-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RIQSxRzNc9GJMascg0vKdeokos7QO5EFOE9v3N1OyNgRh7Bs7f76KyxJfMIHlceF Yt3hQAGE6ji2q3LIyV1oYg== 0000950123-10-000056.txt : 20100104 0000950123-10-000056.hdr.sgml : 20100101 20100104095552 ACCESSION NUMBER: 0000950123-10-000056 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20091031 FILED AS OF DATE: 20100104 DATE AS OF CHANGE: 20100104 EFFECTIVENESS DATE: 20100104 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RIVERSOURCE GLOBAL SERIES INC CENTRAL INDEX KEY: 0000842918 IRS NUMBER: 411850486 STATE OF INCORPORATION: MN FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-05696 FILM NUMBER: 10500468 BUSINESS ADDRESS: STREET 1: 50606 AMERIPRSE FINANCIAL CENTER STREET 2: H27/5228 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 BUSINESS PHONE: 612-671-4321 MAIL ADDRESS: STREET 1: 50606 AMERIPRSE FINANCIAL CENTER STREET 2: H27/5228 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 FORMER COMPANY: FORMER CONFORMED NAME: RIVERSOURCE GLOBAL SERIES, INC. DATE OF NAME CHANGE: 20060504 FORMER COMPANY: FORMER CONFORMED NAME: AXP GLOBAL SERIES INC DATE OF NAME CHANGE: 19991228 FORMER COMPANY: FORMER CONFORMED NAME: IDS GLOBAL SERIES INC DATE OF NAME CHANGE: 19920703 0000842918 S000003513 Threadneedle Emerging Markets Fund C000009724 Threadneedle Emerging Markets Fund Class C RMCEX C000009725 Threadneedle Emerging Markets Fund Class I RSRIX C000009727 Threadneedle Emerging Markets Fund Class A IDEAX C000009728 Threadneedle Emerging Markets Fund Class B IEMBX C000043004 Threadneedle Emerging Markets Fund Class R4 C000068287 Threadneedle Emerging Markets Fund Class R5 REMFX C000076523 Threadneedle Emerging Markets Fund Class R2 REMRX 0000842918 S000003514 RiverSource Emerging Markets Bond Fund C000009729 RiverSource Emerging Markets Bond Fund Class A REBAX C000009730 RiverSource Emerging Markets Bond Fund Class B C000009731 RiverSource Emerging Markets Bond Fund Class C REBCX C000009732 RiverSource Emerging Markets Bond Fund Class I RSMIX C000043005 RiverSource Emerging Markets Bond Fund Class R4 C000043006 RiverSource Emerging Markets Bond Fund Class W REMWX 0000842918 S000003516 RiverSource Global Bond Fund C000009739 RiverSource Global Bond Fund Class A IGBFX C000009740 RiverSource Global Bond Fund Class B IGLOX C000009741 RiverSource Global Bond Fund Class C AGBCX C000009742 RiverSource Global Bond Fund Class I AGBIX C000043007 RiverSource Global Bond Fund Class R4 RGBRX C000043008 RiverSource Global Bond Fund Class W RGBWX 0000842918 S000003517 Threadneedle Global Equity Fund C000009743 Threadneedle Global Equity Fund Class C RGCEX C000009744 Threadneedle Global Equity Fund Class A IGLGX C000009745 Threadneedle Global Equity Fund Class B IDGBX C000043009 Threadneedle Global Equity Fund Class R4 IDGYX C000043010 Threadneedle Global Equity Fund Class R5 RGERX C000043011 Threadneedle Global Equity Fund Class W C000043012 Threadneedle Global Equity Fund Class R2 C000043013 Threadneedle Global Equity Fund Class R3 C000068288 Threadneedle Global Equity Fund Class I 0000842918 S000007870 RiverSource Absolute Return Currency and Income Fund C000021407 RiverSource Absolute Return Currency and Income Fund Class A RARAX C000021408 RiverSource Absolute Return Currency and Income Fund Class B C000021409 RiverSource Absolute Return Currency and Income Fund Class C RARCX C000021410 RiverSource Absolute Return Currency and Income Fund Class I RVAIX C000043015 RiverSource Absolute Return Currency and Income Fund Class R4 C000043016 RiverSource Absolute Return Currency and Income Fund Class W RACWX C000055911 RiverSource Absolute Return Currency and Income Fund Class R5 0000842918 S000022614 Threadneedle Global Equity Income Fund C000065411 Threadneedle Global Equity Income Fund Class A RTNAX C000065412 Threadneedle Global Equity Income Fund Class B C000065413 Threadneedle Global Equity Income Fund Class C RTNEX C000065414 Threadneedle Global Equity Income Fund Class I C000065415 Threadneedle Global Equity Income Fund Class R2 RGEOX C000065416 Threadneedle Global Equity Income Fund Class R3 RGETX C000065417 Threadneedle Global Equity Income Fund Class R4 RGEYX C000065418 Threadneedle Global Equity Income Fund Class R5 RGEFX 0000842918 S000022615 Threadneedle Global Extended Alpha Fund C000065419 Threadneedle Global Extended Alpha Fund Class B C000065420 Threadneedle Global Extended Alpha Fund Class C RTACX C000065421 Threadneedle Global Extended Alpha Fund Class I C000065422 Threadneedle Global Extended Alpha Fund Class R2 REAOX C000065423 Threadneedle Global Extended Alpha Fund Class R3 RTNRX C000065424 Threadneedle Global Extended Alpha Fund Class R4 REYRX C000065425 Threadneedle Global Extended Alpha Fund Class R5 REAFX C000065426 Threadneedle Global Extended Alpha Fund Class A RTAAX N-CSR 1 c54776nvcsr.txt N-CSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act File Number 811-5696 RIVERSOURCE GLOBAL SERIES, INC. (Exact name of registrant as specified in charter) 50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (Address of principal executive offices) (Zip code) Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474 (Name and address of agent for service) Registrant's telephone number, including area code: (612) 671-1947 Date of fiscal year end: 10/31 Date of reporting period: 10/31 Annual Report and Prospectus (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND ANNUAL REPORT FOR THE PERIOD ENDED OCTOBER 31, 2009 (Prospectus also enclosed) RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND SEEKS TO PROVIDE SHAREHOLDERS WITH POSITIVE ABSOLUTE RETURN. This annual report includes a prospectus that describes in detail the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you (ADVANCED ALPHA(R) STRATEGIES invest or send money. ICON)
TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Manager Commentary................. 4 The Fund's Long-term Performance... 8 Fund Expenses Example.............. 10 Portfolio of Investments........... 14 Statement of Assets and Liabilities...................... 21 Statement of Operations............ 22 Statements of Changes in Net Assets........................... 23 Financial Highlights............... 25 Notes to Financial Statements...... 32 Report of Independent Registered Public Accounting Firm........... 47 Federal Income Tax Information..... 49 Board Members and Officers......... 50 Proxy Voting....................... 54
- -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Absolute Return Currency and Income Fund (the Fund) Class A shares gained 0.15% (excluding sales charge) for the 12 months ended Oct. 31, 2009. > The Fund underperformed its benchmark, the Citigroup 3-month U.S. Treasury Bill Index, which rose 0.28% during the same period. ANNUALIZED TOTAL RETURNS (for period ended Oct. 31, 2009) - --------------------------------------------------------------------------------
SINCE INCEPTION 1 YEAR 3 YEARS 06/15/06 - ------------------------------------------------------------------ RiverSource Absolute Return Currency and Income Fund Class A (excluding sales charge) +0.15% +3.07% +3.44% - ------------------------------------------------------------------ Citigroup 3-month U.S. Treasury Bill Index (unmanaged) +0.28% +2.49% +2.83% - ------------------------------------------------------------------
(See "The Fund's Long-term Performance" for Index descriptions) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 1(800) 221-2450. The 3.00% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in fees and expenses. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. See the Average Annual Total Returns table for performance of other share classes of the Fund. The index does not reflect the effects of sales charges, expenses and taxes. It is not possible to invest directly in an index. - -------------------------------------------------------------------------------- 2 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT OCT. 31, 2009 SINCE Without sales charge 1 YEAR 3 YEARS INCEPTION Class A (inception 6/15/06) +0.15% +3.07% +3.44% - ------------------------------------------------------------------- Class B (inception 6/15/06) -0.56% +2.38% +2.76% - ------------------------------------------------------------------- Class C (inception 6/15/06) -0.56% +2.38% +2.76% - ------------------------------------------------------------------- Class I (inception 6/15/06) +0.56% +3.49% +3.87% - ------------------------------------------------------------------- Class R4 (inception 6/15/06) +0.25% +3.31% +3.66% - ------------------------------------------------------------------- Class R5 (inception 10/18/07) +0.56% N/A +0.35% - ------------------------------------------------------------------- Class W (inception 12/1/06) +0.04% N/A +2.85% - ------------------------------------------------------------------- With sales charge Class A (inception 6/15/06) -2.86% +2.03% +2.51% - ------------------------------------------------------------------- Class B (inception 6/15/06) -5.51% +1.44% +1.93% - ------------------------------------------------------------------- Class C (inception 6/15/06) -1.55% +2.38% +2.76% - -------------------------------------------------------------------
Class A share performance reflects the maximum initial sales charge of 3.00%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second year 4%; third and fourth years 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R4, Class R5 and Class W shares. Class I, Class R4 and Class R5 are available to qualifying institutional investors only. Class W shares are offered through qualifying discretionary accounts. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 3 MANAGER COMMENTARY ------------------------------------------------------------- Dear Shareholders, RiverSource Absolute Return Currency and Income Fund (the Fund) Class A shares gained 0.15% (excluding sales charge) for the 12 months ended Oct. 31, 2009. The Fund underperformed its benchmark, the Citigroup 3-month U.S. Treasury Bill Index (Citigroup Index), which rose 0.28% during the same period. PORTFOLIO BREAKDOWN(1) (at Oct. 31, 2009; % of portfolio assets) - ---------------------------------------------------------------------
Asset-Backed 3.8% - ------------------------------------------------ Commercial Mortgage-Backed 1.3% - ------------------------------------------------ Consumer Discretionary 1.4% - ------------------------------------------------ FDIC-Insured Debt(2) 1.7% - ------------------------------------------------ Financials 2.9% - ------------------------------------------------ Foreign Government 0.8% - ------------------------------------------------ Health Care 0.6% - ------------------------------------------------ Industrials 2.7% - ------------------------------------------------ Residential Mortgage-Backed 0.2% - ------------------------------------------------ Other(3) 84.6% - ------------------------------------------------
(1) Portfolio holdings include industry sectors that can be comprised of securities in several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. (2) Debt guaranteed under the FDIC's Temporary Liquidity Guarantee Program (TLGP). (3) Cash & Cash Equivalents. QUALITY BREAKDOWN (at Oct. 31, 2009; % of portfolio assets) - ---------------------------------------------------------------------
AAA bonds 8.7% - ------------------------------------------------ AA bonds 1.4% - ------------------------------------------------ A bonds 5.0% - ------------------------------------------------ BBB bonds 0.3% - ------------------------------------------------ Non-investment grade bonds --% - ------------------------------------------------ A1/P1/F1 short-term securities 84.6% - ------------------------------------------------
Bond ratings apply to the underlying holdings of the Fund and not the Fund itself. Whenever possible, the Standard and Poor's rating is used to determine the credit quality of a security. Standard and Poor's rates the creditworthiness of corporate bonds, with 15 categories, ranging from AAA (highest) to D (lowest). Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. If Standard and Poor's doesn't rate a security, then Moody's rating is used. RiverSource Investments, LLC, (the Investment Manager), rates a security using an internal rating system when Moody's doesn't provide a rating. Ratings for 0.3% of the bond portfolio assets were determined through internal analysis. For short-term securities, A1/P1/F1 represent the rating designation with the highest quality within the Standard and Poor's, Moody's, and Fitch short-term credit ratings scales, respectively. - -------------------------------------------------------------------------------- 4 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- SIGNIFICANT PERFORMANCE FACTORS We use a two-part investment process to seek to achieve the Fund's investment objective. The first component consists of investments in primarily high quality, short-term fixed income securities with minimal interest rate risk. This component seeks to build a base of consistent income. These short-term investments are also designated, as necessary, to cover obligations invested in through the second component of our process, which is based on a proprietary quantitative currency model. The model uses various fundamental and technical factors, including current and historical data, to rank the anticipated value of nine different currencies from developed countries, relative to the U.S. dollar. Based on these rankings, we enter into long forward currency contracts for the three most attractive currencies and enter into short forward currency contracts for the three least attractive currencies, all relative to the U.S. dollar. The Fund experiences profits or losses to the extent the values of the currencies appreciate or depreciate relative to the U.S. dollar. During the annual period, we were able to generate positive total return from both the Fund's investment in short-term fixed income securities and our proprietary quantitative currency model. While the Fund's returns were modest during the period, we were pleased with the way the Fund's strategy held up during a time of unprecedented market volatility. The Fund's positioning in the Australian dollar, New Zealand dollar, Canadian dollar, Japanese yen and Norwegian krone benefited its results for the 12 months ended Oct. 31, 2009. On the other hand, positioning in the euro, Swiss franc, British pound and Swedish krona detracted from Fund performance. The Fund experiences profits or losses to the extent the values of the currencies appreciate or depreciate relative to the U.S. dollar. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 5 MANAGER COMMENTARY (continued) ------------------------------------------------- OUR CURRENT INVESTMENT STRATEGY We run our quantitative model weekly and reset currency positions as needed, applying the output of this model on a systematic basis. We generally seek neutral exposure to the U.S. dollar, the base currency. In our view, remaining neutral to the U.S. dollar as part of our strategy helps control overall volatility. We also use an externally developed but fully integrated, risk management system to help us monitor and mitigate market risk. We believe the Fund is designed to do well in either rising or falling U.S. dollar environments. OUR FUTURE STRATEGY We intend to stay disciplined to our systematic investment strategy. Through the use of our proprietary quantitative model, which determines the Fund's positions in forward foreign currency contracts relative to the U.S. dollar, we will continue to seek an absolute return that is unrelated to general movements in the U.S. dollar and other types of financial assets. Overall, we will continue to seek to generate positive total returns from the income produced by the Fund's investments in short-term debt obligations, plus the gains, or minus the losses, resulting from the fluctuations in the values of various foreign currencies relative to the U.S. dollar. The Fund does not actually take ownership of foreign currencies or sell actual foreign currencies. Rather, forward currency contracts are used to gain comparable currency exposure. Because the establishment of the Fund's forward foreign currency contracts requires little cash outlay, the Fund's assets will consist primarily of short-term investment grade U.S. dollar-denominated assets (if unrated, securities will be of comparable quality, as determined by the investment manager). Currently, the majority of the underlying portfolio is invested in RiverSource Short-Term Cash Fund in an effort to reduce volatility. - -------------------------------------------------------------------------------- 6 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- (PHOTO - NICOLAS PIFER, CFA(R)) Nicholas Pifer, CFA(R) Portfolio Manager Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the RiverSource Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the RiverSource Family of Funds. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 7 THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in RiverSource Absolute Return Currency and Income Fund Class A shares (from 06/15/06 to 10/31/09) as compared to the performance of the Citigroup 3-month U.S. Treasury Bill Index. In comparing the Fund's Class A shares to this index, you should take into account the fact that the Fund's performance reflects the maximum initial sales charge 3.00%, while such charges are not reflected in the performance of the index. Returns for the Fund include the reinvestment of any distributions paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The table below and the chart on the facing page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary or visiting riversource.com/funds. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS - --------------------------------------------------------------------------------
Results at Oct. 31, 2009 SINCE INCEPTION 1 YEAR 3 YEARS 6/15/06 RIVERSOURCE ABSOLUTE RETURN AND CURRENCY INCOME FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $9,714 $10,622 $10,872 - --------------------------------------------------------------------------------- Average annual total return -2.86% +2.03% +2.51% - --------------------------------------------------------------------------------- CITIGROUP 3-MONTH U.S. TREASURY BILL INDEX(1) Cumulative value of $10,000 $10,028 $10,766 $10,966 - --------------------------------------------------------------------------------- Average annual total return +0.28% +2.49% +2.83% - ---------------------------------------------------------------------------------
Results for other share classes can be found on page 3. - -------------------------------------------------------------------------------- 8 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND LINE GRAPH)
RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME CITIGROUP 3-MONTH FUND CLASS U.S. TREASURY A (INCLUDES BILL SALES CHARGE) INDEX(1) -------------------- ------------------ 6/15/06 $ 9,700 $10,000 7/06 9,697 10,060 10/06 9,930 10,186 1/07 10,226 10,314 4/07 10,513 10,441 7/07 10,655 10,569 10/07 10,918 10,690 1/08 10,729 10,788 4/08 10,535 10,848 7/08 10,631 10,891 10/08 10,856 10,937 1/09 10,817 10,952 4/09 10,719 10,958 7/09 10,773 10,962 10/09 10,872 10,966
(1) The Citigroup 3-month U.S. Treasury Bill Index, an unmanaged index, represents the performance of three-month Treasury bills. The index reflects reinvestment of all distributions and changes in market prices. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 9 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expenses of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Oct. 31, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Direct expenses paid during the period" to estimate the expenses you paid on your account during this period. You can also estimate the direct and indirect expenses you paid over the period by using the number in the first line under the heading "Direct and indirect expenses paid during the period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. - -------------------------------------------------------------------------------- 10 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 11 FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
DIRECT AND DIRECT INDIRECT BEGINNING ENDING EXPENSES EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING PAID DURING MAY 1, 2009 OCT. 31, 2009 THE PERIOD(a) THE PERIOD(b) - ------------------------------------------------------------------------------------------ Class A - ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,014.30 $ 7.07 $ 7.12 - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.05 $ 7.08 $ 7.13 - ------------------------------------------------------------------------------------------ Class B - ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,011.30 $10.89 $10.94 - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,014.24 $10.91 $10.96 - ------------------------------------------------------------------------------------------ Class C - ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,011.30 $10.89 $10.94 - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,014.24 $10.91 $10.96 - ------------------------------------------------------------------------------------------ Class I - ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,016.30 $ 5.05 $ 5.11 - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.05 $ 5.06 $ 5.11 - ------------------------------------------------------------------------------------------ Class R4 - ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,014.30 $ 6.61 $ 6.67 - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.50 $ 6.63 $ 6.68 - ------------------------------------------------------------------------------------------ Class R5 - ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,017.30 $ 5.36 $ 5.41 - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.75 $ 5.37 $ 5.42 - ------------------------------------------------------------------------------------------ Class W - ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,014.30 $ 7.37 $ 7.42 - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,017.75 $ 7.38 $ 7.44 - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 12 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIOS
FUND'S ACQUIRED FUND ANNUALIZED FEES AND NET FUND EXPENSE RATIO EXPENSES EXPENSES - ---------------------------------------------------------------------- Class A 1.40% .01% 1.41% - ---------------------------------------------------------------------- Class B 2.16% .01% 2.17% - ---------------------------------------------------------------------- Class C 2.16% .01% 2.17% - ---------------------------------------------------------------------- Class I 1.00% .01% 1.01% - ---------------------------------------------------------------------- Class R4 1.31% .01% 1.32% - ---------------------------------------------------------------------- Class R5 1.06% .01% 1.07% - ---------------------------------------------------------------------- Class W 1.46% .01% 1.47% - ----------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). (b) Expenses are equal to the annualized expense ratio for each class plus the acquired fund fees and expenses, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). (c) Based on the actual return for the six months ended Oct. 31, 2009: +1.43% for Class A, +1.13% for Class B, +1.13% for Class C, +1.63% for Class I, +1.43% for Class R4, +1.73% for Class R5 and +1.43% for Class W. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 13 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 FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Fiscal year ended Oct. 31, 2009
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Qualified Dividend Income for individuals.................... 0.00% Dividends Received Deduction for corporations................ 0.00% U.S. Government Obligations.................................. 5.35% CAPITAL GAIN DISTRIBUTION - the Fund designates $2,756,390 to be taxed as long-term capital gain.
