-----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, Sf6r1tePGteXhq2HKS+r0zTw7yaRzHeN+PfpnTjcbeqVTyRfpe8d0nJXAevZsiGC DfRAcQ3+CjFgHqMgze+15Q== 0000950123-10-062991.txt : 20100701 0000950123-10-062991.hdr.sgml : 20100701 20100701091539 ACCESSION NUMBER: 0000950123-10-062991 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20100430 FILED AS OF DATE: 20100701 DATE AS OF CHANGE: 20100701 EFFECTIVENESS DATE: 20100701 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-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-05696 FILM NUMBER: 10928908 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 C000089163 RiverSource Global Bond Fund Class R2 RBGRX C000089164 RiverSource Global Bond Fund Class R3 RGBSX C000089165 RiverSource Global Bond Fund Class R5 RGBTX 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-CSRS 1 c58332nvcsrs.txt N-CSRS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act File Number 811-5696 RIVERSOURCE GLOBAL SERIES, INC. (Exact name of registrant as specified in charter) 50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (Address of principal executive offices) (Zip code) Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474 (Name and address of agent for service) Registrant's telephone number, including area code: (612) 671-1947 Date of fiscal year end: 10/31 Date of reporting period: 4/30 Semiannual Report (COLUMBIA MANAGEMENT LOGO) RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND - -------------------------------------------------------------------------------- SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2010 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND SEEKS TO PROVIDE SHAREHOLDERS WITH POSITIVE ABSOLUTE RETURN. NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 6 Portfolio of Investments........... 8 Statement of Assets and Liabilities...................... 13 Statement of Operations............ 14 Statements of Changes in Net Assets........................... 15 Financial Highlights............... 17 Notes to Financial Statements...... 24 Approval of Investment Management Services Agreement............... 37 Proxy Voting....................... 40
- -------------------------------------------------------------------------------- 2 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Absolute Return Currency and Income Fund (the Fund) Class A shares gained 1.01% (excluding sales charge) for the six months ended April 30, 2010. > The Fund outperformed its benchmark, the Citigroup 3-Month U.S. Treasury Bill Index, which rose 0.04% during the same period. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2010) - --------------------------------------------------------------------------------
SINCE INCEPTION 6 MONTHS* 1 YEAR 3 YEARS 6/15/06 - ----------------------------------------------------------------------- RiverSource Absolute Return Currency and Income Fund Class A (excluding sales charge) +1.01% +2.45% +1.47% +3.26% - ----------------------------------------------------------------------- Citigroup 3-month U.S. Treasury Bill Index(1) (unmanaged) +0.04% +0.12% +1.66% +2.47% - -----------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 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. (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 -- 2010 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT APRIL 30, 2010 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS INCEPTION Class A (inception 6/15/06) +1.01% +2.45% +1.47% +3.26% - ----------------------------------------------------------------------- Class B (inception 6/15/06) +0.61% +1.74% +0.80% +2.56% - ----------------------------------------------------------------------- Class C (inception 6/15/06) +0.61% +1.75% +0.81% +2.57% - ----------------------------------------------------------------------- Class I (inception 6/15/06) +1.20% +2.85% +1.90% +3.68% - ----------------------------------------------------------------------- Class R4 (inception 6/15/06) +1.11% +2.55% +1.75% +3.48% - ----------------------------------------------------------------------- Class R5 (inception 10/18/07) +1.20% +2.96% N/A +0.75% - ----------------------------------------------------------------------- Class W (inception 12/1/06) +1.01% +2.45% +1.44% +2.73% - ----------------------------------------------------------------------- With sales charge Class A (inception 6/15/06) -2.02% -0.62% +0.44% +2.45% - ----------------------------------------------------------------------- Class B (inception 6/15/06) -4.39% -3.26% -0.15% +1.84% - ----------------------------------------------------------------------- Class C (inception 6/15/06) -0.39% +0.75% +0.81% +2.57% - -----------------------------------------------------------------------
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. * Not annualized. RiverSource Absolute Return Currency and Income Fund is designed for investors with an above average risk tolerance. Risks associated with the fund include, but are not limited to, derivatives risk, counterparty risk, interest rate risk, credit risk, and tax risk. Derivative instruments are financial instruments that have a value dependent on the value of something else, such as one or more underlying securities. Gains or losses may be substantial, because a relatively small price movement in an underlying security may result in a substantial gain or loss for the Fund. A counterparty to a financial instrument entered into by the Fund may become bankrupt or otherwise fail to perform its obligations due to financial difficulties. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. The issuer of a security could default or otherwise become unable or unwilling to honor a financial obligation, and the Fund may be unable to recover its investment or may only obtain a limited or delayed recovery. Gains from some of the Fund's foreign currency-denominated positions may not meet Treasury Department regulations for "qualifying income," in which case, the Fund might not qualify as a regulated investment company for one or more years, requiring the Fund's Board of Directors to authorize a significant change in investment strategy or Fund liquidation. A significant portion of the Fund is invested in forward currency contracts, which are subject to a number of risks. Losses may be substantial if prices do not move in the direction anticipated. See the Fund's prospectus for information on these and other risks associated with the Fund. - -------------------------------------------------------------------------------- 4 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- PORTFOLIO BREAKDOWN(1) (at April 30, 2010) - ---------------------------------------------------------------------
Asset-Backed 3.2% - ------------------------------------------------ Commercial Mortgage-Backed 1.5% - ------------------------------------------------ FDIC-Insured Debt(2) 1.9% - ------------------------------------------------ Financials 1.0% - ------------------------------------------------ Foreign Government 1.0% - ------------------------------------------------ Health Care 0.7% - ------------------------------------------------ Industrials 2.2% - ------------------------------------------------ Residential Mortgage-Backed 0.1% - ------------------------------------------------ Other(3) 88.4% - ------------------------------------------------
(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. The Fund's composition is subject to change. (2) Debt guaranteed under the FDIC's Temporary Liquidity Guarantee Program (TLGP). (3) Cash & Cash Equivalents. QUALITY BREAKDOWN OF FIXED INCOME SECURITIES(1) (at April 30, 2010) - ---------------------------------------------------------------------
AAA rating 8.6% - ------------------------------------------------ AA rating --% - ------------------------------------------------ A rating 3.0% - ------------------------------------------------ Non-investment grade --% - ------------------------------------------------ A1/P1/F1 short-term securities 88.4% - ------------------------------------------------
(1) Percentages indicated are based upon total fixed income securities. 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 0.1% 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. * Effective May 1, 2010, RiverSource Investments, LLC is know as Columbia Management Investment Advisers, LLC. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT 5 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments; and (ii) ongoing costs, which may include management fees; distribution and service (Rule 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 April 30, 2010. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses for each class. 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 actual expense ratio for each class and an assumed rate of return of 5% per year before expenses, which is not the actual return for the class. 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. - -------------------------------------------------------------------------------- 6 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2009 APRIL 30, 2010 THE PERIOD(a) EXPENSE RATIO - ------------------------------------------------------------------------------------------- Class A - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,010.10 $ 7.27 1.45% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.70 $ 7.29 1.45% - ------------------------------------------------------------------------------------------- Class B - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,006.10 $11.05 2.21% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,013.91 $11.10 2.21% - ------------------------------------------------------------------------------------------- Class C - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,006.10 $11.05 2.21% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,013.91 $11.10 2.21% - ------------------------------------------------------------------------------------------- Class I - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,012.00 $ 5.27 1.05% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.70 $ 5.29 1.05% - ------------------------------------------------------------------------------------------- Class R4 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,011.10 $ 6.77 1.35% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.20 $ 6.79 1.35% - ------------------------------------------------------------------------------------------- Class R5 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,012.00 $ 5.42 1.08% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.55 $ 5.44 1.08% - ------------------------------------------------------------------------------------------- Class W - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,010.10 $ 7.52 1.50% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.45 $ 7.54 1.50% - -------------------------------------------------------------------------------------------
(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 182/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2010: +1.01% for Class A, +0.61% for Class B, +0.61% for Class C, +1.20% for Class I, +1.11% for Class R4, +1.20% for Class R5 and +1.01% for Class W. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT 7 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2010 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
BONDS (9.8%) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) SUPRANATIONAL (1.0%)(C) Inter-American Development Bank Sr Unsecured 03-16-11 0.46% $2,000,000(g) $2,004,108 - ------------------------------------------------------------------------------------- ASSET-BACKED (3.2%) Countrywide Home Equity Loan Trust Series 2005-H Cl 2A (FGIC) 12-15-35 0.49 137,651(e,g) 52,222 Northstar Education Finance Series 2007-1 Cl A2 01-29-46 0.34 750,000(g) 749,700 SLM Student Loan Trust Series 2005-5 Cl A2 10-25-21 0.40 837,468(g) 834,344 SLM Student Loan Trust Series 2005-8 Cl A2 07-25-22 0.41 1,132,137(g) 1,130,502 SLM Student Loan Trust Series 2005-B Cl A1 12-16-19 0.30 12,078(g) 12,047 SLM Student Loan Trust Series 2006-A Cl A1 03-16-20 0.28 125,898(g) 125,433 SLM Student Loan Trust Series 2006-A Cl A2 12-15-20 0.34 2,000,000(g) 1,955,818 SLM Student Loan Trust Series 2006-C Cl A2 09-15-20 0.31 822,607(g) 805,066 SLM Student Loan Trust Series 2007-2 Cl A2 07-25-17 0.32 982,438(g) 973,901 --------------- Total 6,639,033 - ------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE-BACKED (1.5%)(f) GS Mtge Securities II Series 2007-EOP Cl A2 03-06-20 0.38 1,200,000(d,g) 1,146,097 GS Mtge Securities II Series 2007-EOP Cl A3 03-06-20 0.43 1,770,000(d,g) 1,674,013 Morgan Stanley Dean Witter Capital I Series 2002-TOP7 Cl A1 01-15-39 5.38 166,041 166,774 --------------- Total 2,986,884 - ------------------------------------------------------------------------------------- RESIDENTIAL MORTGAGE-BACKED (0.1%)(f) Deutsche Bank Alternate Mtge Loan Trust Collateralized Mtge Obligation Series 2006-AR6 Cl A3 02-25-37 0.35 24,593(g) 24,299 Downey Savings & Loan Assn Mtge Loan Trust Collateralized Mtge Obligation Series 2006-AR2 Cl 2AB1 11-19-37 0.35 102,773(g) 100,794 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2006-12 Cl 2A11 01-19-38 0.35 124,918(g) 124,567 --------------- Total 249,660 - ------------------------------------------------------------------------------------- BANKING (1.0%) Royal Bank of Scotland Govt Guaranteed 05-11-12 0.95 2,000,000(c,d,g) 2,020,086 - ------------------------------------------------------------------------------------- BROKERAGE (0.1%) Lehman Brothers Holdings Sr Unsecured 10-22-09 0.00 640,000(b,g,h) 138,400 - ------------------------------------------------------------------------------------- CONSTRUCTION MACHINERY (2.2%) John Deere Capital Sr Unsecured 01-18-11 1.00 4,500,000(g) 4,510,852 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 8 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) HEALTH CARE INSURANCE (0.7%) UnitedHealth Group Sr Unsecured 06-21-10 0.45% $1,500,000(g) $1,500,211 - ------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $20,702,255) $20,049,234 - ------------------------------------------------------------------------------------- FDIC-INSURED DEBT (2.0%)(i) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) U.S. AGENCIES Bank of America FDIC Govt Guaranty 06-22-12 0.47% $2,000,000(g) $2,008,344 General Electric Capital FDIC Govt Guaranty 03-11-11 0.34 2,000,000(g) 2,002,380 - ------------------------------------------------------------------------------------- TOTAL FDIC-INSURED DEBT (Cost: $4,000,000) $4,010,724 - -------------------------------------------------------------------------------------
MONEY MARKET FUND (88.8%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.21% 182,502,842(j) $182,502,842 - ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $182,502,842) $182,502,842 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $207,205,097)(k) $206,562,800 =====================================================================================
INVESTMENTS IN DERIVATIVES FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT APRIL 30, 2010
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION - ---------------------------------------------------------------------------------------------- May 26, 2010 12,920,000 19,977,679 $211,084 $-- British Pound U.S. Dollar - ---------------------------------------------------------------------------------------------- May 26, 2010 37,495,000 49,960,213 37,335 -- European Monetary Unit U.S. Dollar - ---------------------------------------------------------------------------------------------- May 26, 2010 32,260,000 29,974,727 -- (11,850) Swiss Franc U.S. Dollar - ---------------------------------------------------------------------------------------------- May 26, 2010 29,834,949 32,269,000 -- (55,958) U.S. Dollar Australian Dollar - ---------------------------------------------------------------------------------------------- May 26, 2010 19,967,620 19,980,000 -- (295,918) U.S. Dollar Canadian Dollar - ---------------------------------------------------------------------------------------------- May 26, 2010 49,937,678 294,073,000 -- (135,901) U.S. Dollar Norwegian Krone - ---------------------------------------------------------------------------------------------- Total $248,419 $(499,627) - ----------------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- 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 April 30, 2010, the value of foreign securities, excluding short- term securities, represented 1.96% 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. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2010, the value of these securities amounted to $4,840,196 or 2.35% of net assets. (e) The following abbreviation is used in the portfolio security description to identify the insurer of the issue: FGIC -- Financial Guaranty Insurance Company
(f) Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and collateralized mortgage obligations. These securities may be issued or guaranteed by U.S. government agencies or instrumentalities, or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. Unless otherwise noted, the coupon rates presented are fixed rates. (g) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on April 30, 2010. (h) This position is in bankruptcy. (i) This debt is guaranteed under the FDIC's Temporary Liquidity Guarantee Program (TLGP) and is backed by the full faith and credit of the United States. (j) Affiliated Money Market Fund -- See Note 7 to the financial statements. The rate shown is the seven-day current annualized yield at April 30, 2010. (k) At April 30, 2010, the cost of securities for federal income tax purposes was approximately $207,205,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $68,000 Unrealized depreciation (710,000) ---------------------------------------------------------- Net unrealized depreciation $(642,000) ----------------------------------------------------------
- -------------------------------------------------------------------------------- 10 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL 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 ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT 11 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 April 30, 2010:
FAIR VALUE AT APRIL 30, 2010 --------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION(A) IDENTICAL ASSETS INPUTS INPUTS TOTAL - -------------------------------------------------------------------------------------------- Bonds Foreign Government Obligations & Agencies $-- $2,004,108 $-- $2,004,108 Asset-Backed Securities -- 6,639,033 -- 6,639,033 Commercial Mortgage- Backed Securities -- 2,986,884 -- 2,986,884 Residential Mortgage- Backed Securities -- 249,660 -- 249,660 Corporate Debt Securities -- 8,169,549 -- 8,169,549 - -------------------------------------------------------------------------------------------- Total Bonds -- 20,049,234 -- 20,049,234 - -------------------------------------------------------------------------------------------- Other FDIC-Insured Debt Securities -- 4,010,724 -- 4,010,724 Affiliated Money Market Fund 182,502,842 -- -- 182,502,842 - -------------------------------------------------------------------------------------------- Total Other 182,502,842 4,010,724 -- 186,513,566 - -------------------------------------------------------------------------------------------- Investments in Securities 182,502,842 24,059,958 -- 206,562,800 Other Financial Instruments(b) -- (251,208) -- (251,208) - -------------------------------------------------------------------------------------------- Total $182,502,842 $23,808,750 $-- $206,311,592 - --------------------------------------------------------------------------------------------
(a) See the Portfolio of Investments for all investment classifications not indicated in the table. (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. 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 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 800.221.2450. - -------------------------------------------------------------------------------- 12 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- APRIL 30, 2010 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers (identified cost $24,702,255) 24,059,958 Affiliated money market fund (identified cost $182,502,842) 182,502,842 - -------------------------------------------------------------------------------------- Total investments in securities (identified cost $207,205,097) 206,562,800 Capital shares receivable 195,766 Dividends and accrued interest receivable 42,449 Unrealized appreciation on forward foreign currency contracts 248,419 - -------------------------------------------------------------------------------------- Total assets 207,049,434 - -------------------------------------------------------------------------------------- LIABILITIES Disbursements in excess of cash 1,369 Capital shares payable 1,024,594 Unrealized depreciation on forward foreign currency contracts 499,627 Accrued investment management services fees 5,040 Accrued distribution fees 1,298 Accrued transfer agency fees 827 Accrued administrative services fees 453 Other accrued expenses 56,030 - -------------------------------------------------------------------------------------- Total liabilities 1,589,238 - -------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $205,460,196 - -------------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 204,702 Additional paid-in capital 209,839,997 Accumulated net investment loss (1,293,811) Accumulated net realized gain (loss) (2,397,187) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (893,505) - -------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $205,460,196 - --------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $79,924,704 7,966,483 $10.03(1) Class B $ 1,404,835 141,720 $ 9.91 Class C $ 5,741,761 579,892 $ 9.90 Class I $38,668,618 3,828,119 $10.10 Class R4 $ 10,052 1,000 $10.05 Class R5 $ 9,510 942 $10.10 Class W $79,700,716 7,952,005 $10.02 - -----------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $10.34. 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 -- 2010 SEMIANNUAL REPORT 13 STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED APRIL 30, 2010 (UNAUDITED)
INVESTMENT INCOME Income: Interest 101,604 Income distributions from affiliated money market fund 175,892 - ------------------------------------------------------------------------------ Total income 277,496 - ------------------------------------------------------------------------------ Expenses: Investment management services fees 968,440 Distribution fees Class A 117,948 Class B 7,903 Class C 33,829 Class W 103,259 Transfer agency fees Class A 73,785 Class B 1,304 Class C 5,410 Class R4 2 Class R5 2 Class W 82,607 Administrative services fees 87,051 Plan administration services fees -- Class R4 13 Compensation of board members 3,705 Custodian fees 2,576 Printing and postage 27,760 Registration fees 25,670 Professional fees 14,079 Other 8,167 - ------------------------------------------------------------------------------ Total expenses 1,563,510 - ------------------------------------------------------------------------------ Investment income (loss) -- net (1,286,014) - ------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions 3,888 Foreign currency transactions 5,174,724 - ------------------------------------------------------------------------------ Net realized gain (loss) on investments 5,178,612 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (1,602,222) - ------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 3,576,390 - ------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ 2,290,376 - ------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 14 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ (1,286,014) $ (3,979,874) Net realized gain (loss) on investments 5,178,612 (11,823,260) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (1,602,222) 9,397,281 - -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 2,290,376 (6,405,853) - -------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A -- (3,686) Class I -- (38,612) Class R4 -- (1) Class R5 -- (2) Net realized gain Class A -- (1,035,644) Class B -- (22,568) Class C -- (55,949) Class I -- (1,077,400) Class R4 -- (115) Class R5 -- (51) Class W -- (1,582,466) - -------------------------------------------------------------------------------------------------- Total distributions -- (3,816,494) - --------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT 15 STATEMENTS OF CHANGES IN NET ASSETS (continued) --------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 (UNAUDITED) CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 8,753,390 $ 77,249,711 Class B shares 247,441 1,997,878 Class C shares 554,465 4,071,796 Class I shares 11,381,416 22,509,441 Class R4 shares -- 11,804 Class W shares 9,369,318 37,138,223 Reinvestment of distributions at net asset value Class A shares -- 1,016,629 Class B shares -- 22,416 Class C shares -- 48,467 Class I shares -- 1,115,956 Class R4 shares -- 61 Class W shares -- 1,582,439 Conversions from Class B to Class A Class A shares -- 613,986 Class B shares -- (613,986) Payments for redemptions Class A shares (43,997,195) (138,504,444) Class B shares (879,058) (2,582,407) Class C shares (2,465,502) (5,828,137) Class I shares (2,089,888) (192,632,580) Class R4 shares -- (22,927) Class W shares (17,522,361) (251,615,251) - -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (36,647,974) (444,420,925) - -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (34,357,598) (454,643,272) Net assets at beginning of period 239,817,794 694,461,066 - -------------------------------------------------------------------------------------------------- Net assets at end of period $205,460,196 $ 239,817,794 - -------------------------------------------------------------------------------------------------- Accumulated net investment loss/excess of distributions over net investment income $ (1,293,811) $ (7,797) - --------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 16 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL 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 SIX MONTHS ENDED ------------------------------------------ PER SHARE DATA APRIL 30, 2010 2009 2008 2007 2006(a) (UNAUDITED) Net asset value, beginning of period $9.93 $9.97 $10.58 $10.09 $9.98 - ------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.06) (.08) .15 .41 .12 Net gains (losses) (both realized and unrealized) .16 .09 (.22) .57 .11 - ------------------------------------------------------------------------------------------------------------------- Total from investment operations .10 .01 (.07) .98 .23 - ------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.00)(b) (.18) (.39) (.12) Distributions from realized gains -- (.05) (.36) (.10) -- - ------------------------------------------------------------------------------------------------------------------- Total distributions -- (.05) (.54) (.49) (.12) - ------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.03 $9.93 $9.97 $10.58 $10.09 - ------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 1.01% .15% (.57%) 9.96%(c) 2.37% - ------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Gross expenses prior to expense waiver/reimbursement 1.45%(e) 1.38% 1.39% 1.36% 1.59%(e) - ------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f) 1.45%(e) 1.38% 1.39% 1.36% 1.37%(e) - ------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (1.19%)(e) (.83%) 1.50% 3.98% 3.89%(e) - ------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $80 $114 $176 $9 $10 - ------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate --% 16% 39% 36% 12% - -------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT 17 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS B SIX MONTHS ENDED ------------------------------------------- PER SHARE DATA APRIL 30, 2010 2009 2008 2007 2006(a) (UNAUDITED) Net asset value, beginning of period $9.85 $9.96 $10.58 $10.09 $9.97 - -------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.10) (.16) .04 .34 .09 Net gains (losses) (both realized and unrealized) .16 .10 (.18) .59 .12 - -------------------------------------------------------------------------------------------------------------------- Total from investment operations .06 (.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 $9.91 $9.85 $9.96 $10.58 $10.09 - -------------------------------------------------------------------------------------------------------------------- TOTAL RETURN .61% (.56%) (1.35%) 9.38%(c) 2.16% - -------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Gross expenses prior to expense waiver/reimbursement 2.21%(e) 2.14% 2.16% 2.10% 2.38%(e) - -------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f) 2.21%(e) 2.14% 2.16% 2.10% 2.16%(e) - -------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (1.97%)(e) (1.59%) .38% 3.26% 3.11%(e) - -------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $2 $3 $-- $-- - -------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate --% 16% 39% 36% 12% - --------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 18 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS C SIX MONTHS ENDED ------------------------------------------- PER SHARE DATA APRIL 30, 2010 2009 2008 2007 2006(a) (UNAUDITED) Net asset value, beginning of period $9.84 $9.95 $10.57 $10.09 $9.97 - -------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.10) (.16) .06 .34 .09 Net gains (losses) (both realized and unrealized) .16 .10 (.20) .58 .12 - -------------------------------------------------------------------------------------------------------------------- Total from investment operations .06 (.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 $9.90 $9.84 $9.95 $10.57 $10.09 - -------------------------------------------------------------------------------------------------------------------- TOTAL RETURN .61% (.56%) (1.31%) 9.37%(c) 2.16% - -------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Gross expenses prior to expense waiver/reimbursement 2.21%(e) 2.14% 2.15% 2.12% 2.38%(e) - -------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f) 2.21%(e) 2.14% 2.15% 2.12% 2.16%(e) - -------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (1.95%)(e) (1.60%) .66% 3.42% 3.11%(e) - -------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $6 $8 $9 $-- $-- - -------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate --% 16% 39% 36% 12% - --------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT 19 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS I SIX MONTHS ENDED ------------------------------------------ PER SHARE DATA APRIL 30, 2010 2009 2008 2007 2006(a) (UNAUDITED) Net asset value, beginning of period $9.98 $9.98 $10.59 $10.10 $9.98 - ------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.04) (.04) .21 .44 .13 Net gains (losses) (both realized and unrealized) .16 .10 (.24) .59 .12 - ------------------------------------------------------------------------------------------------------------------- Total from investment operations .12 .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 $10.10 $9.98 $9.98 $10.59 $10.10 - ------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 1.20% .56% (.25%) 10.49%(c) 2.56% - ------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Gross expenses prior to expense waiver/reimbursement 1.05%(e) 1.01% 1.03% 1.07% 1.34%(e) - ------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f) 1.05%(e) 1.01% 1.03% 1.07% 1.12%(e) - ------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.80%)(e) (.40%) 2.10% 4.30% 4.37%(e) - ------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $39 $29 $202 $122 $68 - ------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate --% 16% 39% 36% 12% - -------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 20 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R4 SIX MONTHS ENDED ------------------------------------------ PER SHARE DATA APRIL 30, 2010 2009 2008 2007 2006(a) (UNAUDITED) Net asset value, beginning of period $9.94 $9.97 $10.58 $10.09 $9.98 - ------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.05) (.07) .22 .42 .13 Net gains (losses) (both realized and unrealized) .16 .09 (.26) .59 .11 - ------------------------------------------------------------------------------------------------------------------- Total from investment operations .11 .02 (.04) 1.01 .24 - ------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.00)(b) (.21) (.42) (.13) Distributions from realized gains -- (.05) (.36) (.10) -- - ------------------------------------------------------------------------------------------------------------------- Total distributions -- (.05) (.57) (.52) (.13) - ------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.05 $9.94 $9.97 $10.58 $10.09 - ------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 1.11% .25% (.26%) 10.27%(c) 2.42% - ------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Gross expenses prior to expense waiver/reimbursement 1.35%(e) 1.31% 1.34% 1.36% 1.45%(e) - ------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f) 1.35%(e) 1.25% 1.09% 1.31% 1.23%(e) - ------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (1.10%)(e) (.69%) 2.27% 4.13% 4.04%(e) - ------------------------------------------------------------------------------------------------------------------- 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 -- 2010 SEMIANNUAL REPORT 21 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS R5 SIX MONTHS ENDED ------------------------------ PER SHARE DATA APRIL 30, 2010 2009 2008 2007(g) (UNAUDITED) Net asset value, beginning of period $9.98 $9.98 $10.59 $10.58 - ------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.04) (.05) .22 .02 Net gains (losses) (both realized and unrealized) .16 .10 (.26) .03 - ------------------------------------------------------------------------------------------------------- Total from investment operations .12 .05 (.04) .05 - ------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.00)(b) (.21) (.04) Distributions from realized gains -- (.05) (.36) -- - ------------------------------------------------------------------------------------------------------- Total distributions -- (.05) (.57) (.04) - ------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.10 $9.98 $9.98 $10.59 - ------------------------------------------------------------------------------------------------------- TOTAL RETURN 1.20% .56% (.30%) .44%(c) - ------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Total expenses 1.08%(e) 1.06% 1.07% 1.06%(e) - ------------------------------------------------------------------------------------------------------- Net investment income (loss) (.83%)(e) (.54%) 2.23% 4.43%(e) - ------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- - ------------------------------------------------------------------------------------------------------- Portfolio turnover rate --% 16% 39% 36% - -------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 22 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS W SIX MONTHS ENDED ------------------------------ PER SHARE DATA APRIL 30, 2010 2009 2008 2007(h) (UNAUDITED) Net asset value, beginning of period $9.92 $9.97 $10.58 $10.13 - ------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (0.06) (.08) .11 .36 Net gains (losses) (both realized and unrealized) 0.16 .08 (.19) .55 - ------------------------------------------------------------------------------------------------------- Total from investment operations 0.10 .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 $10.02 $9.92 $9.97 $10.58 - ------------------------------------------------------------------------------------------------------- TOTAL RETURN 1.01% .04% (.66%) 9.21%(c) - ------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Total expenses 1.50%(e) 1.46% 1.50% 1.54%(e) - ------------------------------------------------------------------------------------------------------- Net investment income (loss) (1.24%)(e) (.86%) 1.09% 3.88%(e) - ------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $80 $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) Rounds to zero. (c) 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%. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (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). (g) For the period from Oct. 18, 2007 (when shares became publicly available) to Oct. 31, 2007. (h) 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 -- 2010 SEMIANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS OF APRIL 30, 2010) 1. ORGANIZATION RiverSource Absolute Return Currency and Income Fund (the Fund) is a series of RiverSource Global Series, Inc. (the Corporation) and is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified, open-end management investment company. The Corporation has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Corporation'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 April 30, 2010, RiverSource Investments, LLC* (the Investment Manager) and affiliated funds-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 * Effective May 1, 2010, RiverSource Investments, LLC is known as Columbia Management Investment Advisers, LLC. - -------------------------------------------------------------------------------- 24 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- investments are allocated to each class of shares based upon its relative net assets. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 from the primary exchange. 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 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 - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- conditions as of the close of the NYSE. The fair value of a security is likely to be different from the quoted or published price, if available. 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 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. - -------------------------------------------------------------------------------- 26 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- Generally, the tax authorities can examine all tax returns filed for the last three years. FOREIGN CAPITAL GAINS TAXES Realized gains in certain countries may be subject to foreign taxes at the fund level, at rates ranging from approximately 10% to 15%. The Fund pays such foreign taxes on net realized gains at the appropriate rate for each jurisdiction. RECENT ACCOUNTING PRONOUNCEMENT On Jan. 21, 2010, the Financial Accounting Standards Board issued an Accounting Standards Update (the amendment), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which provides guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities to disclose the input and valuation techniques used to measure fair value for both recurring and non-recurring fair value measurements for Level 2 and Level 3 positions. The amendment also requires that transfers between all levels (including Level 1 and Level 2) be disclosed on a gross basis (i.e., transfers out must be disclosed separately from transfers in), and the reason(s) for the transfer. Additionally purchases, sales, issuances and settlements must be disclosed on a gross basis in the Level 3 rollforward. The effective date of the amendment is for interim and annual periods beginning after Dec. 15, 2009, however, the requirement to provide the Level 3 activity for purchases, sales, issuances and settlements on a gross basis will be effective for interim and annual periods beginning after Dec. 15, 2010. At this time the Fund is evaluating the implications of the amendment and the impact to the financial statements. 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. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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. Investments in derivative instruments may expose the Fund to certain additional risks, including those detailed below. 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. 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. - -------------------------------------------------------------------------------- 28 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FAIR VALUES OF DERIVATIVE INSTRUMENTS AT APRIL 30, 2010
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 $248,419 currency contracts $499,627 - ------------------------------------------------------------------------------------------- Total $248,419 $499,627 - -------------------------------------------------------------------------------------------
EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME - ---------------------------------------------------------------------- FORWARD FOREIGN RISK EXPOSURE CATEGORY CURRENCY CONTRACTS - ---------------------------------------------------------------------- Foreign exchange contracts $5,174,724 - ---------------------------------------------------------------------- Total $5,174,724 - ----------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME - ---------------------------------------------------------------------- FORWARD FOREIGN RISK EXPOSURE CATEGORY CURRENCY CONTRACTS - ---------------------------------------------------------------------- Foreign exchange contracts $(1,881,854) - ---------------------------------------------------------------------- Total $(1,881,854) - ----------------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY FORWARD FOREIGN CURRENCY CONTRACTS The gross notional amount of contracts outstanding was approximately $199.7 million at April 30, 2010. The monthly average gross notional amount for these contracts was $214.8 million for the six months ended April 30, 2010. The fair value of such contracts on April 30, 2010 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 six months ended April 30, 2010 was 0.89% of the Fund's average daily net assets. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 six months ended April 30, 2010 was 0.08% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended April 30, 2010, other expenses paid to this company were $736. 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 RiverSource, Seligman and Threadneedle 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. * Effective May 1, 2010, RiverSource Service Corporation is known as Columbia Management Investment Services Corp. - -------------------------------------------------------------------------------- 30 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 $70,000 and $25,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of Jan. 31, 2010, 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 $8,766 for Class A, $140 for Class B and $1,437 for Class C for the six months ended April 30, 2010. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $0 and $12,936,462, respectively, for the six months ended April 30, 2010. Realized gains and losses are determined on an identified cost basis. * Effective May 1, 2010, RiverSource Fund Distributors, Inc. is known as Columbia Management Investment Distributors, Inc. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 - ---------------------------------------------------------------------- CLASS A Sold 877,821 7,828,875 Converted from Class B* -- 62,397 Reinvested distributions -- 103,312 Redeemed (4,415,753) (14,115,766) - ---------------------------------------------------------------------- Net increase (decrease) (3,537,932) (6,121,182) - ---------------------------------------------------------------------- CLASS B Sold 25,033 202,702 Reinvested distributions -- 2,280 Converted to Class A* -- (62,780) Redeemed (89,021) (264,660) - ---------------------------------------------------------------------- Net increase (decrease) (63,988) (122,458) - ---------------------------------------------------------------------- CLASS C Sold 56,319 414,719 Reinvested distributions -- 4,936 Redeemed (249,957) (597,391) - ---------------------------------------------------------------------- Net increase (decrease) (193,638) (177,736) - ---------------------------------------------------------------------- CLASS I Sold 1,137,639 2,280,706 Reinvested distributions -- 113,149 Redeemed (208,563) (19,747,663) - ---------------------------------------------------------------------- Net increase (decrease) 929,076 (17,353,808) - ---------------------------------------------------------------------- CLASS R4 Sold -- 1,202 Reinvested distributions -- 6 Redeemed -- (2,336) - ---------------------------------------------------------------------- Net increase (decrease) -- (1,128) - ---------------------------------------------------------------------- CLASS W Sold 942,298 3,773,483 Reinvested distributions -- 160,817 Redeemed (1,758,304) (25,660,216) - ---------------------------------------------------------------------- Net increase (decrease) (816,006) (21,725,916) - ----------------------------------------------------------------------
