Income Ameriprise Financial Services, 5221 Ameriprise Financial Executive Vice President - Equity and Inc. Center, Minneapolis, MN 55474 Fixed Income IDS Property Casualty 3500 Packerland Drive Vice President - Investments Insurance Company De Pere, WI 54115 J. & W. Seligman & Co. 100 Park Avenue, New York, NY Executive Vice President - Equity and Incorporated 10017 Fixed Income Kenwood Capital Management LLC 333 S. 7th Street, Suite 2330, Director Minneapolis, MN 55402 RiverSource CDO Seed Chairperson and President Investments, LLC RiverSource Life Insurance 829 Ameriprise Financial Center, Director, Vice President - Investments Company Minneapolis, MN 55474 RiverSource Life Insurance 20 Madison Ave. Extension, Vice President - Investments Company of New York Albany, NY 12005
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------- ---------------------------------- -------------------------------------- Eleanor T.M. Hoagland, Ameriprise Certificate Company 70100 Ameriprise Financial Center, Chief Compliance Officer Chief Compliance Minneapolis, MN 55474 Officer, Money Laundering Prevention Officer and Identity Theft Prevention Officer Ameriprise Trust Company 200 Ameriprise Financial Center, Chief Resolution Officer Minneapolis, MN 55474 J. & W. Seligman & Co. 100 Park Avenue, Money Laundering Prevention Officer Incorporated New York, NY 10017 Kenwood Capital Management LLC 333 S. 7th Street, Suite 2330, Chief Compliance Officer Minneapolis, MN 55474 RiverSource Fund Distributors, Money Laundering Prevention Officer Inc. RiverSource Service Corporation 734 Ameriprise Financial Center, Chief Compliance Officer Minneapolis, MN 55474 RiverSource Services, Inc. Money Laundering Prevention Officer Seligman Data Corp. 100 Park Avenue, Chief Compliance Officer New York, NY 10017
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------- ---------------------------------- -------------------------------------- Brian Joseph McGrane, Advisory Capital Strategies Vice President and Chief Financial Director, Vice Group Inc. Officer President and Chief Financial Officer Advisory Select LLC Dissolved Vice President and Chief Financial Officer (resigned 5/1/07) Ameriprise Certificate Company 70100 Ameriprise Financial Vice President and Chief Financial Center, Minneapolis, MN 55474 Officer (resigned 8/24/07) Ameriprise Financial, Inc. 200 Ameriprise Financial Center, Senior Vice President and Lead Minneapolis, MN 55474 Financial Officer Ameriprise Financial Services, 5221 Ameriprise Financial Vice President and Lead Financial Inc. Center, Minneapolis, MN 55474 Officer - Finance
Ameriprise Holdings, Inc. Director Ameriprise Trust Company 200 Ameriprise Financial Center, Director, Vice President and Chief Minneapolis, MN 55474 Financial Officer Boston Equity General Partner Vice President and Chief Financial LLC Officer J. & W. Seligman & Co. 100 Park Avenue, New York, NY Director, Vice President and Chief Incorporated 10017 Financial Officer RiverSource CDO Seed Board Member Investments, LLC RiverSource Life Insurance 829 Ameriprise Financial Center, Director, Executive Vice President Company Minneapolis, MN 55474 and Chief Financial Officer Seligman Focus Partners LLC 100 Park Avenue, New York, NY Vice President and Chief Financial 10017 Officer Seligman Health Partners LLC 100 Park Avenue, New York, NY Vice President and Chief Financial 10017 Officer Seligman Health Plus Partners 100 Park Avenue, New York, NY Vice President and Chief Financial LLC 10017 Officer Seligman Partners LLC 100 Park Avenue, New York, NY Vice President and Chief Financial 10017 Officer