The Fund also designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 49 BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. The RiverSource Family of Funds that each Board member oversees consists of 132 funds, which includes 100 RiverSource funds and 32 Seligman funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 2006 Attorney Minneapolis, MN 55402 Age 55 - ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Family of Funds, 1999-2006; former None 901 S. Marquette Ave. 1999 Governor of Minnesota Minneapolis, MN 55402 Age 75 - ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 2007 Leadership (consulting company) Minneapolis, MN 55402 Age 55 - ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley University Age 59 - ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 1985 Minneapolis, MN 55402 Age 74 - ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 2005 Insurance Minneapolis, MN 55402 Age 74 - ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. since 2007, College Inc. (manufactures Minneapolis, MN 55402 Board member since irrigation systems) Age 70 2002 - ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 50 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ John F. Maher Board member since Retired President and Chief Executive Officer and None 901 S. Marquette Ave. 2008 former Director, Great Western Financial Corporation Minneapolis, MN 55402 (financial services), 1986-1997 Age 66 - ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 2004 real estate and asset management company) Minneapolis, MN 55402 Age 57 - ------------------------------------------------------------------------------------------------------------------------------ Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc. 901 S. Marquette Ave. 2008 President and General Counsel, Automotive Legal (digital imaging); Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil Age 68 and gas exploration and production); OGE Energy Corp. (energy and energy services) - ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Forester Pharmaceuticals, Minneapolis, MN 55402 Biotech Inc. Age 65 (biotechnology); Healthways, Inc. (health management programs) - ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 51 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. since 2005; Financial Center Vice President since President, Chairman of the Board and Chief Investment Minneapolis, MN 55474 2002 Officer, RiverSource Investments, LLC since 2001; Age 49 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; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc., 2001-2005 - ------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments or Ameriprise Financial. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; or visiting riversource.com/funds (for RiverSource and Threadneedle funds) or seligman.com (for Seligman funds). The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management, 172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC Center and Director and Vice President -- Asset Management, Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc. Age 44 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 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 52 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income, 172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 45 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 - -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Chief Administrative Officer, RiverSource Investments, 5228 Ameriprise Financial 2006 LLC since 2009; Vice President -- Asset Management and Center Minneapolis, MN Trust Company Services, RiverSource Investments, LLC, 55474 2006-2009; Vice President -- Operations and Compliance, Age 44 RiverSource Investments, LLC, 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 and of Minneapolis, MN 55474 RiverSource Fund Distributors, Inc. since 2008 Age 54 - -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management, 5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel, Center Secretary since 2006 RiverSource Distributors, Inc. and Chief Legal Officer Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC Age 50 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 Investments, LLC, 100 Park Avenue Officer since 2009 Ameriprise Certificate Company and RiverSource Service New York, NY 10010 Corporation since 2009; Chief Compliance Officer for Age 58 each of the Seligman funds since 2004; Anti-Money Laundering Prevention Officer and Identity Theft Prevention Officer for each of the Seligman funds since 2008; 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 Financial, 2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer, Center since 2004 Ameriprise Financial, Inc. since 2004; Compliance Minneapolis, MN 55474 Director, Ameriprise Financial, Inc., 2004-2008 Age 45 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT 53 PROXY VOTING ------------------------------------------------------------------ The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- 54 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2009 ANNUAL REPORT RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C)2009 RiverSource Investments, LLC. S-6502 H (12/09)
Annual Report and Prospectus (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE EMERGING MARKETS BOND FUND ANNUAL REPORT FOR THE PERIOD ENDED OCTOBER 31, 2009 (Prospectus also enclosed) RIVERSOURCE EMERGING MARKETS BOND FUND SEEKS TO PROVIDE SHAREHOLDERS WITH HIGH TOTAL RETURN THROUGH CURRENT INCOME AND, SECONDARILY, THROUGH CAPITAL APPRECIATION. This annual report includes a prospectus that describes in detail the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money. (SINGLE STRATEGY FUNDS ICON)
TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Manager Commentary................. 5 The Fund's Long-term Performance... 12 Fund Expenses Example.............. 14 Portfolio of Investments........... 17 Statement of Assets and Liabilities...................... 26 Statement of Operations............ 28 Statements of Changes in Net Assets........................... 29 Financial Highlights............... 31 Notes to Financial Statements...... 37 Report of Independent Registered Public Accounting Firm........... 56 Federal Income Tax Information..... 58 Board Members and Officers......... 59 Proxy Voting....................... 63
- -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Emerging Markets Bond Fund (the Fund) Class A shares gained 54.87% (excluding sales charge) for the 12 months ended Oct. 31, 2009. > The Fund outperformed its benchmark, the J.P. Morgan Emerging Markets Bond Index-Global (J.P. Morgan EMBI-Global), which rose 39.64% during the same timeframe. > The Fund also outperformed the Lipper Emerging Markets Debt Funds Index, representing the Fund's peer group, which advanced 39.55% during the same period. ANNUALIZED TOTAL RETURNS (for period ended Oct. 31, 2009) - --------------------------------------------------------------------------------
SINCE INCEPTION 1 YEAR 3 YEARS 2/16/06 - ------------------------------------------------------------------- RiverSource Emerging Markets Bond Fund Class A (excluding sales charge) +54.87% +6.81% +6.95% - ------------------------------------------------------------------- J.P. Morgan EMBI-Global (unmanaged) +39.64% +6.86% +7.01% - ------------------------------------------------------------------- Lipper Emerging Markets Debt Funds Index +39.55% +5.08% +5.65% - -------------------------------------------------------------------
(See "The Fund's Long-term Performance" for Index descriptions) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 1(800) 221-2450. The 4.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in fees and expenses. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. - -------------------------------------------------------------------------------- 2 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT OCT. 31, 2009 SINCE Without sales charge 1 YEAR 3 YEARS INCEPTION Class A (inception 2/16/06) +54.87% +6.81% +6.95% - ------------------------------------------------------------------- Class B (inception 2/16/06) +53.60% +5.98% +6.15% - ------------------------------------------------------------------- Class C (inception 2/16/06) +53.57% +5.96% +6.12% - ------------------------------------------------------------------- Class I (inception 2/16/06) +55.44% +7.27% +7.37% - ------------------------------------------------------------------- Class R4 (inception 2/16/06) +55.14% +7.10% +7.22% - ------------------------------------------------------------------- Class W (inception 12/1/06) +54.69% N/A +6.55% - ------------------------------------------------------------------- With sales charge Class A (inception 2/16/06) +47.51% +5.09% +5.55% - ------------------------------------------------------------------- Class B (inception 2/16/06) +48.60% +5.08% +5.46% - ------------------------------------------------------------------- Class C (inception 2/16/06) +52.57% +5.96% +6.12% - -------------------------------------------------------------------
Class A share performance reflects the maximum initial sales charge of 4.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second year 4%; third and fourth years 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R4 and Class W shares. Class I and Class R4 are available to qualifying institutional investors only. Class W shares are offered through qualifying discretionary accounts. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX - --------------------------------------------------------------------------------
DURATION SHORT INT. LONG HIGH MEDIUM QUALITY X LOW
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. PORTFOLIO STATISTICS - -------------------------------------------------------------------------------- Weighted average life(1) 11.2 years - -------------------------------------- Effective duration(2) 6.5 years - -------------------------------------- Weighted average bond rating(3) BBB- - --------------------------------------
(1) WEIGHTED AVERAGE LIFE measures a bond's maturity, which takes into consideration the possibility that the issuer may call the bond before its maturity date. (2) EFFECTIVE DURATION measures the sensitivity of a security's price to parallel shifts in the yield curve (the graphical depiction of the levels of interest rates from two years out to 30 years). Positive duration means that as rates rise, the price decreases, and negative duration means that as rates rise, the price increases. (3) WEIGHTED AVERAGE BOND RATING represents the average credit quality of the underlying bonds in the portfolio. There are risks associated with an investment in a bond fund, including credit risk, interest rate risk, and prepayment and extension risk. See the Fund's prospectus for information on these and other risks associated with the Fund. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. Non-investment grade securities, commonly called "high-yield" or "junk" bonds, generally have more volatile prices and carry more risk to principal and income than investment grade securities. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. - -------------------------------------------------------------------------------- 4 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT MANAGER COMMENTARY ------------------------------------------------------------- At October 31, 2009, approximately 41% of the Fund's shares were owned in aggregate by affiliated funds-of-funds managed by RiverSource Investments, LLC (RiverSource). As a result of asset allocation decisions by RiverSource, it is possible RiverSource Emerging Markets Bond Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds (see page 49, Class I capital share transactions for related activity during the most recent fiscal period). RiverSource seeks to minimize the impact of these transactions by structuring them over a reasonable period of time. RiverSource Emerging Markets Bond Fund may experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated funds-of-funds. For more information on the Fund's expenses, see the discussions beginning on pages 14 and 45. Dear Shareholders, RiverSource Emerging Markets Bond Fund (the Fund) Class A shares gained 54.87% (excluding sales charge) for the 12 months ended Oct. 31, 2009. The Fund outperformed its benchmark, the J.P. Morgan Emerging Markets Bond Index-Global (J.P. Morgan EMBI-Global), which rose 39.64%. The Fund also outperformed the Lipper Emerging Markets Debt Funds Index, representing the Fund's peer group, which advanced 39.55%, during the same period.
COUNTRY BREAKDOWN(1) (at Oct. 31, 2009; % of portfolio assets) - ------------------------------------------------ Argentina 2.4% - ------------------------------------------------ Brazil 10.3% - ------------------------------------------------ Cayman Islands 2.0% - ------------------------------------------------ Chile 0.5% - ------------------------------------------------ Colombia 6.1% - ------------------------------------------------ Croatia 0.4% - ------------------------------------------------ Dominican Republic 0.9% - ------------------------------------------------ El Salvador 2.2% - ------------------------------------------------ Gabon 0.4% - ------------------------------------------------ Indonesia 7.8% - ------------------------------------------------ Iraq 0.3% - ------------------------------------------------ Kazakhstan 1.2% - ------------------------------------------------ Luxembourg 4.6% - ------------------------------------------------ Mexico 9.4% - ------------------------------------------------ Netherlands 5.0% - ------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 5 MANAGER COMMENTARY (continued) -------------------------------------------------
COUNTRY BREAKDOWN(1) (at Oct. 31, 2009; % of portfolio assets) - ------------------------------------------------ Peru 2.6% - ------------------------------------------------ Philippine Islands 3.2% - ------------------------------------------------ Qatar 1.1% - ------------------------------------------------ Russia 7.4% - ------------------------------------------------ South Korea 1.1% - ------------------------------------------------ Supra-National 2.3% - ------------------------------------------------ Trinidad and Tobago 0.8% - ------------------------------------------------ Turkey 7.4% - ------------------------------------------------ Ukraine 0.3% - ------------------------------------------------ United Arab Emirates 0.7% - ------------------------------------------------ United Kingdom 0.6% - ------------------------------------------------ Uruguay 2.7% - ------------------------------------------------ Venezuela 7.1% - ------------------------------------------------ Other(2) 9.2% - ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan) as of Oct. 31, 2009. The Fund's composition is subject to change. (2) Cash & Cash Equivalents. QUALITY BREAKDOWN (at Oct. 31, 2009; % of portfolio assets excluding cash equivalents and equities) - ---------------------------------------------------------------------
AA bonds 1.2% - ------------------------------------------------ A bonds 8.2% - ------------------------------------------------ BBB bonds 38.9% - ------------------------------------------------ BB bonds 43.5% - ------------------------------------------------ B bonds 7.1% - ------------------------------------------------ Non-investment grade bonds 0.3% - ------------------------------------------------ Non-rated bonds 0.8% - ------------------------------------------------
Bond ratings apply to the underlying holdings of the Fund and not the Fund itself. Whenever possible, the Standard and Poor's rating is used to determine the credit quality of a security. Standard and Poor's rates the creditworthiness of corporate bonds, with 15 categories, ranging from AAA (highest) to D (lowest). Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. If Standard and Poor's doesn't rate a security, then Moody's rating is used. RiverSource Investments, LLC, (the Investment Manager), rates a security using an internal rating system when Moody's doesn't provide a rating. - -------------------------------------------------------------------------------- 6 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- SIGNIFICANT PERFORMANCE FACTORS Emerging market bonds rebounded robustly from late 2008 weakness during the annual period ended Oct. 31, 2009. At the start of the period, emerging market bonds were struggling, as the fallout from the global financial crisis peaked in intensity in November 2008. Indeed, spreads on emerging market debt (the differential in yields between emerging market bonds and those of comparable- duration Treasuries) reached a high on November 20, 2008. For the next three months, emerging market bond performance was rather range-bound, see-sawing with economic news flow. Then, in early March, investors began to believe that the worst of the financial crisis was behind us and a modern-day Great Depression had been averted. There was heightened confidence that massive and unprecedented government programs designed to inject liquidity into the financial system and stimulate economic activity were beginning to work. Especially key were extremely accommodative monetary and fiscal policies by the European Union, the U.S., Japan and China. Beginning in mid-2009, anticipation of a better economy transformed into real improvement in economic indicators. Economic output data improved, retail sales showed some life and corporate earnings results began to consistently come in better than expected. The housing market showed some modest recovery and manufacturing output stabilized. While consumers continued to be burdened by a weak labor market, the combination of improving financial conditions and stability in economic data stemmed the flight to safety and led to a dramatic Emerging market bonds rebounded robustly from late 2008 weakness during the annual period ended Oct. 31, 2009. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- increase in investors' appetite for risk. Measures of volatility declined, equity markets surged and demand for riskier fixed income assets soared, investors moved their money to higher yielding assets. Emerging markets led the way in the nascent economic recovery, with emerging Asia at the front edge of economic growth and Latin America not far behind. This leadership role was a new one for the emerging markets. The recovery in commodity prices from their bottom in March 2009 also helped the resource-rich emerging market nations. Together, these factors boosted the performance of emerging market bonds. By the end of October 2009, spreads on emerging market debt had declined dramatically. Exposure to local currencies contributed to the Fund's performance the most during the annual period, as several emerging market currencies appreciated against the U.S. dollar. Fund positions in bonds denominated in the Brazilian real, Indonesian rupiah and Colombian peso particularly boosted Fund results. Further contributing to the Fund's outperformance was the decline in interest rates in these same three markets -- Brazil, Indonesia and Colombia -- which caused local asset prices to rise. Also, the average yields on these markets' local assets were higher than that of the J.P. Morgan EMBI-Global, thus boosting the Fund's relative results. Country selection overall helped the Fund's performance as well. Overweight exposure to Indonesia, Colombia, Venezuela and Russia and an underweighted allocation to Turkey was especially beneficial. There were no major detractors from the Fund's performance during the annual period. Only partially offsetting results was the detracting effect of underweighted allocations to the bonds of Brazil, Mexico and Ecuador, which outpaced the J.P. Morgan EMBI-Global during the annual period. CHANGES TO THE FUND'S PORTFOLIO We increased the portfolio's exposure to local emerging market currencies, as these currencies overall strengthened relative to the U.S. dollar during the annual period. We correspondingly reduced the portfolio's exposure to pure corporate bonds, i.e. those not issued by a quasi-sovereign agency. We did not believe that yields available were adequately compensating for the lack of liquidity in emerging market corporate bonds. Within the portfolio's remaining exposure to corporate - -------------------------------------------------------------------------------- 8 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- bonds, we sought to focus holdings on commodity-oriented issues, such as those issued by oil and metals & mining companies. At the end of October 2009, the Fund had its most significant allocations to the bond markets of Colombia, Indonesia, Russia and Peru. Conversely, the Fund had its most modest exposures in the bond markets of Panama, Mexico, the Philippines and Brazil. OUR FUTURE STRATEGY Going forward, we believe there continues to be attractive upside potential in emerging market debt, but more moderate than we saw during the most recent annual period, given the strength of the rally and dramatic tightening in spreads seen since March 2009. Increased issuance from emerging market governments and corporations anticipated over the near term may also serve as a brake to the asset class' performance and spread compression trends. In the near term, we do not anticipate making any major changes in the Fund's strategy or portfolio allocations. Rather, we intend to look for incidents of emerging market local currency weakness as opportunities to add to the Fund's exposure in those currencies. As always, we continue to monitor several important factors. Among them are the creditworthiness of each country, the strength of its economic policies and the soundness of its fundamentals. Using our top-down investment approach, we intend to continually re-evaluate these factors as we seek to identify individual securities that present attractive value opportunities. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 9 MANAGER COMMENTARY (continued) ------------------------------------------------- Nicholas Pifer, CFA(R) James Carlen, CFA(R) Portfolio Manager Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the RiverSource Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the RiverSource Family of Funds. - -------------------------------------------------------------------------------- 10 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT THIS PAGE LEFT BLANK INTENTIONALLY THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in RiverSource Emerging Markets Bond Fund Class A shares (from 2/16/06 to 10/31/09) as compared to the performance of the J.P. Morgan Emerging Markets Bond Index-Global and the Lipper Emerging Markets Debt Funds Index. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum initial sales charge of 4.75%, while such charges are not reflected in the performance of the indices. Returns for the Fund include the reinvestment of any distributions paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The table below and the chart on the facing page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary or visiting riversource.com/funds. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS - --------------------------------------------------------------------------------
Results at Oct. 31, 2009 SINCE INCEPTION 1 YEAR 3 YEARS 2/16/06 RIVERSOURCE EMERGING MARKETS BOND FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $14,751 $11,606 $12,214 - --------------------------------------------------------------------------------- Average annual total return +47.51% +5.09% +5.55% - --------------------------------------------------------------------------------- J.P. MORGAN EMBI-GLOBAL(1) Cumulative value of $10,000 $13,964 $12,204 $12,853 - --------------------------------------------------------------------------------- Average annual total return +39.64% +6.86% +7.01% - --------------------------------------------------------------------------------- LIPPER EMERGING MARKETS DEBT FUNDS INDEX(2) Cumulative value of $10,000 $13,955 $11,602 $12,256 - --------------------------------------------------------------------------------- Average annual total return +39.55% +5.08% +5.65% - ---------------------------------------------------------------------------------
Results for other share classes can be found on page 3. - -------------------------------------------------------------------------------- 12 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE EMERGING MARKETS BOND FUND LINE GRAPH)
RIVERSOURCE EMERGING MARKETS BOND FUND CLASS LIPPER EMERGING A (INCLUDES J.P. MORGAN MARKETS DEBT SALES CHARGE) EMBI-GLOBAL INDEX(1) FUNDS INDEX(2) -------------------- ------------------------ --------------- 2/16/06 $ 9,525 $10,000 $10,000 04/06 9,446 9,908 9,987 07/06 9,507 10,022 10,041 10/06 10,025 10,532 10,564 01/07 10,259 10,704 10,845 04/07 10,761 11,089 11,293 07/07 10,521 10,740 10,938 10/07 11,021 11,382 11,604 01/08 10,975 11,507 11,544 04/08 10,986 11,599 11,570 07/08 10,801 11,516 11,530 10/08 7,887 9,205 8,783 01/09 8,854 10,252 9,153 04/09 9,859 11,074 10,004 07/09 11,149 12,005 11,259 10/09 12,214 12,853 12,256
(1) The J.P. Morgan Emerging Markets Bond Index-Global (J.P. Morgan EMBI- Global), an unmanaged index, is based on U.S. dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities, such as Brady bonds, Eurobonds and loans. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Emerging Markets Debt Funds Index includes the 10 largest emerging markets debt funds tracked by Lipper Inc. The index's returns include reinvested dividends. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expenses of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Oct. 31, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 14 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED MAY 1, 2009 OCT. 31, 2009 THE PERIOD(a) EXPENSE RATIO - ------------------------------------------------------------------------------------------ Class A - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,238.80 $ 7.13(c) 1.27% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.70 $ 6.43(c) 1.27% - ------------------------------------------------------------------------------------------ Class B - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,234.30 $ 11.43(c) 2.04% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,014.84 $ 10.30(c) 2.04% - ------------------------------------------------------------------------------------------ Class C - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,233.80 $ 11.37(c) 2.03% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,014.89 $ 10.25(c) 2.03% - ------------------------------------------------------------------------------------------ Class I - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,241.20 $ 4.78(c) .85% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.81 $ 4.31(c) .85% - ------------------------------------------------------------------------------------------ Class R4 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,239.30 $ 6.46(c) 1.15% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.30 $ 5.82(c) 1.15% - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 15 FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED MAY 1, 2009 OCT. 31, 2009 THE PERIOD(a) EXPENSE RATIO - ------------------------------------------------------------------------------------------ Class W - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,238.70 $7.30(c) 1.30% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.55 $6.58(c) 1.30% - ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended Oct. 31, 2009: +23.88% for Class A, +23.43% for Class B, +23.38% for Class C, +24.12% for Class I, +23.93% for Class R4 and +23.87% for Class W. (c) 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, such that net 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. Any amounts waived will not be reimbursed by the Fund. This change was effective Nov. 1, 2009. Had this change been in place for the entire six month period ended Oct. 31, 2009, the actual expenses paid would have been $7.35 for Class A, $11.65 for Class B, $11.59 for Class C, $4.94 for Class I, $6.62 for Class R4 and $7.46 for Class W; the hypothetical expenses paid would have been $6.63 for Class A, $10.50 for Class B, $10.45 for Class C, $4.46 for Class I, $5.97 for Class R4 and $6.73 for Class W. - -------------------------------------------------------------------------------- 16 RIVERSOURCE EMERGING MARKETS BOND 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 FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Fiscal year ended Oct. 31, 2009