* Automatic conversion of Class B shares to Class A shares based on the original purchase date. - -------------------------------------------------------------------------------- 32 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL 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 RiverSource, Seligman and Threadneedle funds and other institutional clients of the Investment Manager. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $25,486,217 and $44,745,138, respectively, for the six months ended April 30, 2010. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at April 30, 2010, 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 agreement, which is a collective agreement between the Fund and certain other RiverSource, Seligman and Threadneedle 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 (i) 1.25% per annum plus (ii) 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. The Fund had no borrowings during the six months ended April 30, 2010. 9. 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 - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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. 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. 10. 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. As a result, the Fund's exposure to foreign currencies may reduce the returns of the Fund. Trading of foreign currencies also includes the risk of clearing and settling trades which, if prices are volatile, may be difficult. 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 a special purpose or structured vehicle becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties. The Fund may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. The Fund may obtain only limited recovery or may obtain no recovery in such circumstances. The Fund will typically enter into - -------------------------------------------------------------------------------- 34 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- financial instrument transactions with counterparties whose credit rating is investment grade, or, if unrated, determined to be of comparable quality by the Investment Manager. 11. 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 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. 12. 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 (the Supreme Court), asking the Supreme Court to stay the District Court proceedings while the 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. On March 30, 2010, the Supreme Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit's decision in the Gallus case and remanded the case to the Eighth Circuit for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT 35 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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. 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. - -------------------------------------------------------------------------------- 36 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- Columbia Management Investment Advisers, LLC ("Columbia Management" or the "investment manager"), formerly known as RiverSource Investments, LLC, a wholly- owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), Columbia Management provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. Columbia Management prepared detailed reports for the Board and its Contracts Committee in March and April 2010, including reports based on data provided by independent organizations and a comprehensive response to each item of information requested by independent legal counsel to the Independent Directors ("Independent Legal Counsel") in a letter to the investment manager, to assist the Board in making this determination. All of the materials presented in March and April 2010 were first supplied in draft form to designated representatives of the Independent Directors, i.e., Independent Legal Counsel, the Chair of the Board and the Chair of the Contracts Committee, and the final materials were revised to reflect comments provided by these Board representatives. In addition, throughout the year, the Board (or its committees) reviews information prepared by Columbia Management addressing the services Columbia Management provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts Committee, the Investment Review Committee and the Compliance Committee in determining whether to continue the IMS Agreement. At the April 6-8, 2010 in-person Board meeting, Independent Legal Counsel reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by Columbia Management: The Board analyzed various reports and presentations it had received detailing the services performed by Columbia Management, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by Columbia Management, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, most notably, management's announcement of the massive investment made in the acquisition of the long-term asset management business - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT 37 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- of Columbia Management Group, LLC (the "Columbia Transaction") and the completed integration of J. & W. Seligman & Co. Incorporated, acquisitions which should continue to enhance investment capabilities and provide access to a greater depth of experienced portfolio managers in key categories. The Board noted, in particular, that upon the close of the Columbia Transaction, RiverSource will have grown to 10 investment offices (compared to 6 in 2009). In addition, the Board reviewed information concerning the investment manager's new Chief Investment Officer upon the close of the Columbia Transaction, including the application of his particular investment philosophy, which is intended to enhance the risk and portfolio management oversight of the entire fund family. Moreover, in connection with the Board's evaluation of the overall package of services provided by Columbia Management, the Board considered the quality of the administrative and transfer agency services provided by Columbia Management's affiliates to the Fund. The Board also reviewed the financial condition of Columbia Management (and its affiliates) and each entity's ability to carry out its responsibilities under the IMS Agreement. Further, the Board considered Columbia Management's ability to retain key personnel in certain targeted areas and its expectations in this regard. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by Columbia Management). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that Columbia Management and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, and the net assets of the Fund. The Board observed that the Fund's investment performance met expectations. Comparative Fees, Costs of Services Provided and the Profits Realized By Columbia Management and its Affiliates from their Relationships with the Fund: - -------------------------------------------------------------------------------- 38 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to Columbia Management's profitability. They also reviewed information in the report showing the fees charged by Columbia Management to other client accounts (with similar investment strategies to those of the Fund). The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund (with few defined exceptions) are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio was slightly below the peer group's median expense ratio shown in the reports. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered various preliminary integration plans in connection with the Columbia Transaction which, if implemented, would impact the fee structures of various RiverSource Funds. The Board was satisfied with the principles underlying these plans, which, at their preliminary stage, are designed to achieve a rational, consistent pricing model across the combined fund families, as well as preserve the "pricing philosophy" of the Funds. The Board also considered the expected profitability of Columbia Management and its affiliates in connection with Columbia Management providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to Columbia Management and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. In this regard, the Board observed slightly reduced profitability in 2009 vs. 2008. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL REPORT 39 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by Columbia Management as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 8, 2010, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement for an additional annual period. PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling 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. - -------------------------------------------------------------------------------- 40 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2010 SEMIANNUAL 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 Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.), member FINRA and managed by Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC). (C)2010 Columbia Management Investment Advisers, LLC. All (COLUMBIA MANAGEMENT LOGO) rights reserved. S-6512 E (6/10)
Semiannual Report (COLUMBIA MANAGEMENT LOGO) RIVERSOURCE EMERGING MARKETS BOND FUND - -------------------------------------------------------------------------------- SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2010 RIVERSOURCE EMERGING MARKETS BOND FUND SEEKS TO PROVIDE SHAREHOLDERS WITH HIGH TOTAL RETURN THROUGH CURRENT INCOME AND, SECONDARILY, THROUGH CAPITAL APPRECIATION. NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 8 Portfolio of Investments........... 10 Statement of Assets and Liabilities...................... 20 Statement of Operations............ 22 Statements of Changes in Net Assets........................... 24 Financial Highlights............... 26 Notes to Financial Statements...... 32 Approval of Investment Management Services Agreement............... 50 Proxy Voting....................... 53
- -------------------------------------------------------------------------------- 2 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Emerging Markets Bond Fund (the Fund) Class A shares gained 8.71% (excluding sales charge) for the six months ended April 30, 2010. > The Fund outperformed its benchmark, the J.P. Morgan Emerging Markets Bond Index-Global (EMBI-Global), which rose 6.40% during the same period. > The Fund also outperformed the Lipper Emerging Markets Debt Funds Index, representing the Fund's peer group, which advanced 8.08% during the same period. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2010) - --------------------------------------------------------------------------------
SINCE INCEPTION 6 MONTHS* 1 YEAR 3 YEARS 2/16/06 - ------------------------------------------------------------------------ RiverSource Emerging Markets Bond Fund Class A (excluding sales charge) +8.71% +34.68% +7.26% +8.23% - ------------------------------------------------------------------------ J.P. Morgan EMBI-Global(1) (unmanaged) +6.40% +23.49% +7.24% +7.74% - ------------------------------------------------------------------------ Lipper Emerging Markets Debt Funds Index(2) +8.08% +32.41% +5.46% +6.92% - ------------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 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. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. (1) The J.P. Morgan Emerging Markets Bond Index-Global (J.P. Morgan EMBI- Global), an unmanaged index, is based on U.S. dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities, such as Brady bonds, Eurobonds and loans. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Emerging Markets Debt Funds Index includes the 10 largest emerging markets debt funds tracked by Lipper Inc. The index's returns include reinvested dividends. AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT APRIL 30, 2010 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS INCEPTION Class A (inception 2/16/06) +8.71% +34.68% +7.26% +8.23% - ----------------------------------------------------------------------- Class B (inception 2/16/06) +8.33% +33.72% +6.47% +7.43% - ----------------------------------------------------------------------- Class C (inception 2/16/06) +8.36% +33.69% +6.48% +7.42% - ----------------------------------------------------------------------- Class I (inception 2/16/06) +8.91% +35.17% +7.73% +8.66% - ----------------------------------------------------------------------- Class R4 (inception 2/16/06) +8.75% +34.78% +7.58% +8.49% - ----------------------------------------------------------------------- Class W (inception 12/1/06) +8.68% +34.62% +7.26% +8.18% - ----------------------------------------------------------------------- With sales charge Class A (inception 2/16/06) +3.55% +28.28% +5.53% +6.98% - ----------------------------------------------------------------------- Class B (inception 2/16/06) +3.33% +28.72% +5.58% +7.05% - ----------------------------------------------------------------------- Class C (inception 2/16/06) +7.36% +32.69% +6.48% +7.42% - -----------------------------------------------------------------------
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. * Not annualized. - -------------------------------------------------------------------------------- 4 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- PORTFOLIO STATISTICS - -------------------------------------------------------------------------------- Weighted average life(1) 11.3 years - -------------------------------------- Effective duration(2) 6.7 years - --------------------------------------
(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. 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. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- COUNTRY BREAKDOWN(1) (at April 30, 2010) - ---------------------------------------------------------------------
Argentina 3.6% - ------------------------------------------------ Bahrain 0.4% - ------------------------------------------------ Brazil 9.6% - ------------------------------------------------ Cayman Islands 3.6% - ------------------------------------------------ Chile 0.5% - ------------------------------------------------ Colombia 5.9% - ------------------------------------------------ Dominican Republic 1.6% - ------------------------------------------------ El Salvador 2.0% - ------------------------------------------------ Indonesia 9.5% - ------------------------------------------------ Iraq 0.4% - ------------------------------------------------ Kazakhstan 2.1% - ------------------------------------------------ Lithuania 0.6% - ------------------------------------------------ Luxembourg 4.8% - ------------------------------------------------ Mexico 8.6% - ------------------------------------------------ Netherlands 5.7% - ------------------------------------------------ Peru 1.8% - ------------------------------------------------ Philippine Islands 3.7% - ------------------------------------------------ Qatar 0.9% - ------------------------------------------------ Russia 8.3% - ------------------------------------------------ South Korea 0.7% - ------------------------------------------------ Supra-National 1.5% - ------------------------------------------------ Trinidad and Tobago 0.8% - ------------------------------------------------ Turkey 7.0% - ------------------------------------------------ Ukraine 1.4% - ------------------------------------------------ United Kingdom 1.1% - ------------------------------------------------ Uruguay 2.7% - ------------------------------------------------ Venezuela 8.1% - ------------------------------------------------ Other(2) 3.1% - ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. (2) Cash & Cash Equivalents. - -------------------------------------------------------------------------------- 6 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- QUALITY BREAKDOWN OF FIXED INCOME SECURITIES(1) (at April 30, 2010) - ---------------------------------------------------------------------
AA rating 1.2% - ------------------------------------------------ A rating 7.6% - ------------------------------------------------ BBB rating 37.1% - ------------------------------------------------ BB rating 42.0% - ------------------------------------------------ B rating 10.3% - ------------------------------------------------ Non-rated 1.8% - ------------------------------------------------
(1) Percentages indicated are based upon total fixed income securities (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). 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. * Effective May 1, 2010, RiverSource Investments, LLC is known as Columbia Management Investment Advisers, LLC. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments; and (ii) ongoing costs, which may include management fees; distribution and service (Rule 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 April 30, 2010. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses for each class. 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 actual expense ratio for each class and an assumed rate of return of 5% per year before expenses, which is not the actual return for the class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 8 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2009 APRIL 30, 2010 THE PERIOD(a) EXPENSE RATIO - ------------------------------------------------------------------------------------------- Class A - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,087.10 $ 6.82 1.31% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.40 $ 6.59 1.31% - ------------------------------------------------------------------------------------------- Class B - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,083.30 $10.80 2.08% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.56 $10.45 2.08% - ------------------------------------------------------------------------------------------- Class C - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,083.60 $10.75 2.07% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.61 $10.40 2.07% - ------------------------------------------------------------------------------------------- Class I - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,089.10 $ 4.79 .92% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,020.34 $ 4.63 .92% - ------------------------------------------------------------------------------------------- Class R4 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,087.50 $ 6.35 1.22% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.85 $ 6.14 1.22% - ------------------------------------------------------------------------------------------- Class W - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,086.80 $ 7.13 1.37% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.10 $ 6.89 1.37% - -------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2010: +8.71% for Class A, +8.33% for Class B, +8.36% for Class C, +8.91% for Class I, +8.75% for Class R4 and +8.68% for Class W. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2010 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
BONDS (95.1%)(c) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) ARGENTINA (3.5%) Republic of Argentina Sr Unsecured 09-12-13 7.00% $7,600,000 $6,821,446 10-03-15 7.00 1,000,000(j) 814,000 12-15-35 0.00 16,450,000(g) 1,274,875 --------------- Total 8,910,321 - ------------------------------------------------------------------------------------- BAHRAIN (0.4%) Kingdom of Bahrain Sr Unsecured 03-31-20 5.50 1,000,000(d) 1,000,000 - ------------------------------------------------------------------------------------- BRAZIL (9.4%) Banco Nacional de Desenvolvimento Economico e Social Sr Unsecured 06-16-18 6.37 2,650,000(d) 2,782,500 06-10-19 6.50 1,300,000(d) 1,398,144 Braco I Holding Ltda Sr Unsecured 10-05-16 10.25 580,000(d) 638,000 Centrais Eletricas Brasileiras Sr Unsecured 07-30-19 6.88 1,000,000(d) 1,094,386 Federative Republic of Brazil 01-22-21 4.88 1,770,000 1,747,432 Federative Republic of Brazil (Brazilian Real) 01-05-16 12.50 350,000 225,612 Federative Republic of Brazil Sr Unsecured 01-17-17 6.00 700,000 766,500 01-07-41 5.63 1,000,000 956,250 Marfrig Overseas 05-04-20 9.50 800,000(d,e) 787,408 Marfrig Overseas Ltd. 11-16-16 9.63 1,130,000(d) 1,163,900 Morgan Stanley (Brazilian Real) Sr Unsecured 05-03-17 10.09 4,600,000(d) 2,541,582 Nota do Tesouro Nacional (Brazilian Real) Series F 01-01-12 10.00 489,500 2,813,776 01-01-13 10.00 1,006,100 5,641,517 Petrobras Intl Finance 01-20-20 5.75 500,000(j) 507,832 01-20-40 6.88 1,000,000(j) 1,034,413 --------------- Total 24,099,252 - ------------------------------------------------------------------------------------- CAYMAN ISLANDS (3.6%) Govt of the Cayman Islands Sr Unsecured 11-24-19 5.95 1,800,000(d) 1,792,049 Peru Enhanced Pass-Thru Sr Secured Zero Coupon 05-31-18 4.27 5,724,652(b,d,k) 4,579,721 Petrobras Intl Finance 03-15-19 7.88 2,300,000 2,687,474 --------------- Total 9,059,244 - ------------------------------------------------------------------------------------- CHILE (0.5%) Empresa Nacional Del Petroleo Sr Unsecured 07-08-19 6.25 1,200,000(d) 1,254,265 - ------------------------------------------------------------------------------------- COLOMBIA (5.8%) Ecopetrol Sr Unsecured 07-23-19 7.63 1,400,000(j) 1,568,000 Empresas Publicas de Medellin Sr Unsecured 07-29-19 7.63 400,000(d) 447,768 Republic of Colombia 09-18-37 7.38 4,100,000(j) 4,571,500 Republic of Colombia (Colombian Peso) 10-22-15 12.00 2,693,000,000 1,733,837 06-28-27 9.85 1,000,000,000 636,829
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 10 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) COLOMBIA (CONT.) Republic of Colombia (Colombian Peso) Sr Unsecured 04-14-21 7.75% 1,911,000,000 $1,036,309 Republic of Colombia Sr Unsecured 05-21-24 8.13 $400,000 481,000 01-18-41 6.13 3,600,000(j) 3,505,645 Santa Fe de Bogota (Colombian Peso) Sr Unsecured 07-26-28 9.75 1,377,000,000(d) 785,348 --------------- Total 14,766,236 - ------------------------------------------------------------------------------------- DOMINICAN REPUBLIC (1.6%) Aes Dominicana Energia Finance 12-13-15 11.00 1,050,000(d) 1,113,000 Cerveceria Nacional Dominicana 03-27-12 16.00 1,450,000(d) 1,380,458 Dominican Republic 05-06-21 7.50 1,600,000(d,e) 1,600,000 --------------- Total 4,093,458 - ------------------------------------------------------------------------------------- EL SALVADOR (2.0%) Republic of El Salvador 04-10-32 8.25 750,000(d) 847,500 06-15-35 7.65 2,310,000(d) 2,494,800 Republic of El Salvador Sr Unsecured 01-24-23 7.75 1,460,000(d) 1,642,500 --------------- Total 4,984,800 - ------------------------------------------------------------------------------------- INDONESIA (9.4%) Govt of Indonesia (Indonesian Rupiah) 07-15-22 10.25 29,000,000,000 3,540,895 Govt of Indonesia (Indonesian Rupiah) Series FR34 06-15-21 12.80 12,800,000,000 1,827,809 Govt of Indonesia (Indonesian Rupiah) Sr Unsecured Series FR26 10-15-14 11.00 6,000,000,000 739,620 Govt of Indonesia (Indonesian Rupiah) Sr Unsecured Series FR28 07-15-17 10.00 10,000,000,000 $1,202,699 Govt of Indonesia (Indonesian Rupiah) Sr Unsecured Series FR30 05-15-16 10.75 4,470,000,000 552,398 Govt of Indonesia (Indonesian Rupiah) Sr Unsecured Series FR31 11-15-20 11.00 9,000,000,000 1,158,997 Govt of Indonesia (Indonesian Rupiah) Sr Unsecured Series FR36 09-15-19 11.50 23,500,000,000 3,096,217 Perusahaan Penerbit SBSN Sr Unsecured 04-23-14 8.80 $1,900,000(d) 2,227,414 Republic of Indonesia Sr Unsecured 03-13-20 5.88 1,500,000(d,j) 1,563,750 10-12-35 8.50 2,100,000(d) 2,640,750 02-17-37 6.63 1,950,000(d) 2,008,500 01-17-38 7.75 2,800,000(d) 3,269,000 --------------- Total 23,828,049 - ------------------------------------------------------------------------------------- IRAQ (0.4%) Republic of Iraq 01-15-28 5.80 1,100,000(d) 921,250 - ------------------------------------------------------------------------------------- KAZAKHSTAN (2.0%) KazMunaiGaz Finance 07-02-18 9.13 2,995,000(d) 3,557,176 05-05-20 7.00 1,600,000(d,e) 1,584,176 --------------- Total 5,141,352 - ------------------------------------------------------------------------------------- LITHUANIA (0.6%) Republic of Lithuania 02-11-20 7.38 1,500,000(d) 1,602,895 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) LUXEMBOURG (4.7%) Gaz Capital for Gazprom Sr Unsecured 11-22-16 6.21% $3,950,000(d) $3,989,499 Gaz Capital Sr Unsecured 07-31-14 8.13 1,000,000(d,j) 1,112,141 08-16-37 7.29 2,950,000(d) 2,990,563 TNK-BP Finance 03-13-18 7.88 2,625,000(d) 2,877,656 02-02-20 7.25 1,000,000(d) 1,045,000 --------------- Total 12,014,859 - ------------------------------------------------------------------------------------- MEXICO (8.4%) Mexican Fixed Rate Bonds (Mexican Peso) 12-19-13 8.00 6,330,000 545,066 12-17-15 8.00 19,400,000 1,654,427 Mexican Fixed Rate Bonds (Mexican Peso) Series M-10 12-15-16 7.25 33,010,000 2,697,086 12-14-17 7.75 39,100,000 3,278,531 Pemex Project Funding Master Trust 03-15-15 4.88 2,000,000(d) 2,067,575 03-01-18 5.75 2,950,000 3,048,922 06-15-35 6.63 4,304,000(j) 4,259,979 06-15-38 6.63 2,000,000 1,950,810 Petroleos Mexicanos 05-03-19 8.00 1,600,000 1,880,000 --------------- Total 21,382,396 - ------------------------------------------------------------------------------------- NETHERLANDS (5.5%) KazMunaiGaz Finance 01-23-15 11.75 1,600,000(d) 2,065,091 Lukoil Intl Finance 11-05-19 7.25 2,900,000(d) 3,038,826 Majapahit Holding 10-17-16 7.75 2,030,000(d) 2,245,586 06-28-17 7.25 1,150,000(d) 1,233,375 08-07-19 8.00 2,100,000(d) 2,331,000 01-20-20 7.75 2,900,000(d) 3,222,589 --------------- Total 14,136,467 - ------------------------------------------------------------------------------------- PERU (1.8%) Banco de Credito del Peru 10-15-22 7.17 4,000,000(d) 1,418,131 Republic of Peru Sr Unsecured 03-14-37 6.55 2,900,000 3,074,000 --------------- Total 4,492,131 - ------------------------------------------------------------------------------------- PHILIPPINE ISLANDS (3.6%) Natl Power 11-02-16 6.88 900,000(d) 996,180 Power Sector Assets & Liabilities Management 05-27-19 7.25 2,750,000(d) 3,000,801 12-02-24 7.39 2,000,000(d) 2,170,120 Republic of Philippines Sr Unsecured 01-20-20 6.50 2,300,000 2,518,500 01-15-32 6.38 600,000 600,000 --------------- Total 9,285,601 - ------------------------------------------------------------------------------------- QATAR (0.9%) Qtel Intl Finance 06-10-19 7.88 1,000,000(d) 1,163,398 State of Qatar Sr Notes 01-20-40 6.40 1,000,000(d) 1,047,500 --------------- Total 2,210,898 - ------------------------------------------------------------------------------------- RUSSIA (8.1%) Gaz Capital Sr UnSecured 04-11-18 8.15 550,000(d) 611,187 Gazstream 07-22-13 5.63 243,467(d,j) 249,554 Russian Federation 04-29-20 5.00 4,800,000(d) 4,703,662 03-31-30 7.50 7,738,120(d) 8,875,623 TransCapitalInvest for Transneft Sr Unsecured 08-07-18 8.70 5,180,000(d) 6,229,945 --------------- Total 20,669,971 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 12 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) SOUTH KOREA (0.7%) Export-Import Bank of Korea Sr Unsecured 01-14-15 5.88% $1,650,000 $1,793,326 - ------------------------------------------------------------------------------------- SUPRA-NATIONAL (1.5%) Central American Bank Sr Notes 09-24-14 5.38 1,500,000(d) 1,571,927 Corp Andina de Fomento Sr Unsecured 06-04-19 8.13 1,800,000 2,162,237 --------------- Total 3,734,164 - ------------------------------------------------------------------------------------- TRINIDAD AND TOBAGO (0.8%) Petro Trinidad/Tobago Sr Unsecured 08-14-19 9.75 1,800,000(d) 2,106,213 - ------------------------------------------------------------------------------------- TURKEY (6.9%) Republic of Turkey 03-15-15 7.25 1,500,000 1,689,375 04-03-18 6.75 1,150,000 1,250,625 06-05-20 7.00 1,300,000 1,421,875 03-17-36 6.88 4,450,000 4,466,688 05-30-40 6.75 3,500,000 3,447,500 Republic of Turkey Sr Unsecured 07-14-17 7.50 1,300,000 1,478,750 11-07-19 7.50 3,375,000 3,826,406 --------------- Total 17,581,219 - ------------------------------------------------------------------------------------- UKRAINE (1.3%) Govt of Ukraine 06-26-12 6.39 850,000(d) 854,250 MHP 04-29-15 10.25 2,528,000(d) 2,579,269 --------------- Total 3,433,519 - ------------------------------------------------------------------------------------- UNITED KINGDOM (1.1%) Vedanta Resources Sr Unsecured 07-18-18 9.50 2,500,000(d) 2,767,584 - ------------------------------------------------------------------------------------- URUGUAY (2.6%) Republic of Uruguay Pay-in-kind 01-15-33 7.88 198,500(h) 232,245 Republica Orient Uruguay (Uruguay Peso) 04-05-27 4.25 84,936,163(f) 4,477,043 Republica Orient Uruguay Sr Unsecured 03-21-36 7.63 1,783,939 2,024,771 --------------- Total 6,734,059 - ------------------------------------------------------------------------------------- VENEZUELA (8.0%) Petroleos de Venezuela 10-28-16 5.13 3,400,000 2,196,235 04-12-17 5.25 11,100,000 7,201,125 Republic of Venezuela 02-26-16 5.75 5,389,500 3,880,440 03-31-38 7.00 1,800,000 1,053,000 Republic of Venezuela Sr Unsecured 10-08-14 8.50 794,000 684,825 05-07-23 9.00 7,150,000 5,326,750 --------------- Total 20,342,375 - ------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $221,830,792) $242,345,904 - -------------------------------------------------------------------------------------
MONEY MARKET FUND (3.0%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.21% 7,652,711(l) $7,652,711 - ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $7,652,711) $7,652,711 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (3.2%) AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) REPURCHASE AGREEMENTS(I) Cantor Fitzgerald dated 04-30-10, matures 05-03-10, repurchase price $5,000,092 0.22% $5,000,000 $5,000,000 Goldman Sachs dated 04-30-10, matures 05-03-10, repurchase price $3,194,165 0.19 3,194,114 3,194,114 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $8,194,114) $8,194,114 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $237,677,617)(m) $258,192,729 =====================================================================================
CREDIT DEFAULT SWAP CONTRACTS OUTSTANDING AT APRIL 30, 2010 BUY PROTECTION
UNAMORTIZED PERIODIC PREMIUM PAYMENTS REFERENCE EXPIRATION RECEIVE NOTIONAL MARKET (PAID) RECEIVABLE UNREALIZED COUNTERPARTY ENTITY DATE FIXED RATE AMOUNT VALUE RECEIVED (PAYABLE) DEPRECIATION - ----------------------------------------------------------------------------------------------------------------------------- JPMorgan Chase CDX Emerging Dec. 20, 2013 2.65% $2,000,000 $(14,351) $(270,366) $(19,433) $(304,150) Bank Markets Index
CREDIT DEFAULT SWAP CONTRACTS OUTSTANDING AT APRIL 30, 2010 SELL PROTECTION
UNAMORTIZED PERIODIC PREMIUM PAYMENTS REFERENCE EXPIRATION PAY FIXED NOTIONAL MARKET (PAID) RECEIVABLE UNREALIZED COUNTERPARTY ENTITY DATE RATE AMOUNT VALUE RECEIVED (PAYABLE) APPRECIATION - -------------------------------------------------------------------------------------------------------------------- Merril Lynch CDX Emerging June 20, 2013 2.65% $2,000,000 $14,952 $-- $19,433 $34,386 Intl
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. - -------------------------------------------------------------------------------- 14 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (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. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2010, the value of these securities amounted to $117,282,485 or 46.04% of net assets. (e) At April 30, 2010, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $3,959,296. See Note 2 to the financial statements. (f) 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. (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) 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. (i) The table below represents securities received as collateral for repurchase agreements. This collateral, which is generally high quality short-term obligations, is deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral.
CANTOR FITZGERALD (0.22%) SECURITY DESCRIPTION VALUE(a) - ------------------------------------------------------------ Fannie Mae Discount Notes $6,362 Fannie Mae Interest Strip 27,412 Fannie Mae Pool 3,386,704 Fannie Mae Principal Strip 639 Fannie Mae REMICS 100,189 Federal Farm Credit Bank 87,812 Federal Home Loan Banks 81,413 Federal Home Loan Mortgage Corp 113,973 Federal National Mortgage Association 82,036 Freddie Mac Non Gold Pool 379,138 Freddie Mac Reference REMIC 5,396 Freddie Mac REMICS 117,694 Freddie Mac Strips 68,463
- -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
CANTOR FITZGERALD (0.22%) (CONT.) SECURITY DESCRIPTION VALUE(a) - ------------------------------------------------------------ Ginnie Mae I Pool $168,045 Ginnie Mae II Pool 124,749 Government National Mortgage Association 28,257 United States Treasury Inflation Indexed Bonds 23,011 United States Treasury Note/Bond 40,106 United States Treasury Strip Coupon 256,013 United States Treasury Strip Principal 2,588 - ------------------------------------------------------------ Total market value of collateral securities $5,100,000 - ------------------------------------------------------------ GOLDMAN SACHS (0.19%) SECURITY DESCRIPTION VALUE(a) - ------------------------------------------------------------ Fannie Mae Pool $2,342,486 Freddie Mac Gold Pool 789,408 Freddie Mac Non Gold Pool 126,102 - ------------------------------------------------------------ Total market value of collateral securities $3,257,996 - ------------------------------------------------------------
(j) At April 30, 2010, security was partially or fully on loan. See Note 7 to the financial statements. (k) For zero coupons, the interest rate disclosed represents the annualized effective yield on the date of acquisition. (l) Affiliated Money Market Fund -- See Note 8 to the financial statements. The rate shown is the seven-day current annualized yield at April 30, 2010. (m) At April 30, 2010, the cost of securities for federal income tax purposes was approximately $237,678,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $21,869,000 Unrealized depreciation (1,354,000) ----------------------------------------------------------- Net unrealized appreciation $20,515,000 -----------------------------------------------------------
- -------------------------------------------------------------------------------- 16 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL 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 -- 2010 SEMIANNUAL REPORT 17 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 April 30, 2010:
FAIR VALUE AT APRIL 30, 2010 ---------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION(A) IDENTICAL ASSETS INPUTS INPUTS TOTAL - --------------------------------------------------------------------------------------------- Bonds Banking $-- $1,793,326 $1,418,131 $3,211,457 Food and Beverage -- 5,168,577 1,380,458 6,549,035 Foreign Government Obligations & Agencies -- 177,316,858 4,579,722 181,896,580 All Other Industries -- 50,688,832 -- 50,688,832 - --------------------------------------------------------------------------------------------- Total Bonds -- 234,967,593 7,378,311 242,345,904 - --------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(b) 7,652,711 -- -- 7,652,711 Investments of Cash Collateral Received for Securities on Loan -- 8,194,114 -- 8,194,114 - --------------------------------------------------------------------------------------------- Total Other 7,652,711 8,194,114 -- 15,846,825 - --------------------------------------------------------------------------------------------- Investments in Securities 7,652,711 243,161,707 7,378,311 258,192,729 Other Financial Instruments(c) -- (269,764) -- (269,764) - --------------------------------------------------------------------------------------------- Total $7,652,711 $242,891,943 $7,378,311 $257,922,965 - ---------------------------------------------------------------------------------------------
(a) See the Portfolio of Investments for all investment classifications not indicated in the table. (b) Money market fund that is a sweep investment for cash balances in the Fund at April 30, 2010. (c) 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. - -------------------------------------------------------------------------------- 18 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL 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 CORPORATE OBLIGATIONS & DEBT AGENCIES SECURITIES TOTAL - ----------------------------------------------------------------------------------- Balance as of Oct. 30, 2009 $5,251,716 $2,703,228 $7,954,944 Accrued discounts/premiums 96,548 (2,242) 94,306 Realized gain (loss) 138,539 -- 138,539 Change in unrealized appreciation (depreciation)* 57,365 92,267 149,632 Net purchases (sales) (964,446) 5,336 (959,110) Transfers in and/or out of Level 3 -- -- -- - ----------------------------------------------------------------------------------- Balance as of April 30, 2010 $4,579,722 $2,798,589 $7,378,311 - -----------------------------------------------------------------------------------
* Change in unrealized appreciation (depreciation) relating to securities held at April 30, 2010 was $149,632, which is comprised of Foreign Government Obligations & Agencies of $57,365 and Corporate Debt Securities of $92,267. 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 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 800.221.2450. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 19 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- APRIL 30, 2010 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $221,830,792) $242,345,904 Affiliated money market fund (identified cost $7,652,711) 7,652,711 Investments of cash collateral received for securities on loan (identified cost $8,194,114) 8,194,114 - ------------------------------------------------------------------------------- Total investments in securities (identified cost $237,677,617) 258,192,729 Foreign currency holdings (identified cost $616,482) 644,175 Capital shares receivable 365,020 Premiums paid on outstanding credit default swap contracts 270,366 Dividends and accrued interest receivable 3,797,471 Receivable for investment securities sold 4,703,113 Unrealized appreciation on swap contracts 34,386 Cash deposits and collateral held at broker 90,000 - ------------------------------------------------------------------------------- Total assets 268,097,260 - ------------------------------------------------------------------------------- LIABILITIES Capital shares payable 796,435 Payable for investment securities purchased on a forward- commitment basis 3,959,296 Payable upon return of securities loaned 8,194,114 Unrealized depreciation on swap contracts 304,150 Accrued investment management services fees 5,024 Accrued distribution fees 1,279 Accrued transfer agency fees 913 Accrued administrative services fees 559 Other accrued expenses 76,421 - ------------------------------------------------------------------------------- Total liabilities 13,338,191 - ------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $254,759,069 - ------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 232,087 Additional paid-in capital 243,357,090 Undistributed net investment income 4,288,111 Accumulated net realized gain (loss) (13,406,825) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 20,288,606 - ------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $254,759,069 - ------------------------------------------------------------------------------- *Value of securities on loan $ 8,171,913 - -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 20 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $ 52,010,484 4,735,668 $10.98(1) Class B $ 3,363,597 306,702 $10.97 Class C $ 1,373,668 125,454 $10.95 Class I $ 82,026,917 7,467,741 $10.98 Class R4 $ 26,520 2,416 $10.98 Class W $115,957,883 10,570,693 $10.97 - ------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $11.53. 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 -- 2010 SEMIANNUAL REPORT 21 STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED APRIL 30, 2010 (UNAUDITED)