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------- --------------------------------- -------------------------------------- Thomas R. Moore, Advisory Capital Strategies Secretary Secretary Group Inc. American Enterprise Investment 70400 AXP Financial Center, Secretary Services Inc. Minneapolis, MN 55474 Ameriprise Bank, FSB 9393 Ameriprise Financial Secretary Center, Minneapolis, MN 55474 Ameriprise Financial, Inc. 200 Ameriprise Financial Center, Vice President, Chief Governance Minneapolis, MN 55474 Officer and Corporate Secretary Ameriprise Financial Services, 5221 Ameriprise Financial Secretary Inc. Center, Minneapolis, MN 55474 Ameriprise Holdings, Inc. Secretary Ameriprise Insurance Company 3500 Packerland Drive Secretary De Pere, WI 54115 Ameriprise Trust Company 200 Ameriprise Financial Center, Secretary Minneapolis, MN 55474 Boston Equity General Partner Secretary LLC IDS Capital Holdings Inc. Secretary IDS Futures Corporation 570 Ameriprise Financial Center, Secretary Minneapolis, MN 55474 IDS Management Corporation Secretary IDS Property Casualty 3500 Packerland Drive Secretary Insurance Company De Pere, WI 54115 Investors Syndicate Secretary Development Corporation J. & W. Seligman & Co. 100 Park Avenue, New York, NY Secretary Incorporated 10017 RiverSource CDO Seed Secretary Investments, LLC RiverSource Fund Distributors, Secretary Inc. RiverSource Distributors, Inc. 50611 Ameriprise Financial Secretary Center, Minneapolis, MN 55474
RiverSource Life Insurance 20 Madison Ave. Extension, Secretary Company of New York Albany, NY 12005 RiverSource Life Insurance 829 Ameriprise Financial Center, Secretary Company Minneapolis, MN 55474 RiverSource Service 734 Ameriprise Financial Center, Secretary Corporation Minneapolis, MN 55474 RiverSource Services, Inc. Secretary RiverSource Tax Advantaged Secretary Investments, Inc. Seligman Focus Partners LLC 100 Park Avenue, New York, NY Secretary 10017 Seligman Health Partners LLC 100 Park Avenue, New York, NY Secretary 10017 Seligman Health Plus Partners 100 Park Avenue, New York, NY Secretary LLC 10017 Seligman Partners LLC 100 Park Avenue, New York, NY Secretary 10017
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------- --------------------------------- -------------------------------------- Scott Roane Plummer, Advisory Capital Strategies Chief Legal Officer Chief Legal Officer Group Inc. and Assistant Secretary Ameriprise Certificate Company 70100 Ameriprise Financial Vice President, General Counsel and Center, Minneapolis, MN 55474 Secretary Ameriprise Financial, Inc. 200 Ameriprise Financial Center, Vice President - Asset Management Minneapolis, MN 55474 Compliance Ameriprise Financial Services, 5221 Ameriprise Financial Vice President and Chief Counsel - Inc. Center, Minneapolis, MN 55474 Asset Management Ameriprise Trust Company Chief Legal Officer Boston Equity General Partner Chief Legal Officer LLC J. & W. Seligman & Co. 100 Park Avenue, New York, NY Chief Legal Officer Incorporated 10017 RiverSource Distributors, Inc. 50611 Ameriprise Financial Chief Counsel Center, Minneapolis, MN 55474 RiverSource Service Corporation 734 Ameriprise Financial Center, Vice President and Chief Legal Minneapolis, MN 55474 Officer RiverSource Fund Distributors, Chief Counsel Inc. RiverSource Services, Inc. Chief Counsel Seligman Focus Partners LLC 100 Park Avenue, New York, NY Chief Counsel 10017 Seligman Health Partners LLC 100 Park Avenue, New York, NY Chief Counsel 10017 Seligman Health Plus Partners 100 Park Avenue, New York, NY Chief Counsel LLC 10017 Seligman Partners LLC 100 Park Avenue, New York, NY Chief Counsel 10017