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Qualified Dividend Income for individuals.................... 0.00% Dividends Received Deduction for corporations................ 0.00% U.S. Government Obligations.................................. 0.00%
The Fund also designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. - -------------------------------------------------------------------------------- 58 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. The RiverSource Family of Funds that each Board member oversees consists of 132 funds, which includes 100 RiverSource funds and 32 Seligman funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 2006 Attorney Minneapolis, MN 55402 Age 55 - ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Family of Funds, 1999-2006; former None 901 S. Marquette Ave. 1999 Governor of Minnesota Minneapolis, MN 55402 Age 75 - ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 2007 Leadership (consulting company) Minneapolis, MN 55402 Age 55 - ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley University Age 59 - ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 1985 Minneapolis, MN 55402 Age 74 - ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 2005 Insurance Minneapolis, MN 55402 Age 74 - ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. since 2007, College Inc. (manufactures Minneapolis, MN 55402 Board member since irrigation systems) Age 70 2002 - ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 59 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ John F. Maher Board member since Retired President and Chief Executive Officer and None 901 S. Marquette Ave. 2008 former Director, Great Western Financial Corporation Minneapolis, MN 55402 (financial services), 1986-1997 Age 66 - ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 2004 real estate and asset management company) Minneapolis, MN 55402 Age 57 - ------------------------------------------------------------------------------------------------------------------------------ Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc. 901 S. Marquette Ave. 2008 President and General Counsel, Automotive Legal (digital imaging); Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil Age 68 and gas exploration and production); OGE Energy Corp. (energy and energy services) - ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Forester Pharmaceuticals, Minneapolis, MN 55402 Biotech Inc. Age 65 (biotechnology); Healthways, Inc. (health management programs) - ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 60 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. since 2005; Financial Center Vice President since President, Chairman of the Board and Chief Investment Minneapolis, MN 55474 2002 Officer, RiverSource Investments, LLC since 2001; Age 49 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; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc., 2001-2005 - ------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments or Ameriprise Financial. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; or visiting riversource.com/funds (for RiverSource and Threadneedle funds) or seligman.com (for Seligman funds). The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management, 172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC Center and Director and Vice President -- Asset Management, Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc. Age 44 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 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 61 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income, 172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 45 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 - -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Chief Administrative Officer, RiverSource Investments, 5228 Ameriprise Financial 2006 LLC since 2009; Vice President -- Asset Management and Center Minneapolis, MN Trust Company Services, RiverSource Investments, LLC, 55474 2006-2009; Vice President -- Operations and Compliance, Age 44 RiverSource Investments, LLC, 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 and of Minneapolis, MN 55474 RiverSource Fund Distributors, Inc. since 2008 Age 54 - -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management, 5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel, Center Secretary since 2006 RiverSource Distributors, Inc. and Chief Legal Officer Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC Age 50 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 Investments, LLC, 100 Park Avenue Officer since 2009 Ameriprise Certificate Company and RiverSource Service New York, NY 10010 Corporation since 2009; Chief Compliance Officer for Age 58 each of the Seligman funds since 2004; Anti-Money Laundering Prevention Officer and Identity Theft Prevention Officer for each of the Seligman funds since 2008; 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 Financial, 2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer, Center since 2004 Ameriprise Financial, Inc. since 2004; Compliance Minneapolis, MN 55474 Director, Ameriprise Financial, Inc., 2004-2008 Age 45 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 62 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT PROXY VOTING ------------------------------------------------------------------ The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2009 ANNUAL REPORT 63 RIVERSOURCE EMERGING MARKETS BOND FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C)2009 RiverSource Investments, LLC. S-6398 F (12/09)
Annual Report and Prospectus (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE GLOBAL BOND FUND ANNUAL REPORT FOR THE PERIOD ENDED OCTOBER 31, 2009 (Prospectus also enclosed) RIVERSOURCE GLOBAL BOND FUND SEEKS TO PROVIDE SHAREHOLDERS WITH HIGH TOTAL RETURN THROUGH INCOME AND GROWTH OF CAPITAL. This annual report includes a prospectus that describes in detail the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money. (SINGLE STRATEGY FUNDS ICON)
TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Manager Commentary................. 5 The Fund's Long-term Performance... 12 Fund Expenses Example.............. 14 Portfolio of Investments........... 16 Statement of Assets and Liabilities...................... 34 Statement of Operations............ 36 Statements of Changes in Net Assets........................... 37 Financial Highlights............... 39 Notes to Financial Statements...... 45 Report of Independent Registered Public Accounting Firm........... 62 Federal Income Tax Information..... 64 Board Members and Officers......... 65 Proxy Voting....................... 69
- -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Global Bond Fund (the Fund) Class A shares gained 22.12% (excluding sales charge) for the 12 months ended Oct. 31, 2009. > The Fund outperformed its benchmark, the Barclays Capital Global Aggregate Index, which rose 18.41%. > The Fund also outperformed the Lipper Global Income Funds Index, representing the Fund's peer group, which increased 21.05% during the same period. ANNUALIZED TOTAL RETURNS (for period ended Oct. 31, 2009) - --------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS - --------------------------------------------------------------------- RiverSource Global Bond Fund Class A (excluding sales charge) +22.12% +7.00% +4.95% +5.95% - --------------------------------------------------------------------- Barclays Capital Global Aggregate Index (unmanaged) +18.41% +7.91% +5.70% +6.48% - --------------------------------------------------------------------- Lipper Global Income Funds Index +21.05% +5.65% +4.84% +5.98% - ---------------------------------------------------------------------
(See "The Fund's Long-term Performance" for Index descriptions) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 1(800) 221-2450. The 4.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in fees and expenses. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. - -------------------------------------------------------------------------------- 2 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT OCT. 31, 2009 SINCE Without sales charge 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION* Class A (inception 3/20/89) +22.12% +7.00% +4.95% +5.95% N/A - --------------------------------------------------------------------------- Class B (inception 3/20/95) +21.14% +6.16% +4.14% +5.14% N/A - --------------------------------------------------------------------------- Class C (inception 6/26/00) +21.15% +6.19% +4.15% N/A +5.89% - --------------------------------------------------------------------------- Class I (inception 3/4/04) +22.83% +7.44% +5.41% N/A +5.86% - --------------------------------------------------------------------------- Class R4 (inception 3/20/95) +22.42% +7.34% +5.21% +6.19% N/A - --------------------------------------------------------------------------- Class W (inception 12/1/06) +22.04% N/A N/A N/A +6.20% - --------------------------------------------------------------------------- With sales charge Class A (inception 3/20/89) +16.32% +5.28% +3.93% +5.43% N/A - --------------------------------------------------------------------------- Class B (inception 3/20/95) +16.14% +5.26% +3.80% +5.14% N/A - --------------------------------------------------------------------------- Class C (inception 6/26/00) +20.15% +6.19% +4.15% N/A +5.89% - ---------------------------------------------------------------------------
Class A share performance reflects the maximum initial sales charge of 4.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second year 4%; third and fourth years 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R4 and Class W shares. Class I and Class R4 are available to qualifying institutional investors only. Class W shares are offered through qualifying discretionary accounts. * For classes with less than 10 years performance. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX - --------------------------------------------------------------------------------
DURATION SHORT INT. LONG X HIGH MEDIUM QUALITY LOW
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. PORTFOLIO STATISTICS - -------------------------------------------------------------------------------- Weighted average life(1) 7.0 years - -------------------------------------- Effective duration(2) 5.3 years - -------------------------------------- Weighted average bond rating(3) AA- - --------------------------------------
(1) WEIGHTED AVERAGE LIFE measures a bond's maturity, which takes into consideration the possibility that the issuer may call the bond before its maturity date. (2) EFFECTIVE DURATION measures the sensitivity of a security's price to parallel shifts in the yield curve (the graphical depiction of the levels of interest rates from two years out to 30 years). Positive duration means that as rates rise, the price decreases, and negative duration means that as rates rise, the price increases. (3) WEIGHTED AVERAGE BOND RATING represents the average credit quality of the underlying bonds in the portfolio. There are risks associated with an investment in a bond funds, including credit risk, interest rate risk, and prepayment and extension risk. See the Fund's prospectus for information on these and other risks associated with the Fund. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. Non-investment grade securities, commonly called "high-yield" or "junk" bonds, generally have more volatile prices and carry more risk to principal and income than investment grade securities. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. - -------------------------------------------------------------------------------- 4 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT MANAGER COMMENTARY ------------------------------------------------------------- At Oct. 31, 2009, approximately 33% of the Fund's shares were owned in aggregate by affiliated funds-of-funds managed by RiverSource Investments, LLC (RiverSource). As a result of asset allocation decisions by RiverSource, it is possible RiverSource Global Bond Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds (see page 55, Class I capital share transactions for related activity during the most recent fiscal period). RiverSource seeks to minimize the impact of these transactions by structuring them over a reasonable period of time. RiverSource Global Bond Fund may experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated funds-of-funds. For more information on the Fund's expenses, see the discussions beginning on pages 14 and 51. PORTFOLIO BREAKDOWN(1) (at Oct. 31, 2009; % of portfolio assets) - ---------------------------------------------------------------------
Asset-Backed 3.7% - ------------------------------------------------ Commercial Mortgage-Backed 2.5% - ------------------------------------------------ Consumer Discretionary 1.2% - ------------------------------------------------ Consumer Staples 1.0% - ------------------------------------------------ Energy 0.9% - ------------------------------------------------ Financials 7.3% - ------------------------------------------------ Foreign Government 53.7% - ------------------------------------------------ Health Care 0.3% - ------------------------------------------------ Industrials 0.8% - ------------------------------------------------ Materials 0.9% - ------------------------------------------------ Residential Mortgage-Backed 6.4% - ------------------------------------------------ Telecommunication 4.3% - ------------------------------------------------ U.S. Government Obligations & Agencies 7.8% - ------------------------------------------------ Utilities 6.8% - ------------------------------------------------ Other(2) 2.4% - ------------------------------------------------
(1) Portfolio holdings include industry sectors that can be comprised of securities in several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan) as of Oct. 31, 2009. The Fund's composition is subject to change. (2) Cash & Cash Equivalents. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 5 MANAGER COMMENTARY (continued) ------------------------------------------------- Dear Shareholders, RiverSource Global Bond Fund (the Fund) Class A shares gained 22.12% (excluding sales charge) for the 12 months ended Oct. 31, 2009. The Fund outperformed its benchmark, the Barclays Capital Global Aggregate Index (Barclays Global Index), which rose 18.41%. The Fund also outperformed the Lipper Global Income Funds Index, representing the Fund's peer group, which increased 21.05% during the same period. SIGNIFICANT PERFORMANCE FACTORS On an absolute basis, the Fund benefited during the annual period from a decline in government bond yields, a sharp recovery in non-government bond sectors and a broad-based fall in the U.S. dollar. The U.S. dollar declined 10.4% on a trade- weighted basis during the annual period. As the value of the U.S. dollar decreases, the dollar value of foreign investments typically rises and vice versa. The Fund had approximately 63% of its net assets exposed to foreign currencies, on average, during the annual period, up from approximately 53%, on average in the prior 12-month period. Relative to the Barclays Global Index, the Fund was helped most during the annual period by our active management. Strong issue selection, especially among investment grade corporate bonds, had a particularly strong impact on the Fund. For example, the Fund benefited from an overweight position in U.S. corporate bonds vs. an underweight position in non-U.S. corporate bonds. During the first half of the annual period, overweight positions in industrial and utility issues vs. an underweight TOP TEN COUNTRIES (at Oct. 31, 2009; % of portfolio assets) - ---------------------------------------------------------------------
United States 41.8% - ------------------------------------------------ Japan 10.6% - ------------------------------------------------ Germany 6.0% - ------------------------------------------------ France 4.5% - ------------------------------------------------ Italy 4.2% - ------------------------------------------------ Netherlands 3.9% - ------------------------------------------------ United Kingdom 3.2% - ------------------------------------------------ Canada 2.6% - ------------------------------------------------ Spain 2.3% - ------------------------------------------------ Brazil 1.9% - ------------------------------------------------
- -------------------------------------------------------------------------------- 6 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- position in financial issues helped. Our allocation decisions also benefited the Fund's results, notably the Fund's investments in high yield corporate bonds and emerging market debt. Currency positioning aided the Fund's performance as well, particularly the Fund's overweight positions in commodity-related currencies, such as the Australian dollar, New Zealand dollar and Norwegian krone, and cyclically- sensitive currencies, such as the Swedish krona and Polish zloty. Exposure to emerging market currencies, such as the Brazilian real and Indonesian rupiah also helped. Finally, we added return vs. the Barclays Global Index through local market decisions, including those regarding duration, yield curve and country allocation. The primary detractors from Fund performance came from allocation and issue selection decisions within structured assets, such as commercial mortgage-backed securities, especially at the beginning of the annual period when global financial markets were under intense duress. Having an underweight position in the euro also detracted from the Fund's results. Relative to the Fund's peer group, the Fund saw its strongest performance during the first half of the annual period, especially in months when financials underperformed dramatically. This suggests that our issue selection within corporate bonds was a major contributor to the Fund's results. It also appears we added risk to the Fund earlier in the market recovery process than many of the Fund's peers, further aiding relative performance during the first half of the annual period. The Fund's peers, however, seemed to have turned up the dial more aggressively once they did On an absolute basis, the Fund benefited during the annual period from a decline in government bond yields, a sharp recovery in non-government bond sectors and a broad-based fall in the U.S. dollar. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- eventually start adding risk, enabling them to regain ground during the second half of the annual period when risk assets of virtually all types experienced sharp gains. Still, as mentioned above, the Fund outperformed the Lipper Global Income Funds Index for the 12 months ended Oct. 31, 2009. CHANGES TO THE FUND'S PORTFOLIO We made several changes to portfolio positioning during the period. We added some interest rate exposure during the first half of the annual period, after global yields moved up from their crisis-related lows, leaving the Fund modestly overweight interest rate exposure vs. the Barclays Global Index. We implemented this strategy partly as a hedge against the Fund's sector and currency exposures, which were structured to benefit from a recovery in the global economy, and partly because we expected global yields to move broadly sideways even with that recovery as major central banks were anticipated to keep their accommodative monetary policies on hold for an extended period. We had meaningfully increased the Fund's investment grade corporate bond exposure in October 2008, with a strong bias toward industrial and utility issuers. We maintained that positioning until March-April 2009, when we covered the Fund's underweight position in financials and pared back its overweight in industrials as an offset. During the second half of the annual period, we gradually reduced the Fund's exposure to investment grade corporate bonds on the view that the sharp tightening in yield spreads, back to pre-crisis levels in many industries, had outpaced the actual improvement seen in corporate fundamentals. We also trimmed the Fund's exposure to U.S. agency mortgage-backed securities, as yield spreads in that sector moved to pre-crisis levels on the back of substantial purchases by the Federal Reserve Board (the Fed). In contrast, we added some exposure to below investment grade securities during the second half of the annual period, especially in emerging markets, where we felt that yield spreads better compensated the Fund for the risks involved. Yield spreads are the differential between yields on securities within a given fixed income sector and those of comparable-duration U.S. Treasuries. On currencies, the Fund maintained its underweight in the U.S. dollar throughout the annual period, but made changes in some other positions, especially during the second half of the period. We increased the Fund's - -------------------------------------------------------------------------------- 8 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- exposure to several emerging market and peripheral European currencies, including the Brazilian real, Mexican peso, Indonesian rupiah, Swedish krona and Norwegian krone. Against this, we decreased the Fund's exposure to the British pound, the euro and the yen. At the very end of the annual period, we also pared back modestly the Fund's exposure to the Australian and New Zealand dollars. OUR FUTURE STRATEGY At the end of October 2009, we were positioning the Fund for continued recovery in the global economy, but cautiously so given the dramatic rebound in risk assets during the annual period. We expect the major central banks to keep monetary policy at highly accommodative levels until the second half of 2010, if not later. The ample supply of liquidity resulting from these policies should support economic growth and further gains in risk assets, but risk premiums across a range of markets looked rather skinny at the end of the annual period relative to the actual improvement seen so far in economic and corporate fundamentals. Put differently, we would argue that a lot of good news about the economic recovery process is already priced in, and this warrants some caution even if we think the trend may continue in the months ahead due to ample global liquidity. We intend to continue to hold less exposure to the U.S. dollar in the Fund than the Barclays Global Index. From a long-term valuation perspective, the U.S. dollar was beginning to look fairly undervalued toward the end of the annual period, especially against other major developed currencies. This undervaluation, we believe, creates a risk of corrective bounces in the U.S. currency. At the same time, we believe the necessary components of a sustained dollar rally are not yet in place and will not be in place for some time. We think the Fed will need to be well into its tightening cycle before the U.S. dollar can find a true bottom and then appreciate in sustained fashion, especially if U.S. fiscal policy remains loose. As always, we constantly monitor the market for changing conditions and regularly review the Fund's duration, country, sector, yield curve, and currency positioning in an effort to seek an attractive balance between risk and potential return. Our sector teams remain focused on careful - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 9 MANAGER COMMENTARY (continued) ------------------------------------------------- individual security selection, as we continue to seek opportunities to capitalize on attractively valued bonds. (PHOTO - NICHOLAS PIFER, CFA(R)) Nicholas Pifer, CFA(R) Portfolio Manager Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the RiverSource Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the RiverSource Family of Funds. - -------------------------------------------------------------------------------- 10 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT THIS PAGE LEFT BLANK INTENTIONALLY THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in RiverSource Global Bond Fund Class A shares (from 11/1/99 to 10/31/09) as compared to the performance of the Barclays Capital Global Aggregate Index and the Lipper Global Income Funds Index. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum initial sales charge of 4.75%, while such charges are not reflected in the performance of the indices. Returns for the Fund include the reinvestment of any distributions paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The table below and the chart on the facing page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary or visiting riversource.com/funds. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS - --------------------------------------------------------------------------------
Results at Oct. 31, 2009 1 YEAR 3 YEARS 5 YEARS 10 YEARS RIVERSOURCE GLOBAL BOND FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $11,632 $11,668 $12,126 $16,985 - ------------------------------------------------------------------------------------------ Average annual total return +16.32% +5.28% +3.93% +5.43% - ------------------------------------------------------------------------------------------ BARCLAYS CAPITAL GLOBAL AGGREGATE INDEX(1) Cumulative value of $10,000 $11,841 $12,564 $13,196 $18,736 - ------------------------------------------------------------------------------------------ Average annual total return +18.41% +7.91% +5.70% +6.48% - ------------------------------------------------------------------------------------------ LIPPER GLOBAL INCOME FUNDS INDEX(2) Cumulative value of $10,000 $12,105 $11,791 $12,669 $17,867 - ------------------------------------------------------------------------------------------ Average annual total return +21.05% +5.65% +4.84% +5.98% - ------------------------------------------------------------------------------------------