INVESTMENT INCOME Income: Interest $11,630,944 Income distributions from affiliated money market fund 10,721 Income from securities lending -- net 2,357 Less foreign taxes withheld (20,119) - ------------------------------------------------------------------------------ Total income 11,623,903 - ------------------------------------------------------------------------------ Expenses: Investment management services fees 940,504 Distribution fees Class A 52,272 Class B 13,914 Class C 5,191 Class W 146,557 Transfer agency fees Class A 37,204 Class B 2,678 Class C 958 Class R4 6 Class W 117,246 Administrative services fees 104,672 Plan administration services fees -- Class R4 30 Compensation of board members 4,509 Custodian fees 32,975 Printing and postage 34,320 Registration fees 39,954 Professional fees 12,136 Other 41,184 - ------------------------------------------------------------------------------ Total expenses 1,586,310 Expenses waived/reimbursed by the Investment Manager and its affiliates (16,731) - ------------------------------------------------------------------------------ Total net expenses 1,569,579 - ------------------------------------------------------------------------------ Investment income (loss) -- net 10,054,324 - ------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 22 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $ 4,610,251 Foreign currency transactions 8,809 Swap transactions (37,025) - ------------------------------------------------------------------------------ Net realized gain (loss) on investments 4,582,035 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 7,107,597 - ------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 11,689,632 - ------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $21,743,956 - ------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 23 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 10,054,324 $ 11,540,815 Net realized gain (loss) on investments 4,582,035 (17,850,581) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 7,107,597 83,465,430 - -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 21,743,956 77,155,664 - -------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (1,047,055) (713,409) Class B (59,238) (70,961) Class C (22,424) (14,643) Class I (2,595,223) (3,796,231) Class R4 (604) (1,021) Class W (2,823,046) (5,505,562) - -------------------------------------------------------------------------------------------------- Total distributions (6,547,590) (10,101,827) - --------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 24 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 (UNAUDITED) CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 22,054,584 $ 29,094,965 Class B shares 1,107,771 1,423,379 Class C shares 663,301 476,438 Class I shares 5,602,577 50,883,356 Class R4 shares 1,595 454 Class W shares 17,415,680 37,492,530 Reinvestment of distributions at net asset value Class A shares 1,010,296 683,747 Class B shares 56,833 67,114 Class C shares 19,380 12,821 Class I shares 2,594,942 3,795,741 Class R4 shares 339 553 Class W shares 2,822,921 5,505,342 Conversions from Class B to Class A Class A shares 2,011 305,470 Class B shares (2,011) (305,470) Payments for redemptions Class A shares (6,301,034) (11,853,498) Class B shares (386,143) (536,960) Class C shares (96,281) (74,221) Class I shares (37,934,073) (37,808,587) Class R4 shares (9) (33) Class W shares (28,357,502) (67,652,580) - -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (19,724,823) 11,510,561 - -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (4,528,457) 78,564,398 Net assets at beginning of period 259,287,526 180,723,128 - -------------------------------------------------------------------------------------------------- Net assets at end of period $254,759,069 $259,287,526 - -------------------------------------------------------------------------------------------------- Undistributed net investment income $ 4,288,111 $ 781,377 - --------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 25 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 SIX MONTHS ENDED -------------------------------------------- PER SHARE DATA APRIL 30, 2010 2009 2008 2007 2006(a) (UNAUDITED) Net asset value, beginning of period $10.35 $7.05 $10.57 $10.16 $9.98 - --------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .43 .53 .61 .59 .33 Net gains (losses) (both realized and unrealized) .46 3.22 (3.43) .39 .18 - --------------------------------------------------------------------------------------------------------------------- Total from investment operations .89 3.75 (2.82) .98 .51 - --------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.26) (.45) (.61) (.55) (.33) Distributions from realized gains -- -- (.09) (.02) -- - --------------------------------------------------------------------------------------------------------------------- Total distributions (.26) (.45) (.70) (.57) (.33) - --------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.98 $10.35 $7.05 $10.57 $10.16 - --------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 8.71% 54.87% (28.44%) 9.94% 5.25% - --------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.37%(c) 1.37% 1.41% 1.33% 1.81%(c) - --------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 1.31%(c) 1.27% 1.40% 1.33% 1.39%(c) - --------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 8.11%(c) 5.85% 6.31% 5.61% 5.20%(c) - --------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $52 $33 $10 $5 $12 - --------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 21% 62% 82% 41% 32% - ---------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 26 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS B SIX MONTHS ENDED -------------------------------------------- PER SHARE DATA APRIL 30, 2010 2009 2008 2007 2006(a) (UNAUDITED) Net asset value, beginning of period $10.34 $7.05 $10.55 $10.16 $9.97 - --------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .38 .46 .55 .52 .28 Net gains (losses) (both realized and unrealized) .47 3.22 (3.42) .37 .19 - --------------------------------------------------------------------------------------------------------------------- Total from investment operations .85 3.68 (2.87) .89 .47 - --------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.22) (.39) (.54) (.48) (.28) Distributions from realized gains -- -- (.09) (.02) -- - --------------------------------------------------------------------------------------------------------------------- Total distributions (.22) (.39) (.63) (.50) (.28) - --------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.97 $10.34 $7.05 $10.55 $10.16 - --------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 8.33% 53.60% (28.85%) 8.94% 4.80% - --------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 2.13%(c) 2.15% 2.19% 2.13% 2.62%(c) - --------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 2.08%(c) 2.04% 2.17% 2.13% 2.20%(c) - --------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 7.22%(c) 5.28% 5.61% 4.90% 4.51%(c) - --------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $3 $2 $1 $1 $1 - --------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 21% 62% 82% 41% 32% - ---------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 27 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS C SIX MONTHS ENDED -------------------------------------------- PER SHARE DATA APRIL 30, 2010 2009 2008 2007 2006(a) (UNAUDITED) Net asset value, beginning of period $10.32 $7.04 $10.54 $10.15 $9.97 - --------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .40 .45 .55 .53 .28 Net gains (losses) (both realized and unrealized) .45 3.22 (3.42) .36 .18 - --------------------------------------------------------------------------------------------------------------------- Total from investment operations .85 3.67 (2.87) .89 .46 - --------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.22) (.39) (.54) (.48) (.28) Distributions from realized gains -- -- (.09) (.02) -- - --------------------------------------------------------------------------------------------------------------------- Total distributions (.22) (.39) (.63) (.50) (.28) - --------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.95 $10.32 $7.04 $10.54 $10.15 - --------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 8.36% 53.57% (28.88%) 8.94% 4.75% - --------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 2.13%(c) 2.13% 2.18% 2.13% 2.61%(c) - --------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 2.07%(c) 2.03% 2.16% 2.13% 2.19%(c) - --------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 7.51%(c) 5.06% 5.64% 5.00% 4.46%(c) - --------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $1 $-- $-- $-- - --------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 21% 62% 82% 41% 32% - ---------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 28 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS I SIX MONTHS ENDED -------------------------------------------- PER SHARE DATA APRIL 30, 2010 2009 2008 2007 2006(a) (UNAUDITED) Net asset value, beginning of period $10.35 $7.05 $10.57 $10.16 $9.98 - --------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .40 .57 .69 .65 .35 Net gains (losses) (both realized and unrealized) .51 3.22 (3.46) .38 .17 - --------------------------------------------------------------------------------------------------------------------- Total from investment operations .91 3.79 (2.77) 1.03 .52 - --------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.28) (.49) (.66) (.60) (.34) Distributions from realized gains -- -- (.09) (.02) -- - --------------------------------------------------------------------------------------------------------------------- Total distributions (.28) (.49) (.75) (.62) (.34) - --------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.98 $10.35 $7.05 $10.57 $10.16 - --------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 8.91% 55.52% (28.08%) 10.38% 5.44% - --------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement .92%(c) .88% .91% .93% 1.52%(c) - --------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) .92%(c) .85% .91% .93% 1.10%(c) - --------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 7.62%(c) 6.59% 6.89% 6.14% 5.70%(c) - --------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $82 $106 $65 $147 $47 - --------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 21% 62% 82% 41% 32% - ---------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 29 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS R4 SIX MONTHS ENDED -------------------------------------------- PER SHARE DATA APRIL 30, 2010 2009 2008 2007 2006(a) (UNAUDITED) Net asset value, beginning of period $10.35 $7.05 $10.56 $10.16 $9.98 - --------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .42 .54 .67 .60 .34 Net gains (losses) (both realized and unrealized) .47 3.23 (3.43) .39 .18 - --------------------------------------------------------------------------------------------------------------------- Total from investment operations .89 3.77 (2.76) .99 .52 - --------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.26) (.47) (.66) (.57) (.34) Distributions from realized gains -- -- (.09) (.02) -- - --------------------------------------------------------------------------------------------------------------------- Total distributions (.26) (.47) (.75) (.59) (.34) - --------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.98 $10.35 $7.05 $10.56 $10.16 - --------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 8.75% 55.14% (27.98%) 9.97% 5.36% - --------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.23%(c) 1.18% 1.22% 1.24% 1.67%(c) - --------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 1.22%(c) 1.11% .97% 1.24% 1.25%(c) - --------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 7.97%(c) 6.31% 6.82% 5.75% 5.37%(c) - --------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- $-- - --------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 21% 62% 82% 41% 32% - ---------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 30 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS W SIX MONTHS ENDED -------------------------------- PER SHARE DATA APRIL 30, 2010 2009 2008 2007(e) (UNAUDITED) Net asset value, beginning of period $10.34 $7.05 $10.55 $10.24 - --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .40 .53 .56 .57 Net gains (losses) (both realized and unrealized) .49 3.21 (3.36) .28 - --------------------------------------------------------------------------------------------------------- Total from investment operations .89 3.74 (2.80) .85 - --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.26) (.45) (.61) (.52) Distributions from realized gains -- -- (.09) (.02) - --------------------------------------------------------------------------------------------------------- Total distributions (.26) (.45) (.70) (.54) - --------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.97 $10.34 $7.05 $10.55 - --------------------------------------------------------------------------------------------------------- TOTAL RETURN 8.68% 54.69% (28.29%) 8.49% - --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.38%(c) 1.33% 1.35% 1.33%(c) - --------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 1.37%(c) 1.30% 1.35% 1.33%(c) - --------------------------------------------------------------------------------------------------------- Net investment income (loss) 7.60%(c) 6.18% 6.08% 5.86%(c) - --------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $116 $117 $104 $38 - --------------------------------------------------------------------------------------------------------- Portfolio turnover rate 21% 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. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS OF APRIL 30, 2010) 1. ORGANIZATION RiverSource Emerging Markets Bond Fund (the Fund) is a series of RiverSource Global Series, Inc. (the Corporation) and is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a non-diversified, open-end management investment company. The Corporation has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Corporation'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 April 30, 2010, RiverSource Investments, LLC* (the Investment Manager) and affiliated funds-of-funds owned 100% of Class I shares and owned approximately 32% of the total outstanding Fund shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. * Effective May 1, 2010, RiverSource Investments, LLC is known as Columbia Management Investment Advisers, LLC. - -------------------------------------------------------------------------------- 32 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 from the primary exchange. 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 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. The fair value of a security is likely to be different from the quoted or published price, if available. Swap transactions are valued through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. 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 April 30, 2010, foreign currency holdings consisted of Brazilian reais and Mexican pesos. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements. Generally, securities received as collateral subject to repurchase agreements are deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral. SECURITIES PURCHASED ON A FORWARD-COMMITMENT BASIS Delivery and payment for securities that have been purchased by the Fund on a forward-commitment basis, including when-issued securities and other forward- commitments, can take place one month or more after the transaction date. During this period, such securities are subject to market fluctuations, and they may affect the Fund's net assets the same as owned securities. The Fund designates cash or liquid securities at least equal to the amount of its forward- commitments. At April 30, 2010, the Fund has outstanding when-issued securities of $3,959,296. - -------------------------------------------------------------------------------- 34 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 tax returns filed for the last three years. FOREIGN CAPITAL GAINS TAXES Realized gains in certain countries may be subject to foreign taxes at the fund level, at rates ranging from approximately 10% to 15%. The Fund pays such foreign taxes on net realized gains at the appropriate rate for each jurisdiction. RECENT ACCOUNTING PRONOUNCEMENT On Jan. 21, 2010, the Financial Accounting Standards Board issued an Accounting Standards Update (the amendment), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which provides guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities to disclose the input and valuation techniques used to measure fair value for both recurring and non-recurring fair value measurements for Level 2 and Level 3 positions. The amendment also requires that transfers between all levels (including Level 1 and Level 2) be disclosed on a gross basis (i.e., transfers out must be disclosed separately from transfers in), and the reason(s) for the transfer. Additionally purchases, sales, issuances and settlements must be disclosed on a gross basis in the Level 3 rollforward. The effective date of the amendment is for interim and annual periods beginning after Dec. 15, 2009, however, the requirement to provide the Level 3 activity for purchases, sales, issuances and settlements on a gross basis will be effective for interim and annual periods beginning after Dec. 15, 2010. At this time the Fund is evaluating the implications of the amendment and the impact to the financial statements. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 35 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 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. Investments in derivative instruments may expose the Fund to certain additional risks, including those detailed below. 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 - -------------------------------------------------------------------------------- 36 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- Statement of Assets and Liabilities. At April 30, 2010, 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. 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, if any, 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 - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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, if any, 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 leverage risk, hedging risk, correlation risk and liquidity risk. Credit default swap transactions are also subject to the risk of the counterparty not fulfilling its obligations under the contract (counterparty credit risk). The Fund attempts to mitigate counterparty credit risk by entering into credit default swap transactions only with counterparties that meet prescribed levels of creditworthiness, as determined by the Investment Manager. The Fund and any counterparty are required to maintain an agreement that requires the Fund and that counterparty to monitor (on a daily basis) the net market value of all derivative transactions entered into pursuant to the contract between the Fund and such counterparty. If the net market value of such derivatives transactions between the Fund and that counterparty exceeds a certain threshold (as defined in the agreement), the Fund or the counterparty is required to post cash and/or securities as collateral. Market values of derivatives transactions presented in the financial statements are not netted with the market values of other derivatives transactions or with any collateral amounts posted by the Fund or any counterparty. At April 30, 2010, the Fund had posted $90,000 cash as collateral for credit default swap transactions. 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 - -------------------------------------------------------------------------------- 38 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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. The Fund attempts to mitigate counterparty credit risk by entering into interest rate swap transactions only with counterparties that meet prescribed levels of creditworthiness, as determined by the Investment Manager. The Fund and any counterparty are required to maintain an agreement that requires the Fund and that counterparty to monitor (on a daily basis) the net market value of all derivative transactions entered into pursuant to the contract between the Fund and such counterparty. If the net market value of such derivatives transactions between the Fund and that counterparty exceeds a certain threshold (as defined in the agreement), the Fund or the counterparty is required to post cash and/or securities as collateral. Market values of derivatives transactions presented in the financial statements are not netted with the market values of other derivatives transactions or with any collateral amounts posted by the Fund or any counterparty. At April 30, 2010, and for the six months then ended, the Fund has 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 - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 APRIL 30, 2010
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 Unrealized Unrealized appreciation on depreciation on swap transactions $34,386 swap transactions $304,150 - ------------------------------------------------------------------------------------------- Total $34,386 $304,150 - -------------------------------------------------------------------------------------------
EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME - ------------------------------------------------------------------------------ FORWARD RISK EXPOSURE FOREIGN CURRENCY CATEGORY CONTRACTS SWAPS TOTAL - ------------------------------------------------------------------------------ Credit contracts $ -- $(37,025) $(37,025) - ------------------------------------------------------------------------------ Foreign exchange contracts (16,022) -- $(16,022) - ------------------------------------------------------------------------------ Total $(16,022) $(37,025) $(53,047) - ------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME - ----------------------------------------------------------------------------- FORWARD RISK EXPOSURE FOREIGN CURRENCY CATEGORY CONTRACTS SWAPS TOTAL - ----------------------------------------------------------------------------- Credit contracts $-- $31,495 $31,495 - ----------------------------------------------------------------------------- Foreign exchange contracts -- -- $ -- - ----------------------------------------------------------------------------- Total $-- $31,495 $31,495 - -----------------------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY FORWARD FOREIGN CURRENCY CONTRACTS At April 30, 2010 the Fund had no outstanding forward foreign currency contracts. The average gross notional amount of forward foreign currency - -------------------------------------------------------------------------------- 40 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- contracts opened and closed was $976,000 for the six months ended April 30, 2010. SWAPS The gross notional amount of contracts outstanding was $4.0 million at April 30, 2010. The monthly average gross notional amount for these contracts was $4.0 million for the six months ended April 30, 2010. The fair value of such contracts on April 30, 2010 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 six months ended April 30, 2010 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 six months ended April 30, 2010 was 0.08% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended April 30, 2010, other expenses paid to this company were $770. 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 RiverSource, Seligman and Threadneedle 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. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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. * Effective May 1, 2010, RiverSource Service Corporation is known as Columbia Management Investment Services Corp. 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 $134,000 and $50,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of Jan. 31, 2010, 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. ** Effective May 1, 2010, RiverSource Fund Distributors, Inc. is known as Columbia Management Investment Distributors, Inc. - -------------------------------------------------------------------------------- 42 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- SALES CHARGES Sales charges, including front-end and CDSCs, received by the Distributor for distributing Fund shares were $59,890 for Class A, $1,266 for Class B and $107 for Class C for the six months ended April 30, 2010. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended April 30, 2010, 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.............................................. 1.31% Class B.............................................. 2.08 Class C.............................................. 2.07 Class R4............................................. 1.22 Class W.............................................. 1.37
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class A............................................ $11,925 Class B............................................ 738 Class C............................................ 304 Class W............................................ 3,764
The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Dec. 31, 2010, unless sooner terminated at the sole 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.............................................. 1.31% 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. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 43 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $51,809,989 and $63,302,837, respectively, for the six months ended April 30, 2010. 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:
SIX MONTH ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 - ---------------------------------------------------------------------- CLASS A Sold 2,071,764 3,173,284 Converted from Class B* 193 31,953 Reinvested distributions 94,647 76,058 Redeemed (592,241) (1,490,957) - ---------------------------------------------------------------------- Net increase (decrease) 1,574,363 1,790,338 - ---------------------------------------------------------------------- CLASS B Sold 104,156 153,167 Reinvested distributions 5,337 7,818 Converted to Class A* (193) (31,986) Redeemed (36,635) (62,140) - ---------------------------------------------------------------------- Net increase (decrease) 72,665 66,859 - ---------------------------------------------------------------------- CLASS C Sold 62,816 49,606 Reinvested distributions 1,820 1,458 Redeemed (9,121) (8,248) - ---------------------------------------------------------------------- Net increase (decrease) 55,515 42,816 - ---------------------------------------------------------------------- CLASS I Sold 531,326 5,204,021 Reinvested distributions 244,503 449,432 Redeemed (3,582,042) (4,633,781) - ---------------------------------------------------------------------- Net increase (decrease) (2,806,213) 1,019,672 - ---------------------------------------------------------------------- CLASS R4 Sold 147 55 Reinvested distributions 32 65 Redeemed (1) (4) - ---------------------------------------------------------------------- Net increase (decrease) 178 116 - ----------------------------------------------------------------------
- -------------------------------------------------------------------------------- 44 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
SIX MONTH ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 - ---------------------------------------------------------------------- CLASS W Sold 1,658,412 4,123,883 Reinvested distributions 265,721 659,389 Redeemed (2,672,822) (8,276,964) - ---------------------------------------------------------------------- Net increase (decrease) (748,689) (3,493,692) - ----------------------------------------------------------------------
* Automatic conversion of Class B shares to Class A shares based on the original purchase date. 7. LENDING OF PORTFOLIO SECURITIES 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 are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At April 30, 2010 securities valued at $8,171,913 were on loan, secured by cash collateral of $8,194,114 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 - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 45 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- $2,357 earned from securities lending for the six months ended April 30, 2010 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 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 RiverSource, Seligman and Threadneedle funds and other institutional clients of the Investment Manager. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $55,046,051 and $71,698,871 respectively, for the six months ended April 30, 2010. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at April 30, 2010, 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 agreement, which is a collective agreement between the Fund and certain other RiverSource, Seligman and Threadneedle 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 (i) 1.25% per annum plus (ii) 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. The Fund had no borrowings during the six months ended April 30, 2010. - -------------------------------------------------------------------------------- 46 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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. 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 NON-DIVERSIFICATION RISK The Fund is non-diversified. A non-diversified fund may invest more of its assets in fewer companies than if it were a diversified fund. Because each investment has a greater effect on the Fund's performance, the Fund may be more exposed to the risks of loss and volatility than a fund that invests more broadly. 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 the date of issuance of the Fund's financial statements. There were no events or - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 47 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 (the Supreme Court), asking the Supreme Court to stay the District Court proceedings while the 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. On March 30, 2010, the Supreme Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit's decision in the Gallus and remanded the case to the Eighth Circuit for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. 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 - -------------------------------------------------------------------------------- 48 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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. 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 -- 2010 SEMIANNUAL REPORT 49 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- Columbia Management Investment Advisers, LLC ("Columbia Management" or the "investment manager"), formerly known as RiverSource Investments, LLC, a wholly- owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), Columbia Management provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. Columbia Management prepared detailed reports for the Board and its Contracts Committee in March and April 2010, including reports based on data provided by independent organizations and a comprehensive response to each item of information requested by independent legal counsel to the Independent Directors ("Independent Legal Counsel") in a letter to the investment manager, to assist the Board in making this determination. All of the materials presented in March and April 2010 were first supplied in draft form to designated representatives of the Independent Directors, i.e., Independent Legal Counsel, the Chair of the Board and the Chair of the Contracts Committee (including materials relating to the Fund's expense cap), and the final materials were revised to reflect comments provided by these Board representatives. In addition, throughout the year, the Board (or its committees) reviews information prepared by Columbia Management addressing the services Columbia Management provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts Committee, the Investment Review Committee and the Compliance Committee in determining whether to continue the IMS Agreement. At the April 6-8, 2010 in-person Board meeting, Independent Legal Counsel reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by Columbia Management: The Board analyzed various reports and presentations it had received detailing the services performed by Columbia Management, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by Columbia Management, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, most notably, management's announcement of the massive - -------------------------------------------------------------------------------- 50 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- investment made in the acquisition of the long-term asset management business of Columbia Management Group, LLC (the "Columbia Transaction") and the completed integration of J. & W. Seligman & Co. Incorporated, acquisitions which should continue to enhance investment capabilities and provide access to a greater depth of experienced portfolio managers in key categories. The Board noted, in particular, that upon the close of the Columbia Transaction, RiverSource will have grown to 10 investment offices (compared to 6 in 2009). In addition, the Board reviewed information concerning the investment manager's new Chief Investment Officer upon the close of the Columbia Transaction, including the application of his particular investment philosophy, which is intended to enhance the risk and portfolio management oversight of the entire fund family. Moreover, in connection with the Board's evaluation of the overall package of services provided by Columbia Management, the Board considered the quality of the administrative and transfer agency services provided by Columbia Management's affiliates to the Fund. The Board also reviewed the financial condition of Columbia Management (and its affiliates) and each entity's ability to carry out its responsibilities under the IMS Agreement. Further, the Board considered Columbia Management's ability to retain key personnel in certain targeted areas and its expectations in this regard. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by Columbia Management). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that Columbia Management and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund. The Board observed that the Fund's investment performance met expectations. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT 51 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- Comparative Fees, Costs of Services Provided and the Profits Realized By Columbia Management and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to Columbia Management's profitability. They also reviewed information in the report showing the fees charged by Columbia Management to other client accounts (with similar investment strategies to those of the Fund). The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund (with few defined exceptions) are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) approximated the peer group's median expense ratio. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered various preliminary integration plans in connection with the Columbia Transaction which, if implemented, would impact the fee structures of various RiverSource Funds. The Board was satisfied with the principles underlying these plans, which, at their preliminary stage, are designed to achieve a rational, consistent pricing model across the combined fund families, as well as preserve the "pricing philosophy" of the Funds. The Board also considered the expected profitability of Columbia Management and its affiliates in connection with Columbia Management providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to Columbia Management and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. In this regard, the Board observed slightly reduced profitability in 2009 vs. 2008. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer - -------------------------------------------------------------------------------- 52 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by Columbia Management as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 8, 2010, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement for an additional annual period. PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling 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 -- 2010 SEMIANNUAL REPORT 53 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 Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.), member FINRA and managed by Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC). (C)2010 Columbia Management Investment Advisers, LLC. All (COLUMBIA MANAGEMENT LOGO) rights reserved. S-6511 F (6/10)
Semiannual Report (COLUMBIA MANAGEMENT LOGO) RIVERSOURCE GLOBAL BOND FUND - -------------------------------------------------------------------------------- SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2010 RIVERSOURCE GLOBAL BOND FUND SEEKS TO PROVIDE SHAREHOLDERS WITH HIGH TOTAL RETURN THROUGH INCOME AND GROWTH OF CAPITAL. NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 8 Portfolio of Investments........... 11 Statement of Assets and Liabilities...................... 30 Statement of Operations............ 32 Statements of Changes in Net Assets........................... 34 Financial Highlights............... 36 Notes to Financial Statements...... 45 Approval of Investment Management Services Agreement............... 62 Proxy Voting....................... 65
- -------------------------------------------------------------------------------- 2 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Global Bond Fund (the Fund) Class A shares fell 0.89% (excluding sales charge) for the six months ended April 30, 2010. > The Fund outperformed its benchmark, the Barclays Capital Global Aggregate Index, which decreased 1.56% during the same period. > The Fund underperformed the Lipper Global Income Funds Index, representing the Fund's peer group, which increased 3.44% during the same period. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2010) - --------------------------------------------------------------------------------
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------------------------------------------------------------------------- RiverSource Global Bond Fund Class A (excluding sales charge) -0.89% +12.59% +5.32% +4.16% +6.34% - ------------------------------------------------------------------------- Barclays Capital Global Aggregate Index(1) (unmanaged) -1.56% +9.26% +6.10% +4.67% +6.72% - ------------------------------------------------------------------------- Lipper Global Income Funds Index(2) +3.44% +20.36% +5.54% +4.88% +6.50% - -------------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 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. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. (1) The 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. - -------------------------------------------------------------------------------- 4 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT APRIL 30, 2010 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 3/20/89) -0.89% +12.59% +5.32% +4.16% +6.34% N/A - ------------------------------------------------------------------------------------ Class B (inception 3/20/95) -1.22% +11.78% +4.53% +3.37% +5.54% N/A - ------------------------------------------------------------------------------------ Class C (inception 6/26/00) -1.19% +11.75% +4.56% +3.36% N/A +5.46% - ------------------------------------------------------------------------------------ Class I (inception 3/4/04) -0.68% +13.17% +5.81% +4.58% N/A +5.26% - ------------------------------------------------------------------------------------ Class R2 (inception 3/15/10) N/A N/A N/A N/A N/A -0.32%* - ------------------------------------------------------------------------------------ Class R3 (inception 3/15/10) N/A N/A N/A N/A N/A -0.32%* - ------------------------------------------------------------------------------------ Class R4 (inception 3/20/95) -0.82% +12.83% +5.64% +4.42% +6.58% N/A - ------------------------------------------------------------------------------------ Class R5 (inception 3/15/10) N/A N/A N/A N/A N/A -0.31%* - ------------------------------------------------------------------------------------ Class W (inception 12/1/06) -0.77% +12.57% +5.38% N/A N/A +5.04% - ------------------------------------------------------------------------------------ With sales charge Class A (inception 3/20/89) -5.60% +7.24% +3.62% +3.15% +5.83% N/A - ------------------------------------------------------------------------------------ Class B (inception 3/20/95) -6.11% +6.78% +3.61% +3.02% +5.54% N/A - ------------------------------------------------------------------------------------ Class C (inception 6/26/00) -2.17% +10.75% +4.56% +3.36% N/A +5.46% - ------------------------------------------------------------------------------------
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 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. *Not annualized. **For classes with less than 10 years performance. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- PORTFOLIO STATISTICS - -------------------------------------------------------------------------------- Weighted average life(1) 7.3 years - -------------------------------------- Effective duration(2) 5.3 years - --------------------------------------
(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. 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. - -------------------------------------------------------------------------------- 6 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- PORTFOLIO BREAKDOWN(1) (at April 30, 2010) - --------------------------------------------------------------------- Asset-Backed 3.1% - ------------------------------------------------ Commercial Mortgage-Backed 3.4% - ------------------------------------------------ Consumer Discretionary 1.6% - ------------------------------------------------ Consumer Staples 1.7% - ------------------------------------------------ Energy 1.2% - ------------------------------------------------ Financials 6.5% - ------------------------------------------------ Foreign Government 53.5% - ------------------------------------------------ Health Care 0.6% - ------------------------------------------------ Industrials 0.8% - ------------------------------------------------ Materials 1.5% - ------------------------------------------------ Residential Mortgage-Backed 5.5% - ------------------------------------------------ Telecommunication 5.2% - ------------------------------------------------ U.S. Government Obligations & Agencies 5.7% - ------------------------------------------------ Utilities 8.7% - ------------------------------------------------ Other(2) 1.0% - ------------------------------------------------
(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). The Fund's composition is subject to change. (2) Cash & Cash Equivalents. TOP TEN COUNTRIES(1) (at April 30, 2010) - --------------------------------------------------------------------- United States 38.5% - ------------------------------------------------ Japan 10.6% - ------------------------------------------------ Germany 6.1% - ------------------------------------------------ France 4.5% - ------------------------------------------------ Netherlands 4.0% - ------------------------------------------------ United Kingdom 3.5% - ------------------------------------------------ Italy 3.2% - ------------------------------------------------ Canada 3.0% - ------------------------------------------------ Spain 2.6% - ------------------------------------------------ Greece 2.4% - ------------------------------------------------
(1) Percentages are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments; and (ii) ongoing costs, which may include management fees; distribution and service (Rule 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 April 30, 2010. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses for each class. 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 actual expense ratio for each class and an assumed rate of return of 5% per year before expenses, which is not the actual return for the class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 8 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2009(a) APRIL 30, 2010 THE PERIOD(b) EXPENSE RATIO - --------------------------------------------------------------------------------------------- Class A - --------------------------------------------------------------------------------------------- Actual(c) $1,000 $ 991.10 $ 6.21 1.25% - --------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.70 $ 6.29 1.25% - --------------------------------------------------------------------------------------------- Class B - --------------------------------------------------------------------------------------------- Actual(c) $1,000 $ 987.80 $10.01 2.02% - --------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.86 $10.15 2.02% - --------------------------------------------------------------------------------------------- Class C - --------------------------------------------------------------------------------------------- Actual(c) $1,000 $ 988.10 $ 9.96 2.01% - --------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.91 $10.10 2.01% - --------------------------------------------------------------------------------------------- Class I - --------------------------------------------------------------------------------------------- Actual(c) $1,000 $ 993.20 $ 4.07 .82% - --------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,020.84 $10.10 .82% - --------------------------------------------------------------------------------------------- Class R2 - --------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 996.80 $ 2.04 1.62% - --------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.85 $ 8.15 1.62% - --------------------------------------------------------------------------------------------- Class R3 - --------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 996.80 $ 1.70 1.35% - --------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.20 $ 6.79 1.35% - --------------------------------------------------------------------------------------------- Class R4 - --------------------------------------------------------------------------------------------- Actual(c) $1,000 $ 991.80 $ 5.56 1.12% - --------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.35 $ 5.64 1.12% - --------------------------------------------------------------------------------------------- Class R5 - --------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 996.90 $ 1.09 .87% - --------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,020.59 $ 4.38 .87% - --------------------------------------------------------------------------------------------- Class W - --------------------------------------------------------------------------------------------- Actual(c) $1,000 $ 992.30 $ 6.31 1.27% - --------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.60 $ 6.39 1.27% - ---------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 9 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- (a) The beginning account values for Classes R2, R3 and R5 are as of March 15, 2010 (when shares of these classes became publicly available) for actual expense calculations, and as of Nov. 1, 2009 for hypothetical expense calculations. (b) 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 182/365 (to reflect the one-half year period). Actual expenses for Classes R2, R3 and R5 are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 46/365 (to reflect the number of days in the period). (c) Based on the actual return for the six months ended April 30, 2010: -0.89% for Class A, -1.22% for Class B, -1.19% for Class C, -0.68% for Class I, -0.82% for Class R4 and -0.77% for Class W. (d) Based on the actual return for the period from March 15, 2010 (when shares became publicly available) to April 30, 2010: -0.32% for Class R2, -0.32% for Class R3, and -0.31% for Class R5. - -------------------------------------------------------------------------------- 10 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2010 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
BONDS (97.3%)(c) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) ARGENTINA (0.2%) Republic of Argentina Sr Unsecured 09-12-13 7.00% $1,033,000 $927,178 12-15-35 0.00 2,900,000(h) 224,750 --------------- Total 1,151,928 - ------------------------------------------------------------------------------------- AUSTRALIA (1.6%) Australia & New Zealand Banking Group (Australian Dollar) 11-08-11 6.50 420,000 393,454 New South Wales Treasury (Australian Dollar) 05-01-12 6.00 6,300,000 5,896,192 Telstra Sr Unsecured 04-01-12 6.38 500,000 547,132 Westpac Banking (Australian Dollar) Sr Unsecured 09-24-12 7.25 300,000 284,598 Woodside Finance 11-10-14 4.50 520,000(d) 536,714 --------------- Total 7,658,090 - ------------------------------------------------------------------------------------- AUSTRIA (1.1%) Republic of Austria (European Monetary Unit) 07-15-14 4.30 3,545,000 5,136,804 - ------------------------------------------------------------------------------------- BELGIUM (2.1%) Fortis Bank (European Monetary Unit) Sr Unsecured 05-30-14 4.50 420,000 594,049 Kingdom of Belgium (European Monetary Unit) 03-28-11 3.50 1,470,000 2,005,370 09-28-12 5.00 5,285,000 7,660,926 --------------- Total 10,260,345 - ------------------------------------------------------------------------------------- BERMUDA (0.1%) Bacardi Sr Notes 04-01-14 7.45 245,000(d) 282,048 - ------------------------------------------------------------------------------------- BRAZIL (2.2%) Banco Nacional de Desenvolvimento Economico e Social Sr Unsecured 06-16-18 6.37 535,000(d) 561,750 06-10-19 6.50 910,000(d) 978,701 Centrais Eletricas Brasileiras Sr Unsecured 07-30-19 6.88 375,000(d) 410,395 Federative Republic of Brazil 01-15-18 8.00 265,778 308,302 Federative Republic of Brazil Sr Unsecured 01-17-17 6.00 307,000 336,165 10-14-19 8.88 115,000 149,500 Nota do Tesouro Nacional (Brazilian Real) Series F 01-01-12 10.00 640,500 3,681,764 01-01-13 10.00 740,000 4,149,411 --------------- Total 10,575,988 - ------------------------------------------------------------------------------------- CANADA (2.9%) Canadian Pacific Railway (Canadian Dollar) Sr Unsecured 06-15-10 4.90 380,000(d) 375,895 Cascades 12-15-17 7.75 695,000(d) 708,900 Devon Financing 09-30-11 6.88 110,000 118,371 EnCana Sr Unsecured 11-01-11 6.30 30,000 32,146 Govt of Canada (Canadian Dollar) 06-01-18 4.25 1,730,000 1,797,415