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------- --------------------------------- -------------------------------------- William Frederick Advisory Capital Strategies Director and President 'Ted' Truscott Group Inc. Chairman, Chief Investment Officer and President Ameriprise Certificate Company 70100 Ameriprise Financial Director, President and Chief Center, Minneapolis, MN 55474 Executive Officer Ameriprise Financial, Inc. 200 Ameriprise Financial Center, President - U.S. Asset Management, Minneapolis, MN 55474 Annuities and Chief Investment Officer Ameriprise Financial Services, 5221 Ameriprise Financial Senior Vice President and Chief Inc. Center, Minneapolis, MN 55474 Investment Officer Ameriprise Trust Company 200 Ameriprise Financial Center, Director Minneapolis, MN 55474 Boston Equity General Partner President LLC IDS Capital Holdings Inc. Director and President J. & W. Seligman & Co. 100 Park Avenue, New York, NY Chairman and President Incorporated 10017 Kenwood Capital Management LLC 333 S. 7th Street, Suite 2330, Board Member Minneapolis, MN 55402 RiverSource Distributors, Inc. 50611 Ameriprise Financial Chairman and Chief Executive Officer Center, Minneapolis, MN 55474 RiverSource Fund Distributors, Chairman and Chief Executive Officer Inc. RiverSource Life Insurance 829 Ameriprise Financial Center, Director Company Minneapolis, MN 55474 RiverSource Services, Inc. Chairman and Chief Executive Officer Seligman Focus Partners LLC 100 Park Avenue, New York, NY President 10017 Seligman Health Partners LLC 100 Park Avenue, New York, NY President 10017 Seligman Health Plus Partners 100 Park Avenue, New York, NY President LLC 10017 Seligman Partners LLC 100 Park Avenue, New York, NY President 10017 Threadneedle Asset Management 60 St. Mary Axe, London EC3A 8JQ Director Holdings Ltd. Threadneedle Asset Management 60 St. Mary Axe, London EC3A 8JQ Director Holdings Sarl
* Unless otherwise noted, address is 50606 Ameriprise Financial Center, Minneapolis, MN 55474 Item 27. Principal Underwriter (a) RiverSource Fund Distributors, Inc. acts as principal underwriter for the following investment companies: THE RIVERSOURCE FUNDS: RiverSource Bond Series, Inc.; RiverSource California Tax-Exempt Trust; RiverSource Dimensions Series, Inc.; RiverSource Diversified Income Series, Inc.; RiverSource Equity Series, Inc.; RiverSource Global Series, Inc.; RiverSource Government Income Series, Inc.; RiverSource High Yield Income Series, Inc.; RiverSource Income Series, Inc.; RiverSource International Managers Series, Inc.; RiverSource International Series, Inc.; RiverSource Investment Series, Inc.; RiverSource Large Cap Series, Inc.; RiverSource Managers Series, Inc.; RiverSource Market Advantage Series, Inc.; RiverSource Money Market Series, Inc.; RiverSource Sector Series, Inc.; RiverSource Selected Series, Inc.; RiverSource Series Trust; RiverSource Short Term Investments Series, Inc.; RiverSource Special Tax-Exempt Series Trust; RiverSource Strategic Allocation Series, Inc., RiverSource Strategy Series, Inc.; RiverSource Tax-Exempt Income Series, Inc.; RiverSource Tax-Exempt Money Market Series, Inc., RiverSource Tax-Exempt Series, Inc.; and RiverSource Variable Series Trust. THE SELIGMAN FUNDS: Seligman Asset Allocation Series, Inc., Seligman Capital Fund, Inc., Seligman Cash Management Fund, Inc., Seligman Common Stock Fund, Inc., Seligman Communications and Information Fund, Inc., Seligman Core Fixed Income Fund, Inc., Seligman Frontier Fund, Inc., Seligman Growth Fund, Inc., Seligman Global Fund Series, Inc., Seligman High Income Fund Series, Seligman Income and Growth Fund, Inc., Seligman LaSalle Real Estate Fund Series, Inc., Seligman Municipal Fund Series, Inc., Seligman Municipal Series Trust, Seligman New Jersey Municipal Fund, Inc., Seligman Pennsylvania Municipal Fund Series, Seligman Portfolios, Inc., Seligman TargetHorizon ETF Portfolios, Inc. and Seligman Value Fund Series, Inc. (b) As to each director, principal officer or partner of RiverSource Fund Distributors, Inc.