Results for other share classes can be found on page 3. - -------------------------------------------------------------------------------- 12 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE GLOBAL BOND FUND LINE GRAPH)
RIVERSOURCE GLOBAL BOND FUND CLASS A BARCLAYS CAPITAL LIPPER GLOBAL (INCLUDES SALES GLOBAL AGGREGATE INCOME FUNDS CHARGE) INDEX(1) INDEX(2) ------------------ ------------------ ------------------ 10/99 $ 9,525 $10,000 $10,000 1/00 9,249 9,688 9,832 4/00 9,099 9,623 9,842 7/00 9,281 9,814 10,022 10/00 9,037 9,718 9,903 1/01 9,669 10,219 10,519 4/01 9,436 10,014 10,333 7/01 9,592 10,191 10,507 10/01 10,016 10,674 10,903 1/02 9,697 10,237 10,652 4/02 9,901 10,548 10,852 7/02 10,359 11,261 11,158 10/02 10,642 11,538 11,436 1/03 11,335 12,172 12,070 4/03 11,681 12,519 12,525 7/03 11,626 12,450 12,520 10/03 12,053 12,946 12,948 1/04 12,676 13,593 13,560 4/04 12,419 13,310 13,322 7/04 12,511 13,411 13,409 10/04 13,341 14,199 14,104 1/05 13,743 14,643 14,537 4/05 13,730 14,682 14,566 7/05 13,360 14,305 14,412 10/05 13,183 14,096 14,267 1/06 13,364 14,313 14,572 4/06 13,451 14,388 14,716 7/06 13,610 14,602 14,854 10/06 13,865 14,912 15,153 1/07 13,976 14,925 15,300 4/07 14,410 15,441 15,723 7/07 14,394 15,440 15,743 10/07 15,062 16,241 16,307 1/08 15,449 16,961 16,820 4/08 15,656 17,260 16,831 7/08 15,493 17,107 16,539 10/08 13,908 15,823 14,761 1/09 14,569 16,727 15,041 4/09 14,952 16,880 15,356 7/09 16,291 17,943 16,829 10/09 16,985 18,736 17,867
(1) The Barclays Capital Global Aggregate Index, an unmanaged market capitalization weighted benchmark, tracks the performance of investment grade fixed income securities denominated in 13 currencies. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Global Income Funds Index includes the 30 largest global income funds tracked by Lipper Inc. The index's returns include net reinvested dividends. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Oct. 31, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 14 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED MAY 1, 2009 OCT. 31, 2009 THE PERIOD(a) EXPENSE RATIO - ------------------------------------------------------------------------------------------ Class A - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,136.00 $ 6.69 1.25% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.80 $ 6.33 1.25% - ------------------------------------------------------------------------------------------ Class B - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,131.50 $10.74(c) 2.01% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,014.99 $10.15(c) 2.01% - ------------------------------------------------------------------------------------------ Class C - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,131.00 $10.74 2.01% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,014.99 $10.15 2.01% - ------------------------------------------------------------------------------------------ Class I - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,139.40 $ 4.40 .82% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.96 $ 4.15 .82% - ------------------------------------------------------------------------------------------ Class R4 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,137.60 $ 6.00 1.12% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.45 $ 5.67 1.12% - ------------------------------------------------------------------------------------------ Class W - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,134.40 $ 6.80 1.27% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.70 $ 6.43 1.27% - ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended Oct. 31, 2009: +13.60% for Class A, +13.15% for Class B, +13.10% for Class C, +13.94% for Class I, +13.76% for Class R4 and +13.44% for Class W. (c) 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, such that net expenses (excluding fees and expenses of acquired funds), will not exceed 2.02% for Class B. Any amounts waived will not be reimbursed by the Fund. This change was effective Nov. 1, 2009. Had this change been in place for the entire six month period ended Oct. 31, 2009, the actual expenses paid would have been $10.79 for Class B and the hypothetical expenses paid would have been $10.20 for Class B. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 15 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 FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Fiscal year ended Oct. 31, 2009
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Qualified Dividend Income for individuals.................... 0.00% Dividends Received Deduction for corporations................ 0.00% U.S. Government Obligations.................................. 3.82% Foreign taxes paid........................................... $16,798 Foreign source income........................................ $2,247,727
The Fund designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. - -------------------------------------------------------------------------------- 64 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. The RiverSource Family of Funds that each Board member oversees consists of 132 funds, which includes 100 RiverSource funds and 32 Seligman funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 2006 Attorney Minneapolis, MN 55402 Age 55 - ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Family of Funds, 1999-2006; former None 901 S. Marquette Ave. 1999 Governor of Minnesota Minneapolis, MN 55402 Age 75 - ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 2007 Leadership (consulting company) Minneapolis, MN 55402 Age 55 - ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley University Age 59 - ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 1985 Minneapolis, MN 55402 Age 74 - ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 2005 Insurance Minneapolis, MN 55402 Age 74 - ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. since 2007, College Inc. (manufactures Minneapolis, MN 55402 Board member since irrigation systems) Age 70 2002 - ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 65 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ John F. Maher Board member since Retired President and Chief Executive Officer and None 901 S. Marquette Ave. 2008 former Director, Great Western Financial Corporation Minneapolis, MN 55402 (financial services), 1986-1997 Age 66 - ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 2004 real estate and asset management company) Minneapolis, MN 55402 Age 57 - ------------------------------------------------------------------------------------------------------------------------------ Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc. 901 S. Marquette Ave. 2008 President and General Counsel, Automotive Legal (digital imaging); Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil Age 68 and gas exploration and production); OGE Energy Corp. (energy and energy services) - ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Forester Pharmaceuticals, Minneapolis, MN 55402 Biotech Inc. Age 65 (biotechnology); Healthways, Inc. (health management programs) - ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 66 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. since 2005; Financial Center Vice President since President, Chairman of the Board and Chief Investment Minneapolis, MN 55474 2002 Officer, RiverSource Investments, LLC since 2001; Age 49 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; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc., 2001-2005 - ------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments or Ameriprise Financial. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; or visiting riversource.com/funds (for RiverSource and Threadneedle funds) or seligman.com (for Seligman funds). The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management, 172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC Center and Director and Vice President -- Asset Management, Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc. Age 44 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 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 67 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income, 172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 45 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 - -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Chief Administrative Officer, RiverSource Investments, 5228 Ameriprise Financial 2006 LLC since 2009; Vice President -- Asset Management and Center Minneapolis, MN Trust Company Services, RiverSource Investments, LLC, 55474 2006-2009; Vice President -- Operations and Compliance, Age 44 RiverSource Investments, LLC, 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 and of Minneapolis, MN 55474 RiverSource Fund Distributors, Inc. since 2008 Age 54 - -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management, 5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel, Center Secretary since 2006 RiverSource Distributors, Inc. and Chief Legal Officer Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC Age 50 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 Investments, LLC, 100 Park Avenue Officer since 2009 Ameriprise Certificate Company and RiverSource Service New York, NY 10010 Corporation since 2009; Chief Compliance Officer for Age 58 each of the Seligman funds since 2004; Anti-Money Laundering Prevention Officer and Identity Theft Prevention Officer for each of the Seligman funds since 2008; 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 Financial, 2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer, Center since 2004 Ameriprise Financial, Inc. since 2004; Compliance Minneapolis, MN 55474 Director, Ameriprise Financial, Inc., 2004-2008 Age 45 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 68 RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2009 ANNUAL REPORT 69 RIVERSOURCE GLOBAL BOND FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C)2009 RiverSource Investments, LLC. S-6309 AF (12/09)
Annual Report and Prospectus (THREADNEEDLE LOGO) THREADNEEDLE EMERGING MARKETS FUND ANNUAL REPORT FOR THE PERIOD ENDED OCTOBER 31, 2009 (Prospectus also enclosed) THREADNEEDLE EMERGING MARKETS FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. This annual report includes a prospectus that describes in detail the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money. (SINGLE STRATEGY FUNDS ICON)
TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Manager Commentary................. 5 The Fund's Long-term Performance... 12 Fund Expenses Example.............. 14 Portfolio of Investments........... 17 Statement of Assets and Liabilities...................... 25 Statement of Operations............ 27 Statements of Changes in Net Assets........................... 29 Financial Highlights............... 31 Notes to Financial Statements...... 38 Report of Independent Registered Public Accounting Firm........... 56 Federal Income Tax Information..... 58 Board Members and Officers......... 59 Proxy Voting....................... 63
RIVERSOURCE FAMILY OF FUNDS Threadneedle Funds are a part of the RiverSource Family of Funds that includes funds branded "RiverSource," "RiverSource Partners," "Seligman" and "Threadneedle." These funds share the same Board of Directors/Trustees and officers. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY - -------------------------------------------------------------------------------- > Threadneedle Emerging Markets Fund (the Fund) Class A shares advanced 56.05% (excluding sales charge) for the 12 months ended Oct. 31, 2009. > The Fund underperformed its benchmark, the Morgan Stanley Capital International (MSCI) Emerging Markets Index, (MSCI Emerging Markets Index), which advanced 64.63%. > The Fund's peer group, represented by the Lipper Emerging Markets Funds Index, advanced 56.89% for the period. ANNUALIZED TOTAL RETURNS (for period ended Oct. 31, 2009) - --------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------------------------------------------------------------------- Threadneedle Emerging Markets Fund Class A (excluding sales charge) +56.05% +3.48% +15.03% +9.85% - ------------------------------------------------------------------- MSCI Emerging Markets Index (unmanaged) +64.63% +6.66% +17.16% +11.48% - ------------------------------------------------------------------- Lipper Emerging Markets Funds Index +56.89% +3.10% +14.43% +10.93% - -------------------------------------------------------------------
(See "The Fund's Long-term Performance" for Index descriptions) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 1(800) 221-2450. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in fees and expenses. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. - -------------------------------------------------------------------------------- 2 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT OCT. 31, 2009 SINCE Without sales charge 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION* Class A (inception 11/13/96) +56.05% +3.48% +15.03% +9.85% N/A - ------------------------------------------------------------------------- Class B (inception 11/13/96) +55.08% +2.67% +14.12% +9.02% N/A - ------------------------------------------------------------------------- Class C (inception 6/26/00) +55.18% +2.73% +14.13% N/A +8.04% - ------------------------------------------------------------------------- Class I (inception 3/4/04) +57.03% +3.98% +15.55% N/A +13.06% - ------------------------------------------------------------------------- Class R2 (inception 8/3/09) N/A N/A N/A N/A +4.31%** - ------------------------------------------------------------------------- Class R4 (inception 11/13/96) +56.62% +3.84% +15.31% +10.14% N/A - ------------------------------------------------------------------------- Class R5 (inception 08/1/08) +57.12% N/A N/A N/A -10.98% - ------------------------------------------------------------------------- With sales charge Class A (inception 11/13/96) +47.06% +1.46% +13.67% +9.20% N/A - ------------------------------------------------------------------------- Class B (inception 11/13/96) +49.96% +2.05% +13.88% +9.02% N/A - ------------------------------------------------------------------------- Class C (inception 6/26/00) +54.06% +2.73% +14.13% N/A +8.04% - -------------------------------------------------------------------------
Class A share performance reflects the maximum initial sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second year 4%; third and fourth years 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R2, Class R4 and Class R5 shares. Class I, Class R2, Class R4 and Class R5 shares are available to qualifying institutional investors only. *For classes with less than 10 years performance. **Not annualized. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX - --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. - -------------------------------------------------------------------------------- 4 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT MANAGER COMMENTARY ------------------------------------------------------------- Threadneedle Emerging Markets Fund portfolio managers Julian Thompson and Jules Mort of Threadneedle International Limited (Threadneedle) discuss the Fund's results and positioning for the fiscal year ended Oct. 31, 2009. Threadneedle, an indirect wholly-owned subsidiary of Ameriprise Financial, Inc., acts as the subadviser to the Fund. Dear Shareholders, Threadneedle Emerging Markets Fund (the Fund) Class A shares advanced 56.05% (excluding sales charge) for the 12 months ended Oct. 31, 2009. The Fund underperformed its benchmark, the Morgan Stanley Capital International (MSCI) Emerging Markets Index, (MSCI Emerging Markets Index), which advanced 64.63%. The Fund's peer group, represented by the Lipper Emerging Markets Funds Index, advanced 56.89% for the period. SIGNIFICANT PERFORMANCE FACTORS The investment environment from the middle of 2008 through March 2009 was very difficult for emerging market equities. The financial crisis and economic slowdown made investors reluctant to take any risk and money already invested in emerging markets was rapidly moved back to the perceived safe haven of the U.S. Emerging market equities fell sharply in price before bottoming in early March 2009. COUNTRY DIVERSIFICATION(1) (at Oct. 31, 2009; % of portfolio assets) - ---------------------------------------------------------------------
Brazil 19.7% - ------------------------------------------------ China 10.7% - ------------------------------------------------ Egypt 0.7% - ------------------------------------------------ Hong Kong 7.6% - ------------------------------------------------ Hungary 0.8% - ------------------------------------------------ India 6.4% - ------------------------------------------------ Indonesia 2.8% - ------------------------------------------------ Israel 0.7% - ------------------------------------------------ Luxembourg 0.7% - ------------------------------------------------ Malaysia 1.4% - ------------------------------------------------ Mexico 3.9% - ------------------------------------------------ Panama 0.8% - ------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 5 MANAGER COMMENTARY (continued) ------------------------------------------------- COUNTRY DIVERSIFICATION(1) (at Oct. 31, 2009; % of portfolio assets) - ---------------------------------------------------------------------
Poland 0.4% - ------------------------------------------------ Russia 10.2% - ------------------------------------------------ Singapore 0.9% - ------------------------------------------------ South Africa 5.6% - ------------------------------------------------ South Korea 10.7% - ------------------------------------------------ Taiwan 8.1% - ------------------------------------------------ Thailand 1.7% - ------------------------------------------------ Turkey 1.8% - ------------------------------------------------ United Kingdom 1.4% - ------------------------------------------------ United States 0.8% - ------------------------------------------------ Other(2) 2.2% - ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan) as of Oct. 31, 2009. The Fund's composition is subject to change. (2) Cash & Cash Equivalents. Several events contributed to an emerging markets recovery that has been even stronger than the rebound in developed market equities. First, China passed a very large fiscal and monetary stimulus package that successfully stimulated domestic demand. Second, emerging market economies were better positioned than in previous global crises. Because their financial systems were solvent, emerging market economies could reduce interest rates aggressively without weakening their currencies. Lower interest rates supported domestic demand, helping the economies stave off global recessionary pressures. Finally, in March, the G-20 (a group of finance ministers and central bank governors from developed and emerging market countries) made clear that they were not going to allow the financial collapse of Central and Eastern Europe -- a particularly vulnerable emerging market region due to weaker banking systems. Rising commodity prices (copper, nickel, iron ore, oil) in 2009 further benefited commodity producing markets such as Brazil, Russia and South Africa. The weaker U.S. dollar, relative strength of emerging market currencies, benign domestic inflation and improved current account positioning all made emerging markets more attractive to foreign investors in the latter part of the fiscal year. - -------------------------------------------------------------------------------- 6 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- The Fund benefited from its exposure to emerging Europe, the Middle East and Africa, due mainly to an overweight and good stock selection in Russia, the region's best performer for the period. Also, the Fund was underweight in South Africa, which did not perform well. In Latin America, the Fund benefited from being overweight, relative to the MSCI Emerging Markets Index, but this was offset by unfavorable stock selection. Stock selection in Asia also detracted from relative return, though being underweight in Asia was advantageous. In terms of sector contributions, positioning in the consumer discretionary sector had the largest positive effect on return relative to the MSCI Emerging Markets Index. Positioning in financials, consumer staples and telecommunication services also added to relative return. The information technology position was the primary detractor. Utilities was another area of weakness. Though the Fund was well-positioned with a smaller utilities weighting than the MSCI Emerging Markets Index, individual holdings performed poorly. Positioning in the health care, materials, energy and industrials sectors also detracted. At the beginning of the Fund's fiscal year and at the start of calendar year 2009, there was little indication that emerging markets would rebound as TOP TEN HOLDINGS (at Oct. 31, 2009; % of portfolio assets) - ---------------------------------------------------------------------
Vale ADR (Brazil) 3.9% - ------------------------------------------------ Petroleo Brasileiro ADR (Brazil) 3.6% - ------------------------------------------------ Samsung Electronics (South Korea) 3.3% - ------------------------------------------------ China Mobile (Hong Kong) 2.2% - ------------------------------------------------ China Life Insurance Series H (China) 2.1% - ------------------------------------------------ Itau Unibanco Holding (Brazil) 2.0% - ------------------------------------------------ Hon Hai Precision Industry (Taiwan) 2.0% - ------------------------------------------------ China Construction Bank Series H (China) 1.8% - ------------------------------------------------ Cyrela Brazil Realty (Brazil) 1.7% - ------------------------------------------------ Lojas Renner (Brazil) 1.7% - ------------------------------------------------
Excludes cash & cash equivalents. For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- strongly as they did. In retrospect, the Fund would have benefited if we had acted more quickly to position the portfolio for a strong recovery. In fact, performance relative to the MSCI Emerging Markets Index improved as we shifted the portfolio toward a more cyclical positioning. However, we were concerned that stresses on the global financial system would spill into the emerging markets and that some countries would not weather the difficulties as well as they ultimately did. We believe it was prudent to take a defensive approach to protect capital in an unprecedented global crisis. The Fund delivered a strong absolute return, similar to that of its peers during the period. The defensive positioning explains why it lagged the MSCI Emerging Markets Index. CHANGES TO THE FUND'S PORTFOLIO We made no significant changes to the portfolio's regional composition. The portfolio's weighting in Latin America was larger than that of the MSCI Emerging Markets Index, while weightings in emerging Europe, Middle East and Africa and in Asia were smaller. At the margin, we reduced exposure in Asia, relative to the MSCI Emerging Markets Index, while increasing relative exposure to Latin America and slightly reducing exposure to emerging Europe, the Middle East and Africa. We also reduced the Fund's cash position as the global crisis subsided. We made more notable changes to sector allocations. We increased the consumer discretionary weighting significantly, moving from a neutral position to an overweight, relative to the MSCI Emerging Markets Index. We also moved the financials position to an overweight. We increased the materials weighting, but it was still smaller than the MSCI Emerging Markets Index at fiscal year end. We reduced the overweight in health care stocks, making the position smaller than that of the MSCI Emerging Markets Index. We reduced the technology allocation to an underweight as well. The portfolio is now positioned for a cyclical recovery in domestic economic activity within the emerging markets. Examples of stocks we believe can perform well in this environment include developer CYRELA BRAZIL REALTY, department store chain LOJAS RENNER and shopping mall developer MULTIPLAN, all in Brazil. The portfolio also holds X5 RETAIL GROUP, a discount retailer in Russia and ARCELIK, a white goods - -------------------------------------------------------------------------------- 8 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- manufacturer in Turkey. Arcelik makes products such as ovens, refrigerators and televisions and is benefiting as European consumers trade down to lower priced brands. On a country basis, the Fund's allocations to Russia, Brazil and Turkey are larger than those of the benchmark. Economic activity in Russia has increased in the wake of higher oil prices, the devaluation of the ruble and lower interest rates. Though the Russian equity market recovered strongly in the latter part of the fiscal year, there are still a number of companies that we believe are attractively valued. We think Brazil's economy will also grow strongly 2009-2010 given the commodity price recovery, lower interest rates and the Brazilian currency remaining sound. Turkey offers excellent opportunities, in our view, because the financial system is very well capitalized, interest rates are down significantly and loan growth is high, which we believe should lead to increased domestic economic activity. In keeping with the overall underweight in Asia, the portfolio's weightings in South Korea, China and Taiwan were smaller than those of the MSCI Emerging Markets Index at fiscal year end. South Korea and Taiwan's markets are typically dependent on U.S. and global consumers. We prefer companies and countries that have exposure to emerging market consumers. In China, many of the companies we look at seem relatively expensive. We think China's economic growth will be strong, but we see better investment opportunities in the countries China must import from in order to sustain its growth. The Fund benefited from its exposure to emerging Europe, the Middle East and Africa, due mainly to an overweight and good stock selection in Russia, the region's best performer for the period. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 9 MANAGER COMMENTARY (continued) ------------------------------------------------- OUR FUTURE STRATEGY Our outlook for the emerging market asset class is very favorable. Earnings forecasts for 2010 are already strong and, compared to results following previous crises, they actually appear conservative to us. We anticipate that earnings forecasts across the emerging markets could rise. We believe emerging markets are at the beginning of a multi-year cycle in loan and consumer spending growth and that their economic growth will outpace growth in the developed world. Despite recent sharp gains, price-to-earnings ratios on emerging market equities are at significant discounts to their five-year average, indicating there is room for further equity appreciation. We are cognizant of the possibility that the very factors responsible for our favorable outlook -- historically low interest rates, significant capital inflows, stronger domestic economic activity and equity market appreciation -- could put emerging markets at risk of higher inflation and a "bubble" environment. We are watching closely to see if growth will be too strong, but we think the emerging markets are a long way from that. In the near term, we are focused on companies that can benefit from a cyclical recovery. - -------------------------------------------------------------------------------- 10 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- (PHOTO -Julian Thompson) (PHOTO - Jules Mort) Julian Thompson, Ph.D. Jules Mort Portfolio Manager Deputy Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the RiverSource Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the RiverSource Family of Funds. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 11 THE FUND'S LONG-TERM PERFORMANCE ---------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in Threadneedle Emerging Markets Fund Class A shares (from 11/1/99 to 10/31/09) as compared to the performance of the MSCI Emerging Markets Index and the Lipper Emerging Markets Funds Index. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum initial sales charge of 5.75%, while such charges are not reflected in the performance of the indices. Returns for the Fund include the reinvestment of any distributions paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The table below and the chart on the facing page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary or visiting riversource.com/funds. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS - --------------------------------------------------------------------------------