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) CANADA (CONT.) Nova Chemicals Sr Unsecured 11-01-16 8.38% $353,000(d) $367,120 11-01-19 8.63 190,000(d) 197,600 Province of British Columbia (Canadian Dollar) 06-18-14 5.30 1,640,000 1,748,731 Province of Ontario (Canadian Dollar) 03-08-14 5.00 3,135,000 3,290,098 Province of Quebec (Canadian Dollar) 12-01-17 4.50 2,283,000 2,310,467 Royal Bank of Canada (European Monetary Unit) Sr Unsecured 01-18-13 3.25 630,000 868,724 TELUS Sr Unsecured 06-01-11 8.00 686,000 736,716 Thomson Reuters Sr Unsecured 04-15-40 5.85 500,000 501,459 Toronto-Dominion Bank (European Monetary Unit) Sr Unsecured 05-14-15 5.38 600,000 895,569 --------------- Total 13,949,211 - ------------------------------------------------------------------------------------- CAYMAN ISLANDS (0.2%) Allstate Life Funding LLC (British Pound) Sr Secured 01-17-11 6.38 250,000 394,090 Pacific Life Funding LLC (British Pound) Secured 02-08-11 6.25 251,000 395,474 --------------- Total 789,564 - ------------------------------------------------------------------------------------- COLOMBIA (0.3%) Ecopetrol Sr Unsecured 07-23-19 7.63 300,000 336,000 Republic of Colombia 01-27-17 7.38 230,000 264,960 09-18-37 7.38 260,000 289,900 Republic of Colombia Sr Unsecured 03-18-19 7.38 250,000 287,250 01-18-41 6.13 235,000 228,841 --------------- Total 1,406,951 - ------------------------------------------------------------------------------------- CZECH REPUBLIC (0.1%) Czech Republic (Czech Koruna) 06-16-13 3.70 11,530,000 627,561 - ------------------------------------------------------------------------------------- DENMARK (0.4%) Nykredit Realkredit (Danish Krone) 04-01-28 5.00 11,114,748 2,067,462 - ------------------------------------------------------------------------------------- EL SALVADOR (0.1%) Republic of El Salvador Sr Unsecured 01-24-23 7.75 245,000(d) 275,625 - ------------------------------------------------------------------------------------- FRANCE (4.4%) BNP Paribas (European Monetary Unit) Sr Sub Notes 12-17-12 5.25 555,000 797,890 Caisse Refinance Hypothe (European Monetary Unit) 10-11-10 4.38 700,000 945,278 Credit Agricole (European Monetary Unit) Sr Unsecured 06-24-13 6.00 550,000 818,370 Electricite de France (European Monetary Unit) Sr Unsecured 02-05-18 5.00 750,000 1,098,689 France Telecom (European Monetary Unit) Sr Unsecured 02-21-17 4.75 1,180,000 1,709,680 Govt of France (European Monetary Unit) 04-25-12 5.00 540,000 777,328 04-25-13 4.00 6,020,000 8,651,578 10-25-16 5.00 2,680,000 4,072,563 10-25-19 3.75 1,400,000 1,944,193
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 12 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) FRANCE (CONT.) Veolia Environnement (European Monetary Unit) Sr Unsecured 01-16-17 4.38% 315,000 $439,274 --------------- Total 21,254,843 - ------------------------------------------------------------------------------------- GERMANY (5.9%) Bayerische Landesbank (Japanese Yen) 04-22-13 1.40 170,000,000 1,831,314 Bundesrepublik Deutschland (European Monetary Unit) 07-04-10 5.25 465,000 624,032 01-04-15 3.75 1,650,000 2,375,453 07-04-19 3.50 2,120,000 2,953,710 07-04-27 6.50 4,350,000 7,958,386 07-04-28 4.75 2,300,000 3,525,731 07-04-34 4.75 4,235,000 6,568,508 Landwirtschaftliche Rentenbank (Australian Dollar) 06-15-11 5.75 1,250,000 1,162,299 Rheinische Hypothekenbank (European Monetary Unit) Series 803 07-05-10 5.75 1,305,000(d) 1,751,321 --------------- Total 28,750,754 - ------------------------------------------------------------------------------------- GREECE (2.3%) Hellenic Republic (European Monetary Unit) 03-20-11 3.80 3,500,000 4,333,198 Hellenic Republic (European Monetary Unit) Sr Unsecured 08-20-12 4.10 4,695,000 5,202,381 03-20-24 4.70 1,800,000 1,673,940 --------------- Total 11,209,519 - ------------------------------------------------------------------------------------- INDONESIA (1.6%) Govt of Indonesia (Indonesian Rupiah) 07-15-22 10.25 21,944,000,000 2,679,359 Govt of Indonesia (Indonesian Rupiah) Sr Unsecured Series FR30 05-15-16 10.75 9,320,000,000 1,151,755 Govt of Indonesia (Indonesian Rupiah) Sr Unsecured Series FR31 11-15-20 11.00 19,540,000,000 2,516,312 Perusahaan Penerbit SBSN Sr Unsecured 04-23-14 8.80 $160,000(d) 187,572 Republic of Indonesia Sr Unsecured 01-17-18 6.88 500,000(d) 556,250 10-12-35 8.50 190,000(d) 238,925 02-17-37 6.63 205,000(d) 211,150 01-17-38 7.75 140,000(d) 163,450 --------------- Total 7,704,773 - ------------------------------------------------------------------------------------- ITALY (3.1%) Buoni Poliennali Del Tesoro (European Monetary Unit) 04-15-12 4.00 1,745,000 2,421,853 08-01-15 3.75 700,000 972,971 02-01-19 4.25 2,445,000 3,379,340 11-01-26 7.25 3,486,283 6,045,189 11-01-27 6.50 1,025,000 1,657,928 Intesa Sanpaolo (European Monetary Unit) Sr Unsecured 12-19-13 5.38 400,000 584,378 Telecom Italia Capital 11-15-13 5.25 120,000 126,345 --------------- Total 15,188,004 - ------------------------------------------------------------------------------------- JAPAN (10.3%) Bayer Holding (Japanese Yen) 06-28-12 1.96 40,000,000 430,060 Development Bank of Japan (Japanese Yen) 06-20-12 1.40 326,000,000 3,549,883 Govt of Japan CPI Linked (Japanese Yen) Sr Unsecured 03-10-18 1.40 346,016,000(m) 3,670,157 Govt of Japan (Japanese Yen) Sr Unsecured 06-20-12 1.40 175,000,000 1,911,979 12-20-12 1.00 823,000,000 8,944,771 12-20-14 1.30 200,000,000 2,211,041
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) JAPAN (CONT.) 09-20-17 1.70% 811,000,000 $9,160,163 12-20-22 1.40 346,000,000 3,598,065 12-20-26 2.10 819,000,000 8,972,079 09-20-29 2.10 300,000,000 3,226,639 12-20-34 2.40 283,000,000 3,169,299 03-20-39 2.30 123,000,000 1,350,403 --------------- Total 50,194,539 - ------------------------------------------------------------------------------------- KAZAKHSTAN (0.1%) KazMunaiGaz Finance 07-02-18 9.13 $250,000(d) 296,926 - ------------------------------------------------------------------------------------- LUXEMBOURG (0.2%) Expro Finance Luxembourg Sr Secured 12-15-16 8.50 618,000(d) 630,168 Gaz Capital for Gazprom Sr Unsecured 11-22-16 6.21 100,000(d) 101,000 Gaz Capital Sr Unsecured 08-16-37 7.29 230,000(d) 233,163 --------------- Total 964,331 - ------------------------------------------------------------------------------------- MALAYSIA (0.5%) Petronas Capital 05-22-12 7.00 500,000(d) 550,884 08-12-19 5.25 1,980,000(d) 2,059,280 --------------- Total 2,610,164 - ------------------------------------------------------------------------------------- MEXICO (1.7%) Mexican Fixed Rate Bonds (Mexican Peso) 12-19-13 8.00 24,940,000 2,147,544 12-17-15 8.00 60,280,000 5,140,664 Pemex Project Funding Master Trust 03-01-18 5.75 617,000 637,690 United Mexican States Sr Unsecured 09-27-34 6.75 270,000 292,950 --------------- Total 8,218,848 - ------------------------------------------------------------------------------------- NETHERLANDS (3.9%) Allianz Finance II (European Monetary Unit) 11-23-16 4.00 400,000 559,853 BMW Finance (European Monetary Unit) 09-19-13 8.88 650,000 1,038,974 Deutsche Telekom Intl Finance (British Pound) 12-09-10 6.25 415,000 651,427 Deutsche Telekom Intl Finance (European Monetary Unit) 01-19-15 4.00 1,335,000 1,858,359 E.ON Intl Finance (European Monetary Unit) 10-02-17 5.50 535,000 810,020 Govt of Netherlands (European Monetary Unit) 07-15-12 5.00 2,880,000 4,174,120 07-15-13 4.25 2,345,000 3,404,339 07-15-16 4.00 1,700,000 2,457,486 ING Groep (European Monetary Unit) Sr Unsecured 05-31-17 4.75 1,205,000 1,682,294 Nederlandse Waterschapsbank (British Pound) Sr Unsub 06-07-10 5.38 850,000 1,306,186 Rabobank Nederland (European Monetary Unit) Sr Unsecured 04-04-12 4.13 600,000 838,954 --------------- Total 18,782,012 - ------------------------------------------------------------------------------------- NEW ZEALAND (0.8%) Govt of New Zealand (New Zealand Dollar) 04-15-13 6.50 5,300,000 4,039,771 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 14 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) NORWAY (1.3%) Eksportfinans (British Pound) Sr Unsecured 09-06-10 6.00% 930,000 $1,442,119 Govt of Norway (Norwegian Krone) 05-16-11 6.00 28,650,000 5,033,623 --------------- Total 6,475,742 - ------------------------------------------------------------------------------------- PHILIPPINE ISLANDS (0.3%) Power Sector Assets & Liabilities Management 05-27-19 7.25 $790,000(d) 862,048 Republic of Philippines Sr Unsecured 01-15-16 8.00 100,000 120,120 01-14-31 7.75 405,000 470,813 --------------- Total 1,452,981 - ------------------------------------------------------------------------------------- POLAND (1.3%) Govt of Poland (Polish Zloty) 04-25-13 5.25 6,400,000 2,208,344 10-25-17 5.25 12,635,000 4,247,338 --------------- Total 6,455,682 - ------------------------------------------------------------------------------------- QATAR (0.3%) Ras Laffan Liquefied Natural Gas 3 Sr Secured 09-30-14 5.50 310,000(d) 335,112 State of Qatar Sr Notes 04-09-19 6.55 550,000(d) 626,353 01-20-20 5.25 435,000(d) 450,769 --------------- Total 1,412,234 - ------------------------------------------------------------------------------------- RUSSIA (0.3%) Russian Federation 03-31-30 7.50 1,191,400(d) 1,366,536 TransCapitalInvest for Transneft Sr Unsecured 03-05-14 5.67 200,000(d) 208,564 08-07-18 8.70 100,000(d) 120,269 --------------- Total 1,695,369 - ------------------------------------------------------------------------------------- SOUTH AFRICA (0.4%) Republic of South Africa (South African Rand) Sr Unsecured 12-21-14 8.75 14,625,000 2,055,029 - ------------------------------------------------------------------------------------- SOUTH KOREA (0.7%) Export-Import Bank of Korea Sr Unsecured 01-21-14 8.13 810,000 933,523 01-14-15 5.88 450,000 489,089 Korea Development Bank (Japanese Yen) Sr Unsecured 06-28-10 0.87 200,000,000 2,122,850 --------------- Total 3,545,462 - ------------------------------------------------------------------------------------- SPAIN (2.6%) AyT Cedulas Cajas Global (European Monetary Unit) 06-14-18 4.25 1,500,000 1,893,849 Caja de Ahorros y Monte de Piedad de Madrid (European Monetary Unit) 03-25-11 3.50 1,800,000 2,424,546 Govt of Spain (European Monetary Unit) 07-30-17 5.50 2,050,000 3,043,021 Instituto de Credito Oficial (Australian Dollar) 03-08-11 5.50 1,210,000 1,113,600 Santander Intl Debt (European Monetary Unit) Bank Guaranteed 04-11-11 5.13 1,200,000 1,644,665 Telefonica Emisiones 04-27-20 5.13 1,570,000 1,571,558 Telefonica Emisiones SAU (European Monetary Unit) 02-02-16 4.38 550,000 756,708 --------------- Total 12,447,947 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) SUPRA-NATIONAL (0.8%) Corp Andina de Fomento Sr Unsecured 06-04-19 8.13% $730,000 $876,907 European Investment Bank (British Pound) Sr Unsecured 12-07-11 5.50 1,695,000 2,766,624 --------------- Total 3,643,531 - ------------------------------------------------------------------------------------- SWEDEN (1.0%) Govt of Sweden (Swedish Krona) 05-05-14 6.75 29,625,000 4,836,205 - ------------------------------------------------------------------------------------- TUNISIA (0.4%) Banque Centrale de Tunisie (Japanese Yen) 08-02-10 3.30 190,000,000 2,023,008 - ------------------------------------------------------------------------------------- TURKEY (0.3%) Republic of Turkey 04-03-18 6.75 204,000 221,850 06-05-20 7.00 235,000 257,031 03-17-36 6.88 540,000 542,025 Republic of Turkey Sr Unsecured 07-14-17 7.50 350,000 398,125 --------------- Total 1,419,031 - ------------------------------------------------------------------------------------- UNITED KINGDOM (3.4%) MetLife of Connecticut (Japanese Yen) 05-24-12 0.93 100,000,000(i) 1,016,823 SABMiller Sr Unsecured 01-15-14 5.70 1,275,000(d) 1,405,319 United Kingdom Treasury (British Pound) 03-07-19 4.50 2,440,000 3,938,226 03-07-25 5.00 660,000 1,084,939 12-07-27 4.25 1,750,000 2,630,643 03-07-36 4.25 1,400,000 2,068,100 12-07-38 4.75 1,690,000 2,702,831 12-07-49 4.25 1,185,000 1,750,499 --------------- Total 16,597,380 - ------------------------------------------------------------------------------------- UNITED STATES (37.5%) AmeriCredit Automobile Receivables Trust Series 2007-DF Cl A3A (AGM) 07-06-12 5.49 167,393(l) 167,993 Amkor Technology Sr Unsecured 05-01-18 7.38 237,000(d,g) 238,185 Anadarko Petroleum 03-15-40 6.20 215,000 217,623 Anadarko Petroleum Sr Unsecured 03-15-14 7.63 220,000 256,224 Anheuser-Busch InBev Worldwide 01-15-14 7.20 710,000(d) 817,290 Ashland 06-01-17 9.13 180,000(d) 205,200 AT&T Sr Unsecured 02-15-39 6.55 2,205,000 2,363,958 Ball 09-01-16 7.13 30,000 31,875 03-15-18 6.63 75,000 76,313 09-01-19 7.38 35,000 36,838 09-15-20 6.75 234,000 239,264 Bank of America (British Pound) Sr Unsecured 02-02-11 0.71 950,000(i) 1,431,489 Bank of America Sr Unsecured 05-01-18 5.65 2,190,000 2,215,097 BellSouth Sr Unsecured 10-15-11 6.00 785,000 838,474 BMW Vehicle Lease Trust Series 2009-1 Cl A2 04-15-11 2.04 880,987 883,237 Brocade Communications Systems Sr Secured 01-15-18 6.63 76,000(d) 78,090 01-15-20 6.88 67,000(d) 69,010 CC Holdings GS V LLC/Crown Castle GS III Sr Secured 05-01-17 7.75 820,000(d) 891,749
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 16 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) UNITED STATES (CONT.) CCO Holdings LLC/ Capital 04-30-18 7.88% $136,000(d) $139,400 04-30-20 8.13 58,000(d) 59,305 CenterPoint Energy Houston Electric LLC Series U 03-01-14 7.00 605,000 690,618 CenterPoint Energy Resources Sr Unsecured 02-15-11 7.75 1,270,000 1,331,849 CF Inds Sr Unsecured 05-01-18 6.88 65,000 67,844 05-01-20 7.13 65,000 68,413 Charter Communications Operating LLC/Capital Secured 04-30-12 8.00 945,000(d) 1,001,700 Chesapeake Energy 01-15-16 6.63 290,000 285,650 Chrysler Financial Lease Trust Series 2010-A Cl A2 06-15-11 1.78 1,300,000(d) 1,298,760 CIT Group Sr Secured 05-01-16 7.00 535,000 508,919 Citibank Credit Card Issuance Trust (European Monetary Unit) Series 2001-A4 Cl A4 04-10-13 5.38 1,160,000 1,605,663 CitiFinancial Auto Issuance Trust Series 2009-1 Cl A2 11-15-12 1.83 5,050,000(d) 5,073,672 Citigroup Commercial Mtge Trust Series 2006-C5 Cl A4 10-15-49 5.43 1,700,000(f) 1,739,736 Citigroup (European Monetary Unit) Sr Unsecured 08-02-19 5.00 595,000 781,771 Citigroup Sr Unsecured 05-15-18 6.13 700,000 725,876 Cleveland Electric Illuminating 1st Mtge 11-15-18 8.88 750,000 955,097 Colorado Interstate Gas Sr Unsecured 11-15-15 6.80 3,170,000 3,616,193 Comcast 07-01-39 6.55 1,340,000 1,417,960 Commercial Mtge Pass-Through Ctfs Series 2006-CN2A Cl BFL 02-05-19 0.56 400,000(d,f,i) 351,246 Cooper-Standard Automotive Sr Notes 05-01-18 8.50 116,000(d,g) 118,900 Credit Suisse First Boston Mtge Securities Series 2004-C2 Cl A1 05-15-36 3.82 488,691(f) 487,349 Cricket Communications Sr Secured 05-15-16 7.75 317,000 328,888 CSC Holdings LLC Sr Unsecured 04-15-14 8.50 285,000(d) 306,375 02-15-19 8.63 100,000(d) 108,625 DaVita 03-15-13 6.63 615,000 621,150 Del Monte 10-15-19 7.50 370,000(d) 390,813 Denbury Resources 04-01-13 7.50 340,000 340,425 03-01-16 9.75 310,000 342,550 DISH DBS 10-01-14 6.63 550,000 555,500 02-01-16 7.13 290,000 294,350 Dominion Resources Sr Unsecured Series F 08-01-33 5.25 1,460,000 1,578,275 Dow Chemical (European Monetary Unit) Sr Unsecured 05-27-11 4.63 520,000 708,793 Dow Chemical Sr Unsecured 05-15-19 8.55 1,400,000 1,710,683 Dr Pepper Snapple Group 12-21-11 1.70 1,310,000 1,314,706
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) UNITED STATES (CONT.) DTE Energy Sr Unsecured 06-01-11 7.05% $115,000 $121,283 05-15-14 7.63 1,540,000 1,777,267 Duke Energy Indiana 1st Mtge 08-15-38 6.35 940,000 1,056,889 Duke Energy Sr Unsecured 02-01-14 6.30 450,000 505,160 Dunkin Securitization Series 2006-1 Cl A2 (AMBAC) 06-20-31 5.78 1,600,000(d,l) 1,568,128 El Paso Sr Unsecured 12-12-13 12.00 405,000 481,950 Embarq Sr Unsecured 06-01-36 8.00 920,000 985,107 ERAC USA Finance LLC 10-15-37 7.00 905,000(d) 965,051 Exelon Sr Unsecured 06-15-10 4.45 1,000,000 1,004,463 Federal Home Loan Mtge Corp #A11799 08-01-33 6.50 132,345(f) 145,297 Federal Home Loan Mtge Corp #A15881 11-01-33 5.00 917,267(f) 957,510 Federal Home Loan Mtge Corp #E91486 09-01-17 6.50 94,594(f) 102,374 Federal Home Loan Mtge Corp #E99684 10-01-18 5.00 387,042(f) 413,031 Federal Home Loan Mtge Corp #G01960 12-01-35 5.00 2,280,527(f) 2,373,102 Federal Natl Mtge Assn 10-15-14 4.63 3,130,000(n) 3,419,888 11-15-30 6.63 2,300,000(n) 2,816,782 Federal Natl Mtge Assn #545874 08-01-32 6.50 142,336(f) 158,508 Federal Natl Mtge Assn #555528 04-01-33 6.00 645,387(f) 699,485 Federal Natl Mtge Assn #555734 07-01-23 5.00 628,962(f) 659,733 Federal Natl Mtge Assn #555740 08-01-18 4.50 828,764(f) 875,738 Federal Natl Mtge Assn #555851 01-01-33 6.50 737,091(f) 812,113 Federal Natl Mtge Assn #575487 04-01-17 6.50 346,394(f) 377,401 Federal Natl Mtge Assn #621581 12-01-31 6.50 179,806(f) 198,385 Federal Natl Mtge Assn #633966 03-01-17 6.00 65,151(f) 70,421 Federal Natl Mtge Assn #634749 03-01-17 5.50 396,651(f) 429,073 Federal Natl Mtge Assn #640996 05-01-32 7.50 259,582(f) 293,555 Federal Natl Mtge Assn #643381 06-01-17 6.00 173,510(f) 187,543 Federal Natl Mtge Assn #645053 05-01-32 7.00 470,055(f) 526,055 Federal Natl Mtge Assn #646147 06-01-32 7.00 265,498(f) 300,000 Federal Natl Mtge Assn #652284 08-01-32 6.50 278,314(f) 306,641 Federal Natl Mtge Assn #653145 07-01-17 6.00 134,890(f) 146,634 Federal Natl Mtge Assn #653730 09-01-32 6.50 140,927(f) 156,937 Federal Natl Mtge Assn #655589 08-01-32 6.50 996,972(f) 1,107,753 Federal Natl Mtge Assn #666424 08-01-32 6.50 152,252(f) 167,749 Federal Natl Mtge Assn #670461 11-01-32 7.50 142,244(f) 160,860 Federal Natl Mtge Assn #677333 01-01-33 6.00 2,974,741(f) 3,224,091 Federal Natl Mtge Assn #688034 03-01-33 5.50 330,312(f) 354,531 Federal Natl Mtge Assn #688691 03-01-33 5.50 492,886(f) 523,158 Federal Natl Mtge Assn #711503 06-01-33 5.50 697,475(f) 742,791 Federal Natl Mtge Assn #720576 06-01-33 5.00 1,697,642(f) 1,772,657
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 18 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) UNITED STATES (CONT.) Federal Natl Mtge Assn #735029 09-01-13 5.32% $606,391(f) $640,100 Federal Natl Mtge Assn #741850 09-01-33 5.50 1,415,401(f) 1,502,330 Federal Natl Mtge Assn #753507 12-01-18 5.00 1,442,715(f) 1,538,103 Federal Natl Mtge Assn #755498 11-01-18 5.50 631,617(f) 679,409 Federal Natl Mtge Assn #756788 11-01-33 6.50 211,362(f) 232,674 Federal Natl Mtge Assn #928019 01-01-37 5.50 1,453,117(f,k) 1,533,734 Florida Power 1st Mtge 06-15-38 6.40 520,000 588,244 04-01-40 5.65 810,000 821,779 Forest Oil 02-15-14 8.50 320,000 340,000 General Electric Capital Assurance Series 2003-1 Cl A4 05-12-35 5.25 413,162(d,f) 435,023 General Electric Capital Sr Unsecured 01-08-20 5.50 1,215,000 1,265,709 01-10-39 6.88 455,000 505,763 Georgia-Pacific LLC 05-01-16 8.25 230,000(d) 251,850 Goldman Sachs Group (European Monetary Unit) Sr Unsecured 05-02-18 6.38 350,000 500,373 Goldman Sachs Group Sr Unsecured 02-15-19 7.50 440,000 486,658 03-15-20 5.38 450,000 437,099 Govt Natl Mtge Assn #604708 10-15-33 5.50 700,019(f) 749,152 Govt Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2002-80 Cl CI 01-20-32 1.92 130,231(e,f) 2,315 Greenwich Capital Commercial Funding Series 2003-C1 Cl A3 07-05-35 3.86 725,000(f) 737,144 Greenwich Capital Commercial Funding Series 2004-GG1 Cl A5 06-10-36 4.88 500,000(f) 513,639 Greenwich Capital Commercial Funding Series 2007-GG9 Cl A4 03-10-39 5.44 2,100,000(f) 2,107,605 Greif Sr Unsecured 02-01-17 6.75 195,000 196,463 GS Mtge Securities II Series 2007-EOP Cl J 03-06-20 1.10 1,250,000(d,f,i) 1,039,880 GS Mtge Securities II Series 2007-GG10 Cl F 08-10-45 6.00 775,000(f) 95,301 GTP Towers Issuer LLC 02-15-15 4.44 450,000(d) 462,198 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2004-1 Cl A4 04-19-34 4.76 1,733,542(f,i) 1,596,209 HCA Sr Secured 02-15-17 9.88 325,000(d) 359,938 09-15-20 7.25 745,000(d) 782,250 HJ Heinz Finance 07-15-11 6.63 500,000 532,527 Indiana Michigan Power Sr Unsecured 03-15-37 6.05 85,000 86,944 INVISTA Sr Unsecured 05-01-12 9.25 465,000(d) 470,813 Jarden 05-01-16 8.00 300,000 316,125 JPMorgan Chase & Co Sr Unsecured 04-23-19 6.30 880,000 973,165
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 19 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) UNITED STATES (CONT.) JPMorgan Chase Commercial Mtge Securities Series 2003-LN1 Cl A1 10-15-37 4.13% $181,664(f) $187,087 JPMorgan Chase Commercial Mtge Securities Series 2003-ML1A Cl A1 03-12-39 3.97 127,832(f) 130,975 JPMorgan Chase Commercial Mtge Securities Series 2003-ML1A Cl A2 03-12-39 4.77 1,200,000(f) 1,255,852 JPMorgan Chase Commercial Mtge Securities Series 2007-CB20 Cl E 02-12-51 6.40 675,000(d,f) 146,910 K Hovnanian Enterprises Sr Secured 10-15-16 10.63 470,000 514,650 Kraft Foods Sr Unsecured 02-19-14 6.75 145,000 164,396 08-11-17 6.50 404,000 457,025 02-01-18 6.13 2,125,000 2,347,347 L-3 Communications 07-15-13 6.13 320,000 324,800 L-3 Communications Series B 10-15-15 6.38 531,000 543,611 Lamar Media 04-01-14 9.75 255,000 283,688 Lamar Media Sr Sub Notes 04-15-18 7.88 73,000(d) 75,008 LBI Escrow Sr Secured 11-01-17 8.00 181,000(d) 187,788 LB-UBS Commercial Mtge Trust Series 2004-C2 Cl A3 03-15-29 3.97 750,000(f) 764,498 LB-UBS Commercial Mtge Trust Series 2006-C4 Cl AAB 06-15-32 6.05 750,000(f) 810,735 LB-UBS Commercial Mtge Trust Series 2007-C7 Cl A3 09-15-45 5.87 900,000(f) 904,319 Lear 03-15-18 7.88 214,000 219,082 03-15-20 8.13 117,000 119,633 Lehman Brothers Holdings Sr Unsecured 05-02-18 6.88 1,320,000(b,o) 293,700 Live Nation Entertainment Sr Unsecured 05-15-18 8.13 50,000(d,g) 51,500 Manitowoc 11-01-13 7.13 470,000 470,000 Mantech Intl 04-15-18 7.25 57,000(d,n) 58,140 Mellon Funding (British Pound) 11-08-11 6.38 370,000 599,854 Merrill Lynch & Co (British Pound) Sr Unsub 09-24-10 5.13 221,000 339,381 Metropolitan Life Global Funding I (British Pound) Sr Secured 01-27-11 4.63 540,000 837,547 MGM MIRAGE Sr Secured 11-15-17 11.13 290,000(d) 329,150 Midwest Generation LLC Pass-Through Ctfs Series B 01-02-16 8.56 293,215 299,080 Morgan Stanley Capital I Series 2004-HQ4 Cl A5 04-14-40 4.59 750,000(f) 754,830 Morgan Stanley Capital I Series 2006-T23 Cl AAB 08-12-41 5.97 575,000(f) 624,167 Morgan Stanley (British Pound) Sr Unsecured 04-11-11 7.50 470,000 747,861 Morgan Stanley (European Monetary Unit) Sr Unsecured 10-02-17 5.50 625,000 862,092 Morgan Stanley Sr Unsecured 04-01-18 6.63 205,000 217,351
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 20 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) UNITED STATES (CONT.) Nalco Sr Notes 05-15-17 8.25% $570,000(d) $609,900 Natl Collegiate Student Loan Trust Collateralized Mtge Obligation Interest Only Series 2006-3 Cl AIO 01-25-12 5.88 2,400,000(e) 250,531 Nevada Power Series L 01-15-15 5.88 1,000,000 1,102,346 Nevada Power Series O 05-15-18 6.50 365,000 406,932 New Communications Holdings Sr Notes 04-15-15 7.88 78,000(d) 80,438 04-15-17 8.25 194,000(d) 200,548 04-15-20 8.50 158,000(d) 161,950 Nextel Communications Series D 08-01-15 7.38 445,000 433,318 Nielsen Finance LLC 08-01-14 10.00 200,000 210,000 NiSource Finance 09-15-17 5.25 1,575,000 1,616,499 Northern States Power 1st Mtge Series B 08-28-12 8.00 515,000 590,029 Northwest Pipeline Sr Unsecured 04-15-17 5.95 1,085,000 1,190,042 NRG Energy 02-01-16 7.38 1,290,000 1,277,100 Omnicare 12-15-13 6.75 575,000 580,031 Oshkosh 03-01-17 8.25 146,000(d) 153,665 03-01-20 8.50 106,000(d) 111,830 Pacific Gas & Electric Sr Unsecured 01-15-40 5.40 425,000 416,403 PacifiCorp 1st Mtge 10-15-37 6.25 200,000 219,624 01-15-39 6.00 440,000 469,602 Petrohawk Energy 08-01-14 10.50 480,000 532,800 Phillips-Van Heusen Sr Unsecured 05-15-20 7.38 110,000(g) 112,750 Potomac Electric Power 1st Mtge 04-15-14 4.65 280,000 298,232 PPL Electric Utilities 1st Mtge 11-30-13 7.13 2,850,000 3,330,411 Progress Energy Sr Unsecured 03-01-11 7.10 325,000 340,698 03-15-14 6.05 875,000 973,571 12-01-39 6.00 245,000 250,849 Quicksilver Resources 08-01-15 8.25 245,000 252,963 QVC Sr Secured 04-15-17 7.13 316,000(d) 320,740 10-15-20 7.38 316,000(d) 320,740 Qwest Communications Intl 04-01-18 7.13 370,000(d) 382,025 Qwest Sr Unsecured 10-01-14 7.50 175,000 191,406 Range Resources 05-15-16 7.50 320,000 332,800 05-15-19 8.00 720,000 777,599 Regal Cinemas 07-15-19 8.63 200,000 212,000 Renaissance Home Equity Loan Trust Series 2005-4 Cl A3 02-25-36 5.57 404,351 381,555 Reynolds Group Issuer LLC Sr Secured 10-15-16 7.75 265,000(d) 273,612
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 21 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 $2,227,102 Santander Drive Auto Receivables Trust Series 2007-1 Cl A4 (FGIC) 09-15-14 0.30 1,001,884(i,l) 990,535 SBA Telecommunications 08-15-16 8.00 240,000(d) 253,200 08-15-19 8.25 85,000(d) 91,163 SCANA Sr Unsecured 05-15-11 6.88 205,000 215,812 Select Medical 02-01-15 7.63 819,000 778,050 Sierra Pacific Power Series M 05-15-16 6.00 2,935,000 3,239,837 Southern California Gas 1st Mtge 03-15-14 5.50 845,000 938,019 Southern Natural Gas Sr Unsecured 04-01-17 5.90 2,131,000(d) 2,259,455 Speedway Motorsports 06-01-16 8.75 435,000 466,538 Sprint Nextel Sr Unsecured 08-15-17 8.38 150,000 155,063 Tampa Electric Sr Unsecured 05-15-18 6.10 620,000 679,170 TCM Sub LLC 01-15-15 3.55 845,000(d) 844,304 Toledo Edison Sr Secured 05-15-37 6.15 450,000 463,305 Transcontinental Gas Pipe Line LLC Sr Unsecured 04-15-16 6.40 3,590,000 4,063,830 TransDigm 07-15-14 7.75 200,000(d) 204,000 tw telecom holdings Sr Notes 03-01-18 8.00 216,000(d) 222,750 U.S. Treasury 10-31-11 1.00 670,000 672,827 07-15-12 1.50 2,130,000(n) 2,151,798 03-31-15 2.50 4,357,000(n) 4,378,785 06-30-16 3.25 800,000(n) 817,000 02-15-20 3.63 2,080,000(n) 2,073,824 08-15-23 6.25 7,900,000 9,662,689 11-15-39 4.38 1,070,000(n) 1,043,250 United States Steel Sr Notes 04-01-20 7.38 173,000 177,325 US Cellular Sr Unsecured 12-15-33 6.70 165,000 163,460 Valmont Inds Sr Unsecured 04-20-20 6.63 632,000 646,463 Verizon New York Sr Unsecured Series A 04-01-12 6.88 2,380,000 2,587,533 Verizon New York Sr Unsecured Series B 04-01-32 7.38 855,000 949,277 Wachovia Bank Commercial Mtge Trust Series 2005-C20 Cl A5 07-15-42 5.09 800,000(f) 822,145 Wachovia Bank Commercial Mtge Trust Series 2006-C24 Cl APB 03-15-45 5.58 500,000(f) 520,842 Wachovia Bank Commercial Mtge Trust Series 2006-C27 Cl APB 07-15-45 5.73 900,000(f) 934,422 Wells Fargo & Co (British Pound) Sr Unsecured 11-30-10 4.75 1,300,000 2,018,162 Wells Fargo & Co (European Monetary Unit) Sr Unsecured 11-03-16 4.13 330,000 450,808
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 22 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) UNITED STATES (CONT.) Windstream 08-01-16 8.63% $315,000 $322,481 03-15-19 7.00 40,000 37,700 --------------- Total 181,521,093 - ------------------------------------------------------------------------------------- URUGUAY (0.2%) Republic of Uruguay 11-18-22 8.00 450,000 535,500 Republica Orient Uruguay Sr Unsecured 03-21-36 7.63 275,000 312,125 --------------- Total 847,625 - ------------------------------------------------------------------------------------- VENEZUELA (0.4%) Petroleos de Venezuela 04-12-17 5.25 1,190,000 772,013 Republic of Venezuela 02-26-16 5.75 620,000 446,400 Republic of Venezuela Sr Unsecured 10-08-14 8.50 160,000 138,000 05-07-23 9.00 931,000 693,595 --------------- Total 2,050,008 - ------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $456,170,956) $471,874,388 - ------------------------------------------------------------------------------------- SENIOR LOANS (0.1%)(j) COUPON PRINCIPAL BORROWER RATE AMOUNT VALUE(a) UNITED STATES FairPoint Communications Tranche B Term Loan 03-31-15 5.00% $558,658(b,o) $466,943 - ------------------------------------------------------------------------------------- TOTAL SENIOR LOANS (Cost: $319,170) $466,943 - -------------------------------------------------------------------------------------
MONEY MARKET FUND (1.0%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.21% 4,767,900(q) $4,767,900 - ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $4,767,900) $4,767,900 - -------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (0.7%) AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) REPURCHASE AGREEMENTS(P) Goldman Sachs dated 04-30-10, matures 05-03-10, repurchase price $3,228,392 0.19% $3,228,341 $3,228,341 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $3,228,341) $3,228,341 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $464,486,367)(r) $480,337,572 =====================================================================================
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 23 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- INVESTMENTS IN DERIVATIVES FUTURES CONTRACTS OUTSTANDING AT APRIL 30, 2010
NUMBER OF UNREALIZED CONTRACTS NOTIONAL EXPIRATION APPRECIATION CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION) - ------------------------------------------------------------------------------------- Euro-Bobl, 5-year 9 $1,415,759 June 2010 $16,329 Euro-Bund, 10-year 1 166,213 June 2010 2,848 Japanese Govt Bond, 10- year 6 8,923,339 June 2010 24,136 U.S. Treasury Note, 5- year (55) (6,372,266) July 2010 (33,989) U.S. Treasury Note, 10- year 11 1,296,969 June 2010 8,491 U.S. Treasury Ultra Bond, 30-year (11) (1,364,344) June 2010 (17,204) - ------------------------------------------------------------------------------------- Total $611 - -------------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT APRIL 30, 2010
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION - ----------------------------------------------------------------------------------------------- May 6, 2010 2,714,626 34,150,000 $59,151 $-- U.S. Dollar Mexican Peso - ----------------------------------------------------------------------------------------------- May 7, 2010 6,150,000 4,375,200 -- (113,438) Singapore Dollar U.S. Dollar - ----------------------------------------------------------------------------------------------- May 7, 2010 5,032,216 229,620,000 141,804 -- U.S. Dollar Indian Rupee - ----------------------------------------------------------------------------------------------- May 13, 2010 1,764,000 2,393,766 45,240 -- European Monetary Unit U.S. Dollar - ----------------------------------------------------------------------------------------------- May 13, 2010 3,700,000 4,915,953 -- (10,092) European Monetary Unit U.S. Dollar - ----------------------------------------------------------------------------------------------- May 21, 2010 3,012,948 3,025,000 -- (34,644) U.S. Dollar Canadian Dollar - ----------------------------------------------------------------------------------------------- May 24, 2010 2,788,347 4,910,000 24,416 -- U.S. Dollar Brazilian Real - ----------------------------------------------------------------------------------------------- May 25, 2010 7,117,019 39,350,000 49,001 -- Swiss Franc Norwegian Krone - ----------------------------------------------------------------------------------------------- May 27, 2010 280,000 431,113 2,736 -- British Pound U.S. Dollar - ----------------------------------------------------------------------------------------------- May 28, 2010 16,904,780 1,591,585,000 43,754 -- U.S. Dollar Japanese Yen - ----------------------------------------------------------------------------------------------- June 7, 2010 2,188,000 2,519,054 6,738 -- British Pound European Monetary Unit - ----------------------------------------------------------------------------------------------- Total $372,840 $(158,174) - -----------------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 24 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL 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. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2010, the value of these securities amounted to $41,872,074 or 8.63% 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 April 30, 2010. (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 April 30, 2010, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $513,000. 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 April 30, 2010. (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 -- 2010 SEMIANNUAL REPORT 25 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (k) At April 30, 2010, investments in securities included securities valued at $405,519 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: AGM -- Assured Guaranty Municipal Corporation AMBAC -- Ambac Assurance Corporation FGIC -- Financial Guaranty Insurance Company
(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 April 30, 2010, security was partially or fully on loan. See Note 7 to the financial statements. (o) This position is in bankruptcy. (p) The table below represents securities received as collateral for repurchase agreements. This collateral, which is generally high quality short-term obligations, is deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral.
GOLDMAN SACHS (0.19%) SECURITY DESCRIPTION VALUE(a) - ------------------------------------------------------------ Fannie Mae Pool $2,367,587 Freddie Mac Gold Pool 797,867 Freddie Mac Non Gold Pool 127,453 - ------------------------------------------------------------ Total market value of collateral securities $3,292,907 - ------------------------------------------------------------
(q) Affiliated Money Market Fund -- See Note 8 to the financial statements. The rate shown is the seven-day current annualized yield at April 30, 2010. (r) At April 30, 2010, the cost of securities for federal income tax purposes was approximately $464,486,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $26,062,000 Unrealized depreciation (10,210,000) ----------------------------------------------------------- Net unrealized appreciation $15,852,000 -----------------------------------------------------------
- -------------------------------------------------------------------------------- 26 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL 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 GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 27 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 April 30, 2010:
FAIR VALUE AT APRIL 30, 2010 ---------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION(A) IDENTICAL ASSETS INPUTS INPUTS TOTAL - -------------------------------------------------------------------------------------------- Bonds Foreign Government Obligations & Agencies $-- $255,278,358 $-- $255,278,358 U.S. Government Obligations & Agencies 20,800,172 6,236,670 -- 27,036,842 Asset-Backed Securities -- 12,682,272 2,067,462 14,749,734 Commercial Mortgage- Backed Securities -- 16,003,805 -- 16,003,805 Residential Mortgage- Backed Securities -- 26,077,052 -- 26,077,052 Corporate Debt Securities Life Insurance -- -- 1,016,823 1,016,823 All Other Industries -- 131,711,774 -- 131,711,774 - -------------------------------------------------------------------------------------------- Total Bonds 20,800,172 447,989,931 3,084,285 471,874,388 - -------------------------------------------------------------------------------------------- Other Senior Loans -- 466,943 -- 466,943 Affiliated Money Market Fund(b) 4,767,900 -- -- 4,767,900 Investments of Cash Collateral Received for Securities on Loan -- 3,228,341 -- 3,228,341 - -------------------------------------------------------------------------------------------- Total Other 4,767,900 3,695,284 -- 8,463,184 - -------------------------------------------------------------------------------------------- Investments in Securities 25,568,072 451,685,215 3,084,285 480,337,572 Other Financial Instruments(c) 611 214,666 -- 215,277 - -------------------------------------------------------------------------------------------- Total $25,568,683 $451,899,881 $3,084,285 $480,552,849 - --------------------------------------------------------------------------------------------
(a) See the Portfolio of Investments for all investment classifications not indicated in the table. (b) Money market fund that is a sweep investment for cash balances in the Fund at April 30, 2010. (c) 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. - -------------------------------------------------------------------------------- 28 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL 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.
ASSET-BACKED CORPORATE DEBT SECURITIES SECURITIES TOTAL - --------------------------------------------------------------------------------- Balance as of Oct. 31, 2009 $2,060,678 $-- $2,060,678 Accrued discounts/premiums 360 12,469 12,829 Realized gain (loss) 26,450 -- 26,450 Change in unrealized appreciation (depreciation)* (175,426) (43,042) (218,468) Net purchases (sales) 155,400 1,047,396 1,202,796 Transfers in and/or out of Level 3 -- -- -- - --------------------------------------------------------------------------------- Balance as of April 30, 2010 $2,067,462 $1,016,823 $3,084,285 - ---------------------------------------------------------------------------------
** Change in unrealized appreciation (depreciation) relating to securities held at March 31, 2010 was $(218,466), which is comprised of Asset-Backed Securities of $(175,424) and Corporate Debt Securities of $(43,042). 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 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 800.221.2450. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 29 STATEMENT OF ASSETS AND LIABILITIES ------------------------------------------- APRIL 30, 2010 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $456,490,126) $472,341,331 Affiliated money market fund (identified cost $4,767,900) 4,767,900 Investments of cash collateral received for securities on loan (identified cost $3,228,341) 3,228,341 - ------------------------------------------------------------------------------- Total investments in securities (identified cost $464,486,367) 480,337,572 Cash 37,800 Foreign currency holdings (identified cost $1,266,473) 1,257,658 Capital shares receivable 466,276 Dividends and accrued interest receivable 7,534,569 Receivable for investment securities sold 999,470 Unrealized appreciation on forward foreign currency contracts 372,840 - ------------------------------------------------------------------------------- Total assets 491,006,185 - ------------------------------------------------------------------------------- LIABILITIES Capital shares payable 987,458 Payable for investment securities purchased 1,356,145 Payable upon return of securities loaned 3,228,341 Variation margin payable on futures contracts 29,173 Unrealized depreciation on forward foreign currency contracts 158,174 Accrued investment management services fees 9,397 Accrued distribution fees 2,913 Accrued transfer agency fees 2,091 Accrued administrative services fees 1,062 Accrued plan administration services fees 2 Other accrued expenses 91,177 - ------------------------------------------------------------------------------- Total liabilities 5,865,933 - ------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $485,140,252 - ------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 697,510 Additional paid-in capital 481,610,617 Undistributed net investment income 1,327,133 Accumulated net realized gain (loss) (14,383,680) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 15,888,672 - ------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $485,140,252 - ------------------------------------------------------------------------------- *Value of securities on loan $ 13,643,883 - -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 30 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $245,210,616 35,271,103 $6.95(1) Class B $ 27,192,706 3,890,532 $6.99 Class C $ 6,051,805 873,354 $6.93 Class I $159,398,342 22,907,580 $6.96 Class R2 $ 4,970 716 $6.94 Class R3 $ 4,971 716 $6.94 Class R4 $ 330,277 47,467 $6.96 Class R5 $ 4,972 715 $6.95 Class W $ 46,941,593 6,758,838 $6.95 - ------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $7.30. 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 -- 2010 SEMIANNUAL REPORT 31 STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED APRIL 30, 2010 (UNAUDITED)
INVESTMENT INCOME Income: Interest 12,368,220 Income distributions from affiliated money market fund 9,688 Income from securities lending -- net 7,739 Less foreign taxes withheld (61,822) - ------------------------------------------------------------------------------- Total income 12,323,825 - ------------------------------------------------------------------------------- Expenses: Investment management services fees 1,800,239 Distribution fees Class A 313,922 Class B 144,919 Class C 31,802 Class R2 3 Class R3 1 Class W 69,139 Transfer agency fees Class A 296,512 Class B 36,484 Class C 7,688 Class R4 53 Class W 55,312 Administrative services fees 203,500 Plan administration services fees Class R2 1 Class R3 1 Class R4 264 Compensation of board members 8,782 Custodian fees 37,250 Printing and postage 40,500 Registration fees 31,850 Professional fees 17,325 Other 22,536 - ------------------------------------------------------------------------------- Total expenses 3,118,083 Expenses waived/reimbursed by the Investment Manager and its affiliates (153,267) - ------------------------------------------------------------------------------- Total net expenses 2,964,816 - ------------------------------------------------------------------------------- Investment income (loss) -- net 9,359,009 - -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 32 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $ 3,133,864 Foreign currency transactions (465,234) Futures contracts 566,872 - ------------------------------------------------------------------------------- Net realized gain (loss) on investments 3,235,502 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (16,861,135) - ------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (13,625,633) - ------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (4,266,624) - -------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 33 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 9,359,009 $ 14,084,975 Net realized gain (loss) on investments 3,235,502 (6,929,498) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (16,861,135) 96,312,630 - -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (4,266,624) 103,468,107 - -------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (3,131,426) (14,451,166) Class B (266,196) (2,363,547) Class C (59,878) (247,912) Class I (2,459,176) (12,198,283) Class R2 (13) N/A Class R3 (13) N/A Class R4 (2,402) (7,374) Class R5 (13) N/A Class W (701,512) (5,231,186) - -------------------------------------------------------------------------------------------------- Total distributions (6,620,629) (34,499,468) - --------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 34 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 (UNAUDITED) CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 26,645,551 $ 34,656,103 Class B shares 2,794,765 4,760,950 Class C shares 2,033,842 1,892,530 Class I shares 20,744,715 44,757,560 Class R2 shares 5,000 N/A Class R3 shares 5,000 N/A Class R4 shares 193,057 42,421 Class R5 shares 5,000 N/A Class W shares 2,909,095 47,318,890 Reinvestment of distributions at net asset value Class A shares 2,925,843 13,585,257 Class B shares 250,629 2,243,075 Class C shares 56,058 228,357 Class I shares 2,459,028 12,197,728 Class R4 shares 2,402 7,374 Class W shares 701,448 5,230,912 Conversions from Class B to Class A Class A shares 16,107 6,603,705 Class B shares (16,107) (6,603,705) Payments for redemptions Class A shares (31,822,119) (83,721,233) Class B shares (5,183,411) (17,508,600) Class C shares (1,443,088) (1,461,886) Class I shares (29,926,562) (115,655,803) Class R4 shares (29,301) (18,796) Class W shares (15,769,830) (135,568,998) - -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (22,442,878) (187,014,159) - -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (33,330,131) (118,045,520) Net assets at beginning of period 518,470,383 636,515,903 - -------------------------------------------------------------------------------------------------- Net assets at end of period $485,140,252 $ 518,470,383 - -------------------------------------------------------------------------------------------------- Undistributed (excess of distributions over) net investment income $ 1,327,133 $ (1,411,247) - --------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 35 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.