Name and Principal Business Address Positions and Offices with Underwriter Positions and Offices with Fund --------------------------------- -------------------------------------- ----------------------------------- William Frederick "Ted" Truscott* Chairman and Chief Executive Officer Director and Vice President Jeffrey Lee McGregor, Sr.* Director and President None Patrick Thomas Bannigan* Director and Vice President President Paul J. Dolan* Chief Operating Officer and Chief None Administrative Officer Jeffrey P. Fox* Chief Financial Officer Treasurer Christopher P. Keating* Vice President None Emily Calcagno** Vice President None Scott Roane Plummer* Chief Counsel Vice President, General Counsel and Secretary James F. Angelos* Chief Compliance Officer None Thomas R. Moore* Secretary None Walter Berman* Treasurer None Eleanor T. M. Hoagland** Anti-Money Laundering Officer None
* Business address is: 50611 Ameriprise Financial Center, Minneapolis, MN 55474 ** Business address is: 100 Park Avenue, New York, NY 10017. (c) Not Applicable Item 28. Location of Accounts and Records Ameriprise Financial, Inc. 707 Second Avenue, South Minneapolis, MN 55402 Iron Mountain Records Management 920 & 950 Apollo Road Eagan, MN 55121 Iron Mountain Records Management is an off-site storage facility housing historical records that are no longer required to be maintained on-site. Records stored at this facility include various trading and accounting records, as well as other miscellaneous records. Item 29. Management Services Not Applicable Item 30. Undertakings Not Applicable SIGNATURES Pursuant to the requirements of the Securities Act and the Investment Company Act, the Registrant, RIVERSOURCE GLOBAL SERIES, INC., certifies that it meets all of the requirements for effectiveness of this Amendment to its Registration Statement pursuant to Rule 485(b) under the Securities Act and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Minneapolis, and State of Minnesota on the 29th day of December, 2009. RIVERSOURCE GLOBAL SERIES, INC. By /s/ Patrick T. Bannigan --------------------------------- Patrick T. Bannigan President By /s/ Jeffrey P. Fox --------------------------------- Jeffrey P. Fox Treasurer Pursuant to the requirements of the Securities Act, this Amendment to the Registration Statement has been signed below by the following persons in the capacities indicated on the 29th day of December, 2009.
Signature Capacity ------------------------------------ ------------------ /s/ Stephen R. Lewis, Jr.* Chair of the Board ------------------------------------ Stephen R. Lewis, Jr. /s/ Kathleen A. Blatz* Director ------------------------------------ Kathleen A. Blatz /s/ Arne H. Carlson* Director ------------------------------------ Arne H. Carlson /s/ Pamela G. Carlton* Director ------------------------------------ Pamela G. Carlton /s/ Patricia M. Flynn* Director ------------------------------------ Patricia M. Flynn /s/ Anne P. Jones* Director ------------------------------------ Anne P. Jones
Signature Capacity ------------------------------------ ------------------ /s/ Jeffrey Laikind* Director ------------------------------------ Jeffrey Laikind /s/ John F. Maher* Director ------------------------------------ John F. Maher /s/ Catherine James Paglia* Director ------------------------------------ Catherine James Paglia /s/ Leroy C. Richie* Director ------------------------------------ Leroy C. Richie /s/ Alison Taunton-Rigby* Director ------------------------------------ Alison Taunton-Rigby /s/ William F. Truscott* Director ------------------------------------ William F. Truscott
* Signed pursuant to Directors/Trustees Power of Attorney, dated Jan. 8, 2009, filed electronically on or about Feb. 20, 2009 as Exhibit (q) to Registrant's Post-Effective Amendment No. 59 to Registration Statement No. 33-25824, by: /s/ Scott R. Plummer ------------------------------------ Scott R. Plummer Contents of this Post-Effective Amendment No. 60 to Registration Statement No. 33-25824 This Post-Effective Amendment comprises the following papers and documents: The facing sheet. Part A. The prospectuses for: RiverSource Absolute Return Currency and Income Fund. RiverSource Emerging Markets Bond Fund. RiverSource Global Bond Fund. Threadneedle Emerging Markets Fund. Threadneedle Global Equity Fund. Threadneedle Global Equity Income Fund. Threadneedle Global Extended Alpha Fund. Part B. Statement of Additional Information. Financial Statements. Part C. Other information. The signatures. EXHIBIT INDEX (a)(8) Certificate of Designation reflecting the addition of Class R2 shares to Threadneedle Emerging Markets Fund, dated Feb. 23, 2009. (d)(1) Investment Management Services Agreement, dated May 1, 2006, amended and restated Sept. 14, 2009, between Registrant and RiverSource Investments, LLC. (h)(12) Agreement and Plan of Reorganization, dated Jan. 10, 2009, between Seligman Global Fund Series, Inc., on behalf of Seligman Emerging Markets Fund, and RiverSource Global Series, Inc., on behalf of Threadneedle Emerging Markets Fund, and Seligman Global Fund Series, Inc., on behalf of Seligman Global Growth Fund and RiverSource Global Series, Inc., on behalf of Threadneedle Global Equity Fund. (i) Opinion and consent of counsel as to the legality of the securities being registered. (j) Consent of Independent Registered Public Accounting Firm (Ernst & Young LLP).