Results at Oct. 31, 2009 1 YEAR 3 YEARS 5 YEARS 10 YEARS THREADNEEDLE EMERGING MARKETS FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $14,706 $10,443 $18,977 $24,111 - ------------------------------------------------------------------------------------------ Average annual total return +47.06% +1.46% +13.67% +9.20% - ------------------------------------------------------------------------------------------ MSCI EMERGING MARKETS INDEX(1) Cumulative value of $10,000 $16,463 $12,133 $22,073 $29,647 - ------------------------------------------------------------------------------------------ Average annual total return +64.63% +6.66% +17.16% +11.48% - ------------------------------------------------------------------------------------------ LIPPER EMERGING MARKETS FUNDS INDEX(2) Cumulative value of $10,000 $15,689 $10,960 $19,617 $28,224 - ------------------------------------------------------------------------------------------ Average annual total return +56.89% +3.10% +14.43% +10.93% - ------------------------------------------------------------------------------------------
Results for other share classes can be found on page 3. - -------------------------------------------------------------------------------- 12 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN THREADNEEDLE EMERGING MARKETS FUND LINE GRAPH)
THREADNEEDLE EMERGING MARKETS FUND CLASS A MSCI EMERGING LIPPER EMERGING (INCLUDES SALES MARKETS MARKETS FUNDS CHARGE) INDEX(1) INDEX(2) --------------------- ---------------- ------------------ 10/99 $ 9,425 $10,000 $10,000 1/00 12,184 12,359 12,902 4/00 11,391 11,408 11,876 7/00 10,559 10,719 11,320 10/00 9,086 9,112 9,572 1/01 9,275 9,688 10,066 4/01 7,972 8,450 8,829 7/01 7,575 7,846 8,360 10/01 6,970 6,974 7,445 1/02 8,406 8,595 9,048 4/02 8,917 9,322 9,877 7/02 7,632 7,840 8,393 10/02 7,556 7,562 7,976 1/03 7,745 7,780 8,254 4/03 7,575 8,011 8,551 7/03 8,708 9,644 10,068 10/03 10,314 11,249 11,834 1/04 11,572 12,646 13,403 4/04 11,266 12,304 13,074 7/04 10,713 11,902 12,695 10/04 11,973 13,431 14,388 1/05 13,655 15,430 16,436 4/05 13,483 15,261 16,190 7/05 15,325 17,501 18,435 10/05 15,785 18,043 19,132 1/06 20,509 23,019 24,227 4/06 21,969 24,859 26,141 7/06 19,779 22,545 23,649 10/06 21,759 24,434 25,752 1/07 24,442 27,154 28,556 4/07 25,881 29,386 30,758 7/07 28,762 34,030 34,758 10/07 36,600 41,129 41,283 1/08 30,121 33,578 34,778 4/08 32,239 36,941 37,222 7/08 28,283 32,638 32,819 10/08 15,451 18,007 17,990 1/09 13,863 16,804 16,161 4/09 17,195 21,162 20,061 7/09 22,366 27,229 26,124 10/09 24,111 29,647 28,224
(1) The Morgan Stanley Capital International (MSCI) Emerging Markets Index, an unmanaged market capitalization-weighted index, is designed to measure equity market performance in the global emerging markets. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Emerging Markets Funds Index includes the 30 largest emerging markets funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Oct. 31, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 14 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED MAY 1, 2009(a) OCT. 31, 2009 THE PERIOD(b) EXPENSE RATIO - ------------------------------------------------------------------------------------------- Class A - ------------------------------------------------------------------------------------------- Actual(c) $1,000 $1,402.20 $10.72 1.78% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.14 $ 9.00 1.78% - ------------------------------------------------------------------------------------------- Class B - ------------------------------------------------------------------------------------------- Actual(c) $1,000 $1,396.30 $15.32 2.55% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,012.28 $12.86 2.55% - ------------------------------------------------------------------------------------------- Class C - ------------------------------------------------------------------------------------------- Actual(c) $1,000 $1,397.60 $15.33 2.55% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,012.28 $12.86 2.55% - ------------------------------------------------------------------------------------------- Class I - ------------------------------------------------------------------------------------------- Actual(c) $1,000 $1,405.60 $ 7.60 1.26% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.75 $ 6.38 1.26% - ------------------------------------------------------------------------------------------- Class R2 - ------------------------------------------------------------------------------------------- Actual(d) $1,000 $1,043.10 $ 5.07 2.06% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,007.09 $ 4.98 2.06% - ------------------------------------------------------------------------------------------- Class R4 - ------------------------------------------------------------------------------------------- Actual(c) $1,000 $1,402.40 $ 9.70 1.61% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.00 $ 8.14 1.61% - -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 15 FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED MAY 1, 2009(a) OCT. 31, 2009 THE PERIOD(b) EXPENSE RATIO - ------------------------------------------------------------------------------------------- Class R5 - ------------------------------------------------------------------------------------------- Actual(c) $1,000 $1,404.20 $ 7.90 1.31% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.50 $ 6.63 1.31% - -------------------------------------------------------------------------------------------
(a) The beginning account values for Class R2 are as of Aug. 3, 2009 (when shares of this class became publicly available) for actual expense calculations, and as of May 1, 2009 for hypothetical expense calculations. (b) Expenses for Classes A, B, C, I, R4 and R5 are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one- half year period). Actual expenses for Class R2 are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 88/365 (to reflect the period from Aug. 3, 2009 to Oct. 31, 2009). Hypothetical expenses for Class R2 are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). (c) Based on the actual return for the six months ended Oct. 31, 2009: +40.22% for Class A, +39.63% for Class B, +39.76% for Class C, +40.56% for Class I, +40.24% for Class R4 and +40.42% for Class R5. (d) Based on the actual return for the period from Aug. 3, 2008 (when shares became publicly available) to Oct. 31, 2009: +4.31% for Class R2. - -------------------------------------------------------------------------------- 16 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 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 FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Fiscal year ended Oct. 31, 2009
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Qualified Dividend Income for individuals.................... 81.67% Dividends Received Deductions for corporations............... 0.27% U.S. Government Obligations.................................. 0.00% Foreign taxes Paid........................................... $897,576 Foreign Source Income........................................ $6,322,810
The Fund designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. - -------------------------------------------------------------------------------- 58 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. The RiverSource Family of Funds that each Board member oversees consists of 132 funds, which includes 100 RiverSource funds and 32 Seligman funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 2006 Attorney Minneapolis, MN 55402 Age 55 - ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Family of Funds, 1999-2006; former None 901 S. Marquette Ave. 1999 Governor of Minnesota Minneapolis, MN 55402 Age 75 - ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 2007 Leadership (consulting company) Minneapolis, MN 55402 Age 55 - ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley University Age 59 - ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 1985 Minneapolis, MN 55402 Age 74 - ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 2005 Insurance Minneapolis, MN 55402 Age 74 - ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. since 2007, College Inc. (manufactures Minneapolis, MN 55402 Board member since irrigation systems) Age 70 2002 - ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 59 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ John F. Maher Board member since Retired President and Chief Executive Officer and None 901 S. Marquette Ave. 2008 former Director, Great Western Financial Corporation Minneapolis, MN 55402 (financial services), 1986-1997 Age 66 - ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 2004 real estate and asset management company) Minneapolis, MN 55402 Age 57 - ------------------------------------------------------------------------------------------------------------------------------ Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc. 901 S. Marquette Ave. 2008 President and General Counsel, Automotive Legal (digital imaging); Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil Age 68 and gas exploration and production); OGE Energy Corp. (energy and energy services) - ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Forester Pharmaceuticals, Minneapolis, MN 55402 Biotech Inc. Age 65 (biotechnology); Healthways, Inc. (health management programs) - ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 60 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. since 2005; Financial Center Vice President since President, Chairman of the Board and Chief Investment Minneapolis, MN 55474 2002 Officer, RiverSource Investments, LLC since 2001; Age 49 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; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc., 2001-2005 - ------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments or Ameriprise Financial. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; or visiting riversource.com/funds (for RiverSource and Threadneedle funds) or seligman.com (for Seligman funds). The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management, 172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC Center and Director and Vice President -- Asset Management, Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc. Age 44 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 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 61 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income, 172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 45 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 - -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Chief Administrative Officer, RiverSource Investments, 5228 Ameriprise Financial 2006 LLC since 2009; Vice President -- Asset Management and Center Minneapolis, MN Trust Company Services, RiverSource Investments, LLC, 55474 2006-2009; Vice President -- Operations and Compliance, Age 44 RiverSource Investments, LLC, 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 and of Minneapolis, MN 55474 RiverSource Fund Distributors, Inc. since 2008 Age 54 - -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management, 5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel, Center Secretary since 2006 RiverSource Distributors, Inc. and Chief Legal Officer Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC Age 50 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 Investments, LLC, 100 Park Avenue Officer since 2009 Ameriprise Certificate Company and RiverSource Service New York, NY 10010 Corporation since 2009; Chief Compliance Officer for Age 58 each of the Seligman funds since 2004; Anti-Money Laundering Prevention Officer and Identity Theft Prevention Officer for each of the Seligman funds since 2008; 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 Financial, 2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer, Center since 2004 Ameriprise Financial, Inc. since 2004; Compliance Minneapolis, MN 55474 Director, Ameriprise Financial, Inc., 2004-2008 Age 45 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 62 THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting riversource.com/funds (for RiverSource and Threadneedle funds) or seligman.com (for Seligman funds); or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2009 ANNUAL REPORT 63 THREADNEEDLE EMERGING MARKETS FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. (THREADNEEDLE LOGO) (C)2009 RiverSource Investments, LLC. S-6354 W (12/09)
Annual Report and Prospectus (THREADNEEDLE LOGO) THREADNEEDLE GLOBAL EQUITY FUND ANNUAL REPORT FOR THE PERIOD ENDED OCTOBER 31, 2009 (Prospectus also enclosed) THREADNEEDLE GLOBAL EQUITY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. This annual report includes a prospectus that describes in detail the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money. (SINGLE STRATEGY FUNDS ICON)
TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Manager Commentary................. 5 The Fund's Long-term Performance... 12 Fund Expenses Example.............. 14 Portfolio of Investments........... 17 Statement of Assets and Liabilities...................... 24 Statement of Operations............ 26 Statements of Changes in Net Assets........................... 28 Financial Highlights............... 30 Notes to Financial Statements...... 39 Report of Independent Registered Public Accounting Firm........... 57 Federal Income Tax Information..... 59 Board Members and Officers......... 60 Proxy Voting....................... 65
RIVERSOURCE FAMILY OF FUNDS Threadneedle Funds are a part of the RiverSource Family of Funds that includes funds branded "RiverSource," "RiverSource Partners," "Seligman" and "Threadneedle." These funds share the same Board of Directors/Trustees and officers. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY - -------------------------------------------------------------------------------- > Threadneedle Global Equity Fund (the Fund) Class A shares advanced 19.39% (excluding sales charge) for the 12 months ended Oct. 31, 2009. > The Fund underperformed its benchmark, the Morgan Stanley Capital International (MSCI) All Country World Index, which advanced 23.42% for the period. > The Lipper Global Funds Index, representing the Fund's peer group, advanced 19.50% over the same time frame. ANNUALIZED TOTAL RETURNS (for period ended Oct. 31, 2009) - --------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS - --------------------------------------------------------------------- Threadneedle Global Equity Fund Class A (excluding sales charge) +19.39% -5.74% +4.24% -0.78% - --------------------------------------------------------------------- MSCI All Country World Index (unmanaged) +23.42% -4.39% +4.27% +1.39% - --------------------------------------------------------------------- Lipper Global Funds Index +19.50% -4.75% +3.74% +2.10% - ---------------------------------------------------------------------
(See "The Fund's Long-term Performance" for Index descriptions) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 1(800) 221-2450. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in fees and expenses. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. - -------------------------------------------------------------------------------- 2 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT OCT. 31, 2009 SINCE Without sales charge 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION* Class A (inception 5/29/90) +19.39% -5.74% +4.24% -0.78% N/A - --------------------------------------------------------------------------- Class B (inception 3/20/95) +18.39% -6.49% +3.46% -1.55% N/A - --------------------------------------------------------------------------- Class C (inception 6/26/00) +18.43% -6.44% +3.48% N/A -3.25% - --------------------------------------------------------------------------- Class I (inception 8/1/08) +20.21% N/A N/A N/A -12.63% - --------------------------------------------------------------------------- Class R2 (inception 12/11/06) +19.13% N/A N/A N/A -7.37% - --------------------------------------------------------------------------- Class R3 (inception 12/11/06) +19.63% N/A N/A N/A -7.11% - --------------------------------------------------------------------------- Class R4 (inception 3/20/95) +19.72% -5.57% +4.45% -0.61% N/A - --------------------------------------------------------------------------- Class R5 (inception 12/11/06) +20.20% N/A N/A N/A -6.80% - --------------------------------------------------------------------------- Class W (inception 12/1/06) +19.70% N/A N/A N/A -6.87% - --------------------------------------------------------------------------- With sales charge Class A (inception 5/29/90) +12.52% -7.59% +3.02% -1.37% N/A - --------------------------------------------------------------------------- Class B (inception 3/20/95) +13.48% -7.44% +3.11% -1.55% N/A - --------------------------------------------------------------------------- Class C (inception 6/26/00) +17.43% -6.44% +3.48% N/A -3.25% - ---------------------------------------------------------------------------
Class A share performance reflects the maximum initial sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second year 4%; third and fourth years 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R2, Class R3, Class R4, Class R5 and Class W shares. Class I, Class R2, Class R3, Class R4 and Class R5 are available to qualifying institutional investors only. Class W shares are offered through qualifying discretionary accounts. * For classes with less than 10 years performance. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX - --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. - -------------------------------------------------------------------------------- 4 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT MANAGER COMMENTARY ------------------------------------------------------------- Threadneedle Global Equity Fund (the Fund) portfolio managers Stephen Thornber and Andrew Holliman of Threadneedle International Limited (Threadneedle) discuss the Fund's results and positioning for the fiscal year ended Oct. 31, 2009. Threadneedle, an indirect wholly-owned subsidiary of Ameriprise Financial, Inc., is the subadviser to the Fund. Dear Shareholders, Threadneedle Global Equity Fund Class A shares advanced 19.39% (excluding sales charge) for the 12 months ended Oct. 31, 2009. The Fund underperformed its benchmark, the Morgan Stanley Capital International (MSCI) All Country World Index (MSCI All Country World Index), which advanced 23.42% for the period. The Lipper Global Funds Index, representing the Fund's peer group, advanced 19.50% over the same time frame. SIGNIFICANT PERFORMANCE FACTORS At the start of the fiscal year, the credit crisis was reaching its peak and stocks were falling on deteriorating economic conditions and fear of the credit crisis. Weakness in the equity markets persisted through February before reversing in March 2009. During the strong recovery, stocks that performed poorly during the market crisis came roaring back and stocks that held up well suffered from profit-taking.
COUNTRY BREAKDOWN(1) (at Oct. 31, 2009; % of portfolio assets) - ------------------------------------------------ Australia 1.1% - ------------------------------------------------ Belgium 1.2% - ------------------------------------------------ Bermuda 0.5% - ------------------------------------------------ Brazil 2.4% - ------------------------------------------------ Canada 1.7% - ------------------------------------------------ China 1.0% - ------------------------------------------------ Denmark 0.8% - ------------------------------------------------ Finland 0.5% - ------------------------------------------------ France 2.4% - ------------------------------------------------ Germany 3.8% - ------------------------------------------------ Hong Kong 3.2% - ------------------------------------------------ India 0.9% - ------------------------------------------------ Indonesia 1.4% - ------------------------------------------------ Ireland 0.9% - ------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 5 MANAGER COMMENTARY (continued) -------------------------------------------------
COUNTRY BREAKDOWN(1) (at Oct. 31, 2009; % of portfolio assets) - ------------------------------------------------ Japan 6.4% - ------------------------------------------------ Luxembourg 0.7% - ------------------------------------------------ Mexico 2.3% - ------------------------------------------------ Netherlands 1.8% - ------------------------------------------------ Portugal 0.8% - ------------------------------------------------ Singapore 0.8% - ------------------------------------------------ South Korea 2.9% - ------------------------------------------------ Spain 1.7% - ------------------------------------------------ Switzerland 6.2% - ------------------------------------------------ Taiwan 1.1% - ------------------------------------------------ United Kingdom 11.6% - ------------------------------------------------ United States 41.4% - ------------------------------------------------ Other(2) 0.5% - ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan) as of Oct. 31, 2009. The Fund's composition is subject to change. (2) Cash & Cash Equivalents. TOP TEN HOLDINGS (at Oct. 31, 2009; % of portfolio assets) - ---------------------------------------------------------------------
JPMorgan Chase & Co (United States) 2.0% - ------------------------------------------------ Nestle (Switzerland) 2.0% - ------------------------------------------------ IBM (United States) 1.9% - ------------------------------------------------ HSBC Holdings (United Kingdom) 1.8% - ------------------------------------------------ Google Cl A (United States) 1.7% - ------------------------------------------------ Tullow Oil (United Kingdom) 1.7% - ------------------------------------------------ America Movil ADR Series L (Mexico) 1.6% - ------------------------------------------------ Johnson & Johnson (United States) 1.6% - ------------------------------------------------ Apple (United States) 1.6% - ------------------------------------------------ BG Group (United Kingdom) 1.5% - ------------------------------------------------