SIX MONTHS ENDED YEAR ENDED OCT. 31, CLASS A APRIL 30, 2010 ---------------------------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006 2005 Net asset value, beginning of period $7.10 $6.16 $6.89 $6.60 $6.59 $7.02 - ----------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .13 .17 .22 .20 .19 .16 Net gains (losses) (both realized and unrealized) (.19) 1.15 (.73) .35 .14 (.23) - ----------------------------------------------------------------------------------------------------------------------------- Total from investment operations (.06) 1.32 (.51) .55 .33 (.07) - ----------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.09) (.38) (.22) (.26) (.32) (.36) - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.95 $7.10 $6.16 $6.89 $6.60 $6.59 - ----------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (.89%) 22.12% (7.66%) 8.63% 5.17% (1.18%) - ----------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 1.34%(b) 1.36% 1.32% 1.37% 1.39% 1.37% - ----------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c) 1.25%(b) 1.25% 1.25% 1.25% 1.25% 1.35% - ----------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.63%(b) 2.72% 3.26% 3.08% 2.77% 2.42% - ----------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $245 $253 $249 $259 $276 $353 - ----------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 31% 69% 75% 77% 68% 73% - -----------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 36 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCT. 31, CLASS B APRIL 30, 2010 ---------------------------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006 2005 Net asset value, beginning of period $7.14 $6.23 $6.96 $6.67 $6.59 $7.02 - ----------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .10 .13 .17 .15 .13 .10 Net gains (losses) (both realized and unrealized) (.19) 1.15 (.73) .35 .16 (.23) - ----------------------------------------------------------------------------------------------------------------------------- Total from investment operations (.09) 1.28 (.56) .50 .29 (.13) - ----------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.37) (.17) (.21) (.21) (.30) - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.99 $7.14 $6.23 $6.96 $6.67 $6.59 - ----------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (1.22%) 21.14% (8.28%) 7.68% 4.45% (1.98%) - ----------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 2.10%(b) 2.13% 2.09% 2.13% 2.16% 2.13% - ----------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c) 2.02%(b) 2.01% 2.01% 2.01% 2.02% 2.12% - ----------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.82%(b) 2.00% 2.49% 2.30% 1.98% 1.65% - ----------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $27 $30 $42 $47 $63 $111 - ----------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 31% 69% 75% 77% 68% 73% - -----------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 37 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCT. 31, CLASS C APRIL 30, 2010 ---------------------------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006 2005 Net asset value, beginning of period $7.08 $6.18 $6.91 $6.62 $6.57 $6.99 - ----------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .10 .13 .17 .15 .14 .11 Net gains (losses) (both realized and unrealized) (.18) 1.14 (.73) .35 .13 (.22) - ----------------------------------------------------------------------------------------------------------------------------- Total from investment operations (.08) 1.27 (.56) .50 .27 (.11) - ----------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.37) (.17) (.21) (.22) (.31) - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.93 $7.08 $6.18 $6.91 $6.62 $6.57 - ----------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (1.19%) 21.15% (8.27%) 7.75% 4.25% (1.83%) - ----------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 2.09%(b) 2.12% 2.08% 2.13% 2.16% 2.14% - ----------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c) 2.01%(b) 2.01% 2.01% 2.01% 2.02% 2.12% - ----------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.88%(b) 1.94% 2.51% 2.32% 2.00% 1.65% - ----------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $6 $6 $4 $3 $3 $4 - ----------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 31% 69% 75% 77% 68% 73% - -----------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 38 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCT. 31, CLASS I APRIL 30, 2010 --------------------------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006 2005 Net asset value, beginning of period $7.11 $6.14 $6.87 $6.59 $6.61 $7.03 - ---------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .14 .20 .25 .23 .21 .19 Net gains (losses) (both realized and unrealized) (.19) 1.15 (.73) .34 .14 (.22) - ---------------------------------------------------------------------------------------------------------------------------- Total from investment operations (.05) 1.35 (.48) .57 .35 (.03) - ---------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.10) (.38) (.25) (.29) (.37) (.39) - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.96 $7.11 $6.14 $6.87 $6.59 $6.61 - ---------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (.68%) 22.83% (7.30%) 8.91% 5.52% (.56%) - ---------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement .85%(b) .86% .85% .87% .88% .91% - ---------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c) .82%(b) .82% .82% .87% .88% .91% - ---------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 4.00%(b) 3.16% 3.68% 3.47% 3.18% 2.87% - ---------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $159 $170 $206 $157 $145 $89 - ---------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 31% 69% 75% 77% 68% 73% - ----------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 39 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
PERIOD ENDED CLASS R2 APRIL 30, 2010(d) PER SHARE DATA (UNAUDITED) Net asset value, beginning of period $6.98 - -------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .06 Net gains (losses) (both realized and unrealized) (.08) - -------------------------------------------------------------------- Total from investment operations (.02) - -------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.02) - -------------------------------------------------------------------- Net asset value, end of period $6.94 - -------------------------------------------------------------------- TOTAL RETURN (.32%) - -------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 1.71%(b) - -------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c) 1.62%(b) - -------------------------------------------------------------------- Net investment income (loss) 7.51%(b) - -------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- - -------------------------------------------------------------------- Portfolio turnover rate 31% - --------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 40 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
PERIOD ENDED CLASS R3 APRIL 30, 2010(d) PER SHARE DATA (UNAUDITED) Net asset value, beginning of period $6.98 - -------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .07 Net gains (losses) (both realized and unrealized) (.09) - -------------------------------------------------------------------- Total from investment operations (.02) - -------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.02) - -------------------------------------------------------------------- Net asset value, end of period $6.94 - -------------------------------------------------------------------- TOTAL RETURN (.32%) - -------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 1.44%(b) - -------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c) 1.35%(b) - -------------------------------------------------------------------- Net investment income (loss) 7.79%(b) - -------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- - -------------------------------------------------------------------- Portfolio turnover rate 31% - --------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 41 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCT. 31, CLASS R4 APRIL 30, 2010 ---------------------------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006 2005 Net asset value, beginning of period $7.11 $6.16 $6.89 $6.60 $6.61 $7.04 - ----------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .13 .18 .25 .22 .20 .16 Net gains (losses) (both realized and unrealized) (.19) 1.15 (.72) .35 .13 (.22) - ----------------------------------------------------------------------------------------------------------------------------- Total from investment operations (.06) 1.33 (.47) .57 .33 (.06) - ----------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.09) (.38) (.26) (.28) (.34) (.37) - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.96 $7.11 $6.16 $6.89 $6.60 $6.61 - ----------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (.82%) 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%(b) 1.16% 1.14% 1.17% 1.20% 1.20% - ----------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c) 1.12%(b) 1.06% .87% 1.08% 1.08% 1.18% - ----------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.83%(b) 2.86% 3.64% 3.27% 2.95% 2.60% - ----------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- $-- $-- - ----------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 31% 69% 75% 77% 68% 73% - -----------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 42 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
PERIOD ENDED CLASS R5 APRIL 30, 2010(d) PER SHARE DATA (UNAUDITED) Net asset value, beginning of period $6.99 - -------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .07 Net gains (losses) (both realized and unrealized) (.09) - -------------------------------------------------------------------- Total from investment operations (.02) - -------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.02) - -------------------------------------------------------------------- Net asset value, end of period $6.95 - -------------------------------------------------------------------- TOTAL RETURN (.31%) - -------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement .97%(b) - -------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c) .87%(b) - -------------------------------------------------------------------- Net investment income (loss) 8.26%(b) - -------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- - -------------------------------------------------------------------- Portfolio turnover rate 31% - --------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 43 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCT. 31, CLASS W APRIL 30, 2010 ------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007(e) Net asset value, beginning of period $7.09 $6.15 $6.88 $6.79 - -------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .12 .17 .22 .20 Net gains (losses) (both realized and unrealized) (.17) 1.14 (.73) .17 - -------------------------------------------------------------------------------------------------------- Total from investment operations (.05) 1.31 (.51) .37 - -------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.09) (.37) (.22) (.28) - -------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.95 $7.09 $6.15 $6.88 - -------------------------------------------------------------------------------------------------------- TOTAL RETURN (.77%) 22.04% (7.62%) 5.71% - -------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 1.30%(b) 1.30% 1.30% 1.35%(b) - -------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c) 1.27%(b) 1.27% 1.27% 1.26%(b) - -------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.43%(b) 2.70% 3.27% 3.34%(b) - -------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $47 $60 $135 $54 - -------------------------------------------------------------------------------------------------------- Portfolio turnover rate 31% 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) Annualized. (c) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (d) For the period from March 15, 2010 (when shares became publicly available) to April 30, 2010. (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. - -------------------------------------------------------------------------------- 44 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS OF APRIL 30, 2010) 1. ORGANIZATION RiverSource Global Bond Fund (the Fund) is a series of RiverSource Global Series, Inc. (the Corporation) and is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a non-diversified, open-end management investment company. The Corporation has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Corporation'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 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 R2, Class R3 and Class R5 shares became available effective March 15, 2010. - - Class W shares are offered without a front-end sales charge or CDSC and are offered through qualifying discretionary accounts. At April 30, 2010, RiverSource Investments, LLC* (the Investment Manager) and affiliated funds-of-funds owned 100% of Class I shares, and the Investment Manager owned 100% of Class R2, Class R3 and Class R5 shares. At April 30, 2010, the Investment Manager and affiliated funds-of-funds owned 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 * Effective May 1, 2010, RiverSource Investments, LLC is known as Columbia Management Investment Advisers, LLC. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 45 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 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 from the primary exchange. 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 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 - -------------------------------------------------------------------------------- 46 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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. The fair value of a security is likely to be different from the quoted or published price, if available. 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 April 30, 2010, foreign currency holdings consisted of multiple denominations. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements. Generally, securities received as collateral subject to repurchase agreements are deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral. 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 - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 47 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- designates cash or liquid securities at least equal to the amount of its forward-commitments. At April 30, 2010, the Fund has outstanding when-issued securities of $513,000. 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 tax returns filed for the last three years. FOREIGN CAPITAL GAINS TAXES Realized gains in certain countries may be subject to foreign taxes at the fund level, at rates ranging from approximately 10% to 15%. The Fund pays such foreign taxes on net realized gains at the appropriate rate for each jurisdiction. RECENT ACCOUNTING PRONOUNCEMENT On Jan. 21, 2010, the Financial Accounting Standards Board issued an Accounting Standards Update (the amendment), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which provides guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities to disclose the input and valuation techniques used to measure fair value for both recurring and non-recurring fair value measurements for Level 2 and Level 3 positions. The amendment also requires that transfers between all levels (including Level 1 and Level 2) be disclosed on a gross basis (i.e., transfers out must be disclosed separately from transfers in), and the reason(s) for the transfer. Additionally purchases, sales, issuances and settlements must be disclosed on a gross basis in the Level 3 rollforward. The effective date of the amendment is for interim and annual periods beginning after Dec. 15, 2009, however, the requirement to - -------------------------------------------------------------------------------- 48 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- provide the Level 3 activity for purchases, sales, issuances and settlements on a gross basis will be effective for interim and annual periods beginning after Dec. 15, 2010. At this time the Fund is evaluating the implications of the amendment and the impact to the financial statements. DIVIDENDS TO SHAREHOLDERS Dividends from net investment income, declared and paid each calendar quarter, when available, are reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the last income dividend of the calendar year. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income, if any, is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 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. Investments in derivative instruments may expose the Fund to certain additional risks, including those detailed below. 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. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 49 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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. 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. - -------------------------------------------------------------------------------- 50 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FAIR VALUES OF DERIVATIVE INSTRUMENTS AT APRIL 30, 2010
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 $372,840 currency contracts $158,174 - ------------------------------------------------------------------------------------------- Interest rate Net assets -- contracts unrealized appreciation on investments 611* N/A N/A - ------------------------------------------------------------------------------------------- Total $373,451 $158,174 - -------------------------------------------------------------------------------------------
* 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 IN THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME - -------------------------------------------------------------------------------------- RISK EXPOSURE CATEGORY FORWARD FOREIGN CURRENCY CONTRACTS FUTURES TOTAL - -------------------------------------------------------------------------------------- Foreign exchange contracts $191,360 $ -- $191,360 - -------------------------------------------------------------------------------------- Interest rate contracts -- 566,872 $566,872 - -------------------------------------------------------------------------------------- Total $191,360 $566,872 $758,232 - --------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME - -------------------------------------------------------------------------------------- RISK EXPOSURE CATEGORY FORWARD FOREIGN CURRENCY CONTRACTS FUTURES TOTAL - -------------------------------------------------------------------------------------- Foreign exchange contracts $(60,318) $ -- $(60,318) - -------------------------------------------------------------------------------------- Interest rate contracts -- 49,083 $ 49,083 - -------------------------------------------------------------------------------------- Total $(60,318) $49,083 $(11,235) - --------------------------------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY FORWARD FOREIGN CURRENCY CONTRACTS The gross notional amount of contracts outstanding was approximately $52.6 million at April 30, 2010. The monthly average gross notional amount for these contracts was $35.3 million for the six months ended April 30, 2010. The fair value of such contracts on April 30, 2010 is set forth in the table above. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 51 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- FUTURES The gross notional amount of long and short contracts outstanding was $11.7 million and $7.7 million, respectively, at April 30, 2010. The monthly average gross notional amounts for long and short contracts was $19.7 million and $3.9 million, respectively, for the six months ended April 30, 2010. The fair value of such contracts on April 30, 2010 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 six months ended April 30, 2010 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 six months ended April 30, 2010 was 0.08% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended April 30, 2010, other expenses paid to this company were $1,576. 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 RiverSource, Seligman and Threadneedle 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. - -------------------------------------------------------------------------------- 52 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 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. 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 $1,200,000 and $85,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of Jan. 31, 2010, and may be recovered * Effective May 1, 2010, RiverSource Service Corporation is known as Columbia Management Investment Services Corp. ** Effective May 1, 2010, RiverSource Fund Distributors, Inc. is known as Columbia Management Investment Distributors, Inc. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 53 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 $153,358 for Class A, $2,670 for Class B and $474 for Class C for the six months ended April 30, 2010. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended April 30, 2010, 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.............................................. 2.02 Class C.............................................. 2.01 Class I.............................................. 0.82 Class R2............................................. 1.62 Class R3............................................. 1.35 Class R4............................................. 1.12 Class R5............................................. 0.87 Class W.............................................. 1.27
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class A............................................ $70,489 Class B............................................ 8,135 Class C............................................ 1,785
The management fees waived/reimbursed at the Fund level were $72,858. The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Dec. 31, 2010, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses - -------------------------------------------------------------------------------- 54 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 R2............................................. 1.62 Class R3............................................. 1.37 Class R4............................................. 1.12 Class R5............................................. 0.87 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. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $153,900,096 and $166,279,408, respectively, for the six months ended April 30, 2010. 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:
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 - ---------------------------------------------------------------------- CLASS A Sold 3,784,456 5,231,964 Converted from Class B* 2,284 969,818 Reinvested distributions 417,156 2,146,170 Redeemed (4,537,832) (13,137,526) - ---------------------------------------------------------------------- Net increase (decrease) (333,936) (4,789,574) - ---------------------------------------------------------------------- CLASS B Sold 394,293 725,964 Reinvested distributions 35,500 349,934 Converted to Class A* (2,271) (962,748) Redeemed (735,203) (2,725,361) - ---------------------------------------------------------------------- Net increase (decrease) (307,681) (2,612,211) - ----------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 55 NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 - ---------------------------------------------------------------------- CLASS C Sold 288,286 281,159 Reinvested distributions 8,008 35,905 Redeemed (207,574) (227,718) - ---------------------------------------------------------------------- Net increase (decrease) 88,720 89,346 - ---------------------------------------------------------------------- CLASS I Sold 2,961,570 6,812,712 Reinvested distributions 350,645 1,933,079 Redeemed (4,291,020) (18,357,075) - ---------------------------------------------------------------------- Net increase (decrease) (978,805) (9,611,284) - ---------------------------------------------------------------------- CLASS R2** Sold 716 N/A - ---------------------------------------------------------------------- Net increase (decrease) 716 N/A - ---------------------------------------------------------------------- CLASS R3** Sold 716 N/A - ---------------------------------------------------------------------- Net increase (decrease) 716 N/A - ---------------------------------------------------------------------- CLASS R4 Sold 27,600 6,358 Reinvested distributions 343 1,165 Redeemed (4,216) (3,012) - ---------------------------------------------------------------------- Net increase (decrease) 23,727 4,511 - ---------------------------------------------------------------------- CLASS R5** Sold 715 N/A - ---------------------------------------------------------------------- Net increase (decrease) 715 N/A - ---------------------------------------------------------------------- CLASS W Sold 413,816 7,283,695 Reinvested distributions 100,127 826,368 Redeemed (2,255,122) (21,598,586) - ---------------------------------------------------------------------- Net increase (decrease) (1,741,179) (13,488,523) - ----------------------------------------------------------------------
* Automatic conversion of Class B shares to Class A shares based on the original purchase date. ** For the period from March 15, 2010 (when shares became publicly available) to April 30, 2010. 7. LENDING OF PORTFOLIO SECURITIES 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 - -------------------------------------------------------------------------------- 56 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At April 30, 2010, securities valued at $13,643,883 were on loan, secured by U.S. government securities valued at $10,591,136 and by cash collateral of $3,228,341 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 $7,739 earned from securities lending for the six months ended April 30, 2010 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 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 RiverSource, Seligman and Threadneedle funds and other institutional clients of the Investment Manager. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $55,499,696 and $62,998,726, respectively, for the six months ended April 30, 2010. 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 - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 57 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- balance in RiverSource Short-Term Cash Fund at April 30, 2010, 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 agreement, which is a collective agreement between the Fund and certain other RiverSource, Seligman and Threadneedle 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 (i) 1.25% per annum plus (ii) 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. The Fund had no borrowings during the six months ended April 30, 2010. 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. 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
- -------------------------------------------------------------------------------- 58 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 NON-DIVERSIFICATION RISK The Fund is non-diversified. A non-diversified fund may invest more of its assets in fewer companies than if it were a diversified fund. Because each investment has a greater effect on the Fund's performance, the Fund may be more exposed to the risks of loss and volatility than a fund that invests more broadly. 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 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 - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 59 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 (the Supreme Court), asking the Supreme Court to stay the District Court proceedings while the 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. On March 30, 2010, the Supreme Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit's decision in the Gallus case and remanded the case to the Eighth Circuit for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. 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. 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 - -------------------------------------------------------------------------------- 60 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 -- 2010 SEMIANNUAL REPORT 61 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- Columbia Management Investment Advisers, LLC ("Columbia Management" or the "investment manager"), formerly known as RiverSource Investments, LLC, a wholly- owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), Columbia Management provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. Columbia Management prepared detailed reports for the Board and its Contracts Committee in March and April 2010, including reports based on data provided by independent organizations and a comprehensive response to each item of information requested by independent legal counsel to the Independent Directors ("Independent Legal Counsel") in a letter to the investment manager, to assist the Board in making this determination. All of the materials presented in March and April 2010 were first supplied in draft form to designated representatives of the Independent Directors, i.e., Independent Legal Counsel, the Chair of the Board and the Chair of the Contracts Committee (including materials relating to the Fund's expense cap), and the final materials were revised to reflect comments provided by these Board representatives. In addition, throughout the year, the Board (or its committees) reviews information prepared by Columbia Management addressing the services Columbia Management provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts Committee, the Investment Review Committee and the Compliance Committee in determining whether to continue the IMS Agreement. At the April 6-8, 2010 in-person Board meeting, Independent Legal Counsel reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by Columbia Management: The Board analyzed various reports and presentations it had received detailing the services performed by Columbia Management, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by Columbia Management, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, most notably, management's announcement of the massive - -------------------------------------------------------------------------------- 62 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- investment made in the acquisition of the long-term asset management business of Columbia Management Group, LLC (the "Columbia Transaction") and the completed integration of J. & W. Seligman & Co. Incorporated, acquisitions which should continue to enhance investment capabilities and provide access to a greater depth of experienced portfolio managers in key categories. The Board noted, in particular, that upon the close of the Columbia Transaction, RiverSource will have grown to 10 investment offices (compared to 6 in 2009). In addition, the Board reviewed information concerning the investment manager's new Chief Investment Officer upon the close of the Columbia Transaction, including the application of his particular investment philosophy, which is intended to enhance the risk and portfolio management oversight of the entire fund family. Moreover, in connection with the Board's evaluation of the overall package of services provided by Columbia Management, the Board considered the quality of the administrative and transfer agency services provided by Columbia Management's affiliates to the Fund. The Board also reviewed the financial condition of Columbia Management (and its affiliates) and each entity's ability to carry out its responsibilities under the IMS Agreement. Further, the Board considered Columbia Management's ability to retain key personnel in certain targeted areas and its expectations in this regard. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by Columbia Management). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that Columbia Management and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund. The Board observed that the Fund's investment performance met expectations. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT 63 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- Comparative Fees, Costs of Services Provided and the Profits Realized By Columbia Management and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to Columbia Management's profitability. They also reviewed information in the report showing the fees charged by Columbia Management to other client accounts (with similar investment strategies to those of the Fund). The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund (with few defined exceptions) are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) approximated the peer group's median expense ratio. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered various preliminary integration plans in connection with the Columbia Transaction which, if implemented, would impact the fee structures of various RiverSource Funds. The Board was satisfied with the principles underlying these plans, which, at their preliminary stage, are designed to achieve a rational, consistent pricing model across the combined fund families, as well as preserve the "pricing philosophy" of the Funds. The Board also considered the expected profitability of Columbia Management and its affiliates in connection with Columbia Management providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to Columbia Management and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. In this regard, the Board observed slightly reduced profitability in 2009 vs. 2008. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer - -------------------------------------------------------------------------------- 64 RIVERSOURCE GLOBAL BOND FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by Columbia Management as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 8, 2010, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement for an additional annual period. PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling 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 -- 2010 SEMIANNUAL REPORT 65 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 Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.), member FINRA and managed by Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC). (C)2010 Columbia Management Investment Advisers, LLC. All (COLUMBIA MANAGEMENT LOGO) rights reserved. S-6339 Z (6/10)
Semiannual Report (COLUMBIA MANAGEMENT LOGO) THREADNEEDLE EMERGING MARKETS FUND - -------------------------------------------------------------------------------- SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2010 THREADNEEDLE EMERGING MARKETS FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 8 Portfolio of Investments........... 10 Statement of Assets and Liabilities...................... 21 Statement of Operations............ 23 Statements of Changes in Net Assets........................... 24 Financial Highlights............... 26 Notes to Financial Statements...... 33 Approval of Investment Management Services Agreement............... 49 Proxy Voting....................... 53
- -------------------------------------------------------------------------------- 2 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY - -------------------------------------------------------------------------------- > Threadneedle Emerging Markets Fund (the Fund) Class A shares gained 13.71% (excluding sales charge) for the six months ended April 30, 2010. > The Fund outperformed its benchmark, the Morgan Stanley Capital International (MSCI) Emerging Markets Index, which advanced 12.46% for the same six-month period. > The Fund also outperformed its peer group, the Lipper Emerging Markets Funds Index, which increased 13.37% for the same period. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2010) - --------------------------------------------------------------------------------
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ----------------------------------------------------------------------- Threadneedle Emerging Markets Fund Class A (excluding sales charge) +13.71% +59.44% +1.94% +15.25% +9.18% - ----------------------------------------------------------------------- MSCI Emerging Markets Index(1) (unmanaged) +12.46% +57.55% +4.30% +16.92% +11.35% - ----------------------------------------------------------------------- Lipper Emerging Markets Funds Index(2) +13.37% +59.50% +1.33% +14.60% +10.42% - -----------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 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. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- (1) The 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. AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT APRIL 30, 2010 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 11/13/96) +13.71% +59.44% +1.94% +15.25% +9.18% N/A - ------------------------------------------------------------------------------------ Class B (inception 11/13/96) +13.30% +58.21% +1.15% +14.36% +8.35% N/A - ------------------------------------------------------------------------------------ Class C (inception 6/26/00) +13.26% +58.29% +1.18% +14.36% N/A +8.99% - ------------------------------------------------------------------------------------ Class I (inception 3/4/04) +14.02% +60.26% +2.45% +15.83% N/A +14.36% - ------------------------------------------------------------------------------------ Class R2 (inception 8/3/09) +13.47% N/A N/A N/A N/A +18.37% - ------------------------------------------------------------------------------------ Class R4 (inception 11/13/96) +13.85% +59.49% +2.25% +15.54% N/A +8.71% - ------------------------------------------------------------------------------------ Class R5 (inception 8/1/08) +13.96% +60.02% N/A N/A N/A -0.83% - ------------------------------------------------------------------------------------ With sales charge Class A (inception 11/13/96) +7.17% +50.26% -0.06% +13.89% +8.54% N/A - ------------------------------------------------------------------------------------ Class B (inception 11/13/96) +8.30% +53.21% +0.36% +14.12% +8.35% N/A - ------------------------------------------------------------------------------------ Class C (inception 6/26/00) +12.26% +57.29% +1.18% +14.36% N/A +8.99% - ------------------------------------------------------------------------------------
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. *Not annualized. **For classes with less than 10 years performance. - -------------------------------------------------------------------------------- 4 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- MORNINGSTAR STYLE BOX(TM) - --------------------------------------------------------------------------------
Equity Style Value Blend Growth X Large Medium Size Small
The Morningstar Style Box(TM) reveals a fund's investment strategy. For equity funds, the vertical axis shows the market capitalization of the stocks owned, and the horizontal axis shows investment style (value, blend, or growth). Information shown is based on the most recent data provided by Morningstar. 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. (C)2010 Morningstar, Inc. All rights reserved. The information contained herein is proprietary to Morningstar and/or its content providers, may not be copied or distributed and is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- COUNTRY BREAKDOWN(1) (at April 30, 2010) - ---------------------------------------------------------------------
Brazil 15.0% - ------------------------------------------------ Chile 0.7% - ------------------------------------------------ China 9.8% - ------------------------------------------------ Egypt 1.0% - ------------------------------------------------ Hong Kong 2.3% - ------------------------------------------------ Hungary 1.8% - ------------------------------------------------ India 6.5% - ------------------------------------------------ Indonesia 2.5% - ------------------------------------------------ Israel 0.6% - ------------------------------------------------ Luxembourg 1.1% - ------------------------------------------------ Malaysia 0.8% - ------------------------------------------------ Mexico 6.1% - ------------------------------------------------ Netherlands 1.1% - ------------------------------------------------ Panama 1.8% - ------------------------------------------------ Poland 1.6% - ------------------------------------------------ Russia 10.5% - ------------------------------------------------ South Africa 6.4% - ------------------------------------------------ South Korea 11.6% - ------------------------------------------------ Taiwan 11.1% - ------------------------------------------------ Thailand 1.5% - ------------------------------------------------ Turkey 3.2% - ------------------------------------------------ United Kingdom 1.2% - ------------------------------------------------ United States 0.7% - ------------------------------------------------ Other(2) 1.1% - ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. (2) Cash & Cash Equivalents. - -------------------------------------------------------------------------------- 6 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- TOP TEN HOLDINGS(1) (at April 30, 2010) - ---------------------------------------------------------------------
Samsung Electronics Co., Ltd. (South Korea) 2.8% - ------------------------------------------------ Lojas Renner SA (Brazil) 2.7% - ------------------------------------------------ Vale SA, ADR (Brazil) 2.4% - ------------------------------------------------ Sberbank of Russian Federation (Russia) 1.9% - ------------------------------------------------ Petroleo Brasileiro SA, ADR (Brazil) 1.9% - ------------------------------------------------ Copa Holdings SA, Class A (Panama) 1.9% - ------------------------------------------------ OTP Bank PLC (Hungary) 1.8% - ------------------------------------------------ America Movil SAB de CV, ADR, Series L (Mexico) 1.6% - ------------------------------------------------ Hon Hai Precision Industry Co., Ltd. (Taiwan) 1.6% - ------------------------------------------------ OGX Petroleo e Gas Participacoes SA (Brazil) 1.6% - ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and 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 -- 2010 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments; and (ii) ongoing costs, which may include management fees; distribution and service (Rule 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 April 30, 2010. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses for each class. 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 actual expense ratio for each class and an assumed rate of return of 5% per year before expenses, which is not the actual return for the class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 8 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2009 APRIL 30, 2010 THE PERIOD(a) EXPENSE RATIO - ------------------------------------------------------------------------------------------- Class A - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,137.10 $ 9.16 1.72% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.36 $ 8.65 1.72% - ------------------------------------------------------------------------------------------- Class B - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,133.00 $13.24 2.49% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,012.52 $12.49 2.49% - ------------------------------------------------------------------------------------------- Class C - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,132.60 $13.19 2.48% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,012.57 $12.44 2.48% - ------------------------------------------------------------------------------------------- Class I - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,140.20 $ 6.51 1.22% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.85 $ 6.14 1.22% - ------------------------------------------------------------------------------------------- Class R2 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,134.70 $10.75 2.02% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.86 $10.15 2.02% - ------------------------------------------------------------------------------------------- Class R4 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,138.50 $ 8.10 1.52% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.35 $ 7.64 1.52% - ------------------------------------------------------------------------------------------- Class R5 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,139.60 $ 6.77 1.27% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.60 $ 6.39 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 182/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2010: +13.71% for Class A, +13.30% for Class B, +13.26% for Class C, +14.02% for Class I, +13.47% for Class R2, +13.85% for Class R4 and +13.96% for Class R5. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2010 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (98.4%)(c) ISSUER SHARES VALUE(a) BRAZIL (15.0%) Anhanguera Educacional Participacoes Unit SA 623,200 $9,533,615 Cia Energetica de Minas Gerais, ADR 186,471 3,011,505 Cia Siderurgica Nacional SA, ADR 243,164 4,535,009 Cyrela Brazil Realty SA 561,000 6,732,000 Itau Unibanco Holding SA 359,915 7,802,957 Itau Unibanco Holding SA, ADR 361,900 7,848,283 Lojas Renner SA 682,800 16,937,370 MRV Engenharia e Participacoes SA 469,400 3,287,826 OGX Petroleo e Gas Participacoes SA 992,400 9,926,856 Petroleo Brasileiro SA, ADR 281,882 11,960,252 Vale SA, ADR 493,999 15,131,189 --------------- Total 96,706,862 - ------------------------------------------------------------------------------------- CHILE (0.7%) Banco Santander Chile, ADR 66,939 4,410,611 - ------------------------------------------------------------------------------------- CHINA (9.7%) Bank of China Ltd., Series H 12,124,000(f) 6,241,376 China Construction Bank Corp., Series H 9,034,000 7,336,406 China Life Insurance Co., Ltd., Series H 1,679,000 7,731,099 China Merchants Bank Co., Ltd., Series H 2,619,500 6,421,730 China Petroleum & Chemical Corp., Series H 2,994,000(f) 2,400,633 China Shenhua Energy Co., Ltd., Series H 664,000 2,849,359 CNOOC Ltd., ADR 39,726 6,988,598 Industrial & Commercial Bank of China, Series H 11,936,000 8,699,691 PetroChina Co., Ltd., Series H 4,178,000(f) 4,811,330 Tencent Holdings Ltd. 195,100(f) 4,034,771 Tingyi Cayman Islands Holding Corp. 1,260,000 3,130,215 ZTE Corp., Series H 699,900(f) 2,507,295 --------------- Total 63,152,503 - ------------------------------------------------------------------------------------- EGYPT (1.0%) Orascom Construction Industries GDR 134,844(d,e) 6,577,260 - ------------------------------------------------------------------------------------- HONG KONG (2.2%) China Mobile Ltd. 635,500 6,221,059 China Overseas Land & Investment Ltd. 1,859,797 3,611,331 Hengan International Group Co., Ltd. 601,000 4,613,923 --------------- Total 14,446,313 - ------------------------------------------------------------------------------------- HUNGARY (1.8%) OTP Bank PLC 334,304(b,f) 11,770,820 - ------------------------------------------------------------------------------------- INDIA (6.4%) Bharat Heavy Electricals Ltd. 120,394 6,715,237 Cairn India Ltd. 531,574(b) 3,745,879 Housing Development Finance Corp. 111,628 7,026,330 Infosys Technologies Ltd. 123,307 7,526,209 Larsen & Toubro Ltd. 81,972 2,960,311 Reliance Industries Ltd. 278,120 6,431,474 State Bank of India Ltd. 139,145 7,166,676 --------------- Total 41,572,116 - ------------------------------------------------------------------------------------- INDONESIA (2.5%) Astra International Tbk PT 1,026,500 5,309,805 Bank Central Asia Tbk PT 5,920,000 3,547,245 Perusahaan Gas Negara PT 6,983,500 3,139,509 Semen Gresik Persero Tbk PT 4,327,000 3,900,184 --------------- Total 15,896,743 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 10 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) ISRAEL (0.6%) Israel Chemicals Ltd. 341,335 $4,088,558 - ------------------------------------------------------------------------------------- LUXEMBOURG (1.1%) Ternium SA, ADR 192,890(b) 7,125,357 - ------------------------------------------------------------------------------------- MALAYSIA (0.8%) CIMB Group Holdings Bhd 1,215,500 5,386,795 - ------------------------------------------------------------------------------------- MEXICO (6.1%) America Movil SAB de CV, ADR, Series L 202,283 10,413,529 Bolsa Mexicana de Valores SAB de CV 3,150,600(f) 5,349,588 Fresnillo PLC 290,340 3,533,873 Grupo Financiero Banorte SAB de CV, Series O 1,097,200 4,412,368 Grupo Modelo SAB de CV, Series C 1,654,000 9,076,985 Wal-Mart de Mexico SAB de CV, Series V 2,892,800(f) 6,768,488 --------------- Total 39,554,831 - ------------------------------------------------------------------------------------- NETHERLANDS (1.1%) VimpelCom Ltd., ADR 419,611(b) 7,309,624 - ------------------------------------------------------------------------------------- PANAMA (1.8%) Copa Holdings SA, Class A 209,188 11,856,776 - ------------------------------------------------------------------------------------- POLAND (1.6%) Bank Pekao SA 77,818(b) 4,437,218 KGHM Polska Miedz SA 109,183 4,074,602 Powszechna Kasa Oszczednosci Bank Polski SA 117,491 1,693,006 --------------- Total 10,204,826 - ------------------------------------------------------------------------------------- RUSSIA (10.4%) CTC Media, Inc. 276,667 4,672,906 Eurasia Drilling Co., Ltd., GDR 236,717(d,e) 4,900,042 Evraz Group SA, GDR 208,184(b,d,e) 7,507,902 Lukoil OAO, ADR 90,521 5,091,726 Mechel, ADR 105,998 2,724,149 MMC Norilsk Nickel, ADR 437,702(b) 8,403,878 Novolipetsk Steel OJSC, GDR 97,594(b,d,e) 3,514,741 OGK-3 OJSC 42,431,742(b) 2,959,911 Rosneft Oil Co., GDR 858,852(d) 6,913,759 Rosneft Oil Co., GDR 164,010 1,312,557 Sberbank of Russian Federation 4,581,711 12,145,534 X5 Retail Group NV, GDR 207,677(b,d,e) 7,376,811 --------------- Total 67,523,916 - ------------------------------------------------------------------------------------- SOUTH AFRICA (6.4%) Impala Platinum Holdings Ltd. 153,997 4,344,899 Massmart Holdings Ltd. 243,748 3,614,231 MTN Group Ltd. 397,718 5,854,816 Murray & Roberts Holdings Ltd. 917,177 5,092,374 Naspers Ltd., Series N 122,386 4,935,586 Shoprite Holdings Ltd. 369,891 3,930,793 Standard Bank Group Ltd. 633,681 9,769,633 Truworths International Ltd. 529,442 3,793,032 --------------- Total 41,335,364 - ------------------------------------------------------------------------------------- SOUTH KOREA (11.6%) Hyundai Development Co. 42,210 1,041,572 Hyundai Engineering & Construction Co., Ltd. 51,219 2,474,152 Hyundai Mobis 23,801 3,951,290 Hyundai Motor Co. 67,331 8,213,338 KB Financial Group, Inc. 117,191 5,711,267 LG Display Co., Ltd. 89,300 3,798,649 LG Electronics, Inc. 19,564 2,133,691 LG Household & Health Care Ltd. 26,990 7,380,173 POSCO 15,221 6,827,144 Samsung Electronics Co., Ltd. 4,011 1,896,045 Samsung Electronics Co., Ltd. 23,649 17,985,310 Samsung Fire & Marine Insurance Co., Ltd. 16,088 2,974,770 Samsung Heavy Industries Co., Ltd. 156,960 3,602,789 Shinhan Financial Group Co., Ltd. 165,970 7,061,564 --------------- Total 75,051,754 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) TAIWAN (11.0%) Acer Inc. 2,163,000 $5,899,742 Cathay Financial Holding Co., Ltd. 1,714,000(b) 2,743,081 China Steel Corp. 3,327,000 3,541,027 Delta Electronics, Inc. 2,458,000 8,149,483 Hon Hai Precision Industry Co., Ltd. 2,190,283 10,284,643 MediaTek, Inc. 468,990 7,942,732 Siliconware Precision Industries Co. 2,670,000 3,272,370 Synnex Technology International Corp. 1,654,400 3,943,262 Taiwan Semiconductor Manufacturing Co., Ltd. 4,397,858 8,608,972 Taiwan Semiconductor Manufacturing Co., Ltd., ADR 271,783 2,878,182 Tripod Technology Corp. 2,236,766 7,686,693 U-Ming Marine Transport Corp. 1,770,000 3,656,366 Yuanta Financial Holding Co., Ltd. 5,137,000 3,063,580 --------------- Total 71,670,133 - ------------------------------------------------------------------------------------- THAILAND (1.5%) Bangkok Bank PCL 1,866,375 6,663,808 Siam Commercial Bank PCL 1,262,600 3,179,315 --------------- Total 9,843,123 - ------------------------------------------------------------------------------------- TURKEY (3.2%) Arcelik AS 912,418 4,048,671 BIM Birlesik Magazalar AS 67,068 3,753,845 Koc Holding AS 510,738 1,978,922 Turkiye Garanti Bankasi AS 1,858,270 9,014,559 Turkiye Halk Bankasi AS 247,748 1,962,943 --------------- Total 20,758,940 - ------------------------------------------------------------------------------------- UNITED KINGDOM (1.2%) Antofagasta PLC 498,944 7,564,644 - ------------------------------------------------------------------------------------- UNITED STATES (0.7%) Southern Copper Corp. 151,470 4,631,953 - ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $530,433,276) $638,439,822 - ------------------------------------------------------------------------------------- OTHER (--%)(c) ISSUER SHARES VALUE(a) SINGAPORE Golden Agri-Resources Ltd. Warrants 1(b,e,g) $-- - ------------------------------------------------------------------------------------- TOTAL OTHER (Cost: $--) $-- - ------------------------------------------------------------------------------------- MONEY MARKET FUND (1.1%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.21% 7,259,294(h) $7,259,294 - ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $7,259,294) $7,259,294 - -------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (3.4%) AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) REPURCHASE AGREEMENTS(I) Goldman Sachs dated 04-30-10, matures 05-03-10, repurchase price $11,747,211 0.19% $11,747,025 $11,747,025 $5,000,104 0.25 5,000,000 5,000,000 Pershing LLC dated 04-30-10, matures 05-03-10, repurchase price $5,000,129 0.31 5,000,000 5,000,000 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $21,747,025) $21,747,025 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $559,439,595)(j) $667,446,141 =====================================================================================
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 12 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- SUMMARY OF INVESTMENTS IN SECURITIES BY INDUSTRY The following table represents the portfolio investments of the Fund by industry classifications as a percentage of net assets at April 30, 2010:
PERCENTAGE OF INDUSTRY NET ASSETS VALUE(a) - ----------------------------------------------------------------------- Airlines 1.8% $11,856,776 Auto Components 0.6 3,951,290 Automobiles 2.1 13,523,143 Beverages 1.4 9,076,985 Capital Markets 0.5 3,063,580 Chemicals 0.6 4,088,558 Commercial Banks 22.0 142,683,805 Communications Equipment 0.4 2,507,295 Computers & Peripherals 0.9 5,899,742 Construction & Engineering 2.8 18,145,669 Construction Materials 0.6 3,900,184 Distributors 1.1 7,309,624 Diversified Consumer Services 1.5 9,533,615 Diversified Financial Services 0.8 5,349,588 Electric Utilities 0.9 5,971,416 Electrical Equipment 1.0 6,715,237 Electronic Equipment, Instruments & 33,862,730 Components 5.2 Energy Equipment & Services 0.7 4,900,042 Food & Staples Retailing 3.9 25,444,168 Food Products 0.5 3,130,215 Gas Utilities 0.5 3,139,509 Household Durables 2.5 16,202,188 Household Products 1.1 7,380,173 Industrial Conglomerates 0.3 1,978,922 Insurance 2.1 13,448,950 Internet Software & Services 0.6 4,034,771 IT Services 1.2 7,526,209 Machinery 0.5 3,602,789 Marine 0.6 3,656,366 Media 1.5 9,608,492 Metals & Mining 12.8 83,460,367 Multiline Retail 2.6 16,937,370 Oil, Gas & Consumable Fuels 9.6 62,432,423 Personal Products 0.7 4,613,923 Real Estate Management & Development 0.6 3,611,331 Semiconductors & Semiconductor 42,583,611 Equipment 6.6 Specialty Retail 0.6 3,793,032 Thrifts & Mortgage Finance 1.1 7,026,330 Wireless Telecommunication Services 3.5 22,489,404 Other(1) 4.5 29,006,319 - ----------------------------------------------------------------------- Total $667,446,141 - -----------------------------------------------------------------------
(1) Cash & Cash Equivalents. See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- 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. INVESTMENTS IN DERIVATIVES FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT APRIL 30, 2010
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION - ------------------------------------------------------------------------------------- May 05, 2010 1,130,000 1,737,036 $8,137 $-- British Pound U.S. Dollar
NOTES TO PORTFOLIO OF INVESTMENTS ADR -- American Depositary Receipt GDR -- Global Depositary Receipt
(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. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2010, the value of these securities amounted to $36,790,515 or 5.67% 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 April 30, 2010 was $29,876,756, representing 4.60% of net assets. Information concerning such security holdings at April 30, 2010 was as follows:
ACQUISITION SECURITY DATES COST --------------------------------------------------------------------------- Eurasia Drilling Co., Ltd., GDR 11-02-07 thru 04-15-08 $5,578,172 Evraz Group SA, GDR 07-08-09 thru 04-07-10 6,184,078 Novolipetsk Steel OJSC, GDR 04-01-10 thru 04-06-10 3,523,003 Orascom Construction Industries GDR 12-06-06 thru 03-30-10 5,336,074 X5 Retail Group NV, GDR 01-28-09 thru 03-24-10 4,058,103 Golden Agri-Resources Ltd. Warrants 09-13-09 --
(f) At April 30, 2010, 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 April 30, 2010. - -------------------------------------------------------------------------------- 14 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (i) The table below represents securities received as collateral for repurchase agreements. This collateral, which is generally high quality short-term obligations, is deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral.