Excludes cash & cash equivalents. For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. - -------------------------------------------------------------------------------- 6 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- In our view, the rising market didn't reflect continuing economic weakness, and stock prices were driven by hope and sentiment rather than fundamental value and future prospects. This presented a challenge for us because the Fund's strategy is to invest in companies we expect to do well over a two to three-year period. By the start of the fiscal year, we had already positioned the Fund defensively. Though we certainly didn't foresee the full magnitude of the crisis, we anticipated problems related to the sub-prime credit market and had prepared the portfolio for a difficult environment. We reduced exposure to Asian and emerging market equities and focused on high quality companies with strong balance sheets in areas such as consumer staples, health care and large-cap technology. The defensive positioning, though highly effective early in the fiscal year, prevented the Fund from fully participating in the subsequent recovery. Asian and emerging market equities, where the portfolio was underweight, recovered more quickly than expected. Also, the market shunned the high quality, less cyclical companies held by the Fund in favor of lower quality companies whose price gains were driven by their cyclicality or how beaten down they had been in the downturn. Though the Fund's defensive positioning was primarily responsible for its underperformance, relative to the MSCI All Country World Index, we believe this approach was prudent because we saw little evidence to justify the strong market rally. On the positive side, the Fund benefited from its energy positioning. The portfolio was underweight in the sector, which fell sharply and then recovered strongly, but stock selection was quite strong. Holdings such as Brazil's PETROBRAS, the U.K.'s BG GROUP and TULLOW OIL benefited from discoveries during the period. Having a smaller utilities position than the MSCI All Country World Index was advantageous as utilities were generally left behind in the market rally. The Fund also benefited from effective stock selection among industrial stocks, even though the sector itself made little headway during the period. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- Regionally, the Fund benefited from its European allocation, which was larger than that of the MSCI All Country World Index. Though the European market did not perform particularly well, the Fund's advantage came from strong stock selection. SAMSUNG ELECTRONICS, a global leader in semiconductors and mobile headsets, was an individual contributor to relative return. Samsung is a good example of a company using its financial strength to take market share from weaker competitors. The largest detractor from relative performance was the Fund's weighting in the materials sector, which was smaller than that of the MSCI All Country World Index. Materials stocks benefited from strong Asian demand and the market's preference for beaten down, cyclical stocks. Within the materials sector, the Fund's holdings of BARRICK GOLD added to relative return as the price of gold rose 40% during 12-month period. People flocked to gold for security during the downturn, and when the market rallied, gold remained strong due to concerns about high government spending. The Fund's emphasis on health care and consumer staples stocks was disadvantageous. These sectors performed poorly in the latter part of the fiscal year when investors moved assets into more cyclical areas. In the health care sector, SCHERING PLOUGH was a key contributor as Merck paid a premium price to acquire it. However, other high quality health care holdings like ROCHE, NOVARTIS and GILEAD SCIENCES suffered as investors sold safer, solid companies in pursuit of more aggressive holdings. Uncertainty about possible U.S. health care reform also affected these stocks. Additional detractors from relative performance included LOCKHEED MARTIN and LLOYD'S TSB. We consider Lockheed Martin a solid, long-term company with a strong balance sheet, but the U.S. defense contractor suffered from the market's move to cyclical opportunities and from concern about defense spending under the Obama administration. We bought Lloyd's to gain financial sector exposure while avoiding exposure to investment banking and riskier derivative assets. Unfortunately, Lloyd's fell with the entire financial sector on fear of rising bad debts. Under pressure from the U.K. government, Lloyd's - -------------------------------------------------------------------------------- 8 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- bought a troubled competitor that exposed them to investment banking and the very type of assets we wanted to avoid. We sold the stock, but it was still a key detractor for the fiscal period. CHANGES TO THE FUND'S PORTFOLIO We maintained the Fund's defensive positioning for most of the period and then, in the final months of the year, we moved the portfolio to a more neutral stance, relative to the MSCI All Country World Index. In addition to continued emphasis on companies that we believe will be long-term industry winners, we added opportunistic exposure to companies that we believe offer shorter term potential based on their sensitivity to economic recovery. Initially, the Fund's financials position was much smaller than that of the MSCI All Country World Index. We added to financials through the year, with particular emphasis on Asian property companies and banks in India, Taiwan and China. Asian banks are generally not involved in investment banking and have less exposure to the derivative assets that derailed banks in developed regions. On the positive side, they are exposed to faster growing regions where expanding personal wealth creates greater need for banking services. We also invested in financial companies in the developed world, including HARTFORD FINANCIAL and CITIGROUP in the U.S. and FORTIS and ING in Europe. These companies appeared close to collapse, but now have government support, improved capital positions and stronger balance sheets. We added to the materials and industrials sectors, two areas poised to benefit from economic recovery and reduced allocations to consumer Asia and the emerging market economies continue on their growth trend and we see small signs that the developed economies are bottoming out. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 9 MANAGER COMMENTARY (continued) ------------------------------------------------- staples and health care, promising long-term sectors that are not currently being rewarded by the market. Geographically, the Fund's weightings in the U.S., Asia and emerging markets were about equal to those of the MSCI All Country World Index at fiscal year end. The portfolio had a larger position in Europe and a smaller weighting in Japan compared to the MSCI All Country World Index. The Fund's positions in the technology and financials sectors were larger than those of the MSCI All Country World Index, while positions in industrials, utilities and consumer-related sectors were smaller. OUR FUTURE STRATEGY At the start of the Fund's fiscal year, the financial system was in disarray and the world appeared to be headed toward a depression. Governments, however, acted quickly and decisively, creating a floor for the markets and the global economy. Now the deepest fears seem to be past and most companies appear to be on improved footing. Asia and the emerging market economies continue on their growth trend and we see small signs that the developed economies are bottoming out. Still, our expectations are more cautious than the general consensus. We anticipate subdued economic activity and, despite strong performing equity markets, we still see challenges to consumer confidence and corporate earnings. Governments will have to pay for their high spending through taxes or program cuts and that, along with unemployment and low interest on savings, is likely to affect consumer spending and, by extension, corporate profits. For the past six months or so, investors have bought recovery and cyclical stocks at any price. In the next market phase, we think investors may settle down, focus on valuations and look for companies that can be long-term winners, rather than just survivors. We believe the Fund's focus on individual stock fundamentals should add value in such an environment. - -------------------------------------------------------------------------------- 10 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- (PHOTO - STEPHEN THORNBER) (PHOTO - ANDREW HOLLIMAN, CFA(R)) Stephen Thornber Andrew Holliman, CFA Portfolio Manager Deputy Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the RiverSource Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the RiverSource Family of Funds. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 11 THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in Threadneedle Global Equity Fund Class A shares (from 11/1/99 to 10/31/09) as compared to the performance of the Morgan Stanley Capital International (MSCI) All Country World Index and the Lipper Global Funds Index. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum initial sales charge of 5.75%, while such charges are not reflected in the performance of the indices. Returns for the Fund include the reinvestment of any distributions paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The table below and the chart on the facing page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary or visiting riversource.com/funds. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS - --------------------------------------------------------------------------------
Results at Oct. 31, 2009 1 YEAR 3 YEARS 5 YEARS 10 YEARS THREADNEEDLE GLOBAL EQUITY FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $11,252 $7,892 $11,602 $8,717 - ------------------------------------------------------------------------------------------ Average annual total return +12.52% -7.59% +3.02% -1.37% - ------------------------------------------------------------------------------------------ MSCI ALL COUNTRY WORLD INDEX(1) Cumulative value of $10,000 $12,342 $8,739 $12,323 $11,480 - ------------------------------------------------------------------------------------------ Average annual total return +23.42% -4.39% +4.27% +1.39% - ------------------------------------------------------------------------------------------ LIPPER GLOBAL FUNDS INDEX(2) Cumulative value of $10,000 $11,950 $8,642 $12,013 $12,315 - ------------------------------------------------------------------------------------------ Average annual total return +19.50% -4.75% +3.74% +2.10% - ------------------------------------------------------------------------------------------
Results for other share classes can be found on page 3. - -------------------------------------------------------------------------------- 12 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN THREADNEEDLE GLOBAL EQUITY FUND LINE GRAPH)
THREADNEEDLE GLOBAL EQUITY FUND CLASS A MSCI ALL (INCLUDES SALES COUNTRY WORLD LIPPER GLOBAL CHARGE) INDEX(1) FUNDS INDEX(2) ------------------- ------------------ -------------- 10/99 $ 9,425 $10,000 $10,000 1/00 10,968 10,567 11,394 4/00 11,104 10,801 11,781 7/00 10,787 10,563 11,643 10/00 9,873 10,088 11,192 1/01 9,287 9,860 11,029 4/01 8,121 9,036 10,163 7/01 7,435 8,525 9,573 10/01 6,433 7,547 8,542 1/02 6,735 7,865 8,862 4/02 6,597 7,901 9,003 7/02 5,651 6,806 7,748 10/02 5,377 6,523 7,410 1/03 5,198 6,361 7,196 4/03 5,473 6,781 7,537 7/03 5,966 7,476 8,327 10/03 6,337 8,170 9,083 1/04 6,805 8,972 10,016 4/04 6,668 8,880 9,923 7/04 6,586 8,846 9,746 10/04 7,079 9,316 10,251 1/05 7,689 9,996 11,007 4/05 7,578 9,907 10,873 7/05 8,227 10,586 11,617 10/05 8,600 10,701 11,801 1/06 9,881 11,934 13,199 4/06 10,268 12,589 13,810 7/06 9,811 12,189 13,272 10/06 10,407 13,137 14,249 1/07 11,174 13,961 15,208 4/07 11,621 14,813 15,945 7/07 12,053 15,000 16,081 10/07 13,407 16,391 17,278 1/08 11,518 14,238 15,212 4/08 11,813 14,877 15,638 7/08 10,510 13,533 14,204 10/08 7,301 9,302 10,305 1/09 6,614 8,249 9,270 4/09 7,080 9,023 9,895 7/09 8,296 10,754 11,667 10/09 8,717 11,480 12,315
(1) The Morgan Stanley Capital International (MSCI) All Country World Index, an unmanaged index of equity securities, is designed to measure equity market performance in the global developed and emerging markets. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Global Funds Index includes the 30 largest global funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Oct. 31, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 14 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED MAY 1, 2009 OCT. 31, 2009 THE PERIOD(a) EXPENSE RATIO - ------------------------------------------------------------------------------------------ Class A - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,231.10 $ 8.00 1.43% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,017.90 $ 7.23 1.43% - ------------------------------------------------------------------------------------------ Class B - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,225.10 $12.27 2.20% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,014.04 $11.11 2.20% - ------------------------------------------------------------------------------------------ Class C - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,224.50 $12.27 2.20% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,014.04 $11.11 2.20% - ------------------------------------------------------------------------------------------ Class I - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,233.00 $ 4.81 .86% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.76 $ 4.36 .86% - ------------------------------------------------------------------------------------------ Class R2 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,227.40 $ 9.49 1.70% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.55 $ 8.59 1.70% - ------------------------------------------------------------------------------------------ Class R3 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,231.10 $ 8.11 1.45% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,017.80 $ 7.33 1.45% - ------------------------------------------------------------------------------------------ Class R4 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,230.80 $ 6.54 1.17% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.20 $ 5.92 1.17% - ------------------------------------------------------------------------------------------ Class R5 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,233.80 $ 5.21 .93% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.41 $ 4.71 .93% - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 15 FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED MAY 1, 2009 OCT. 31, 2009 THE PERIOD(a) EXPENSE RATIO - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ Class W - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,230.80 $ 7.55 1.35% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.30 $ 6.83 1.35% - ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended Oct. 31, 2009: +23.11% for Class A, +22.51% for Class B, +22.45% for Class C, +23.30% for Class I, +22.74% for Class R2, +23.11% for Class R3, +23.08% for Class R4, +23.38% for Class R5 and +23.08% for Class W. - -------------------------------------------------------------------------------- 16 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 (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 FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Fiscal year ended Oct. 31, 2009
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Qualified Dividend Income for individuals.................... 100.00% Dividends Received Deduction for corporations................ 77.49% U.S. Government Obligations.................................. 0.00% Foreign Tax Credit........................................... $452,913 Foreign Source Income........................................ $3,931,631
The Fund designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 59 BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. The RiverSource Family of Funds that each Board member oversees consists of 132 funds, which includes 100 RiverSource funds and 32 Seligman funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 2006 Attorney Minneapolis, MN 55402 Age 55 - ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Family of Funds, 1999-2006; former None 901 S. Marquette Ave. 1999 Governor of Minnesota Minneapolis, MN 55402 Age 75 - ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 2007 Leadership (consulting company) Minneapolis, MN 55402 Age 55 - ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley University Age 59 - ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 1985 Minneapolis, MN 55402 Age 74 - ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 2005 Insurance Minneapolis, MN 55402 Age 74 - ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. since 2007, College Inc. (manufactures Minneapolis, MN 55402 Board member since irrigation systems) Age 70 2002 - ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 60 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ John F. Maher Board member since Retired President and Chief Executive Officer and None 901 S. Marquette Ave. 2008 former Director, Great Western Financial Corporation Minneapolis, MN 55402 (financial services), 1986-1997 Age 66 - ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 2004 real estate and asset management company) Minneapolis, MN 55402 Age 57 - ------------------------------------------------------------------------------------------------------------------------------ Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc. 901 S. Marquette Ave. 2008 President and General Counsel, Automotive Legal (digital imaging); Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil Age 68 and gas exploration and production); OGE Energy Corp. (energy and energy services) - ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Forester Pharmaceuticals, Minneapolis, MN 55402 Biotech Inc. Age 65 (biotechnology); Healthways, Inc. (health management programs) - ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 61 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. since 2005; Financial Center Vice President since President, Chairman of the Board and Chief Investment Minneapolis, MN 55474 2002 Officer, RiverSource Investments, LLC since 2001; Age 49 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; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc., 2001-2005 - ------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments or Ameriprise Financial. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; or visiting riversource.com/funds (for RiverSource and Threadneedle funds) or seligman.com (for Seligman funds). 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 - -------------------------------------------------------------------------------- 62 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management, 172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC Center and Director and Vice President -- Asset Management, Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc. Age 44 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 - -------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income, 172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 45 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 - -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Chief Administrative Officer, RiverSource Investments, 5228 Ameriprise Financial 2006 LLC since 2009; Vice President -- Asset Management and Center Minneapolis, MN Trust Company Services, RiverSource Investments, LLC, 55474 2006-2009; Vice President -- Operations and Compliance, Age 44 RiverSource Investments, LLC, 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 and of Minneapolis, MN 55474 RiverSource Fund Distributors, Inc. since 2008 Age 54 - -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management, 5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel, Center Secretary since 2006 RiverSource Distributors, Inc. and Chief Legal Officer Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC Age 50 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 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 63 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Eleanor T.M. Hoagland Chief Compliance Chief Compliance Officer, RiverSource Investments, LLC, 100 Park Avenue Officer since 2009 Ameriprise Certificate Company and RiverSource Service New York, NY 10010 Corporation since 2009; Chief Compliance Officer for Age 58 each of the Seligman funds since 2004; Anti-Money Laundering Prevention Officer and Identity Theft Prevention Officer for each of the Seligman funds since 2008; 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 Financial, 2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer, Center since 2004 Ameriprise Financial, Inc. since 2004; Compliance Minneapolis, MN 55474 Director, Ameriprise Financial, Inc., 2004-2008 Age 45 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 64 THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT PROXY VOTING ------------------------------------------------------------------ The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2009 ANNUAL REPORT 65 THREADNEEDLE GLOBAL EQUITY FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource Investments employs Threadneedle as a subadviser. Threadneedle(R) mutual funds are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource and Threadneedle are part of Ameriprise Financial, Inc. (THREADNEEDLE LOGO) (C)2009 RiverSource Investments, LLC. S-6334 AH (12/09)
Annual Report and Prospectus (THREADNEEDLE LOGO) THREADNEEDLE GLOBAL EQUITY INCOME FUND ANNUAL REPORT FOR THE PERIOD ENDED OCTOBER 31, 2009 (Prospectus also enclosed) THREADNEEDLE GLOBAL EQUITY INCOME FUND SEEKS TO PROVIDE SHAREHOLDERS WITH A HIGH LEVEL OF CURRENT INCOME AND SECONDARILY, GROWTH OF CAPITAL. This annual report includes a prospectus that describes in detail the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money. (SINGLE STRATEGY FUNDS ICON)
TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Manager Commentary................. 5 The Fund's Long-term Performance... 12 Fund Expenses Example.............. 14 Portfolio of Investments........... 17 Statement of Assets and Liabilities...................... 24 Statement of Operations............ 25 Statements of Changes in Net Assets........................... 27 Financial Highlights............... 29 Notes to Financial Statements...... 37 Report of Independent Registered Public Accounting Firm........... 53 Federal Income Tax Information..... 55 Board Members and Officers......... 56 Proxy Voting....................... 60
RIVERSOURCE FAMILY OF FUNDS Threadneedle Funds are a part of the RiverSource Family of Funds that includes funds branded "RiverSource," "RiverSource Partners," "Seligman" and "Threadneedle." These funds share the same Board of Directors/Trustees and officers. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY - -------------------------------------------------------------------------------- > Threadneedle Global Equity Income Fund Class A shares advanced 20.16% (excluding sales charge) for the 12 months ended Oct. 31, 2009. > The Fund underperformed its benchmark, the Morgan Stanley Capital International (MSCI) All Country World Index, which advanced 23.42% for the period. ANNUALIZED TOTAL RETURNS (for period ended Oct. 31, 2009) - --------------------------------------------------------------------------------
SINCE INCEPTION 1 YEAR 8/1/08 - ---------------------------------------------------------------- Threadneedle Global Equity Income Fund Class A (excluding sales charge) +20.16% -10.06% - ---------------------------------------------------------------- MSCI All Country World Index (unmanaged) +23.42% -11.58% - ----------------------------------------------------------------
(See "The Fund's Long-term Performance" for Index description) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 1(800) 221-2450. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in fees and expenses. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. See the Average Annual Total Returns table for performance of other share classes of the Fund. The index does not reflect the effects of sales charges, expenses and taxes. It is not possible to invest directly in an index. - -------------------------------------------------------------------------------- 2 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT OCT. 31, 2009 SINCE Without sales charge 1 YEAR INCEPTION Class A (inception 8/1/08) +20.16% -10.06% - ---------------------------------------------------------------- Class B (inception 8/1/08) +19.14% -10.72% - ---------------------------------------------------------------- Class C (inception 8/1/08) +19.21% -10.70% - ---------------------------------------------------------------- Class I (inception 8/1/08) +20.53% -9.72% - ---------------------------------------------------------------- Class R2 (inception 8/1/08) +19.63% -10.38% - ---------------------------------------------------------------- Class R3 (inception 8/1/08) +20.04% -10.08% - ---------------------------------------------------------------- Class R4 (inception 8/1/08) +20.26% -9.92% - ---------------------------------------------------------------- Class R5 (inception 8/1/08) +20.47% -9.76% - ---------------------------------------------------------------- With sales charge Class A (inception 8/1/08) +13.26% -14.23% - ---------------------------------------------------------------- Class B (inception 8/1/08) +14.14% -13.53% - ---------------------------------------------------------------- Class C (inception 8/1/08) +18.21% -10.70% - ----------------------------------------------------------------
Class A share performance reflects the maximum initial sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second year 4%; third and fourth years 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R2, Class R3, Class R4 and Class R5 shares. Class I, Class R2, Class R3, Class R4 and Class R5 are available to qualifying institutional investors only. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX - --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. - -------------------------------------------------------------------------------- 4 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT MANAGER COMMENTARY ------------------------------------------------------------- Threadneedle Global Equity Income Fund portfolio managers Stephen Thornber and Jeremy Podger of Threadneedle International Limited (Threadneedle) discuss the Fund's results and positioning for the 12 months ended Oct. 31, 2009. Threadneedle, an indirect wholly-owned subsidiary of Ameriprise Financial, Inc., is the subadviser to the Fund. Dear Shareholders, Threadneedle Global Equity Income Fund Class A shares advanced 20.16% (excluding sales charge) for the 12 months ended Oct. 31, 2009. The Fund underperformed its benchmark, the Morgan Stanley Capital International (MSCI) All Country World Index (MSCI Index), which advanced 23.42% for the period. THE FUND'S CURRENT INVESTMENT STRATEGY At the start of the fiscal year, the credit crisis was reaching its peak and stocks were falling on deteriorating economic conditions and fear of the credit crisis. Weakness in the equity markets persisted through February before reversing in March 2009. A robust rally followed. The past year was particularly challenging for the Fund because its strategy is to invest in larger, defensive companies that pay dividends. These stocks performed well from a price perspective during the first part of the fiscal year, but many companies reduced or eliminated dividends in response to the difficult economic and credit environments. A record number of dividend cuts made it harder to manage the Fund. When the market turned, cyclical companies and beaten down, lower quality firms led the rebound. The Fund had little exposure to these stocks because they generally don't pay much in the way of dividends. Areas that performed well for the Fund included consumer staples, where strong stock selection added value, and emerging markets and Asia where we have still been able to find companies paying good income. In the consumer staples sector, the Fund's holdings of food stocks -- particularly emerging market cola bottlers AMBEV and GRUPO CONTINENTAL -- performed well. The Fund also benefited from its position in NATIONAL AUSTRALIA BANK. Australian banks in general performed well. They had little exposure to the toxic assets that plagued banks in other developed countries, while - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 5 MANAGER COMMENTARY (continued) ------------------------------------------------- having broad exposure to growth in the Asian region. An overweight in Asian property stocks and stock selection in the industrials sector were also advantageous. We took advantage of the credit crisis to purchase three convertible bonds, bonds that pay income and then convert to equities based on certain criteria. We acquired these bonds at very attractive prices and, as credit markets improved, they were revalued closer to their fair value. COUNTRY BREAKDOWN(1) (at Oct. 31, 2009; % of portfolio assets) - ---------------------------------------------------------------------
Australia 4.6% - ------------------------------------------------ Brazil 3.1% - ------------------------------------------------ Canada 1.2% - ------------------------------------------------ China 0.9% - ------------------------------------------------ Denmark 0.4% - ------------------------------------------------ Finland 6.2% - ------------------------------------------------ France 5.3% - ------------------------------------------------ Germany 5.5% - ------------------------------------------------ Greece 0.8% - ------------------------------------------------ Hong Kong 5.6% - ------------------------------------------------ Indonesia 0.7% - ------------------------------------------------ Italy 2.8% - ------------------------------------------------ Japan 4.1% - ------------------------------------------------ Jersey 1.4% - ------------------------------------------------ Mexico 1.1% - ------------------------------------------------ Netherlands 0.9% - ------------------------------------------------ Norway 0.8% - ------------------------------------------------ Singapore 1.7% - ------------------------------------------------ Spain 4.0% - ------------------------------------------------ Sweden 1.7% - ------------------------------------------------ Taiwan 3.9% - ------------------------------------------------ United Kingdom 19.2% - ------------------------------------------------ United States 22.9% - ------------------------------------------------ Other(2) 1.2% - ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan) as of Oct. 31, 2009. The Fund's composition is subject to change. (2) Cash & Cash Equivalents. - -------------------------------------------------------------------------------- 6 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- TOP TEN HOLDINGS (at Oct. 31, 2009; % of portfolio assets) - ---------------------------------------------------------------------
BP (United Kingdom) 2.4% - ------------------------------------------------ Talvivaara Mining 2013 5.25% (Finland) 2.0% - ------------------------------------------------ Pearson (United Kingdom) 2.0% - ------------------------------------------------ BP Prudhoe Bay Royalty Trust (United States) 2.0% - ------------------------------------------------ Ono Pharmaceutical (Japan) 1.8% - ------------------------------------------------ Vivendi (France) 1.8% - ------------------------------------------------ Banco Santander (Spain) 1.7% - ------------------------------------------------ DBS Group Holdings (Singapore) 1.6% - ------------------------------------------------ Champion REIT (Hong Kong) 1.5% - ------------------------------------------------ Bristol-Myers Squibb (United States) 1.5% - ------------------------------------------------
Excludes cash & cash equivalents. For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. Having smaller positions in materials, technology and financials compared to the MSCI Index was detrimental. These groups performed well in the recovery -- materials and technology due to their cyclical attributes and financials because they had been so beaten down in the bear market phase. Materials and technology stocks don't usually pay attractive dividends, even under favorable economic conditions. Financial stocks had historically been a key source of dividend income, but due to widespread dividend cuts, many financials no longer suited the Fund's strategy. Individual detractors included OPAP, a Greek gambling company that was hurt by the economic slowdown and threats of changes to gambling taxes. Japanese game maker NINTENDO was also disappointing. The stock has a healthy dividend, which is unusual in Japan, but the company has had a poor schedule of game releases. Cell phone maker NOKIA underperformed on lost market share. We chose Nokia to gain exposure to the cell phone market because unlike many other handset makers, it pays a dividend. Unfortunately new Nokia products haven't been well-received. The portfolio had a larger health care position than the MSCI Index. The health care sector typically provides large and, generally, secure - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- dividends, making it attractive to us. In the latter part of the fiscal year, health care stocks came under pressure from the shift toward cyclical sectors and from concerns about possible U.S. health care reform. CHANGES TO THE PORTFOLIO The Fund's two-pronged investment goal is to provide a combination of a high level of current income and, secondarily, growth potential. We made quite a few changes to the Fund over the course of the year in response to the significant shift in the dividend landscape. As financial stocks -- as well as many industrials and other cyclical companies -- cut dividends, we sought new sources of income. We sold the portfolio's bank holdings and reinvested in insurance and real estate stocks, particularly Asian real estate. As mentioned above, we also found opportunities among Australian banks. Overall, we reduced the Fund's financial sector weighting. We sold some cyclical stocks that cut or reduced dividends and we increased the energy allocation, which was larger than that of the MSCI Index at fiscal year end. We prefer energy stocks that have strong balance sheets and secure dividend streams. We bought some consumer staples stocks, including the Australian beverage company FOSTER'S. And, as cited above, we bought convertible bonds that boosted the Fund's income potential. With income so hard to come by, we had to reduce allocations to the lowest yielding sectors. We initially held some materials stocks because we wanted exposure to the sector despite the low income, but we sold those holdings early in the year and didn't buy back in. We reduced the Fund's technology position as well. The portfolio's allocations to Europe and Asia were larger than those of the MSCI Index, while allocations to the U.S. and Japan were smaller. This is structural rather than tactical positioning because it is difficult to find attractive stocks in the low-yielding U.S. and Japanese markets. To summarize, the portfolio's weightings in the energy, telecommunications, consumer staples and utilities sectors were larger than those of the MSCI Index at fiscal year end, while weightings in information technology, industrials and materials were smaller. - -------------------------------------------------------------------------------- 8 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- OUR FUTURE STRATEGY At the start of the Fund's fiscal year, the financial system was in disarray and the world appeared to be headed toward a depression. Governments, however, acted quickly and decisively, creating a floor for the markets and the global economy. Now the deepest fears seem to be past and most companies appear to be on improved footing. Asia and the emerging market economies continue on their growth trend and we see small signs that the developed economies are bottoming out. Still, our expectations are more cautious than the general consensus. We anticipate subdued economic activity and, despite rising equity markets, we see challenges to consumer confidence and corporate earnings. Governments will have to pay for their high spending through taxes or program cuts and that, along with unemployment and low interest on savings, is likely to affect consumer spending and, by extension, corporate profits. We are focusing the portfolio on high quality companies with healthy balance sheets and visible, stable earnings that underpin their dividend-paying capacity. We're looking for companies with income that appears quite secure, but that also have the potential to grow income over time. The recent market hasn't favored the type of stocks in the Fund's portfolio, but we believe a broadening of the equity recovery will shift attention to longer term fundamentals and future growth prospects. Such an environment should favor portfolio holdings that have been overlooked in the mad dash for a cyclical recovery. We think quality stocks, delivering attractive dividends and solid, visible growth are likely to be rewarded going forward. We are focusing the portfolio on high quality companies with healthy balance sheets and visible, stable earnings that underpin their dividend-paying capacity. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 9 MANAGER COMMENTARY (continued) ------------------------------------------------- (PHOTO - STEPHEN THORNBER) (PHOTO - JEREMY PODGER) Stephen Thornber Jeremy Podger Portfolio Manager Deputy Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the RiverSource Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the RiverSource Family of Funds. - -------------------------------------------------------------------------------- 10 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT THIS PAGE LEFT BLANK INTENTIONALLY THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in Threadneedle Global Equity Income Fund Class A shares (from 8/1/08 to 10/31/09) as compared to the performance of the Morgan Stanley Capital International (MSCI) All Country World Index. In comparing the Fund's Class A shares to this index, you should take into account the fact that the Fund's performance reflects the maximum initial sales charge of 5.75%, while such charges are not reflected in the performance of the index. Returns for the Fund include the reinvestment of any distributions paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The table below and the chart on the facing page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary or visiting riversource.com/funds. COMPARATIVE RESULTS - --------------------------------------------------------------------------------
Results at Oct. 31, 2009 SINCE INCEPTION 1 YEAR 8/1/08 THREADNEEDLE GLOBAL EQUITY INCOME FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $11,326 $8,256 - ----------------------------------------------------------------------- Average annual total return +13.26% -14.23% - ----------------------------------------------------------------------- MSCI ALL COUNTRY WORLD INDEX(1) Cumulative value of $10,000 $12,342 $8,576 - ----------------------------------------------------------------------- Average annual total return +23.42% -11.58% - -----------------------------------------------------------------------
Results for other share classes can be found on page 3. - -------------------------------------------------------------------------------- 12 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN THREADNEEDLE GLOBAL EQUITY INCOME FUND LINE GRAPH)
THREADNEEDLE GLOBAL EQUITY INCOME FUND CLASS MSCI ALL A (INCLUDES COUNTRY WORLD SALES CHARGE) INDEX(1) ------------------- ------------- 8/1/08 $9,425 $10,000 10/08 6,878 6,949 1/09 6,062 6,162 4/09 6,430 6,740 7/09 7,711 8,034 10/09 8,256 8,576
(1) The Morgan Stanley Capital International (MSCI) All Country World Index, an unmanaged index of equity securities, is designed to measure equity market performance in the global developed and emerging markets. The index reflects reinvestment of all distributions and changes in market prices. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expenses of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Oct. 31, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Direct expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 14 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED MAY 1, 2009 OCT. 31, 2009 THE PERIOD(a) EXPENSE RATIO - ------------------------------------------------------------------------------------------ Class A - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,284.00 $ 8.65 1.51% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,017.50 $ 7.64 1.51% - ------------------------------------------------------------------------------------------ Class B - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,278.10 $12.96 2.27% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,013.69 $11.46 2.27% - ------------------------------------------------------------------------------------------ Class C - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,278.60 $12.91(c) 2.26% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,013.74 $11.41(c) 2.26% - ------------------------------------------------------------------------------------------ Class I - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,285.90 $ 6.36(c) 1.11% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.50 $ 5.62(c) 1.11% - ------------------------------------------------------------------------------------------ Class R2 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,279.60 $10.91(c) 1.91% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,015.49 $ 9.65(c) 1.91% - ------------------------------------------------------------------------------------------ Class R3 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,282.60 $ 9.50(c) 1.66% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.75 $ 8.39(c) 1.66% - ------------------------------------------------------------------------------------------ Class R4 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,284.10 $ 8.07(c) 1.41% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.00 $ 7.13(c) 1.41% - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 15 FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED MAY 1, 2009 OCT. 31, 2009 THE PERIOD(a) EXPENSE RATIO - ------------------------------------------------------------------------------------------ Class R5 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,285.60 $ 6.65(c) 1.16% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.25 $ 5.87(c) 1.16% - ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended Oct. 31, 2009: +28.40% for Class A, +27.81% for Class B, +27.86% for Class C, +28.59% for Class I, +27.96% for Class R2, +28.26% for Class R3, +28.41% for Class R4 and +28.56% for Class R5. (c) RiverSource Investments, LLC (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, such that net expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment, will not exceed 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. Any amounts waived will not be reimbursed by the Fund. This change was effective Nov. 1, 2009. Had this change been in place for the entire six month period ended Oct. 31, 2009, the actual expenses paid would have been $12.97 for Class C, $6.42 for Class I, $10.97 for Class R2, $9.56 for Class R3, $8.13 for Class R4 and $6.70 for Class R5; the hypothetical expenses paid would have been $11.46 for Class C, $5.67 for Class I, $9.70 for Class R2, $8.44 for Class R3, $7.18 for Class R4 and $5.92 for Class R5. - -------------------------------------------------------------------------------- 16 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 (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 FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Fiscal year ended Oct. 31, 2009
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Qualified Dividend Income for individuals.................... 100% Dividends Received Deduction for corporations................ 29.74% U.S. Government Obligations.................................. 0.00% Foreign Taxes Paid........................................... $ 77,463 Foreign Source Income........................................ $462,076
The Fund designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 55 BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. The RiverSource Family of Funds that each Board member oversees consists of 132 funds, which includes 100 RiverSource funds and 32 Seligman funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 2006 Attorney Minneapolis, MN 55402 Age 55 - ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Family of Funds, 1999-2006; former None 901 S. Marquette Ave. 1999 Governor of Minnesota Minneapolis, MN 55402 Age 75 - ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 2007 Leadership (consulting company) Minneapolis, MN 55402 Age 55 - ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley University Age 59 - ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 1985 Minneapolis, MN 55402 Age 74 - ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 2005 Insurance Minneapolis, MN 55402 Age 74 - ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. since 2007, College Inc. (manufactures Minneapolis, MN 55402 Board member since irrigation systems) Age 70 2002 - ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 56 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ John F. Maher Board member since Retired President and Chief Executive Officer and None 901 S. Marquette Ave. 2008 former Director, Great Western Financial Corporation Minneapolis, MN 55402 (financial services), 1986-1997 Age 66 - ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 2004 real estate and asset management company) Minneapolis, MN 55402 Age 57 - ------------------------------------------------------------------------------------------------------------------------------ Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc. 901 S. Marquette Ave. 2008 President and General Counsel, Automotive Legal (digital imaging); Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil Age 68 and gas exploration and production); OGE Energy Corp. (energy and energy services) - ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Forester Pharmaceuticals, Minneapolis, MN 55402 Biotech Inc. Age 65 (biotechnology); Healthways, Inc. (health management programs) - ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 57 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. since 2005; Financial Center Vice President since President, Chairman of the Board and Chief Investment Minneapolis, MN 55474 2002 Officer, RiverSource Investments, LLC since 2001; Age 49 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; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc., 2001-2005 - ------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments or Ameriprise Financial. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; or visiting riversource.com/funds (for RiverSource and Threadneedle funds) or seligman.com (for Seligman funds). The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management, 172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC Center and Director and Vice President -- Asset Management, Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc. Age 44 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 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 58 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income, 172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 45 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 - -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Chief Administrative Officer, RiverSource Investments, 5228 Ameriprise Financial 2006 LLC since 2009; Vice President -- Asset Management and Center Minneapolis, MN Trust Company Services, RiverSource Investments, LLC, 55474 2006-2009; Vice President -- Operations and Compliance, Age 44 RiverSource Investments, LLC, 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 and of Minneapolis, MN 55474 RiverSource Fund Distributors, Inc. since 2008 Age 54 - -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management, 5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel, Center Secretary since 2006 RiverSource Distributors, Inc. and Chief Legal Officer Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC Age 50 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 Investments, LLC, 100 Park Avenue Officer since 2009 Ameriprise Certificate Company and RiverSource Service New York, NY 10010 Corporation since 2009; Chief Compliance Officer for Age 58 each of the Seligman funds since 2004; Anti-Money Laundering Prevention Officer and Identity Theft Prevention Officer for each of the Seligman funds since 2008; 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 Financial, 2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer, Center since 2004 Ameriprise Financial, Inc. since 2004; Compliance Minneapolis, MN 55474 Director, Ameriprise Financial, Inc., 2004-2008 Age 45 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT 59 PROXY VOTING ------------------------------------------------------------------ The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- 60 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2009 ANNUAL REPORT THREADNEEDLE GLOBAL EQUITY INCOME FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource Investments employs Threadneedle as a subadviser. Threadneedle(R) mutual funds are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource and Threadneedle are part of Ameriprise Financial, Inc. (THREADNEEDLE LOGO) (C)2009 RiverSource Investments, LLC. S-6525 AH (12/09)
Annual Report and Prospectus (THREADNEEDLE LOGO) THREADNEEDLE GLOBAL EXTENDED ALPHA FUND ANNUAL REPORT FOR THE PERIOD ENDED OCTOBER 31, 2009 (Prospectus also enclosed) THREADNEEDLE GLOBAL EXTENDED ALPHA FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. This annual report includes a prospectus that describes in detail the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money. (ADVANCED ALPHA STRATEGIES)
TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Manager Commentary................. 5 The Fund's Long-term Performance... 12 Fund Expenses Example.............. 14 Portfolio of Investments........... 17 Statement of Assets and Liabilities...................... 25 Statement of Operations............ 27 Statements of Changes in Net Assets........................... 29 Financial Highlights............... 30 Notes to Financial Statements...... 38 Report of Independent Registered Public Accounting Firm........... 56 Federal Income Tax Information..... 58 Board Members and Officers......... 59 Proxy Voting....................... 63
RIVERSOURCE FAMILY OF FUNDS Threadneedle Funds are a part of the RiverSource Family of Funds that includes funds branded "RiverSource," "RiverSource Partners," "Seligman" and "Threadneedle." These funds share the same Board of Directors/Trustees and officers. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY - -------------------------------------------------------------------------------- > Threadneedle Global Extended Alpha Fund (the Fund) Class A shares advanced 26.34% (excluding sales charge) for the 12 months ended Oct. 31, 2009. > The Fund outperformed its benchmark, the Morgan Stanley Capital International (MSCI) All Country World Index, which advanced 23.42% for the period. ANNUALIZED TOTAL RETURNS (for period ended Oct. 31, 2009) - --------------------------------------------------------------------------------
SINCE INCEPTION 1 YEAR 8/1/08 - ---------------------------------------------------------------- Threadneedle Global Extended Alpha Fund Class A (excluding sales charge) +26.34% -9.52% - ---------------------------------------------------------------- MSCI All Country World Index (unmanaged) +23.42% -11.58% - ----------------------------------------------------------------
(See "The Fund's Long-term Performance" for Index description) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 1(800) 221-2450. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in fees and expenses. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. See the Average Annual Total Returns table for performance of other share classes of the Fund. The index does not reflect the effects of sales charges, expenses and taxes. It is not possible to invest directly in an index. - -------------------------------------------------------------------------------- 2 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT OCT. 31, 2009 SINCE Without sales charge 1 YEAR INCEPTION Class A (inception 8/1/08) +26.34% -9.52% - ---------------------------------------------------------------- Class B (inception 8/1/08) +25.32% -10.26% - ---------------------------------------------------------------- Class C (inception 8/1/08) +25.39% -10.22% - ---------------------------------------------------------------- Class I (inception 8/1/08) +26.75% -9.23% - ---------------------------------------------------------------- Class R2 (inception 8/1/08) +25.79% -9.89% - ---------------------------------------------------------------- Class R3 (inception 8/1/08) +26.13% -9.64% - ---------------------------------------------------------------- Class R4 (inception 8/1/08) +26.40% -9.44% - ---------------------------------------------------------------- Class R5 (inception 8/1/08) +26.61% -9.32% - ---------------------------------------------------------------- With sales charge Class A (inception 8/1/08) +19.08% -13.71% - ---------------------------------------------------------------- Class B (inception 8/1/08) +20.32% -13.15% - ---------------------------------------------------------------- Class C (inception 8/1/08) +24.39% -10.22% - ----------------------------------------------------------------
Class A share performance reflects the maximum initial sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second year 4%; third and fourth years 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R2, Class R3, Class R4 and Class R5 shares. Class I, Class R2, Class R3, Class R4 and Class R5 are available to qualifying institutional investors only. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX - --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. Threadneedle Global Extended Alpha Fund may make short sales, which involves selling a security the Fund does not own in anticipation that the security's price will decline. The Fund's potential losses could exceed those of other mutual funds which hold only long security positions if the value of the securities held long decrease and the value of the securities sold short increase. The Fund's use of short sales in effect "leverages" the Fund, as the Fund intends to use the cash proceeds from the short sales to invest in additional long securities. Leveraging potentially exposes the Fund to greater risks due to unanticipated market movements, which may magnify losses and increase volatility of returns. There is no assurance that a leveraging strategy will be successful. Both long and short positions may be obtained through buying or selling individual securities or creating similar long or short exposure through the use of derivative instruments. See the Fund's prospectus for information on these and other risks associated with the Fund. - -------------------------------------------------------------------------------- 4 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT MANAGER COMMENTARY ------------------------------------------------------------- Threadneedle Global Extended Alpha Fund portfolio managers Andrew Holliman and Jeremy Podger of Threadneedle International Limited (Threadneedle) discuss the Fund's results and positioning for the 12 months ended Oct. 31, 2009. Threadneedle, an indirect wholly-owned subsidiary of Ameriprise Financial, Inc., is the subadviser to the Fund. Dear Shareholders, Threadneedle Global Extended Alpha Fund (the Fund) Class A shares advanced 26.34% (excluding sales charge) for the 12 months ended Oct. 31, 2009. The Fund outperformed its benchmark, the Morgan Stanley Capital International (MSCI) All Country World Index (MSCI Index), which advanced 23.42% for the period.