GOLDMAN SACHS (0.19%) SECURITY DESCRIPTION VALUE(a) - ----------------------------------------------------------- Fannie Mae Pool $8,614,985 Freddie Mac Gold Pool 2,903,214 Freddie Mac Non Gold Pool 463,767 - ----------------------------------------------------------- Total market value of collateral securities $11,981,966 - ----------------------------------------------------------- GOLDMAN SACHS (0.25%) SECURITY DESCRIPTION VALUE(a) - ----------------------------------------------------------- Allied Irish Banks PLC/New York NY $763,158 Banco Bilbao Vizcaya Argentaria/NY 27,622 Bank of Nova Scotia 1,687 BNP Paribas NY 582,063 Calyon NY 38,985 Credit Agricole Corporate and Investment Bank/New York 382,684 Dexia Credit Local NY 424,893 DnB NOR Bank 3,439 Natixis/New York NY 1,368,599 Nordea Bank Finland PLC 114,336 Rabobank Nederland NV/NY 189,474 Royal Bank of Scotland PLC/Greenwich CT 36,353 Sanpaolo IMI SpA/New York 11,575 Societe Generale NY 168,421 Standard Chartered Banking 230,150 Sumitomo Mitsui Banking Corp/New York 499,999 Svenska Handelsbanken/New York NY 16,395 Toronto Dominion Bank/NY 373,684 UBS AG Stamford 16,483 - ----------------------------------------------------------- Total market value of collateral securities $5,250,000 - -----------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
PERSHING LLC (0.31%) SECURITY DESCRIPTION VALUE(a) - ----------------------------------------------------------- Fannie Mae Pool $1,474,531 Fannie Mae REMICS 467,738 Fannie Mae-Aces 16,488 Federal Farm Credit Bank 92,460 Federal Home Loan Banks 179,004 Federal Home Loan Mortgage Corp 27,352 Federal National Mortgage Association 81,596 Freddie Mac Gold Pool 1,245,692 Freddie Mac Non Gold Pool 67,976 Freddie Mac REMICS 23,831 Ginnie Mae I Pool 81,073 Ginnie Mae II Pool 107,165 Government National Mortgage Association 2,954 United States Treasury Bill 370 United States Treasury Note/Bond 837,713 United States Treasury Strip Coupon 138,394 United States Treasury Strip Principal 255,663 - ----------------------------------------------------------- Total market value of collateral securities $5,100,000 - -----------------------------------------------------------
(j) At April 30, 2010, the cost of securities for federal income tax purposes was approximately $559,440,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $117,369,000 Unrealized depreciation (9,363,000) ----------------------------------------------------------- Net unrealized appreciation $108,006,000 -----------------------------------------------------------
- -------------------------------------------------------------------------------- 16 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL 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. 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 - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- 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 April 30, 2010:
FAIR VALUE AT APRIL 30, 2010 ---------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION(a) IDENTICAL ASSETS INPUTS INPUTS TOTAL - -------------------------------------------------------------------------------------------- Equity Securities Common Stocks(b) Auto Components $-- $3,951,290 $-- $3,951,290 Automobiles -- 13,523,143 -- 13,523,143 Beverages -- 9,076,985 -- 9,076,985 Capital Markets -- 3,063,580 -- 3,063,580 Chemicals -- 4,088,558 -- 4,088,558 Commercial Banks 12,213,568 130,470,237 -- 142,683,805 Communications Equipment -- 2,507,295 -- 2,507,295 Computers & Peripherals -- 5,899,742 -- 5,899,742 Construction & Engineering -- 18,145,669 -- 18,145,669 Construction Materials -- 3,900,184 -- 3,900,184 Diversified Consumer Services -- 9,533,615 -- 9,533,615 Diversified Financial Services -- 5,349,588 -- 5,349,588 Electric Utilities 3,011,505 2,959,911 -- 5,971,416 Electrical Equipment -- 6,715,237 -- 6,715,237 Electronic Equipment, Instruments & Components -- 33,862,730 -- 33,862,730 Energy Equipment & Services -- 4,900,042 -- 4,900,042 Food & Staples Retailing -- 25,444,168 -- 25,444,168 Food Products -- 3,130,215 -- 3,130,215 Gas Utilities -- 3,139,509 -- 3,139,509 Household Durables -- 16,202,188 -- 16,202,188 Household Products -- 7,380,173 -- 7,380,173 Industrial Conglomerates -- 1,978,922 -- 1,978,922 Insurance -- 13,448,950 -- 13,448,950 Internet Software & Services -- 4,034,771 -- 4,034,771
- -------------------------------------------------------------------------------- 18 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED)
FAIR VALUE AT APRIL 30, 2010 ---------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION(a) IDENTICAL ASSETS INPUTS INPUTS TOTAL - -------------------------------------------------------------------------------------------- IT Services $-- $7,526,209 $-- $7,526,209 Machinery -- 3,602,789 -- 3,602,789 Marine -- 3,656,366 -- 3,656,366 Media 4,672,906 4,935,586 -- 9,608,492 Metals & Mining 42,551,534 40,908,833 -- 83,460,367 Multiline Retail -- 16,937,370 -- 16,937,370 Oil, Gas & Consumable Fuels 18,948,851 43,483,572 -- 62,432,423 Personal Products -- 4,613,923 -- 4,613,923 Real Estate Management & Development -- 3,611,331 -- 3,611,331 Semiconductors & Semiconductor Equipment 2,878,182 39,705,429 -- 42,583,611 Specialty Retail -- 3,793,032 -- 3,793,032 Thrifts & Mortgage Finance -- 7,026,330 -- 7,026,330 Wireless Telecommunication Services 10,413,529 12,075,875 -- 22,489,404 All Other Industries 19,166,400 -- -- 19,166,400 Other -- -- -- -- - -------------------------------------------------------------------------------------------- Total Equity Securities 113,856,475 524,583,347 -- 638,439,822 - -------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(c) 7,259,294 -- -- 7,259,294 Investments of Cash Collateral Received for Securities on Loan -- 21,747,025 -- 21,747,025 - -------------------------------------------------------------------------------------------- Total Other 7,259,294 21,747,025 -- 29,006,319 - -------------------------------------------------------------------------------------------- Investments in Securities 121,115,769 546,330,372 -- 667,446,141 Other Financial Instruments(d) -- 8,137 -- 8,137 - -------------------------------------------------------------------------------------------- Total $121,115,769 $546,338,509 $-- $667,454,278 - --------------------------------------------------------------------------------------------
(a) See the Portfolio of Investments for all investment classifications not indicated in the table. (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 April 30, 2010. (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 EMERGING MARKETS FUND -- 2010 SEMIANNUAL 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 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 800.221.2450. - -------------------------------------------------------------------------------- 20 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- APRIL 30, 2010 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $530,433,276) $638,439,822 Affiliated money market fund (identified cost $7,259,294) 7,259,294 Investments of cash collateral received for securities on loan (identified cost $21,747,025) 21,747,025 - ------------------------------------------------------------------------------- Total investments in securities (identified cost $559,439,595) 667,446,141 Foreign currency holdings (identified cost $1,906,045) 1,932,152 Capital shares receivable 1,181,080 Dividends and accrued interest receivable 1,476,887 Receivable for investment securities sold 4,006,251 Unrealized appreciation on forward foreign currency contracts 8,137 - ------------------------------------------------------------------------------- Total assets 676,050,648 - ------------------------------------------------------------------------------- LIABILITIES Capital shares payable 690,627 Payable for investment securities purchased 4,171,272 Payable upon return of securities loaned 21,747,025 Accrued investment management services fees 19,438 Accrued distribution fees 5,688 Accrued transfer agency fees 3,586 Accrued administrative services fees 1,415 Accrued plan administration services fees 103 Other accrued expenses 275,714 - ------------------------------------------------------------------------------- Total liabilities 26,914,868 - ------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $649,135,780 - ------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 750,178 Additional paid-in capital 591,556,433 Excess of distributions over net investment income (3,548,520) Accumulated net realized gain (loss) (47,778,383) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 108,156,072 - ------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $649,135,780 - ------------------------------------------------------------------------------- *Value of securities on loan $ 19,301,832 - -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 21 STATEMENT OF ASSETS AND LIABILITIES (continued) -------------------------------- APRIL 30, 2010 (UNAUDITED)
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $476,721,449 54,486,226 $8.75(1) Class B $ 43,725,144 5,621,218 $7.78 Class C $ 36,000,565 4,641,295 $7.76 Class I $ 77,199,085 8,502,610 $9.08 Class R2 $ 13,610,625 1,559,964 $8.72 Class R4 $ 1,265,892 139,182 $9.10 Class R5 $ 613,020 67,349 $9.10 - ------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $9.28. 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. - -------------------------------------------------------------------------------- 22 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED APRIL 30, 2010 (UNAUDITED)
INVESTMENT INCOME Income: Dividends $ 5,378,089 Interest 2,260 Income distributions from affiliated money market fund 6,975 Income from securities lending -- net 28,780 Less foreign taxes withheld (510,722) - ------------------------------------------------------------------------------ Total income 4,905,382 - ------------------------------------------------------------------------------ Expenses: Investment management services fees 3,242,759 Distribution fees Class A 568,512 Class B 209,990 Class C 173,158 Class R2 32,298 Transfer agency fees Class A 569,203 Class B 56,091 Class C 45,018 Class R2 3,230 Class R4 307 Class R5 146 Administrative services fees 244,635 Plan administration services fees Class R2 16,149 Class R4 1,535 Compensation of board members 10,763 Custodian fees 159,000 Printing and postage 55,868 Registration fees 23,960 Professional fees 11,482 Other 24,910 - ------------------------------------------------------------------------------ Total expenses 5,449,014 - ------------------------------------------------------------------------------ Investment income (loss) -- net (543,632) - ------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions 73,062,250 Foreign currency transactions (567,708) - ------------------------------------------------------------------------------ Net realized gain (loss) on investments 72,494,542 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 5,574,388 - ------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 78,068,930 - ------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $77,525,298 - ------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 23 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ (543,632) $ 1,073,939 Net realized gain (loss) on investments 72,494,542 (79,169,258) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 5,574,388 239,320,659 - -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 77,525,298 161,225,340 - -------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (2,568,740) -- Class B (19,695) -- Class C (193,813) -- Class I (693,406) -- Class R2 (97,017) -- Class R4 (8,976) -- Class R5 (5,301) -- - -------------------------------------------------------------------------------------------------- Total distributions (3,586,948) -- - --------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 24 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 (UNAUDITED) CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 50,357,113 $ 80,251,128 Class B shares 5,113,147 9,019,008 Class C shares 6,609,968 4,625,001 Class I shares 4,128,255 63,017,867 Class R2 shares 3,922,933 765,806 Class R4 shares 85,321 436,563 Class R5 shares -- 668 Fund merger (Note 11) Class A shares N/A 45,280,067 Class B shares N/A 2,387,255 Class C shares N/A 25,077,963 Class R2 shares N/A 12,517,198 Class R5 shares N/A 496,500 Reinvestment of distributions at net asset value Class A shares 2,496,134 -- Class B shares 19,165 -- Class C shares 114,627 -- Class I shares 693,280 -- Class R2 shares 11,505 -- Class R4 shares 8,976 -- Class R5 shares 5,259 -- Conversions from Class B to Class A Class A shares 204,735 6,661,382 Class B shares (204,735) (6,661,382) Payments for redemptions Class A shares (47,005,345) (95,511,753) Class B shares (4,764,855) (8,184,934) Class C shares (7,571,597) (4,011,594) Class I shares (5,451,035) (7,237,209) Class R2 shares (4,098,203) (1,958,447) Class R4 shares (161,884) (397,068) Class R5 shares (125) -- - -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 4,512,639 126,574,019 - -------------------------------------------------------------------------------------------------- Proceeds from regulatory settlement (Note 10) 203,460 458,466 - -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 78,654,449 288,257,825 Net assets at beginning of period 570,481,331 282,223,506 - -------------------------------------------------------------------------------------------------- Net assets at end of period $649,135,780 $570,481,331 - -------------------------------------------------------------------------------------------------- Undistributed (excess of distributions over) net investment income $ (3,548,520) $ 582,060 - --------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 25 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 SIX MONTHS ENDED ------------------------------------------------------- PER SHARE DATA APRIL 30, 2010 2009 2008 2007 2006 2005 (UNAUDITED) Net asset value, beginning of period $7.74 $4.96 $14.99 $11.32 $8.23 $6.27 - -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01) .02 .08 .04 .01 .04 Net gains (losses) (both realized and unrealized) 1.07 2.75 (7.24) 6.27 3.10 1.95 - -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.06 2.77 (7.16) 6.31 3.11 1.99 - -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) -- (.18) -- (.02) (.03) Distributions from realized gains -- -- (2.69) (2.64) -- -- - -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.05) -- (2.87) (2.64) (.02) (.03) - -------------------------------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlement .00(a) .01 -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.75 $7.74 $4.96 $14.99 $11.32 $8.23 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 13.71%(b) 56.05%(c) (57.79%) 68.21% 37.85% 31.83% - -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Total expenses 1.72%(e) 1.90% 1.87% 1.83% 1.81% 1.79% - -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.13%)(e) .38% .78% .31% .19% .54% - -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $477 $416 $250 $661 $425 $295 - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 45% 149% 133% 125% 145% 124% - --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 26 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS B SIX MONTHS ENDED ------------------------------------------------------- PER SHARE DATA APRIL 30, 2010 2009 2008 2007 2006 2005 (UNAUDITED) Net asset value, beginning of period $6.87 $4.43 $13.73 $10.63 $7.77 $5.95 - -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.03) (.02) .00(a) (.05) (.05) (.01) Net gains (losses) (both realized and unrealized) .94 2.45 (6.53) 5.79 2.91 1.83 - -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .91 2.43 (6.53) 5.74 2.86 1.82 - -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.00)(a) -- (.08) -- -- -- Distributions from realized gains -- -- (2.69) (2.64) -- -- - -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.00)(a) -- (2.77) (2.64) -- -- - -------------------------------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlement .00(a) .01 -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.78 $6.87 $4.43 $13.73 $10.63 $7.77 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 13.30%(b) 55.08%(c) (58.08%) 66.95% 36.81% 30.59% - -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Total expenses 2.49%(e) 2.68% 2.62% 2.58% 2.57% 2.55% - -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.91%)(e) (.36%) .02% (.48%) (.55%) (.24%) - -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $44 $38 $28 $94 $77 $74 - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 45% 149% 133% 125% 145% 124% - --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 27 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS C SIX MONTHS ENDED ------------------------------------------------------- PER SHARE DATA APRIL 30, 2010 2009 2008 2007 2006 2005 (UNAUDITED) Net asset value, beginning of period $6.89 $4.44 $13.78 $10.66 $7.79 $5.97 - -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.03) (.04) .00(a) (.05) (.06) -- Net gains (losses) (both realized and unrealized) .94 2.48 (6.54) 5.81 2.93 1.82 - -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .91 2.44 (6.54) 5.76 2.87 1.82 - -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) -- (.11) -- -- -- Distributions from realized gains -- -- (2.69) (2.64) -- -- - -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.04) -- (2.80) (2.64) -- -- - -------------------------------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlement .00(a) .01 -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.76 $6.89 $4.44 $13.78 $10.66 $7.79 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 13.26%(b) 55.18%(c) (58.15%) 67.03% 36.84% 30.54% - -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Total expenses 2.48%(e) 2.60% 2.63% 2.59% 2.58% 2.56% - -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.90%)(e) (.65%) .03% (.48%) (.57%) (.19%) - -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $36 $33 $3 $8 $5 $3 - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 45% 149% 133% 125% 145% 124% - --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 28 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS I SIX MONTHS ENDED ------------------------------------------------------- PER SHARE DATA APRIL 30, 2010 2009 2008 2007 2006 2005 (UNAUDITED) Net asset value, beginning of period $8.04 $5.12 $15.38 $11.50 $8.35 $6.36 - -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02 .06 .11 .09 .03 .06 Net gains (losses) (both realized and unrealized) 1.10 2.85 (7.45) 6.43 3.16 1.98 - -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.12 2.91 (7.34) 6.52 3.19 2.04 - -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) -- (.23) -- (.04) (.05) Distributions from realized gains -- -- (2.69) (2.64) -- -- - -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.08) -- (2.92) (2.64) (.04) (.05) - -------------------------------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlement .00(a) .01 -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.08 $8.04 $5.12 $15.38 $11.50 $8.35 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 14.02%(b) 57.03%(c) (57.63%) 69.07% 38.36% 32.32% - -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Total expenses 1.22%(e) 1.26% 1.42% 1.39% 1.35% 1.30% - -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) .37%(e) .77% .97% .75% .63% .97% - -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $77 $69 $-- $56 $41 $19 - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 45% 149% 133% 125% 145% 124% - --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 29 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS R2 SIX MONTHS ENDED YEAR ENDED OCT. 31, PER SHARE DATA APRIL 30, 2010 2009(f) (UNAUDITED) Net asset value, beginning of period $7.74 $7.42 - -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.02) (.01) Net gains (losses) (both realized and unrealized) 1.06 .33 - -------------------------------------------------------------------------------------------- Total from investment operations 1.04 .32 - -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) -- - -------------------------------------------------------------------------------------------- Proceeds from regulatory settlement .00(a) -- - -------------------------------------------------------------------------------------------- Net asset value, end of period $8.72 $7.74 - -------------------------------------------------------------------------------------------- TOTAL RETURN 13.47%(b) 4.31% - -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Total expenses 2.02%(e) 2.06%(e) - -------------------------------------------------------------------------------------------- Net investment income (loss) (.46%)(e) (.36%)(e) - -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $14 $12 - -------------------------------------------------------------------------------------------- Portfolio turnover rate 45% 149% - --------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 30 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R4 SIX MONTHS ENDED ------------------------------------------------------- PER SHARE DATA APRIL 30, 2010 2009 2008 2007 2006 2005 (UNAUDITED) Net asset value, beginning of period $8.05 $5.14 $15.32 $11.50 $8.33 $6.35 - -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .00(a) .04 .11 .05 .03 .05 Net gains (losses) (both realized and unrealized) 1.11 2.86 (7.45) 6.41 3.14 1.97 - -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.11 2.90 (7.34) 6.46 3.17 2.02 - -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) -- (.15) -- -- (.04) Distributions from realized gains -- -- (2.69) (2.64) -- -- - -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.06) -- (2.84) (2.64) -- (.04) - -------------------------------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlement .00(a) .01 -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.10 $8.05 $5.14 $15.32 $11.50 $8.33 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 13.85%(b) 56.62%(c) (57.58%) 68.51% 38.06% 31.87% - -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Gross expenses prior to expense waiver/reimbursement 1.52%(e) 1.62% 1.73% 1.65% 1.63% 1.59% - -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(g) 1.52%(e) 1.56% 1.47% 1.65% 1.63% 1.59% - -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) .04%(e) .72% 1.12% .45% .41% .81% - -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $1 $1 $2 $6 $2 - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 45% 149% 133% 125% 145% 124% - --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 31 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS R5 SIX MONTHS ENDED ------------------- PER SHARE DATA APRIL 30, 2010 2009 2008(h) (UNAUDITED) Net asset value, beginning of period $8.06 $5.13 $9.32 - -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .01 .05 .03 Net gains (losses) (both realized and unrealized) 1.11 2.87 (4.22) - -------------------------------------------------------------------------------------------- Total from investment operations 1.12 2.92 (4.19) - -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) -- -- - -------------------------------------------------------------------------------------------- Proceeds from regulatory settlement .00(a) .01 -- - -------------------------------------------------------------------------------------------- Net asset value, end of period $9.10 $8.06 $5.13 - -------------------------------------------------------------------------------------------- TOTAL RETURN 13.96%(b) 57.12%(c) (44.96%) - -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Total expenses 1.27%(e) 1.31% 1.47%(e) - -------------------------------------------------------------------------------------------- Net investment income (loss) .32%(e) .68% 1.57%(e) - -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $1 $-- - -------------------------------------------------------------------------------------------- Portfolio turnover rate 45% 149% 133% - --------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) Rounds to zero. (b) During the six months ended April 30, 2010 the fund received proceeds from a regulatory settlement. Had the fund not received these proceeds, the total returns would have been lower by 0.03% for classes A, I, R2, R4 and R5 and by 0.04% for classes B and C. (c) During the year ended Oct. 31, 2009 the fund received proceeds from a regulatory settlement. Had the fund not received these proceeds, the total returns would have been lower by 0.12%. (d) 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 expense ratios. (e) Annualized. (f) For the period from Aug. 3, 2009 (when shares became publicly available) to Oct. 31, 2009. (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 Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 32 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS OF APRIL 30, 2010) 1. ORGANIZATION Threadneedle Emerging Markets Fund (the Fund) is a series of RiverSource Global Series, Inc. (the Corporation) and is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified, open-end management investment company. The Corporation has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Corporation'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. At April 30, 2010, RiverSource Investments, LLC* (the Investment Manager) and affiliated funds-of-funds owned 100% of Class I shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. * Effective May 1, 2010, RiverSource Investments, LLC is known as Columbia Management Investment Advisers, LLC. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 from the primary exchange. 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 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. The fair value of a security is likely to be different from the quoted or published price, if available. - -------------------------------------------------------------------------------- 34 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 April 30, 2010, foreign currency holdings consisted of multiple denominations, primarily Brazilian real. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements. Generally, securities received as collateral subject to repurchase agreements are deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral. ILLIQUID SECURITIES At April 30, 2010, investments in securities included issues that are illiquid which the Fund currently limits to 15% of net assets, at market value, at the time of purchase. The aggregate value of such securities at April 30, 2010 was $29,876,756 representing 4.60% 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 - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 35 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 tax returns filed for the last three years. FOREIGN CAPITAL GAINS TAXES Realized gains in certain countries may be subject to foreign taxes at the fund level, at rates ranging from approximately 10% to 15%. The Fund pays such foreign taxes on net realized gains at the appropriate rate for each jurisdiction. RECENT ACCOUNTING PRONOUNCEMENT On Jan. 21, 2010, the Financial Accounting Standards Board issued an Accounting Standards Update (the amendment), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which provides guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities to disclose the input and valuation techniques used to measure fair value for both recurring and non-recurring fair value measurements for Level 2 and Level 3 positions. The amendment also requires that transfers between all levels (including Level 1 and Level 2) be disclosed on a gross basis (i.e., transfers out must be disclosed separately from transfers in), and the reason(s) for the transfer. Additionally purchases, sales, issuances and settlements must be disclosed on a gross basis in the Level 3 rollforward. The effective date of the amendment is for interim and annual periods beginning after Dec. 15, 2009, however, the requirement to provide the Level 3 activity for purchases, sales, issuances and settlements on a - -------------------------------------------------------------------------------- 36 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- gross basis will be effective for interim and annual periods beginning after Dec. 15, 2010. At this time the Fund is evaluating the implications of the amendment and the impact to the financial statements. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 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. Investments in derivative instruments may expose the Fund to certain additional risks, including those detailed below. 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. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 APRIL 30, 2010
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 contracts appreciation on forward foreign currency contracts $8,137 N/A N/A - ------------------------------------------------------------------------------------------- Total $8,137 N/A - -------------------------------------------------------------------------------------------
EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME - ---------------------------------------------------------------- FORWARD FOREIGN RISK EXPOSURE CATEGORY CURRENCY CONTRACTS - ---------------------------------------------------------------------- Foreign exchange contracts $(51,747) - ---------------------------------------------------------------------- Total $(51,747) - ----------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME - ---------------------------------------------------------------- FORWARD FOREIGN RISK EXPOSURE CATEGORY CURRENCY CONTRACTS - ---------------------------------------------------------------------- Foreign exchange contracts $8,137 - ---------------------------------------------------------------------- Total $8,137 - ----------------------------------------------------------------------
- -------------------------------------------------------------------------------- 38 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- VOLUME OF DERIVATIVE ACTIVITY FORWARD FOREIGN CURRENCY CONTRACTS The gross notional amount of contracts outstanding was approximately $1.7 million at April 30, 2010. The monthly average gross notional amount for these contracts was $800,000 for the six months ended April 30, 2010. The fair value of such contracts on April 30, 2010 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 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 $113,367 for the six months ended April 30, 2010. The management fee for the six months ended April 30, 2010 was 1.05% 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 six months ended April 30, 2010 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, - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended April 30, 2010, other expenses paid to this company were $1,435. 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 RiverSource, Seligman and Threadneedle 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. The Fund and certain other associated investment companies (together, the Guarantors), have 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 Emerging Markets Fund, which was acquired by the Fund on Aug. 14, 2009 (See Note 11), including the payment of rent by SDC (the Guaranty). The lease and the Guaranty expire in January 2019. At April 30, 2010, the Fund's total potential future obligation over the life of the Guaranty is $120,218. The liability remaining at April 30, 2010 for Non-Recurring Charges amounted to $62,173 and is included within other accrued expenses in the Fund's Statement of Assets and Liabilities. * Effective May 1, 2010, RiverSource Service Corporation is known as Columbia Management Investment Services Corp. - -------------------------------------------------------------------------------- 40 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 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 $1,230,000 and $82,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of Jan. 31, 2010, 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. * Effective May 1, 2010, RiverSource Fund Distributors, Inc. is known as Columbia Management Investment Distributors, Inc. SALES CHARGES Sales charges, including front-end and CDSCs, received by the Distributor for distributing Fund shares were $446,534 for Class A, $12,724 for Class B and $759 for Class C for the six months ended April 30, 2010. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $276,792,253 and $270,381,298, respectively, for the six months ended April 30, 2010. Realized gains and losses are determined on an identified cost basis. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009* - ---------------------------------------------------------------------- CLASS A Sold 5,982,540 12,649,748 Fund merger N/A 6,283,578 Converted from Class B** 24,927 927,466 Reinvested distributions 306,274 -- Redeemed (5,603,684) (16,538,001) - ---------------------------------------------------------------------- Net increase (decrease) 710,057 3,322,791 - ---------------------------------------------------------------------- CLASS B Sold 684,027 1,590,019 Fund merger N/A 372,602 Reinvested distributions 2,636 -- Converted to Class A** (28,013) (1,042,154) Redeemed (638,587) (1,673,824) - ---------------------------------------------------------------------- Net increase (decrease) 20,063 (753,357) - ---------------------------------------------------------------------- CLASS C Sold 882,895 779,191 Fund merger N/A 3,905,413 Reinvested distributions 15,811 -- Redeemed (1,013,741) (640,121) - ---------------------------------------------------------------------- Net increase (decrease) (115,035) 4,044,483 - ---------------------------------------------------------------------- CLASS I Sold 455,012 9,487,877 Reinvested distributions 82,142 -- Redeemed (610,165) (913,814) - ---------------------------------------------------------------------- Net increase (decrease) (73,011) 8,574,063 - ---------------------------------------------------------------------- CLASS R2 Sold 465,793 100,396 Fund merger N/A 1,735,811 Reinvested distributions 1,413 -- Redeemed (487,693) (255,756) - ---------------------------------------------------------------------- Net increase (decrease) (20,487) 1,580,451 - ---------------------------------------------------------------------- CLASS R4 Sold 9,392 63,248 Reinvested distributions 1,060 -- Redeemed (18,667) (68,066) - ---------------------------------------------------------------------- Net increase (decrease) (8,215) (4,818) - ----------------------------------------------------------------------
- -------------------------------------------------------------------------------- 42 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009* - ---------------------------------------------------------------------- CLASS R5 Fund merger N/A 66,208 Reinvested distributions 621 -- Redeemed (15) -- - ---------------------------------------------------------------------- Net increase (decrease) 606 66,208 - ----------------------------------------------------------------------
* Class R2 is for the period from Aug. 3, 2009 (when shares became publicly available) to Oct. 31, 2009. ** Automatic conversion of Class B shares to Class A shares based on the original purchase date. 7. LENDING OF PORTFOLIO SECURITIES 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 are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At April 30, 2010, securities valued at $19,301,832 were on loan, secured by cash collateral of $21,747,025 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 - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 43 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- services provided and any other securities lending expenses. Net income of $28,780 earned from securities lending for the six months ended April 30, 2010 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 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 RiverSource, Seligman and Threadneedle funds and other institutional clients of the Investment Manager. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $122,201,395 and $127,428,413, respectively, for the six months ended April 30, 2010. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at April 30, 2010, 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 agreement, which is a collective agreement between the Fund and certain other RiverSource, Seligman and Threadneedle 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 (i) 1.25% per annum plus (ii) 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. The Fund had no borrowings during the six months ended April 30, 2010. - -------------------------------------------------------------------------------- 44 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 10. PROCEEDS FROM REGULATORY SETTLEMENTS As a result of settlements of administrative proceedings brought by the Securities and Exchange Commission against unaffiliated third parties relating to market timing and/or late trading of mutual funds, the Fund received $203,460 during the six months ended April 30, 2010 and $458,466 during the year ended Oct. 31, 2009, which represented the Fund's portion of the proceeds from the settlements (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
The components of Seligman Emerging Markets Fund net assets after adjustments for any permanent book-to-tax differences at the merger date were as follows:
EXCESS OF DISTRIBUTIONS ACCUMULATED OVER NET TOTAL CAPITAL UNREALIZED 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) $--
- -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 45 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, 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. 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 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. - -------------------------------------------------------------------------------- 46 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court (the Supreme Court), asking the Supreme Court to stay the District Court proceedings while the 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. On March 30, 2010, the Supreme Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit's decision in the Gallus case and remanded the case to the Eighth Circuit for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. 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 - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 47 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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. 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. - -------------------------------------------------------------------------------- 48 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- Columbia Management Investment Advisers, LLC ("Columbia Management" or the "investment manager"), formerly known as RiverSource Investments, LLC, a wholly- owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), Columbia Management provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). In addition, under the subadvisory agreement (the "Subadvisory Agreement") between Columbia Management and Threadneedle International Limited (the "Subadviser"), the Subadviser performs portfolio management and related services for the Fund. On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of each of the IMS Agreement and the Subadvisory Agreement (together, the "Advisory Agreements"). Columbia Management prepared detailed reports for the Board and its Contracts Committee in March and April 2010, including reports based on data provided by independent organizations and a comprehensive response to each item of information requested by independent legal counsel to the Independent Directors ("Independent Legal Counsel") in a letter to the investment manager, to assist the Board in making these determinations. All of the materials presented in March and April were first supplied in draft form to designated representatives of the Independent Directors, i.e., Independent Legal Counsel, the Chair and the Chair of the Contracts Committee (including materials relating to the Fund's new expense cap), and the final materials were revised to reflect comments provided by these Board representatives. In addition, throughout the year, the Board (or its committees) reviews information prepared by Columbia Management addressing the services Columbia Management provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts Committee, the Investment Review Committee and the Compliance Committee in determining whether to continue the Advisory Agreements. At the April 6-8, 2010 in-person Board meeting, Independent Legal Counsel reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory and subadvisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the Advisory Agreements. Nature, Extent and Quality of Services Provided by Columbia Management and the Subadviser: The Board analyzed various reports and presentations it had received detailing the services performed by Columbia Management and the - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 49 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- Subadviser, as well as their expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by Columbia Management, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, most notably, management's announcement of the massive investment made in the acquisition of the long-term asset management business of Columbia Management Group, LLC (the "Columbia Transaction") and the completed integration of J. & W. Seligman & Co. Incorporated, acquisitions which should continue to enhance investment capabilities and provide access to a greater depth of experienced portfolio managers in key categories. The Board noted, in particular, that upon the close of the Columbia Transaction, RiverSource will have grown to 10 investment offices (compared to 6 in 2009). In addition, the Board reviewed information concerning the investment manager's new Chief Investment Officer upon the close of the Columbia Transaction, including the application of his particular investment philosophy, which is intended to enhance the risk and portfolio management oversight of the entire fund family. Moreover, in connection with the Board's evaluation of the overall package of services provided by Columbia Management, the Board considered the quality of the administrative and transfer agency services provided by Columbia Management's affiliates to the Fund. The Board also reviewed the financial condition of Columbia Management and its affiliates, including the Subadviser, and each entity's ability to carry out its responsibilities under the Advisory Agreements. Further, the Board considered Columbia Management's ability to retain key personnel in certain targeted areas and its expectations in this regard. The Board also discussed the acceptability of the terms of the Advisory Agreements (including the relatively broad scope of services required to be performed by Columbia Management). The Board concluded that the services being performed under the Advisory Agreements were of a reasonably high quality. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that Columbia Management and its affiliates, including the Subadviser, were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the Advisory Agreements, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered detailed reports containing data prepared by an independent - -------------------------------------------------------------------------------- 50 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund. The Board observed that the Fund's investment performance was appropriate in light of the particular management style. Additionally, the Board reviewed the performance of the Subadviser and Columbia Management's processes for monitoring the Subadviser. The Board considered, in particular, management's rationale for recommending the continued retention of the Subadviser. Comparative Fees, Costs of Services Provided and the Profits Realized By Columbia Management and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under each of the Advisory Agreements. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to Columbia Management's profitability. They also reviewed information in the report showing the fees charged by Columbia Management to other client accounts of the investment manager (or Subadviser) (with similar investment strategies to those of the Fund). The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund (with few defined exceptions) are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund (excluding the effect of a performance incentive adjustment), with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) approximated the peer group's median expense ratio. The Board also considered the Fund's performance incentive adjustment and noted its continued appropriateness. The Board further observed that the subadvisory fees paid under the Subadvisory Agreement are borne by the investment manager and not the Fund. Based on its review, the Board concluded that the fees paid under each of the Advisory Agreements were fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered various preliminary integration plans in connection with the Columbia Transaction which, if implemented, would impact the fee structures of various RiverSource Funds. The Board was satisfied with the - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 51 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- principles underlying these plans, which, at their preliminary stage, are designed to achieve a rational, consistent pricing model across the combined fund families, as well as preserve the "pricing philosophy" of the Funds. The Board also considered the expected profitability of Columbia Management and its affiliates in connection with Columbia Management providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to Columbia Management and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. In this regard, the Board observed slightly reduced profitability in 2009 vs. 2008. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by Columbia Management as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees and subadvisory fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 8, 2010, the Board, including all of the Independent Directors, approved the renewal of each of the Advisory Agreements for an additional annual period. - -------------------------------------------------------------------------------- 52 THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling 800.221.2450; contacting your financial intermediary; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2010 SEMIANNUAL REPORT 53 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. Threadneedle(R) mutual funds are distributed by Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.), member FINRA and managed by Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC). Threadneedle mutual funds are subadvised by Threadneedle International Limited, an affiliate of Columbia Management. (C)2010 Columbia Management Investment Advisers, LLC. All (COLUMBIA MANAGEMENT LOGO) rights reserved. S-6344 R (6/10)