PORTFOLIO BREAKDOWN BY COUNTRY(1) (at Oct. 31, 2009; % of portfolio and portfolio swap(2)) - ------------------------------------------------------- LONG SHORT(3) NET - ------------------------------------------------------- Belgium 1.1% 0.0% 1.1% - ------------------------------------------------------- Bermuda 2.9% 0.0% 2.9% - ------------------------------------------------------- Brazil 2.5% 0.0% 2.5% - ------------------------------------------------------- Canada 0.9% 0.0% 0.9% - ------------------------------------------------------- France 3.8% -1.1% 2.7% - ------------------------------------------------------- Germany 2.6% 0.0% 2.6% - ------------------------------------------------------- Hong Kong 2.9% 0.0% 2.9% - ------------------------------------------------------- India 1.2% 0.0% 1.2% - ------------------------------------------------------- Indonesia 0.9% 0.0% 0.9% - ------------------------------------------------------- Ireland 2.0% 0.0% 2.0% - ------------------------------------------------------- Japan 1.7% -0.7% 1.0% - ------------------------------------------------------- Luxembourg 0.7% 0.0% 0.7% - ------------------------------------------------------- Mexico 2.1% 0.0% 2.1% - ------------------------------------------------------- Netherlands 2.2% -1.6% 0.6% - ------------------------------------------------------- Portugal 1.0% 0.0% 1.0% - ------------------------------------------------------- Singapore 0.8% 0.0% 0.8% - ------------------------------------------------------- South Korea 2.9% -0.5% 2.4% - ------------------------------------------------------- Spain 2.0% 0.0% 2.0% - ------------------------------------------------------- Switzerland 8.0% -0.9% 7.1% - ------------------------------------------------------- Taiwan 1.1% 0.0% 1.1% - ------------------------------------------------------- Turkey 0.8% 0.0% 0.8% - -------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 5 MANAGER COMMENTARY (continued) -------------------------------------------------
PORTFOLIO BREAKDOWN BY COUNTRY(1) (at Oct. 31, 2009; % of portfolio and portfolio swap(2)) - ------------------------------------------------------- LONG SHORT(3) NET - ------------------------------------------------------- United Kingdom 12.9% 0.0% 12.9% - ------------------------------------------------------- United States 59.3% -15.5% 43.8% - ------------------------------------------------------- Other(4) 4.0% 0.0% 4.0% - ------------------------------------------------------- 120.3% -20.3% 100.0% - -------------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan) as of Oct. 31, 2009. The Fund's composition is subject to change. (2) The Fund has entered into a portfolio swap agreement. A portfolio swap allows the Fund to obtain exposure to a custom basket of securities and foreign markets (both long and short exposures) without owning or taking physical custody of such securities. The portfolio breakdown by country for each underlying position in the custom basket has been estimated by multiplying the notional amount of each security by its Oct. 31, 2009 closing market price as obtained from an authorized pricing source. The notional amounts and the market values of the positions in the custom basket are not presented in the financial statements. (3) At Oct. 31, 2009, the Fund had no short positions. However, the Fund had entered into a portfolio swap in order to gain short exposure to foreign equity markets. See Portfolio Swap Outstanding at Oct. 31, 2009 following the Portfolio of Investments, and Note 3 to the financial statements. (4) Cash & Cash Equivalents. Top ten holdings do not include notional exposure to holdings the Fund has through its use of a portfolio swap. For more information regarding the Fund's portfolio swap, see "Portfolio of Investments" page 20. TOP TEN HOLDINGS (at Oct. 31, 2009; % of portfolio assets) - ---------------------------------------------------------------------
IBM (United States) 3.3% - ------------------------------------------------ Laboratory Corp of America Holdings (United States) 2.4% - ------------------------------------------------ Travelers Companies (United States) 2.3% - ------------------------------------------------ Bank of America (United States) 2.1% - ------------------------------------------------ Vodafone Group (United Kingdom) 2.1% - ------------------------------------------------ Mettler Toledo Intl (Switzerland) 2.1% - ------------------------------------------------ America Movil ADR Series L (Mexico) 2.0% - ------------------------------------------------ Tullow Oil (United Kingdom) 2.0% - ------------------------------------------------ BG Group (United Kingdom) 2.0% - ------------------------------------------------ Nestle (Switzerland) 2.0% - ------------------------------------------------
Excludes cash & cash equivalents For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. - -------------------------------------------------------------------------------- 6 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- SIGNIFICANT PERFORMANCE FACTORS The past fiscal year can be split into two distinct periods. From the beginning of the fiscal year through early March 2009, equities lost significant value as credit markets were paralyzed, the global financial system was in crisis and a deflationary depression seemed possible. However, coordinated fiscal and monetary stimulus from governments and central banks around the world put the financial system on more stable footing. With the crisis thwarted and equities at well below average historical valuations, improved investor confidence led to a robust equity rally that began in March. During the downturn, unsurprisingly safer assets outperformed the broader market with the reverse true during the recovery when cyclical sectors such as materials, energy, industrials and financials led the rally. Emerging markets also outperformed in the recovery, in part, because we believe the structure of those stock markets are more biased towards cyclical businesses, but also because the long-term economic growth prospects in emerging markets currently look far healthier than those in the major developed markets where long-term growth may be hampered by excessive debt. We began the period with the portfolio defensively positioned. As we saw that macroeconomic fundamentals were improving, and found attractive values in more cyclical areas, we began to reposition the portfolio. The defensive positioning was advantageous in the first half of the year and the repositioned portfolio also performed well in the latter part of the period. The portfolio For the fiscal year, both the long and the short portfolios added to return, relative to the MSCI Index. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- underperformed at the market's turning point, however for the full period, the Fund outpaced the MSCI Index. The Fund's investment strategy combines a long portfolio of companies we think have positive performance potential with a short portfolio where we take short positions in equities that we view unfavorably. For the fiscal year, both the long and the short portfolios added to return, relative to the MSCI Index. Stock selection was primarily responsible for the Fund's outperformance of the MSCI Index, while geographic and sector allocations had a near-neutral effect on relative performance. The portfolio started the year underweight in emerging markets and, though we moved to an overweight, it was not soon enough to fully capture their sharp rally. On the other hand, having a smaller weighting in Japan than the MSCI Index was advantageous. These two regional positions offset each other, resulting in a neutral geographic impact. In terms of sector weightings, bottom-up stock selection led to an emphasis on information technology, which added to relative return. This was offset by the negative effects of underweights in materials and energy, two sectors that led the market during the recovery as commodity prices significantly rebounded. The Fund's stock selection was strongest in the energy, financials and consumer discretionary sectors. In energy, TULLOW OIL in the U.K., GALP ENERGIA in Portugal and PETROBRAS in Brazil all benefited from significant oil discoveries. In the financials sector, contributors included Hong Kong property stocks SUN HUNG KAI PROPERTIES and GREAT EAGLE HOLDINGS, U.K. listed bank STANDARD CHARTERED PLC and BANK OF AMERICA in the U.S. In the consumer discretionary sector, the Fund benefited from holdings such as HONG KONG AND SHANGHAI HOTELS, U.S. auto parts retailer AUTOZONE and Spanish retailer INDITEX. We subsequently sold both AutoZone and Inditex on valuation grounds. Stock selection in the industrials sector was unfavorable, mainly due to holdings of U.S. railroads such as UNION PACIFIC and NORFOLK SOUTHERN, which suffered as their volumes declined at unprecedented rates. However, we have been impressed by the way the companies have been managed in such a poor operating environment and believe they are - -------------------------------------------------------------------------------- 8 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- very well placed to enjoy substantially high levels of profitability when volumes recover. CHANGES TO THE FUND'S PORTFOLIO Our largest sector overweight position continues to be in the information technology sector, where we find a number of good businesses with excellent free cash flow characteristics, strong balance sheets and above average growth characteristics, yet trading at very attractive valuations. Many of these businesses are large blue-chip names such as IBM, Oracle and Accenture where we believe technological specific risk is low. Geographically, we have increased the portfolio's allocation to emerging markets -- mainly Latin America where we have found better opportunities to invest in strongly managed businesses at attractive valuations than in other emerging markets such as the Far East. However, despite our somewhat dampened view on economies, the Fund has larger positions in the U.S. and U.K., compared to the MSCI Index. This is because our bottom-up stock analysis is finding many attractive companies in these countries at attractive valuations, including many international businesses that appear well placed to benefit from strong growth in emerging markets. Over the course of the year, we increased the Fund's short exposure. The beginning of the period was not a favorable time to try to add value through shorting; volatility was high, shorting bans were in effect and hedge funds were under pressure to unwind their short positions. Therefore, the Fund's short position was initially quite small. As markets stabilized, we increased it and, as of fiscal year end, the Fund's short position was 19% and its long position was 116%. OUTLOOK Clearly, the economic environment is in better shape at the end of the fiscal year than it was at the beginning and we expect recovery to continue -- unemployment should peak in the coming year, consumer and business confidence should improve and emerging market economic growth should be robust. In addition, significant cost-cutting by many corporations should have a strong positive impact on profit growth next year. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 9 MANAGER COMMENTARY (continued) ------------------------------------------------- However, high government and consumer debt in many large developed economies will likely have a longer term dampening impact on global economic growth. Nevertheless, equity valuations are currently reasonable and we believe we are finding plenty of attractive investment prospects that have the potential to deliver attractive long term returns for shareholders. (PHOTO - ANDREW HOLLIMAN) (PHOTO - JEREMY POGER) Andrew Holliman, CFA(R) Jeremy Podger Portfolio Manager Deputy Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the RiverSource Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the RiverSource Family of Funds. - -------------------------------------------------------------------------------- 10 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT THIS PAGE LEFT BLANK INTENTIONALLY THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in Threadneedle Global Extended Alpha Fund Class A shares (from 8/1/08 to 10/31/09) as compared to the performance of the Morgan Stanley Capital International (MSCI) All Country World Index. In comparing the Fund's Class A shares to this index, you should take into account the fact that the Fund's performance reflects the maximum initial sales charge of 5.75%, while such charges are not reflected in the performance of the index. Returns for the Fund include the reinvestment of any distributions paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The table below and the chart on the facing page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary or visiting riversource.com/funds. COMPARATIVE RESULTS - --------------------------------------------------------------------------------
Results at Oct. 31, 2009 SINCE INCEPTION 1 YEAR 8/1/08 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $11,908 $8,318 - ----------------------------------------------------------------------- Average annual total return +19.08% -13.71% - ----------------------------------------------------------------------- MSCI ALL COUNTRY WORLD INDEX(1) Cumulative value of $10,000 $12,342 $8,576 - ----------------------------------------------------------------------- Average annual total return +23.42% -11.58% - -----------------------------------------------------------------------
Results for other share classes can be found on page 3. - -------------------------------------------------------------------------------- 12 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN THREADNEEDLE GLOBAL EXTENDED ALPHA FUND LINE GRAPH)
THREADNEEDLE GLOBAL EXTENDED ALPHA FUND CLASS MSCI ALL A (INCLUDES COUNTRY WORLD SALES CHARGE) INDEX(1) ------------------- ------------- 8/1/08 $9,425 $10,000 10/08 6,583 6,949 1/09 6,070 6,162 4/09 6,508 6,740 7/09 7,724 8,034 10/09 8,318 8,576
(1) The Morgan Stanley Capital International (MSCI) All Country World Index, an unmanaged index of equity securities, is designed to measure equity market performance in the global developed and emerging markets. The index reflects reinvestment of all distributions and changes in market prices. The Fund's performance will be measured against this index for purposes of determining the performance incentive adjustment. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expenses of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Oct. 31, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Direct expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 14 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED MAY 1, 2009 OCT. 31, 2009 THE PERIOD(a) EXPENSE RATIO - ------------------------------------------------------------------------------------------ Class A - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,278.10 $ 8.85 1.55% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,017.30 $ 7.84 1.55% - ------------------------------------------------------------------------------------------ Class B - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,273.30 $13.16 2.31% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,013.49 $11.66 2.31% - ------------------------------------------------------------------------------------------ Class C - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,273.10 $13.11 2.30% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,013.54 $11.61 2.30% - ------------------------------------------------------------------------------------------ Class I - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,280.30 $ 6.97(c) 1.22% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.95 $ 6.17(c) 1.22% - ------------------------------------------------------------------------------------------ Class R2 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,275.20 $11.52(c) 2.02% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,014.94 $10.20(c) 2.02% - ------------------------------------------------------------------------------------------ Class R3 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,276.80 $10.10(c) 1.77% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.19 $ 8.95(c) 1.77% - ------------------------------------------------------------------------------------------ Class R4 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,278.60 $ 8.68(c) 1.52% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,017.45 $ 7.69(c) 1.52% - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 15 FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED MAY 1, 2009 OCT. 31, 2009 THE PERIOD(a) EXPENSE RATIO - ------------------------------------------------------------------------------------------ Class R5 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,279.80 $ 7.26(c) 1.27% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.70 $ 6.43(c) 1.27% - ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended Oct. 31, 2009: +27.81% for Class A, +27.33% for Class B, +27.31% for Class C, +28.03% for Class I, +27.52% for Class R2, +27.68% for Class R3, +27.86% for Class R4 and +27.98% for Class R5. (c) RiverSource Investments, LLC (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, such that net expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment, will not exceed 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. Any amounts waived will not be reimbursed by the Fund. This change was effective Nov. 1, 2009. Had this change been in place for the entire six month period ended Oct. 31, 2009, the actual expenses paid would have been $6.92 for Class I, $11.46 for Class R2, $10.05 for Class R3, $8.63 for Class R4 and $7.20 for Class R5; the hypothetical expenses paid would have been $6.12 for Class I, $10.15 for Class R2, $8.90 for Class R3, $7.64 for Class R4 and $6.38 for Class R5. - -------------------------------------------------------------------------------- 16 THREADNEEDLE GLOBAL EXTENDED ALPHA 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 FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) Fiscal year ended Oct. 31, 2009 The Fund designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. - -------------------------------------------------------------------------------- 58 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. The RiverSource Family of Funds that each Board member oversees consists of 132 funds, which includes 100 RiverSource funds and 32 Seligman funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 2006 Attorney Minneapolis, MN 55402 Age 55 - ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Family of Funds, 1999-2006; former None 901 S. Marquette Ave. 1999 Governor of Minnesota Minneapolis, MN 55402 Age 75 - ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 2007 Leadership (consulting company) Minneapolis, MN 55402 Age 55 - ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley University Age 59 - ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 1985 Minneapolis, MN 55402 Age 74 - ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 2005 Insurance Minneapolis, MN 55402 Age 74 - ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. since 2007, College Inc. (manufactures Minneapolis, MN 55402 Board member since irrigation systems) Age 70 2002 - ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 59 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ John F. Maher Board member since Retired President and Chief Executive Officer and None 901 S. Marquette Ave. 2008 former Director, Great Western Financial Corporation Minneapolis, MN 55402 (financial services), 1986-1997 Age 66 - ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 2004 real estate and asset management company) Minneapolis, MN 55402 Age 57 - ------------------------------------------------------------------------------------------------------------------------------ Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc. 901 S. Marquette Ave. 2008 President and General Counsel, Automotive Legal (digital imaging); Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil Age 68 and gas exploration and production); OGE Energy Corp. (energy and energy services) - ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Forester Pharmaceuticals, Minneapolis, MN 55402 Biotech Inc. Age 65 (biotechnology); Healthways, Inc. (health management programs) - ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 60 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT - -------------------------------------------------------------------------------- BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. since 2005; Financial Center Vice President since President, Chairman of the Board and Chief Investment Minneapolis, MN 55474 2002 Officer, RiverSource Investments, LLC since 2001; Age 49 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; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc., 2001-2005 - ------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments or Ameriprise Financial. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; or visiting riversource.com/funds (for RiverSource and Threadneedle funds) or seligman.com (for Seligman funds). The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management, 172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC Center and Director and Vice President -- Asset Management, Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc. Age 44 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 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 61 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income, 172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 45 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 - -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Chief Administrative Officer, RiverSource Investments, 5228 Ameriprise Financial 2006 LLC since 2009; Vice President -- Asset Management and Center Minneapolis, MN Trust Company Services, RiverSource Investments, LLC, 55474 2006-2009; Vice President -- Operations and Compliance, Age 44 RiverSource Investments, LLC, 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 and of Minneapolis, MN 55474 RiverSource Fund Distributors, Inc. since 2008 Age 54 - -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management, 5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel, Center Secretary since 2006 RiverSource Distributors, Inc. and Chief Legal Officer Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC Age 50 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 Investments, LLC, 100 Park Avenue Officer since 2009 Ameriprise Certificate Company and RiverSource Service New York, NY 10010 Corporation since 2009; Chief Compliance Officer for Age 58 each of the Seligman funds since 2004; Anti-Money Laundering Prevention Officer and Identity Theft Prevention Officer for each of the Seligman funds since 2008; 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 Financial, 2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer, Center since 2004 Ameriprise Financial, Inc. since 2004; Compliance Minneapolis, MN 55474 Director, Ameriprise Financial, Inc., 2004-2008 Age 45 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 62 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT PROXY VOTING ------------------------------------------------------------------ The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2009 ANNUAL REPORT 63 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource Investments employs Threadneedle as a subadviser. Threadneedle(R) mutual funds are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource and Threadneedle are part of Ameriprise Financial, Inc. (THREADNEEDLE LOGO) (C)2009 RiverSource Investments, LLC. S-6527 AH (12/09)
Item 2. (a) The Registrant has adopted a code of ethics that applies to the Registrant's principal executive officer and principal financial officer. A copy of the code of ethics is filed as an exhibit to this form N-CSR. (b) During the period covered by this report, there were not any amendments to the provisions of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, there were not any implicit or explicit waivers to the provisions of the code of ethics adopted in 2(a). Item 3. The Registrant's board of directors has determined that independent directors Pamela G. Carlton, Jeffrey Laikind, John F. Maher and Anne P. Jones, each qualify as audit committee financial experts. Item 4. Principal Accountant Fees and Services Fund - Related Fees (a) Audit Fees. The fees for the year ended Oct. 31, to Ernst & Young LLP for professional services rendered for the audit of the annual financial statements for RiverSource Global Series, Inc. were as follows: 2009 - $224,347 2008 - $248,260 (b) Audit-Related Fees. The fees for the year ended Oct. 31, to Ernst & Young LLP for additional audit-related services rendered for RiverSource Global Series, Inc. were as follows: 2009 - $3,708 2008 - $6,000 (c) Tax Fees. The fees for the year ended Oct. 31, to Ernst & Young LLP for tax compliance related services rendered for RiverSource Global Series, Inc. were as follows: 2009 - $43,761 2008 - $68,090 (d) All Other Fees. The fees for the year ended Oct. 31, to Ernst & Young LLP for additional professional services rendered for RiverSource Global Series, Inc. were as follows: 2009 - $0 2008 - $0 (e) (1) Audit Committee Pre-Approval Policy. Pursuant to Sarbanes-Oxley pre-approval requirements, all services to be performed by Ernst & Young LLP for the registrant and to the registrant's investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant must be pre-approved by the audit committee. (e) (2) 100% of the services performed for items (b) through (d) above during 2009 and 2008 were pre-approved by the audit committee. (f) Not applicable. (g) Non-Audit Fees. The fees for the year ended Oct. 31, to Ernst & Young LLP by the registrant for non-audit fees and by the registrant's investment adviser, and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant were as follows: 2009 - $869,955 2008 - $680,790 (h) 100% of the services performed in item (g) above during 2009 and 2008 were pre-approved by the Ameriprise Financial Audit Committee and/or the RiverSource Mutual Funds Audit Committee. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Investments. (a) The complete schedule of investments is included in Item 1 of this Form N-CSR. (b) Not applicable. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of matters to a vote of security holders. Not applicable. Item 11. Controls and Procedures. (a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's Principal Financial Officer and Principal Executive Officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal controls over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) Code of ethics as applies to the Registrant's principal executive officer and principal financial officer, as required to be disclosed under Item 2 of Form N-CSR, is attached as Ex. 99.CODE ETH. (a)(2) Separate certification for the Registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX.99.CERT. (a)(3) Not applicable. (b) A certification by the Registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached as EX.99.906 CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) RiverSource Global Series, Inc. By /s/ Patrick T. Bannigan ----------------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date January 4, 2010 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By /s/ Patrick T. Bannigan ----------------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date January 4, 2010 By /s/ Jeffrey P. Fox ----------------------------------------- Jeffrey P. Fox Treasurer and Principal Financial Officer Date January 4, 2010 EX-99.CODE ETH 2 c54776exv99wcodeeth.txt EX-99.CODE ETH CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS PURPOSE OF THE CODE; COVERED OFFICERS This code of ethics (the "Code") for the RiverSource Funds (collectively, the "Funds," and each a "Fund")(1) applies to the Funds' Principal Executive Officer and Principal Financial Officer (the "Covered Officers," each of whom is identified in Exhibit A) for the purpose of promoting, in connection with his or her duties: honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; full, fair, accurate, timely, and understandable disclosure in reports and documents that a Fund files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Funds; compliance with laws and governmental rules and regulations applicable to the conduct of the Funds' business and their financial reporting; the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his or her service to, the Funds. For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper personal benefits as a result of his or her position with the Funds. Certain conflicts of interest arise out of the relationships between Covered Officers and the Funds and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually - ---------- (1) For purposes of this Code, the Seligman Funds (including each of the Seligman branded registered investment companies and the separate series thereof) are considered part of the RiverSource Complex of Funds. engage in certain transactions, such as the purchase or sale of securities or other property, with the Funds because of their status as "affiliated persons" of the Funds. The compliance programs and procedures of the Funds and of Ameriprise Financial, Inc. and its affiliates ("Ameriprise") are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Funds and Ameriprise, of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties, whether formally for the Funds or for Ameriprise, or for both, be involved in establishing policies and implementing decisions that will have different effects on Ameriprise and the Funds. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Funds and Ameriprise and is consistent with the performance by the Covered Officers of their duties as officers of the Funds. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Funds. Each Covered Officer must: not use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Funds whereby the Covered Officer would benefit personally to the detriment of the Funds; not cause the Funds to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Funds; and not use material non-public knowledge of portfolio transactions made or contemplated for the Fund to trade personally or cause others to trade personally in contemplation of the market effect of such transactions. DISCLOSURE AND COMPLIANCE Each Covered Officer should familiarize himself or herself with the disclosure requirements generally applicable to the Funds; should not knowingly misrepresent, or cause others to misrepresent, facts about the Funds to others, whether within or outside the Funds, including any member of the Board of Directors or Board of Trustees of any Fund ("Boards"), auditors, governmental regulators, and representatives of self-regulatory organizations; should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Funds and Ameriprise with the goal of promoting full, fair, accurate, timely, and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules, and regulations. REPORTING AND ACCOUNTABILITY Each Covered Officer must: - upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Boards that he or she has received, read, and understands the Code; - annually thereafter affirm to the Boards that he or she has complied with the requirements of the Code; - not retaliate against any other Covered Officer or any employee of Ameriprise for reports of potential violations that are made in good faith; and - notify the Funds' General Counsel promptly if he or she knows of any violation of this Code. Failure to do so is itself a violation of this Code. APPLYING THE CODE The Funds' General Counsel is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. Any approvals or waivers sought by a Covered Officers will be considered by each Board or appropriate committee of the Board. The Funds' General Counsel - shall notify the Boards whenever any evidence of a material violation has been reported, it being understood that the Funds' General Counsel may determine whether to provide such notice immediately or at the next meetings of the Boards based on the nature of the violation; - will take all appropriate action to investigate such reported violations; - shall make a determination after the investigation, and if the Funds' General Counsel believes that no violation has occurred, the Boards will be so notified and no further action is required; if the Funds' General Counsel believes a violation has occurred, the matter shall be reported to the Boards or the committees of the Funds affected by the potential violation for further determination; if the Boards or the committees determine that a violation has occurred the Boards will consider appropriate action, which may include: a review of applicable policies and procedures; the appropriate modifications to such policies and procedures; the notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer; will cause to be made such disclosures as are required by SEC rules if any changes to or waivers of this Code is made by the Boards; and shall maintain a record of each reported evidence of material violation, the response thereto, and all related correspondence for a period of not less than 10 years. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds or Ameriprise govern or purport to govern the activities of the Covered Officers, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. Ameriprise's code of ethics under Rule 17j-1 under the Investment Company Act is a separate requirement applying to the Covered Officers and others, and is not part of this Code. AMENDMENTS Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of each Fund's Board, including a majority of its independent directors. Adopted: July 9, 2003; Amended: April 12, 2006; Amended: November 13, 2008 EXHIBIT A Persons Covered by this Code of Ethics: Patrick T. Bannigan President Jeffrey P. Fox Treasurer (RiverSource Brand Registered Investment Companies, Including Separate Series Thereof) EX-99.CERT 3 c54776exv99wcert.txt EX-99.CERT Certification Pursuant to 270.30a-2 of the Investment Company Act of 1940 I, Patrick T. Bannigan, certify that: 1. I have reviewed this report on Form N-CSR of RiverSource Global Series, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 21, 2009 /s/ Patrick T. Bannigan - ------------------------------------- Name: Patrick T. Bannigan Title: President and Principal Executive Officer Certification Pursuant to 270.30a-2 of the Investment Company Act of 1940 I, Jeffrey P. Fox, certify that: 1. I have reviewed this report on Form N-CSR of RiverSource Global Series, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 21, 2009 /s/ Jeffrey P. Fox - ------------------------------------- Name: Jeffrey P. Fox Title: Treasurer and Principal Financial Officer EX-99.906CERT 4 c54776exv99w906cert.txt EX-99.906CERT CERTIFICATION RIVERSOURCE GLOBAL SERIES, INC. (the Registrant) Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Each of the undersigned below certifies that 1. This report on Form N-CSR of the Registrant (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: December 21, 2009 /s/ Patrick T. Bannigan ----------------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date: December 21, 2009 /s/ Jeffrey P. Fox ----------------------------------------- Jeffrey P. Fox Treasurer and Principal Financial Officer A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, OR OTHER DOCUMENT AUTHENTICATING, ACKNOWLEDGING, OR OTHERWISE ADOPTING THE SIGNATURE THAT APPEARS IN TYPED FORM WITHIN ELECTRONIC VERSION OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, HAS BEEN PROVIDED TO THE REGISTRANT AND WILL BE RETAINED BY THE REGISTRANT AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form N-CSR filed with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----