Semiannual Report (COLUMBIA MANAGEMENT LOGO) THREADNEEDLE GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2010 THREADNEEDLE GLOBAL EQUITY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 8 Portfolio of Investments........... 11 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 Approval of Investment Management Services Agreement............... 55 Proxy Voting....................... 59
- -------------------------------------------------------------------------------- 2 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY - -------------------------------------------------------------------------------- > Threadneedle Global Equity Fund (the Fund) Class A shares gained 9.85% (excluding sales charge) for the six months ended April 30, 2010. > The Fund underperformed its benchmark, the Morgan Stanley Capital International (MSCI) All Country World Index, which advanced 10.03% for the six-month period. > The Fund also underperformed its peer group, as represented by the Lipper Global Funds Index, which rose 10.52% over the same time frame. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2010) - --------------------------------------------------------------------------------
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------------------------------------------------------------------------- Threadneedle Global Equity Fund Class A (excluding sales charge) +9.85% +35.24% -6.25% +4.78% -1.47% - ------------------------------------------------------------------------- MSCI All Country World Index(1) (unmanaged) +10.03% +40.00% -5.17% +4.98% +1.58% - ------------------------------------------------------------------------- Lipper Global Funds Index(2) +10.52% +37.55% -5.14% +4.59% +1.45% - -------------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 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. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- (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. AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT APRIL 30, 2010 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 5/29/90) +9.85% +35.24% -6.25% +4.78% -1.47% N/A - ------------------------------------------------------------------------------------- Class B (inception 3/20/95) +9.48% +34.12% -6.99% +3.98% -2.22% N/A - ------------------------------------------------------------------------------------- Class C (inception 6/26/00) +9.25% +33.77% -7.05% +3.95% N/A -2.21% - ------------------------------------------------------------------------------------- Class I (inception 8/1/08) +10.02% +35.65% N/A N/A N/A -4.10% - ------------------------------------------------------------------------------------- Class R2 (inception 12/11/06) +10.26% +35.34% -6.25% N/A N/A -3.58% - ------------------------------------------------------------------------------------- Class R3 (inception 12/11/06) +9.64% +34.99% -6.20% N/A N/A -3.51% - ------------------------------------------------------------------------------------- Class R4 (inception 3/20/95) +9.87% +35.24% -6.08% +4.93% -1.30% N/A - ------------------------------------------------------------------------------------- Class R5 (inception 12/11/06) +10.00% +35.72% -5.84% N/A N/A -3.14% - ------------------------------------------------------------------------------------- Class W (inception 12/1/06) +9.68% +35.00% -6.25% N/A N/A -3.31% - ------------------------------------------------------------------------------------- With sales charge Class A (inception 5/29/90) +3.54% +27.46% -8.09% +3.55% -2.05% N/A - ------------------------------------------------------------------------------------- Class B (inception 3/20/95) +4.48% +29.12% -7.92% +3.63% -2.22% N/A - ------------------------------------------------------------------------------------- Class C (inception 6/26/00) +8.25% +32.77% -7.05% +3.95% N/A -2.21% - -------------------------------------------------------------------------------------
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. *Not annualized. **For classes with less than 10 years performance. - -------------------------------------------------------------------------------- 4 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- MORNINGSTAR STYLE BOX(TM) - --------------------------------------------------------------------------------
Equity Style Value Blend Growth X Large Medium Size Small
The Morningstar Style Box(TM) reveals a fund's investment strategy. For equity funds, the vertical axis shows the market capitalization of the stocks owned, and the horizontal axis shows investment style (value, blend, or growth). Information shown is based on the most recent data provided by Morningstar. Threadneedle Global Equity Fund is designed for long-term investors with an above average risk tolerance. 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. (C)2010 Morningstar, Inc. All rights reserved. The information contained herein is proprietary to Morningstar and/or its content providers, may not be copied or distributed and is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- COUNTRY BREAKDOWN(1) (at April 30, 2010) - --------------------------------------------------------------------- Australia 1.5% - ------------------------------------------------ Belgium 0.8% - ------------------------------------------------ Brazil 1.7% - ------------------------------------------------ Canada 1.3% - ------------------------------------------------ China 1.0% - ------------------------------------------------ Denmark 1.1% - ------------------------------------------------ Finland 0.5% - ------------------------------------------------ France 2.1% - ------------------------------------------------ Germany 1.8% - ------------------------------------------------ Hong Kong 4.2% - ------------------------------------------------ India 1.3% - ------------------------------------------------ Indonesia 2.6% - ------------------------------------------------ Ireland 0.8% - ------------------------------------------------ Japan 8.9% - ------------------------------------------------ Mexico 0.7% - ------------------------------------------------ Netherlands 1.7% - ------------------------------------------------ Panama 0.7% - ------------------------------------------------ Poland 0.7% - ------------------------------------------------ Portugal 0.7% - ------------------------------------------------ Singapore 0.6% - ------------------------------------------------ South Korea 3.2% - ------------------------------------------------ Spain 1.1% - ------------------------------------------------ Switzerland 6.2% - ------------------------------------------------ Taiwan 1.7% - ------------------------------------------------ United Kingdom 13.0% - ------------------------------------------------ United States 39.6% - ------------------------------------------------ Other(2) 0.5% - ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. (2) Cash & Cash Equivalents. - -------------------------------------------------------------------------------- 6 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- TOP TEN HOLDINGS(1) (at April 30, 2010) - ---------------------------------------------------------------------
Apple, Inc. (United States) 2.4% - ------------------------------------------------ Samsung Electronics Co., Ltd. (South Korea) 1.9% - ------------------------------------------------ Hartford Financial Services Group, Inc. (United States) 1.9% - ------------------------------------------------ IBM Corp. (United States) 1.8% - ------------------------------------------------ Norfolk Southern Corp. (United States) 1.7% - ------------------------------------------------ Johnson & Johnson (United States) 1.6% - ------------------------------------------------ JPMorgan Chase & Co. (United States) 1.6% - ------------------------------------------------ Rio Tinto PLC (United Kingdom) 1.4% - ------------------------------------------------ Tullow Oil PLC (United Kingdom) 1.4% - ------------------------------------------------ Google, Inc., Class A (United States) 1.4% - ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and 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 GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments; and (ii) ongoing costs, which may include management fees; distribution and service (Rule 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 April 30, 2010. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses for each class. 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 actual expense ratio for each class and an assumed rate of return of 5% per year before expenses, which is not the actual return for the class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 8 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2009 APRIL 30, 2010 THE PERIOD(a) EXPENSE RATIO - ------------------------------------------------------------------------------------------- Class A - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,098.50 $ 7.48 1.43% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.80 $ 7.19 1.43% - ------------------------------------------------------------------------------------------- Class B - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,094.80 $11.49 2.20% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,013.96 $11.05 2.20% - ------------------------------------------------------------------------------------------- Class C - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,092.50 $11.43 2.19% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.01 $11.00 2.19% - ------------------------------------------------------------------------------------------- Class I - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,100.20 $ 4.71 .90% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,020.44 $ 4.53 .90% - ------------------------------------------------------------------------------------------- Class R2 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,102.60 $ 8.86 1.69% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.50 $ 8.50 1.69% - ------------------------------------------------------------------------------------------- Class R3 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,096.40 $ 7.79 1.49% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.50 $ 7.49 1.49% - ------------------------------------------------------------------------------------------- Class R4 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,098.70 $ 6.23 1.19% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.00 $ 5.99 1.19% - ------------------------------------------------------------------------------------------- Class R5 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,100.00 $ 4.92 .94% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,020.24 $ 4.73 .94% - -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 9 FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2009 APRIL 30, 2010 THE PERIOD(a) EXPENSE RATIO - ------------------------------------------------------------------------------------------- Class W - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,096.80 $ 7.06 1.35% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.20 $ 6.79 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 182/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2010: +9.85% for Class A, +9.48% for Class B, +9.25% for Class C, +10.02% for Class I, +10.26% for Class R2, +9.64% for Class R3, +9.87% for Class R4, +10.00% for Class R5 and +9.68% for Class W. - -------------------------------------------------------------------------------- 10 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2010 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (98.4%)(c) ISSUER SHARES VALUE(a) AUSTRALIA (1.5%) Atlas Iron Ltd. 567,790(b) $1,298,591 Centamin Egypt Ltd. 1,309,391(b) 2,651,314 CSL Ltd. 103,047 3,078,521 --------------- Total 7,028,426 - ------------------------------------------------------------------------------------- BELGIUM (0.8%) Ageas 1,219,949(b,e) 3,746,874 - ------------------------------------------------------------------------------------- BRAZIL (1.7%) Multiplan Empreendimentos Imobiliarios SA 173,400 3,027,888 Natura Cosmeticos SA 148,300 3,149,508 Redecard SA 100,500 1,669,312 --------------- Total 7,846,708 - ------------------------------------------------------------------------------------- CANADA (1.2%) Barrick Gold Corp. 52,058 2,267,126 Nexen, Inc. 149,300 3,630,708 --------------- Total 5,897,834 - ------------------------------------------------------------------------------------- CHINA (1.0%) Focus Media Holding Ltd., ADR 151,003(b) 2,533,830 Industrial & Commercial Bank of China, Series H 3,216,000(e) 2,344,019 --------------- Total 4,877,849 - ------------------------------------------------------------------------------------- DENMARK (1.1%) FLSmidth & Co. A/S 67,022(e) 5,050,054 - ------------------------------------------------------------------------------------- FINLAND (0.5%) Talvivaara Mining Co., PLC 350,596(b) 2,426,916 - ------------------------------------------------------------------------------------- FRANCE (2.1%) Cie Generale Des Etablissements Michelin, Series B 33,383 2,438,577 Euler Hermes SA 32,540 2,691,205 Renault SA 103,610(b) 4,799,717 --------------- Total 9,929,499 - ------------------------------------------------------------------------------------- GERMANY (1.8%) Linde AG 44,018(e) 5,258,848 MTU Aero Engines Holding AG 58,051(e) 3,182,353 --------------- Total 8,441,201 - ------------------------------------------------------------------------------------- HONG KONG (4.1%) Champion REIT 3,714,770(e) 1,727,720 China High Speed Transmission Equipment Group Co., Ltd. 1,585,000 3,756,387 Great Eagle Holdings Ltd. 1,427,377 3,994,418 KWG Property Holding Ltd. 2,956,000 1,705,963 Sun Hung Kai Properties Ltd. 423,000 5,864,606 The Hongkong & Shanghai Hotels 1,603,500 2,531,526 --------------- Total 19,580,620 - ------------------------------------------------------------------------------------- INDIA (1.3%) State Bank of India Ltd., GDR 58,445(d,f) 5,949,912 - ------------------------------------------------------------------------------------- INDONESIA (2.5%) Bank Mandiri Tbk PT 5,877,500 3,726,058 Bank Rakyat Indonesia 4,989,000 4,887,870 Perusahaan Gas Negara PT 7,471,000 3,358,670 --------------- Total 11,972,598 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) IRELAND (0.8%) Accenture PLC, Class A 82,479 $3,599,384 - ------------------------------------------------------------------------------------- JAPAN (8.8%) Asahi Breweries Ltd. 332,600(e) 5,975,579 Canon, Inc. 136,700 6,254,107 Honda Motor Co., Ltd. 132,800 4,494,345 Hoya Corp. 228,000 6,307,251 Makita Corp. 121,900 3,779,103 Mitsubishi Estate Co., Ltd. 158,000 2,848,798 Nippon Electric Glass Co., Ltd. 204,000 3,111,364 Osaka Securities Exchange Co., Ltd. 309 1,586,851 Ushio, Inc. 141,900 2,344,023 Yamada Denki Co., Ltd. 61,960 4,845,660 --------------- Total 41,547,081 - ------------------------------------------------------------------------------------- MEXICO (0.7%) America Movil SAB de CV, ADR, Series L 66,299 3,413,072 - ------------------------------------------------------------------------------------- NETHERLANDS (1.6%) Fugro NV 60,113 3,912,515 ING Groep NV 442,191(b) 3,902,482 --------------- Total 7,814,997 - ------------------------------------------------------------------------------------- PANAMA (0.7%) Copa Holdings SA, Class A 58,793 3,332,387 - ------------------------------------------------------------------------------------- POLAND (0.7%) KGHM Polska Miedz SA 94,285 3,518,624 - ------------------------------------------------------------------------------------- PORTUGAL (0.7%) Galp Energia SGPS SA, Series B 200,999 3,222,116 - ------------------------------------------------------------------------------------- SINGAPORE (0.6%) DBS Group Holdings Ltd. 267,000 2,940,364 - ------------------------------------------------------------------------------------- SOUTH KOREA (3.2%) KB Financial Group, Inc. 54,668 2,664,228 NHN Corp. 21,850(b) 3,643,698 Samsung Electronics Co., Ltd. 11,489 8,737,504 --------------- Total 15,045,430 - ------------------------------------------------------------------------------------- SPAIN (1.1%) Banco Santander SA 207,406 2,636,944 Inditex SA 43,224 2,674,971 --------------- Total 5,311,915 - ------------------------------------------------------------------------------------- SWITZERLAND (6.2%) Credit Suisse Group AG 79,613 3,654,229 Nestle SA 89,363 4,372,817 Novartis AG 85,190 4,343,593 Roche Holding AG 31,154 4,919,108 Syngenta AG 10,814 2,740,067 The Swatch Group AG 17,730 5,194,487 Xstrata PLC 249,619 4,094,578 --------------- Total 29,318,879 - ------------------------------------------------------------------------------------- TAIWAN (1.7%) Hon Hai Precision Industry Co., Ltd. 629,000 2,953,518 MediaTek, Inc. 143,000 2,421,823 Taiwan Semiconductor Manufacturing Co., Ltd. 1,299,000 2,542,841 --------------- Total 7,918,182 - ------------------------------------------------------------------------------------- UNITED KINGDOM (12.9%) 3i Group PLC 616,624 2,543,632 Aggreko PLC 272,598 5,077,580 Autonomy Corp., PLC 82,934(b) 2,274,908 BG Group PLC 347,274 5,869,643 Burberry Group PLC 541,599 5,546,840 Chemring Group PLC 46,441 2,587,354 Ensco PLC, ADR 97,932 4,620,432 HSBC Holdings PLC 360,370 3,669,312 Intercontinental Hotels Group PLC 146,317 2,579,598 International Power PLC 372,387 1,884,842 Rio Tinto PLC 130,360 6,739,441 Tesco PLC 403,001 2,672,897 The Weir Group PLC 252,770 3,794,487
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 12 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) UNITED KINGDOM (CONT.) Tullow Oil PLC 378,035 $6,583,793 Ultra Electronics Holdings PLC 102,772 2,426,388 Vodafone Group PLC 1,057,130 2,342,365 --------------- Total 61,213,512 - ------------------------------------------------------------------------------------- UNITED STATES (39.1%) Aetna, Inc. 78,635 2,323,664 Alliance Data Systems Corp. 16,903(b) 1,268,739 American Tower Corp., Class A 76,195(b) 3,109,518 Apple, Inc. 43,456(b) 11,347,232 Bank of America Corp. 300,000 5,349,000 Cisco Systems, Inc. 174,501(b) 4,697,567 Citigroup, Inc. 1,219,063(b) 5,327,305 Cliffs Natural Resources, Inc. 49,814 3,114,869 Cloud Peak Energy, Inc. 219,719(b) 3,515,504 Dell, Inc. 355,231(b) 5,747,638 Devon Energy Corp. 58,807 3,959,476 eBay, Inc. 151,158(b) 3,599,072 Flowserve Corp. 36,020 4,127,172 Gilead Sciences, Inc. 86,725(b) 3,440,381 Google, Inc., Class A 12,417(b) 6,524,388 Hartford Financial Services Group, Inc. 305,606 8,731,163 Henry Schein, Inc. 90,000(b) 5,442,301 Hewlett-Packard Co. 94,353 4,903,525 IBM Corp. 63,765 8,225,685 Johnson & Johnson 117,228 7,537,760 JPMorgan Chase & Co. 175,672 7,480,115 Laboratory Corp of America Holdings 56,090(b) 4,406,991 Lockheed Martin Corp. 46,054 3,909,524 Lowe's Companies, Inc. 146,412 3,970,693 Merck & Co., Inc. 84,740 2,969,290 Microsoft Corp. 153,747 4,695,434 Norfolk Southern Corp. 130,253 7,727,910 Oracle Corp. 176,247 4,554,222 QUALCOMM, Inc. 80,683 3,125,659 Republic Services, Inc. 135,020 4,189,671 Sirona Dental Systems, Inc. 121,484(b) 5,064,668 The Goldman Sachs Group, Inc. 13,923 2,021,620 The Walt Disney Co. 165,075 6,081,363 Thermo Fisher Scientific, Inc. 100,000(b) 5,528,000 Ultra Petroleum Corp. 64,520(b) 3,082,120 Union Pacific Corp. 35,930 2,718,464 Walgreen Co. 119,379 4,196,172 Wal-Mart Stores, Inc. 71,114 3,815,266 WESCO International, Inc. 98,352(b) 3,995,058 --------------- Total 185,824,199 - ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $411,296,392) $466,768,633 - ------------------------------------------------------------------------------------- MONEY MARKET FUND (0.5%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.21% 2,555,366(g) $2,555,366 - ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $2,555,366) $2,555,366 - -------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (5.0%) AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) REPURCHASE AGREEMENTS(H) Cantor Fitzgerald dated 04-30-10, matures 05-03-10, repurchase price $10,000,183 0.22% $10,000,000 $10,000,000 Goldman Sachs dated 04-30-10, matures 05-03-10, repurchase price $3,539,472 0.19 3,539,416 3,539,416 $2,000,042 0.25 2,000,000 2,000,000 Pershing LLC dated 04-30-10, matures 05-03-10, repurchase price $5,000,129 0.31 5,000,000 5,000,000
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (CONTINUED) AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) REPURCHASE AGREEMENTS(H) (CONT.) Societe Generale dated 04-30-10, matures 05-03-10, repurchase price $3,000,053 0.21% $3,000,000 $3,000,000 --------------- Total 23,539,416 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $23,539,416) $23,539,416 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $437,391,174)(i) $492,863,415 =====================================================================================
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 April 30, 2010:
PERCENTAGE OF INDUSTRY NET ASSETS VALUE(a) - ----------------------------------------------------------------------- Aerospace & Defense 2.5% $12,105,619 Airlines 0.7 3,332,387 Auto Components 0.5 2,438,577 Automobiles 1.9 9,294,062 Beverages 1.2 5,975,579 Biotechnology 1.4 6,518,902 Capital Markets 1.7 8,219,481 Chemicals 1.7 7,998,915 Commercial Banks 6.1 28,818,707 Commercial Services & Supplies 1.9 9,267,251 Communications Equipment 1.6 7,823,226 Computers & Peripherals 6.4 30,224,080 Construction & Engineering 1.1 5,050,054 Diversified Financial Services 5.0 23,645,753 Electrical Equipment 1.3 6,100,410 Electronic Equipment, Instruments & Components 2.6 12,372,133 Energy Equipment & Services 1.8 8,532,947 Food & Staples Retailing 2.2 10,684,335 Food Products 0.9 4,372,817 Gas Utilities 0.7 3,358,670 Health Care Equipment & Supplies 1.1 5,064,668 Health Care Providers & Services 2.6 12,172,956
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 14 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- SUMMARY OF INVESTMENTS IN SECURITIES BY INDUSTRY (CONTINUED)
PERCENTAGE OF INDUSTRY NET ASSETS VALUE(a) - ----------------------------------------------------------------------- Hotels, Restaurants & Leisure 1.1% $5,111,124 Household Durables 0.8 3,779,103 Independent Power Producers & Energy Traders 0.4 1,884,842 Insurance 3.2 15,169,242 Internet Software & Services 2.9 13,767,158 IT Services 1.4 6,537,435 Life Sciences Tools & Services 1.2 5,528,000 Machinery 1.7 7,921,659 Media 1.8 8,615,193 Metals & Mining 5.5 26,111,459 Office Electronics 1.3 6,254,107 Oil, Gas & Consumable Fuels 6.3 29,863,360 Personal Products 0.7 3,149,508 Pharmaceuticals 4.2 19,769,751 Real Estate Investment Trusts (REITs) 0.4 1,727,720 Real Estate Management & Development 3.7 17,441,673 Road & Rail 2.2 10,446,374 Semiconductors & Semiconductor Equipment 2.9 13,702,168 Software 2.4 11,524,564 Specialty Retail 2.4 11,491,324 Textiles, Apparel & Luxury Goods 2.3 10,741,327 Trading Companies & Distributors 0.8 3,995,058 Wireless Telecommunication Services 1.9 8,864,955 Other(1) 5.5 26,094,782 - ----------------------------------------------------------------------- Total $492,863,415 - -----------------------------------------------------------------------
(1) Cash & Cash Equivalents. 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. INVESTMENTS IN DERIVATIVES FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT APRIL 30, 2010
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION - -------------------------------------------------------------------------------------- May 5, 2010 2,447,222 1,592,000 $-- $(11,463) U.S. Dollar British Pound
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS ADR -- American Depositary Receipt GDR -- Global Depositary Receipt
(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. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2010, the value of these securities amounted to $5,949,912 or 1.25% of net assets. (e) At April 30, 2010, security was partially or fully on loan. See Note 7 to the financial statements. (f) Identifies issues considered to be illiquid as to their marketability (see Note 2 to the financial statements). The aggregate value of such securities at April 30, 2010 was $5,949,912, representing 1.25% of net assets. Information concerning such security holdings at April 30, 2010 was as follows:
ACQUISITION SECURITY DATES COST ---------------------------------------------------------------------- State Bank of India Ltd., GDR 07-29-09 thru 01-29-10 $4,488,231
(g) Affiliated Money Market Fund -- See Note 8 to the financial statements. The rate shown is the seven-day current annualized yield at April 30, 2010. (h) The table below represents securities received as collateral for repurchase agreements. This collateral, which is generally high quality short-term obligations, is deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral. - -------------------------------------------------------------------------------- 16 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
CANTOR FITZGERALD (0.22%) SECURITY DESCRIPTION VALUE(a) - ------------------------------------------------------------ Fannie Mae Discount Notes $12,726 Fannie Mae Interest Strip 54,824 Fannie Mae Pool 6,773,408 Fannie Mae Principal Strip 1,277 Fannie Mae REMICS 200,378 Federal Farm Credit Bank 175,624 Federal Home Loan Banks 162,825 Federal Home Loan Mortgage Corp 227,947 Federal National Mortgage Association 164,072 Freddie Mac Non Gold Pool 758,276 Freddie Mac Reference REMIC 10,792 Freddie Mac REMICS 235,388 Freddie Mac Strips 136,926 Ginnie Mae I Pool 336,090 Ginnie Mae II Pool 249,498 Government National Mortgage Association 56,515 United States Treasury Inflation Indexed Bonds 46,021 United States Treasury Note/Bond 80,211 United States Treasury Strip Coupon 512,026 United States Treasury Strip Principal 5,176 - ------------------------------------------------------------ Total market value of collateral securities $10,200,000 - ------------------------------------------------------------ GOLDMAN SACHS (0.19%) SECURITY DESCRIPTION VALUE(a) - ------------------------------------------------------------ Fannie Mae Pool $2,595,722 Freddie Mac Gold Pool 874,747 Freddie Mac Non Gold Pool 139,735 - ------------------------------------------------------------ Total market value of collateral securities $3,610,204 - ------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
GOLDMAN SACHS (0.25%) SECURITY DESCRIPTION VALUE(a) - ------------------------------------------------------------ Allied Irish Banks PLC/New York NY $305,263 Banco Bilbao Vizcaya Argentaria/NY 11,049 Bank of Nova Scotia 675 BNP Paribas NY 232,825 Calyon NY 15,594 Credit Agricole Corporate and Investment Bank/New York 153,074 Dexia Credit Local NY 169,957 DnB NOR Bank 1,375 Natixis/New York NY 547,439 Nordea Bank Finland PLC 45,734 Rabobank Nederland NV/NY 75,790 Royal Bank of Scotland PLC/Greenwich CT 14,541 Sanpaolo IMI SpA/New York 4,630 Societe Generale NY 67,368 Standard Chartered Banking 92,060 Sumitomo Mitsui Banking Corp/New York 200,000 Svenska Handelsbanken/New York NY 6,558 Toronto Dominion Bank/NY 149,474 UBS AG Stamford 6,594 - ------------------------------------------------------------ Total market value of collateral securities $2,100,000 - ------------------------------------------------------------ PERSHING LLC (0.31%) SECURITY DESCRIPTION VALUE(a) - ------------------------------------------------------------ Fannie Mae Pool $1,474,531 Fannie Mae REMICS 467,738 Fannie Mae-Aces 16,488 Federal Farm Credit Bank 92,460 Federal Home Loan Banks 179,004 Federal Home Loan Mortgage Corp 27,352 Federal National Mortgage Association 81,596 Freddie Mac Gold Pool 1,245,692 Freddie Mac Non Gold Pool 67,976 Freddie Mac REMICS 23,831 Ginnie Mae I Pool 81,073 Ginnie Mae II Pool 107,165 Government National Mortgage Association 2,954 United States Treasury Bill 370 United States Treasury Note/Bond 837,713 United States Treasury Strip Coupon 138,394 United States Treasury Strip Principal 255,663 - ------------------------------------------------------------ Total market value of collateral securities $5,100,000 - ------------------------------------------------------------
- -------------------------------------------------------------------------------- 18 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
SOCIETE GENERALE (0.21%) SECURITY DESCRIPTION VALUE(a) - ------------------------------------------------------------ Fannie Mae REMICS $1,070,709 FHLMC-GNMA 6,643 Freddie Mac REMICS 841,424 Government National Mortgage Association 1,141,224 - ------------------------------------------------------------ Total market value of collateral securities $3,060,000 - ------------------------------------------------------------
(i) At April 30, 2010, the cost of securities for federal income tax purposes was approximately $437,391,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $63,309,000 Unrealized depreciation (7,837,000) ----------------------------------------------------------- Net unrealized appreciation $55,472,000 -----------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 19 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 - -------------------------------------------------------------------------------- 20 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL 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 April 30, 2010:
Fair value at April 30, 2010 ---------------------------------------------------------------- Level 1 Level 2 quoted prices other Level 3 in active significant significant markets for observable unobservable DESCRIPTION(a) identical assets inputs inputs Total - --------------------------------------------------------------------------------------------- Equity Securities Common Stocks(b) Aerospace & Defense $3,909,524 $8,196,095 $-- $12,105,619 Auto Components -- 2,438,577 -- 2,438,577 Automobiles -- 9,294,062 -- 9,294,062 Beverages -- 5,975,579 -- 5,975,579 Biotechnology 3,440,381 3,078,521 -- 6,518,902 Capital Markets 2,021,620 6,197,861 -- 8,219,481 Chemicals -- 7,998,915 -- 7,998,915 Commercial Banks -- 28,818,707 -- 28,818,707 Commercial Services & Supplies 4,189,670 5,077,581 -- 9,267,251 Construction & Engineering -- 5,050,054 -- 5,050,054 Diversified Financial Services 18,156,419 5,489,334 -- 23,645,753 Electrical Equipment -- 6,100,410 -- 6,100,410 Electronic Equipment, Instruments & Components -- 12,372,133 -- 12,372,133 Energy Equipment & Services 4,620,432 3,912,515 -- 8,532,947 Food & Staples Retailing 8,011,438 2,672,897 -- 10,684,335 Food Products -- 4,372,817 -- 4,372,817 Gas Utilities -- 3,358,670 -- 3,358,670 Hotels, Restaurants & Leisure -- 5,111,124 -- 5,111,124 Household Durables -- 3,779,103 -- 3,779,103 Independent Power Producers & Energy Traders -- 1,884,842 -- 1,884,842 Insurance 8,731,164 6,438,078 -- 15,169,242 Internet Software & Services 10,123,460 3,643,698 -- 13,767,158 IT Services 4,868,123 1,669,312 -- 6,537,435 Machinery 4,127,172 3,794,487 -- 7,921,659 Metals & Mining 5,381,995 20,729,464 -- 26,111,459 Office Electronics -- 6,254,107 -- 6,254,107 Oil, Gas & Consumable Fuels 14,187,808 15,675,552 -- 29,863,360
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 21 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED)
Fair value at April 30, 2010 ---------------------------------------------------------------- Level 1 Level 2 quoted prices other Level 3 in active significant significant markets for observable unobservable DESCRIPTION(a) identical assets inputs inputs Total - --------------------------------------------------------------------------------------------- Personal Products $-- $3,149,508 $-- $3,149,508 Pharmaceuticals 10,507,050 9,262,701 -- 19,769,751 Real Estate Investment Trusts (REITs) -- 1,727,720 -- 1,727,720 Real Estate Management & Development -- 17,441,673 -- 17,441,673 Semiconductors & Semiconductor Equipment -- 13,702,168 -- 13,702,168 Software 9,249,656 2,274,908 -- 11,524,564 Specialty Retail 3,970,694 7,520,630 -- 11,491,324 Textiles, Apparel & Luxury Goods -- 10,741,327 -- 10,741,327 Wireless Telecommunication Services 6,522,590 2,342,365 -- 8,864,955 All Other Industries 87,201,942 -- -- 87,201,942 - --------------------------------------------------------------------------------------------- Total Equity Securities 209,221,138 257,547,495 -- 466,768,633 - --------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(c) 2,555,366 -- -- 2,555,366 Investments of Cash Collateral Received for Securities on Loan -- 23,539,416 -- 23,539,416 - --------------------------------------------------------------------------------------------- Total Other 2,555,366 23,539,416 -- 26,094,782 - --------------------------------------------------------------------------------------------- Investments in Securities 211,776,504 281,086,911 -- 492,863,415 Other Financial Instruments(d) -- (11,463) -- (11,463) - --------------------------------------------------------------------------------------------- Total $211,776,504 $281,075,448 $-- $492,851,952 - ---------------------------------------------------------------------------------------------
(a) See the Portfolio of Investments for all investment classifications not indicated in the table. (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 April 30, 2010. (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. - -------------------------------------------------------------------------------- 22 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 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 800.221.2450. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 23 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- APRIL 30, 2010 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $411,296,392) $ 466,768,633 Affiliated money market fund (identified cost $2,555,366) 2,555,366 Investments of cash collateral received for securities on loan (identified cost $23,539,416) 23,539,416 - -------------------------------------------------------------------------------- Total investments in securities (identified cost $437,391,174) 492,863,415 Foreign currency holdings (identified cost $985,061) 1,007,501 Capital shares receivable 222,009 Dividends and accrued interest receivable 566,346 Receivable for investment securities sold 10,084,852 Reclaims receivable 581,173 Other receivable 214,186 - -------------------------------------------------------------------------------- Total assets 505,539,482 - -------------------------------------------------------------------------------- LIABILITIES Capital shares payable 422,260 Payable for investment securities purchased 7,220,989 Payable upon return of securities loaned 23,539,416 Unrealized depreciation on forward foreign currency contracts 11,463 Accrued investment management services fees 10,379 Accrued distribution fees 3,943 Accrued transfer agency fees 3,359 Accrued administrative services fees 1,054 Accrued plan administration services fees 49 Other accrued expenses 143,938 - -------------------------------------------------------------------------------- Total liabilities 31,356,850 - -------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 474,182,632 - -------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 711,178 Additional paid-in capital 757,588,283 Excess of distributions over net investment income (1,434,244) Accumulated net realized gain (loss) (338,238,498) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 55,555,913 - -------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 474,182,632 - -------------------------------------------------------------------------------- *Value of securities on loan $ 22,387,428 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 24 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $393,491,281 58,684,062 $6.71(1) Class B $ 32,869,910 5,212,537 $6.31 Class C $ 10,650,108 1,708,282 $6.23 Class I $ 30,130,161 4,470,917 $6.74 Class R2 $ 37,219 5,496 $6.77 Class R3 $ 4,260 634 $6.72 Class R4 $ 6,977,037 1,032,535 $6.76 Class R5 $ 18,357 2,722 $6.74 Class W $ 4,299 639 $6.73 - ------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $7.12. 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 -- 2010 SEMIANNUAL REPORT 25 STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED APRIL 30, 2010 (UNAUDITED)
INVESTMENT INCOME Income: Dividends $ 3,711,937 Interest 639 Income distributions from affiliated money market fund 416 Income from securities lending -- net 22,210 Less foreign taxes withheld (250,715) - ------------------------------------------------------------------------------ Total income 3,484,487 - ------------------------------------------------------------------------------ Expenses: Investment management services fees 1,829,296 Distribution fees Class A 502,645 Class B 168,246 Class C 53,940 Class R2 95 Class R3 5 Class W 5 Transfer agency fees Class A 570,346 Class B 50,935 Class C 15,832 Class R2 10 Class R3 2 Class R4 1,671 Class R5 5 Class W 4 Administrative services fees 195,034 Plan administration services fees Class R2 48 Class R3 5 Class R4 8,356 Compensation of board members 8,437 Custodian fees 58,150 Printing and postage 30,520 Registration fees 30,940 Professional fees 13,121 Other 15,777 - ------------------------------------------------------------------------------ Total expenses 3,553,425 - ------------------------------------------------------------------------------ Investment income (loss) -- net (68,938) - ------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 26 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $12,616,006 Foreign currency transactions 129,082 - ------------------------------------------------------------------------------ Net realized gain (loss) on investments 12,745,088 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 32,496,414 - ------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 45,241,502 - ------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $45,172,564 - ------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 27 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ (68,938) $ 3,794,601 Net realized gain (loss) on investments 12,745,088 (107,498,811) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 32,496,414 183,214,646 - -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 45,172,564 79,510,436 - -------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (1,451,376) (5,343,305) Class B (38,424) -- Class C (13,917) (7,366) Class I (189,423) (409,801) Class R2 -- (81) Class R3 (14) (64) Class R4 (28,778) (95,325) Class R5 (94) (82) Class W (16) (56) - -------------------------------------------------------------------------------------------------- Total distributions (1,722,042) (5,856,080) - --------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 28 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 (UNAUDITED) CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 13,456,434 $ 38,201,079 Class B shares 1,254,840 3,574,996 Class C shares 650,378 1,451,876 Class I shares 1,598,870 39,064,193 Class R2 shares 10,967 9,763 Class R4 shares 810,897 1,403,150 Class R5 shares -- 1 Fund merger (Note 11) Class A shares N/A 11,920,114 Class B shares N/A 968,653 Class C shares N/A 5,405,143 Class R2 shares N/A 143,426 Class R5 shares N/A 13,250 Reinvestment of distributions at net asset value Class A shares 1,411,601 5,231,241 Class B shares 37,535 -- Class C shares 12,552 7,156 Class I shares 189,400 409,715 Class R2 shares -- 31 Class R4 shares 28,778 95,325 Class R5 shares 72 -- Conversions from Class B to Class A Class A shares 73,345 8,590,859 Class B shares (73,345) (8,590,859) Payments for redemptions Class A shares (52,150,336) (105,412,307) Class B shares (4,335,800) (10,894,724) Class C shares (1,520,697) (1,994,833) Class I shares (7,431,425) (17,447,359) Class R2 shares (23,742) (121,102) Class R4 shares (507,875) (1,395,358) Class R5 shares (971) -- - -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (46,508,522) (29,366,571) - -------------------------------------------------------------------------------------------------- Proceeds from regulatory settlements (Note 10) 424,540 93,216 - -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (2,633,460) 44,381,001 Net assets at beginning of period 476,816,092 432,435,091 - -------------------------------------------------------------------------------------------------- Net assets at end of period $474,182,632 $ 476,816,092 - -------------------------------------------------------------------------------------------------- Undistributed (excess of distributions over) net investment income $ (1,434,244) $ 356,736 - --------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL 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 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.
SIX MONTHS ENDED YEAR ENDED OCT. 31, CLASS A APRIL 30, 2010 ------------------------------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006 2005 Net asset value, beginning of period $6.13 $5.21 $9.61 $7.52 $6.23 $5.16 - -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .00(a) .05 .05 .02 .01 .02 Net gains (losses) (both realized and unrealized) .59 .95 (4.41) 2.13 1.30 1.08 - -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .59 1.00 (4.36) 2.15 1.31 1.10 - -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.02) (.08) (.04) (.06) (.02) (.03) - -------------------------------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlements .01 .00(a) -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.71 $6.13 $5.21 $9.61 $7.52 $6.23 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 9.85%(b) 19.39%(c) (45.55%) 28.82% 21.01% 21.48% - -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Total expenses 1.43%(e) 1.44% 1.46% 1.39% 1.51% 1.57% - -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) .00%(a)(e) .92% .65% .28% .23% .33% - -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $393 $395 $380 $737 $608 $446 - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 32% 81% 97% 100% 112% 93% - --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 30 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCT. 31, CLASS B APRIL 30, 2010 ------------------------------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006 2005 Net asset value, beginning of period $5.77 $4.87 $9.02 $7.06 $5.88 $4.87 - -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.02) .01 (.01) (.04) (.01) (.02) Net gains (losses) (both realized and unrealized) .56 .89 (4.14) 2.00 1.19 1.03 - -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .54 .90 (4.15) 1.96 1.18 1.01 - -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.01) -- -- .00(a) -- -- - -------------------------------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlements .01 .00(a) -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.31 $5.77 $4.87 $9.02 $7.06 $5.88 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 9.48%(b) 18.48%(c) (46.01%) 27.81% 20.07% 20.74% - -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Total expenses 2.20%(e) 2.21% 2.23% 2.15% 2.28% 2.34% - -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.77%)(e) .22% (.11%) (.45%) (.54%) (.41%) - -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $33 $33 $42 $104 $110 $102 - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 32% 81% 97% 100% 112% 93% - --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 31 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCT. 31, CLASS C APRIL 30, 2010 ------------------------------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006 2005 Net asset value, beginning of period $5.71 $4.83 $8.93 $7.02 $5.85 $4.85 - -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.02) .00(a) (.01) (.04) (.01) (.02) Net gains (losses) (both realized and unrealized) .54 .89 (4.09) 1.98 1.18 1.03 - -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .52 .89 (4.10) 1.94 1.17 1.01 - -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.01) (.01) -- (.03) -- (.01) - -------------------------------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlements .01 .00(a) -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.23 $5.71 $4.83 $8.93 $7.02 $5.85 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 9.25%(b) 18.39%(c) (45.91%) 27.76% 20.03% 20.89% - -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Total expenses 2.19%(e) 2.20% 2.22% 2.15% 2.27% 2.33% - -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.76%)(e) (.08%) (.09%) (.48%) (.50%) (.53%) - -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $11 $11 $5 $8 $6 $2 - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 32% 81% 97% 100% 112% 93% - --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 32 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCT. 31, CLASS I APRIL 30, 2010 ------------------- PER SHARE DATA (UNAUDITED) 2009 2008(f) Net asset value, beginning of period $6.16 $5.25 $7.47 - -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02 .09 .03 Net gains (losses) (both realized and unrealized) .59 .95 (2.25) - -------------------------------------------------------------------------------------------- Total from investment operations .61 1.04 (2.22) - -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.13) -- - -------------------------------------------------------------------------------------------- Proceeds from regulatory settlements .01 .00(a) -- - -------------------------------------------------------------------------------------------- Net asset value, end of period $6.74 $6.16 $5.25 - -------------------------------------------------------------------------------------------- TOTAL RETURN 10.02%(b) 20.21%(c) (29.72%) - -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Total expenses .90%(e) .84% .85%(e) - -------------------------------------------------------------------------------------------- Net investment income (loss) .52%(e) 1.56% 1.55%(e) - -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $30 $33 $-- - -------------------------------------------------------------------------------------------- Portfolio turnover rate 32% 81% 97% - --------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 33 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCT. 31, CLASS R2 APRIL 30, 2010 -------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007(g) Net asset value, beginning of period $6.14 $5.23 $9.62 $7.89 - --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01) (.01) .05 (.01) Net gains (losses) (both realized and unrealized) .63 1.00 (4.42) 1.84 - --------------------------------------------------------------------------------------------------------- Total from investment operations .62 .99 (4.37) 1.83 - --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.08) (.02) (.10) - --------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlements .01 .00(a) -- -- - --------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.77 $6.14 $5.23 $9.62 - --------------------------------------------------------------------------------------------------------- TOTAL RETURN 10.26%(b) 19.13%(c) (45.48%) 23.41% - --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Gross expenses prior to expense waiver/reimbursement 1.69%(e) 1.69% 1.79% 1.74%(e) - --------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(h) 1.69%(e) 1.69% 1.54% 1.74%(e) - --------------------------------------------------------------------------------------------------------- Net investment income (loss) (.24%)(e) (.16%) .57% (.13%)(e) - --------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- - --------------------------------------------------------------------------------------------------------- Portfolio turnover rate 32% 81% 97% 100% - ---------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 34 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCT. 31, CLASS R3 APRIL 30, 2010 -------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007(g) Net asset value, beginning of period $6.15 $5.24 $9.65 $7.89 - --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.00)(a) .05 .06 .01 Net gains (losses) (both realized and unrealized) .58 .96 (4.43) 1.85 - --------------------------------------------------------------------------------------------------------- Total from investment operations .58 1.01 (4.37) 1.86 - --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.02) (.10) (.04) (.10) - --------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlements .01 .00(a) -- -- - --------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.72 $6.15 $5.24 $9.65 - --------------------------------------------------------------------------------------------------------- TOTAL RETURN 9.64%(b) 19.63%(c) (45.43%) 23.80% - --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Gross expenses prior to expense waiver/reimbursement 1.49%(e) 1.38% 1.54% 1.49%(e) - --------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(h) 1.49%(e) 1.32% 1.29% 1.49%(e) - --------------------------------------------------------------------------------------------------------- Net investment income (loss) (.06%)(e) 1.03% .82% .12%(e) - --------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- - --------------------------------------------------------------------------------------------------------- Portfolio turnover rate 32% 81% 97% 100% - ---------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 35 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCT. 31, CLASS R4 APRIL 30, 2010 ------------------------------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006 2005 Net asset value, beginning of period $6.18 $5.26 $9.70 $7.60 $6.29 $5.20 - -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .01 .06 .07 .04 .02 .04 Net gains (losses) (both realized and unrealized) .59 .96 (4.46) 2.13 1.31 1.09 - -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .60 1.02 (4.39) 2.17 1.33 1.13 - -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.03) (.10) (.05) (.07) (.02) (.04) - -------------------------------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlements .01 .00(a) -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.76 $6.18 $5.26 $9.70 $7.60 $6.29 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 9.87%(b) 19.72%(c) (45.47%) 28.85% 21.26% 21.90% - -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Gross expenses prior to expense waiver/reimbursement 1.19%(e) 1.15% 1.29% 1.23% 1.32% 1.38% - -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(h) 1.19%(e) 1.15% 1.28% 1.23% 1.32% 1.38% - -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) .25%(e) 1.22% .83% .45% .44% .49% - -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $7 $6 $5 $10 $9 $6 - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 32% 81% 97% 100% 112% 93% - --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 36 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCT. 31, CLASS R5 APRIL 30, 2010 -------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007(g) Net asset value, beginning of period $6.16 $5.25 $9.69 $7.89 - --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02 .08 .08 .05 Net gains (losses) (both realized and unrealized) .58 .96 (4.45) 1.85 - --------------------------------------------------------------------------------------------------------- Total from investment operations .60 1.04 (4.37) 1.90 - --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.03) (.13) (.07) (.10) - --------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlements .01 .00(a) -- -- - --------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.74 $6.16 $5.25 $9.69 - --------------------------------------------------------------------------------------------------------- TOTAL RETURN 10.00%(b) 20.20%(c) (45.40%) 24.33% - --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Total expenses .94%(e) .90% 1.04% .99%(e) - --------------------------------------------------------------------------------------------------------- Net investment income (loss) .49%(e) 1.39% 1.07% .62%(e) - --------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- - --------------------------------------------------------------------------------------------------------- Portfolio turnover rate 32% 81% 97% 100% - ---------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 37 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCT. 31, CLASS W APRIL 30, 2010 -------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007(i) Net asset value, beginning of period $6.16 $5.23 $9.66 $7.83 - --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .00(a) .06 .05 .02 Net gains (losses) (both realized and unrealized) .59 .96 (4.44) 1.91 - --------------------------------------------------------------------------------------------------------- Total from investment operations .59 1.02 (4.39) 1.93 - --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.03) (.09) (.04) (.10) - --------------------------------------------------------------------------------------------------------- Proceeds from regulatory settlements .01 .00(a) -- -- - --------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.73 $6.16 $5.23 $9.66 - --------------------------------------------------------------------------------------------------------- TOTAL RETURN 9.68%(b) 19.70%(c) (45.62%) 24.87% - --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(d) Total expenses 1.35%(e) 1.30% 1.43% 1.39%(e) - --------------------------------------------------------------------------------------------------------- Net investment income (loss) .08%(e) 1.05% .68% .20%(e) - --------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- - --------------------------------------------------------------------------------------------------------- Portfolio turnover rate 32% 81% 97% 100% - ---------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) Rounds to zero. (b) During the six months ended April 30, 2010, the Fund received proceeds from a regulatory settlement. Had the Fund not received these proceeds, the total return would have been lower by 0.09%. (c) During the year ended Oct. 31, 2009, the Fund received proceeds from a regulatory settlement. Had the Fund not received these proceeds, the total return would have been lower by 0.02% (d) 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. (e) Annualized. (f) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (g) For the period from Dec. 11, 2006 (when shares became publicly available) to Oct. 31, 2007. (h) 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. (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. - -------------------------------------------------------------------------------- 38 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS OF APRIL 30, 2010) 1. ORGANIZATION Threadneedle Global Equity Fund (the Fund) is a series of RiverSource Global Series, Inc. (the Corporation) and is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified, open-end management investment company. The Corporation has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Corporation'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 April 30, 2010, RiverSource Investments, LLC* (the Investment Manager) and affiliated funds-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 * Effective May 1, 2010, RiverSource Investments, LLC is known as Columbia Management Investment Advisers, LLC. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- investments are allocated to each class of shares based upon its relative net assets. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 from the primary exchange. 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 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 - -------------------------------------------------------------------------------- 40 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- conditions as of the close of the NYSE. The fair value of a security is likely to be different from the quoted or published price, if available. 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 April 30, 2010, foreign currency holdings consisted of multiple denominations, primarily Taiwan dollars. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements. Generally, securities received as collateral subject to repurchase agreements are deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral. ILLIQUID SECURITIES At April 30, 2010, investments in securities included issues that are illiquid which the Fund currently limits to 15% of net assets, at market value, at the time of purchase. The aggregate value of such securities at April 30, 2010 was $5,949,912 representing 1.25% 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% - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- limitation specified above. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. 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 tax returns filed for the last three years. FOREIGN CAPITAL GAINS TAXES Realized gains in certain countries may be subject to foreign taxes at the fund level, at rates ranging from approximately 10% to 15%. The Fund pays such foreign taxes on net realized gains at the appropriate rate for each jurisdiction. RECENT ACCOUNTING PRONOUNCEMENT On Jan. 21, 2010, the Financial Accounting Standards Board issued an Accounting Standards Update (the amendment), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which provides guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities to disclose the input and valuation techniques used to measure fair value for both recurring and non-recurring fair value measurements for Level 2 and Level 3 positions. The amendment also requires that transfers between all levels (including Level 1 and Level 2) be disclosed on a gross basis (i.e., transfers out must be disclosed separately from transfers in), and the reason(s) for the transfer. Additionally purchases, sales, issuances and settlements must be disclosed on a gross basis in the Level 3 rollforward. The effective date of the amendment is for interim and annual periods beginning after Dec. 15, 2009, however, the requirement to - -------------------------------------------------------------------------------- 42 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- provide the Level 3 activity for purchases, sales, issuances and settlements on a gross basis will be effective for interim and annual periods beginning after Dec. 15, 2010. At this time the Fund is evaluating the implications of the amendment and the impact to the financial statements. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 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. Investments in derivative instruments may expose the Fund to certain additional risks, including those detailed below. 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. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 43 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 APRIL 30, 2010
ASSET DERIVATIVES LIABILITY DERIVATIVES ------------------------------- ------------------------------------- STATEMENT OF ASSETS STATEMENT OF ASSETS RISK EXPOSURE AND LIABILITIES AND LIABILITIES CATEGORY LOCATION FAIR VALUE LOCATION FAIR VALUE - ------------------------------------------------------------------------------------------- Unrealized depreciation on Foreign exchange forward foreign contracts N/A N/A currency contracts $11,463 - ------------------------------------------------------------------------------------------- Total N/A $11,463 - -------------------------------------------------------------------------------------------
EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME - ------------------------------------------------------------------------------ RISK EXPOSURE CATEGORY FORWARD FOREIGN CURRENCY CONTRACTS - ------------------------------------------------------------------------------ Foreign exchange contracts $42,100 - ------------------------------------------------------------------------------ Total $42,100 - ------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME - ------------------------------------------------------------------------------ RISK EXPOSURE CATEGORY FORWARD FOREIGN CURRENCY CONTRACTS - ------------------------------------------------------------------------------ Foreign exchange contracts $(11,463) - ------------------------------------------------------------------------------ Total $(11,463) - ------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 44 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- VOLUME OF DERIVATIVE ACTIVITY FORWARD FOREIGN CURRENCY CONTRACTS The gross notional amount of contracts outstanding was approximately $2.4 million at April 30, 2010. The monthly average gross notional amount for these contracts was $800,000 for the six months ended April 30, 2010. The fair value of such contracts on April 30, 2010 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 0.80% 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 $91,413 for the six months ended April 30, 2010. The management fee for the six months ended April 30, 2010 was 0.75% 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 six months ended April 30, 2010 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, - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 45 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended April 30, 2010, other expenses paid to this company were $1,288. 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 RiverSource, Seligman and Threadneedle 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. The Fund and certain other associated investment companies (together, the Guarantors), have severally, but not jointly, guaranteed the performance and observance of all the terms and conditions of a lease entered into by Seligman Data Corp. (SDC), the former transfer agent of Seligman Global Growth Fund, which was acquired by the Fund on Aug. 14, 2009 (see Note 11), including the payment of rent by SDC (the Guaranty). The lease and the Guaranty expire in January 2019. At April 30, 2010, the Fund's total potential future obligation over the life of the Guaranty is $24,977. The liability remaining at April 30, 2010 for Non-Recurring Charges amounted to $12,936 and is included within other accrued expenses in the Statement of Assets and Liabilities. * Effective May 1, 2010, RiverSource Service Corporation is known as Columbia Management Investment Services Corp. - -------------------------------------------------------------------------------- 46 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 $1,367,000 and $76,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as Jan. 31, 2010, 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. * Effective May 1, 2010, RiverSource Fund Distributors, Inc. is known as Columbia Management Investment Distributors, Inc. SALES CHARGES Sales charges, including front-end and CDSCs, received by the Distributor for distributing Fund shares were $164,031 for Class A, $9,902 for Class B and $61 for Class C for the six months ended April 30, 2010. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $154,177,650 and $208,907,871, respectively, for the six months ended April 30, 2010. Realized gains and losses are determined on an identified cost basis. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 47 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 - ---------------------------------------------------------------------- CLASS A Sold 2,052,763 7,500,867 Fund merger N/A 2,011,033 Converted from Class B* 11,132 1,463,400 Reinvested distributions 218,853 983,464 Redeemed (7,952,411) (20,645,429) - ---------------------------------------------------------------------- Net increase (decrease) (5,669,663) (8,686,665) - ---------------------------------------------------------------------- CLASS B Sold 203,765 745,833 Fund merger N/A 173,293 Reinvested distributions 6,174 -- Converted to Class A* (11,828) (1,561,833) Redeemed (703,473) (2,294,056) - ---------------------------------------------------------------------- Net increase (decrease) (505,362) (2,936,763) - ---------------------------------------------------------------------- CLASS C Sold 106,373 298,410 Fund merger N/A 977,635 Reinvested distributions 2,085 1,304 Redeemed (251,668) (411,308) - ---------------------------------------------------------------------- Net increase (decrease) (143,210) 866,041 - ---------------------------------------------------------------------- CLASS I Sold 240,718 8,069,029 Reinvested distributions 29,228 69,326 Redeemed (1,088,585) (2,849,465) - ---------------------------------------------------------------------- Net increase (decrease) (818,639) 5,288,890 - ---------------------------------------------------------------------- CLASS R2 Sold 1,651 1,844 Fund merger N/A 24,131 Reinvested distributions -- 5 Redeemed (3,653) (19,116) - ---------------------------------------------------------------------- Net increase (decrease) (2,002) 6,864 - ---------------------------------------------------------------------- CLASS R4 Sold 124,080 265,435 Reinvested distributions 4,427 17,716 Redeemed (76,137) (266,560) - ---------------------------------------------------------------------- Net increase (decrease) 52,370 16,591 - ----------------------------------------------------------------------
- -------------------------------------------------------------------------------- 48 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 - ---------------------------------------------------------------------- CLASS R5 Fund merger N/A 2,227 Reinvested distributions 11 -- Redeemed (150) -- - ---------------------------------------------------------------------- Net increase (decrease) (139) 2,227 - ----------------------------------------------------------------------
* Automatic conversion of Class B shares to Class A shares based on the original purchase date. 7. LENDING OF PORTFOLIO SECURITIES 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 are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At April 30, 2010, securities valued at $22,387,428 were on loan, secured by cash collateral of $23,539,416 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 - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 49 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- $22,210 earned from securities lending for the six months ended April 30, 2010 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 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 RiverSource, Seligman and Threadneedle funds and other institutional clients of the Investment Manager. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $65,257,360 and $65,116,927, respectively, for the six months ended April 30, 2010. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at April 30, 2010, 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 agreement, which is a collective agreement between the Fund and certain other RiverSource, Seligman and Threadneedle 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 (i) 1.25% per annum plus (ii) 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. The Fund had no borrowings during the six months ended April 30, 2010. - -------------------------------------------------------------------------------- 50 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 10. PROCEEDS FROM REGULATORY SETTLEMENT As a result of settlements of administrative proceedings brought by the Securities and Exchange Commission against unaffiliated third parties relating to market timing and/or late trading of mutual funds, the Fund received $424,540 during the six months ended April 30, 2010 and $93,216 during the year ended Oct. 31, 2009, which represented the Fund's portion of the proceeds from the settlements (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 -- 2010 SEMIANNUAL 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. 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 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 the date of issuance of the Fund's financial statements. There were no events or - -------------------------------------------------------------------------------- 52 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court (the Supreme Court), asking the Supreme Court to stay the District Court proceedings while the 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. On March 30, 2010, the Supreme Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit's decision in the Gallus case and remanded the case to the Eighth Circuit for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. 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 - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 53 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. 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. - -------------------------------------------------------------------------------- 54 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT --------------------------------------------------------------------- Columbia Management Investment Advisers, LLC ("Columbia Management" or the "investment manager"), formerly known as RiverSource Investments, LLC, a wholly- owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), Columbia Management provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). In addition, under the subadvisory agreement (the "Subadvisory Agreement") between Columbia Management and Threadneedle International Limited (the "Subadviser"), the Subadviser performs portfolio management and related services for the Fund. On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of each of the IMS Agreement and the Subadvisory Agreement (together, the "Advisory Agreements"). Columbia Management prepared detailed reports for the Board and its Contracts Committee in March and April 2010, including reports based on data provided by independent organizations and a comprehensive response to each item of information requested by independent legal counsel to the Independent Directors ("Independent Legal Counsel") in a letter to the investment manager, to assist the Board in making these determinations. All of the materials presented in March and April were first supplied in draft form to designated representatives of the Independent Directors, i.e., Independent Legal Counsel, the Chair and the Chair of the Contracts Committee (including materials relating to the Fund's new expense cap), and the final materials were revised to reflect comments provided by these Board representatives. In addition, throughout the year, the Board (or its committees) reviews information prepared by Columbia Management addressing the services Columbia Management provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts Committee, the Investment Review Committee and the Compliance Committee in determining whether to continue the Advisory Agreements. At the April 6-8, 2010 in-person Board meeting, Independent Legal Counsel reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory and subadvisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the Advisory Agreements. Nature, Extent and Quality of Services Provided by Columbia Management and the Subadviser: The Board analyzed various reports and presentations it had received detailing the services performed by Columbia Management and the - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 55 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) --------------------------------------------------------- Subadviser, as well as their expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by Columbia Management, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, most notably, management's announcement of the massive investment made in the acquisition of the long-term asset management business of Columbia Management Group, LLC (the "Columbia Transaction") and the completed integration of J. & W. Seligman & Co. Incorporated, acquisitions which should continue to enhance investment capabilities and provide access to a greater depth of experienced portfolio managers in key categories. The Board noted, in particular, that upon the close of the Columbia Transaction, RiverSource will have grown to 10 investment offices (compared to 6 in 2009). In addition, the Board reviewed information concerning the investment manager's new Chief Investment Officer upon the close of the Columbia Transaction, including the application of his particular investment philosophy, which is intended to enhance the risk and portfolio management oversight of the entire fund family. Moreover, in connection with the Board's evaluation of the overall package of services provided by Columbia Management, the Board considered the quality of the administrative and transfer agency services provided by Columbia Management's affiliates to the Fund. The Board also reviewed the financial condition of Columbia Management and its affiliates (including the Subadviser), and each entity's ability to carry out its responsibilities under the Advisory Agreements. Further, the Board considered Columbia Management's ability to retain key personnel in certain targeted areas and its expectations in this regard. The Board also discussed the acceptability of the terms of the Advisory Agreements (including the relatively broad scope of services required to be performed by Columbia Management). The Board concluded that the services being performed under the Advisory Agreements were of a reasonably high quality. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that Columbia Management and its affiliates, including the Subadviser, were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the Advisory Agreements, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the - -------------------------------------------------------------------------------- 56 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund. The Board observed that the Fund's investment performance was appropriate in light of the particular management style. Additionally, the Board reviewed the performance of the Subadviser and Columbia Management's processes for monitoring the Subadviser. The Board considered, in particular, management's rationale for recommending the continued retention of the Subadviser. Comparative Fees, Costs of Services Provided and the Profits Realized By Columbia Management and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under each of the Advisory Agreements. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to Columbia Management's profitability. They also reviewed information in the report showing the fees charged by Columbia Management to other client accounts of the investment manager (or Subadviser) (with similar investment strategies to those of the Fund). The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund (with few defined exceptions) are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund (excluding the effect of a performance incentive adjustment), with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) approximated the peer group's median expense ratio. The Board also considered the Fund's performance incentive adjustment and noted its continued appropriateness. The Board further observed that the subadvisory fees paid under the Subadvisory Agreement are borne by the investment manager and not the Fund. Based on its review, the Board concluded that the fees paid under each of the Advisory Agreements were fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered various preliminary integration plans in connection with the Columbia Transaction which, if implemented, would impact the fee structures of various RiverSource Funds. The Board was satisfied with the principles underlying these plans, which, at their preliminary stage, are designed - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT 57 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) --------------------------------------------------------- to achieve a rational, consistent pricing model across the combined fund families, as well as preserve the "pricing philosophy" of the Funds. The Board also considered the expected profitability of Columbia Management and its affiliates in connection with Columbia Management providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to Columbia Management and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. In this regard, the Board observed slightly reduced profitability in 2009 vs. 2008. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by Columbia Management as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees and subadvisory fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 8, 2010, the Board, including all of the Independent Directors, approved the renewal of each of the Advisory Agreements for an additional annual period. - -------------------------------------------------------------------------------- 58 THREADNEEDLE GLOBAL EQUITY FUND -- 2010 SEMIANNUAL REPORT PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling 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 -- 2010 SEMIANNUAL REPORT 59 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. Threadneedle(R) mutual funds are distributed by Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.), member FINRA and managed by Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC). Threadneedle mutual funds are subadvised by Threadneedle International Limited, an affiliate of Columbia Management. (C)2010 Columbia Management Investment Advisers, LLC. All (COLUMBIA MANAGEMENT LOGO) rights reserved. S-6451 Y (6/10)
Semiannual Report (COLUMBIA MANAGEMENT LOGO) THREADNEEDLE GLOBAL EQUITY INCOME FUND - -------------------------------------------------------------------------------- SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2010 THREADNEEDLE GLOBAL EQUITY INCOME FUND SEEKS TO PROVIDE SHAREHOLDERS WITH A HIGH LEVEL OF CURRENT INCOME AND SECONDARILY, GROWTH OF CAPITAL. NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 8 Portfolio of Investments........... 10 Statement of Assets and Liabilities...................... 19 Statement of Operations............ 21 Statements of Changes in Net Assets........................... 23 Financial Highlights............... 25 Notes to Financial Statements...... 33 Approval of Investment Management Services Agreement............... 48 Proxy Voting....................... 51
- -------------------------------------------------------------------------------- 2 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY - -------------------------------------------------------------------------------- > Threadneedle Global Equity Income Fund (the Fund) Class A shares gained 7.71% (excluding sales charge) for the six months ended April 30, 2010. > The Fund underperformed its benchmark, the Morgan Stanley Capital International (MSCI) All Country World Index, which advanced 10.03% for the six-month period. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2010) - --------------------------------------------------------------------------------
SINCE INCEPTION 6 MONTHS* 1 YEAR 8/1/08 - -------------------------------------------------------------------- Threadneedle Global Equity Income Fund Class A (excluding sales charge) +7.71% +38.29% -3.28% - -------------------------------------------------------------------- MSCI All Country World Index(1) (unmanaged) +10.03% +40.00% -3.27% - --------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 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. (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 -- 2010 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT APRIL 30, 2010 SINCE Without sales charge 6 MONTHS* 1 YEAR INCEPTION Class A (inception 8/1/08) +7.71% +38.29% -3.28% - -------------------------------------------------------------------- Class B (inception 8/1/08) +7.33% +37.17% -3.98% - -------------------------------------------------------------------- Class C (inception 8/1/08) +7.36% +37.11% -4.02% - -------------------------------------------------------------------- Class I (inception 8/1/08) +8.02% +38.75% -2.92% - -------------------------------------------------------------------- Class R2 (inception 8/1/08) +7.62% +37.55% -3.63% - -------------------------------------------------------------------- Class R3 (inception 8/1/08) +7.61% +38.03% -3.35% - -------------------------------------------------------------------- Class R4 (inception 8/1/08) +7.75% +38.35% -3.15% - -------------------------------------------------------------------- Class R5 (inception 8/1/08) +7.87% +38.69% -2.97% - -------------------------------------------------------------------- With sales charge Class A (inception 8/1/08) +1.51% +30.33% -6.51% - -------------------------------------------------------------------- Class B (inception 8/1/08) +2.33% +32.17% -6.11% - -------------------------------------------------------------------- Class C (inception 8/1/08) +6.36% +36.11% -4.02% - --------------------------------------------------------------------
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. * Not annualized. - -------------------------------------------------------------------------------- 4 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- MORNINGSTAR STYLE BOX(TM) - --------------------------------------------------------------------------------
Equity Style Value Blend Growth X Large Medium Size Small
The Morningstar Style Box(TM) reveals a fund's investment strategy. For equity funds, the vertical axis shows the market capitalization of the stocks owned, and the horizontal axis shows investment style (value, blend, or growth). Information shown is based on the most recent data provided by Morningstar. Threadneedle Global Equity Income Fund is designed for long-term investors with an above average risk tolerance. 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. (C)2010 Morningstar, Inc. All rights reserved. The information contained herein is proprietary to Morningstar and/or its content providers, may not be copied or distributed and is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- COUNTRY BREAKDOWN(1) (at April 30, 2010) - ---------------------------------------------------------------------
Australia 5.3% - ------------------------------------------------ Brazil 3.2% - ------------------------------------------------ Canada 1.9% - ------------------------------------------------ China 1.4% - ------------------------------------------------ Finland 5.6% - ------------------------------------------------ France 4.4% - ------------------------------------------------ Germany 3.4% - ------------------------------------------------ Greece 0.6% - ------------------------------------------------ Hong Kong 4.2% - ------------------------------------------------ Indonesia 0.8% - ------------------------------------------------ Italy 2.3% - ------------------------------------------------ Japan 3.7% - ------------------------------------------------ Jersey 1.3% - ------------------------------------------------ Malaysia 0.4% - ------------------------------------------------ Mexico 1.1% - ------------------------------------------------ Netherlands 1.1% - ------------------------------------------------ Norway 0.7% - ------------------------------------------------ Poland 0.7% - ------------------------------------------------ Singapore 2.9% - ------------------------------------------------ Spain 1.3% - ------------------------------------------------ Sweden 1.6% - ------------------------------------------------ Taiwan 5.4% - ------------------------------------------------ Thailand 0.8% - ------------------------------------------------ United Kingdom 16.9% - ------------------------------------------------ United States 27.5% - ------------------------------------------------ Other(2) 1.5% - ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. (2) Cash & Cash Equivalents. - -------------------------------------------------------------------------------- 6 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- TOP TEN HOLDINGS(1) (at April 30, 2010) - ---------------------------------------------------------------------
BP Prudhoe Bay Royalty Trust (United States) 2.5% - ------------------------------------------------ Pearson PLC (United Kingdom) 2.3% - ------------------------------------------------ Talvivaara Mining 2013 5.25% (Finland) 2.3% - ------------------------------------------------ BP PLC (United Kingdom) 2.2% - ------------------------------------------------ Merck & Co., Inc. (United States) 2.1% - ------------------------------------------------ DBS Group Holdings Ltd. (Singapore) 2.0% - ------------------------------------------------ Baytex Energy Trust Unit (Canada) 1.9% - ------------------------------------------------ Kinder Morgan Energy Partners LP (United States) 1.8% - ------------------------------------------------ Bristol-Myers Squibb Co. (United States) 1.8% - ------------------------------------------------ Nintendo Co., Ltd. (Japan) 1.8% - ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and 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 GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments; and (ii) ongoing costs, which may include management fees; distribution and service (Rule 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 April 30, 2010. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses for each class. 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 actual expense ratio for each class and an assumed rate of return of 5% per year before expenses, which is not the actual return for the class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 8 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2009 APRIL 30, 2010 THE PERIOD(a) EXPENSE RATIO - ------------------------------------------------------------------------------------------- Class A - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 1,077.10 $ 6.94 1.34% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.25 $ 6.74 1.34% - ------------------------------------------------------------------------------------------- Class B - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 1,073.30 $10.86 2.10% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.46 $10.55 2.10% - ------------------------------------------------------------------------------------------- Class C - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 1,073.60 $10.86 2.10% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $ 1,014.46 $10.55 2.10% - ------------------------------------------------------------------------------------------- Class I - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 1,080.20 $ 4.98 .96% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,020.14 $ 4.84 .96% - ------------------------------------------------------------------------------------------- Class R2 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 1,076.20 $ 9.06 1.75% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.21 $ 8.80 1.75% - ------------------------------------------------------------------------------------------- Class R3 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 1,076.10 $ 7.76 1.50% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.45 $ 7.54 1.50% - ------------------------------------------------------------------------------------------- Class R4 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 1,077.50 $ 6.53 1.26% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.65 $ 6.34 1.26% - ------------------------------------------------------------------------------------------- Class R5 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 1,078.70 $ 5.18 1.00% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.95 $ 5.04 1.00% - -------------------------------------------------------------------------------------------
(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 182/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2010: +7.71% for Class A, +7.33% for Class B, +7.36% for Class C, +8.02% for Class I, +7.62% for Class R2, +7.61% for Class R3, +7.75% for Class R4 and +7.87% for Class R5. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2010 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (94.2%)(c) ISSUER SHARES VALUE(a) AUSTRALIA (5.2%) Coal & Allied Industries Ltd. 3,105 $279,633 Coca-Cola Amatil Ltd. 41,096 424,166 Foster's Group Ltd. 55,692 279,023 National Australia Bank Ltd. 13,837 353,443 Telstra Corp., Ltd. 101,667 297,809 --------------- Total 1,634,074 - ------------------------------------------------------------------------------------- BRAZIL (3.2%) Cia de Bebidas das Americas 3,700 361,397 Multiplus SA 13,937(b) 163,634 Natura Cosmeticos SA 13,400 284,581 Redecard SA 11,500 191,016 --------------- Total 1,000,628 - ------------------------------------------------------------------------------------- CANADA (1.9%) Baytex Energy Trust Unit 17,357 586,840 - ------------------------------------------------------------------------------------- CHINA (1.4%) Bank of China Ltd., Series H 422,000(d) 217,244 CNOOC Ltd. 118,000 207,563 --------------- Total 424,807 - ------------------------------------------------------------------------------------- FINLAND (3.4%) Fortum OYJ 9,826 253,868 Sampo OYJ, Series A 19,704 484,269 Wartsila OYJ 6,295(d) 320,497 --------------- Total 1,058,634 - ------------------------------------------------------------------------------------- FRANCE (4.4%) France Telecom SA 8,548 187,109 Sanofi-Aventis SA 3,840(b) 261,930 Total SA 7,590 412,905 Vivendi SA 19,091(d) 500,747 --------------- Total 1,362,691 - ------------------------------------------------------------------------------------- GERMANY (3.4%) Allianz SE 1,327(b) 151,730 BASF SE 7,810(d) 455,457 Deutsche Telekom AG 13,917 181,183 E.ON AG 7,177 265,405 --------------- Total 1,053,775 - ------------------------------------------------------------------------------------- GREECE (0.6%) OPAP SA 8,529 173,214 - ------------------------------------------------------------------------------------- HONG KONG (4.2%) Champion REIT 1,143,000(d) 531,603 Great Eagle Holdings Ltd. 77,209 216,064 Hang Lung Properties Ltd. 38,000(d) 136,699 Hang Seng Bank Ltd. 18,300 249,414 Sun Hung Kai Properties Ltd. 12,000 166,372 --------------- Total 1,300,152 - ------------------------------------------------------------------------------------- INDONESIA (0.7%) Perusahaan Gas Negara PT 519,500 233,547 - ------------------------------------------------------------------------------------- ITALY (2.3%) ENI SpA 18,091 404,276 Snam Rete Gas SpA 24,069 114,294 Telecom Italia SpA 136,667(b) 191,053 --------------- Total 709,623 - ------------------------------------------------------------------------------------- JAPAN (3.7%) Hoya Corp. 11,200 309,830 Nintendo Co., Ltd. 1,600 537,570 Oracle Corp. Japan 6,200(d) 307,308 --------------- Total 1,154,708 - ------------------------------------------------------------------------------------- MALAYSIA (0.4%) Maxis Bhd 71,000 118,280 - ------------------------------------------------------------------------------------- MEXICO (1.1%) Grupo Continental SAB de Cv 124,300 332,237 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 10 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) NETHERLANDS (1.1%) Royal Dutch Shell PLC, Series B 10,930 $329,512 - ------------------------------------------------------------------------------------- NORWAY (0.7%) Statoil ASA 9,100 220,106 - ------------------------------------------------------------------------------------- POLAND (0.7%) KGHM Polska Miedz SA 6,201 231,415 - ------------------------------------------------------------------------------------- SINGAPORE (2.9%) Ascendas Real Estate Investment Trust 203,000(d) 283,458 DBS Group Holdings Ltd. 55,500 611,198 --------------- Total 894,656 - ------------------------------------------------------------------------------------- SPAIN (1.3%) Banco Santander SA 31,416 399,421 - ------------------------------------------------------------------------------------- SWEDEN (1.6%) Holmen AB, Series B 6,474 163,313 Skanska AB, Series B 20,313 336,657 --------------- Total 499,970 - ------------------------------------------------------------------------------------- TAIWAN (5.2%) Chunghwa Telecom Co., Ltd., ADR 14,467 282,396 Delta Electronics, Inc. 104,040 344,944 HTC Corp. 38,000 509,301 Hung Poo Real Estate Development Corp. 182,000 240,946 Taiwan Semiconductor Manufacturing Co., Ltd. 144,000 281,885 --------------- Total 1,659,472 - ------------------------------------------------------------------------------------- THAILAND (0.8%) Bangkok Bank PCL 69,500 248,147 - ------------------------------------------------------------------------------------- UNITED KINGDOM (16.7%) Admiral Group PLC 25,892 519,268 AstraZeneca PLC 8,386 370,537 BAE Systems PLC 56,710 297,219 BP PLC 76,969 671,294 British American Tobacco PLC 12,648 397,698 Close Brothers Group PLC 18,595 206,968 GlaxoSmithKline PLC 19,626 364,265 Man Group PLC 56,542 208,730 National Grid PLC 31,152 300,386 Northern Foods PLC 260,213 217,550 Pearson PLC 44,473 710,698 RSA Insurance Group PLC 80,174 148,387 Vodafone Group PLC 203,975 451,963 Wincanton PLC 106,124 381,250 --------------- Total 5,246,213 - ------------------------------------------------------------------------------------- UNITED STATES (27.3%) AllianceBernstein Holding LP 12,957 406,721 Altria Group, Inc. 24,504 519,241 AT&T, Inc. 13,937 363,197 BP Prudhoe Bay Royalty Trust 7,827 771,743 Bristol-Myers Squibb Co. 22,069 558,125 CenturyTel, Inc. 12,462 425,078 Diamond Offshore Drilling, Inc. 3,351 265,064 EI du Pont de Nemours & Co. 4,467 177,965 Foot Locker, Inc. 18,306 280,997 Home Depot, Inc. 9,946 350,597 Kinder Morgan Energy Partners LP 8,329 562,124 Merck & Co., Inc. 18,571 650,728 Mesabi Trust 8,967 177,547 Packaging Corp of America 11,999 296,735 Penn Virginia Resource Partners LP 8,172 193,431 Pfizer, Inc. 18,214 304,538 Philip Morris International, Inc. 8,405 412,517 Plum Creek Timber Co., Inc. 8,501 338,340 QUALCOMM, Inc. 4,565 176,848 Qwest Communications International, Inc. 48,681 254,602 Reynolds American, Inc. 6,741 360,104 Southern Co. 10,182 351,889
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) UNITED STATES (CONT.) Southern Copper Corp. 4,983 $152,380 Verizon Communications, Inc. 6,475 187,063 --------------- Total 8,537,574 - ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $24,737,470) $29,409,696 - ------------------------------------------------------------------------------------- OTHER (--%)(c) ISSUER SHARES VALUE(a) BRAZIL Cia de Bebidas das Americas Rights 23(b,f) $-- - ------------------------------------------------------------------------------------- TOTAL OTHER (Cost: $--) $-- - -------------------------------------------------------------------------------------
BONDS (3.5%)(c) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) FINLAND (2.2%) Talvivaara Mining Sr Unsecured (European Monetary Unit) Convertible 05-20-13 5.25% 500,000 $690,613 - ------------------------------------------------------------------------------------- JERSEY (1.3%) Intl Power Finance III (European Monetary Unit) Convertible 06-05-15 4.75 300,000 395,995 - ------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $595,522) $1,086,608 - -------------------------------------------------------------------------------------
MONEY MARKET FUND (1.4%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.21% 448,890(e) $448,890 - ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $448,890) $448,890 - -------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (6.8%) AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) REPURCHASE AGREEMENTS(G) Goldman Sachs dated 04-30-10, matures 05-03-10, repurchase price $2,109,569 0.19% $2,109,535 $2,109,535 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $2,109,535) $2,109,535 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $27,891,417)(h) $33,054,729 =====================================================================================
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 12 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- SUMMARY OF INVESTMENTS IN SECURITIES BY INDUSTRY The following table represents the portfolio investments of the Fund by industry classifications as a percentage of net assets at April 30, 2010:
PERCENTAGE OF INDUSTRY NET ASSETS VALUE(a) - ----------------------------------------------------------------------- Aerospace & Defense 1.0% $297,219 Air Freight & Logistics 1.2 381,250 Beverages 4.5 1,396,823 Capital Markets 2.6 822,419 Chemicals 2.0 633,422 Commercial Banks 6.7 2,078,867 Commercial Services & Supplies 0.5 163,634 Communications Equipment 0.6 176,848 Computers & Peripherals 1.6 509,301 Construction & Engineering 1.1 336,657 Containers & Packaging 1.0 296,735 Diversified Telecommunication Services 7.6 2,369,490 Electric 1.3 395,995 Electric Utilities 2.8 871,162 Electronic Equipment, Instruments & Components 2.1 654,774 Energy Equipment & Services 0.8 265,064 Food Products 0.7 217,550 Gas Utilities 1.1 347,841 Hotels, Restaurants & Leisure 0.6 173,214 Insurance 4.2 1,303,654 IT Services 0.6 191,016 Machinery 1.0 320,497 Media 3.9 1,211,445 Metals 2.2 690,613 Metals & Mining 1.8 561,342 Multi-Utilities 1.0 300,386 Oil, Gas & Consumable Fuels 14.9 4,639,427 Paper & Forest Products 0.5 163,313 Personal Products 0.9 284,581 Pharmaceuticals 8.0 2,510,123 Real Estate Investment Trusts (REITs) 3.7 1,153,401 Real Estate Management & Development 2.4 760,081 Semiconductors & Semiconductor Equipment 0.9 281,885 Software 2.7 844,878 Specialty Retail 2.0 631,594 Tobacco 5.4 1,689,560 Wireless Telecommunication Services 1.8 570,243 Other(1) 8.2 2,558,425 - ----------------------------------------------------------------------- Total $33,054,729 - -----------------------------------------------------------------------
(1) Cash & Cash Equivalents. See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- 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. NOTES TO PORTFOLIO OF INVESTMENTS ADR -- American Depositary Receipt (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 April 30, 2010, 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 April 30, 2010. (f) Negligible market value. (g) The table below represents securities received as collateral for repurchase agreements. This collateral is deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. On a daily basis, the market value of securities held as collateral for repurchase agreements is monitored to ensure the existence of the proper level of collateral.
GOLDMAN SACHS (0.19%) SECURITY DESCRIPTION VALUE(a) - ------------------------------------------------------------ Fannie Mae Pool $1,547,082 Freddie Mac Gold Pool 521,360 Freddie Mac Non Gold Pool 83,284 - ------------------------------------------------------------ Total market value of collateral securities $2,151,726 - ------------------------------------------------------------
(h) At April 30, 2010, the cost of securities for federal income tax purposes was approximately $27,891,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $5,765,000 Unrealized depreciation (601,000) ---------------------------------------------------------- Net unrealized appreciation $5,164,000 ----------------------------------------------------------
- -------------------------------------------------------------------------------- 14 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL 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. 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 - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- 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 April 30, 2010:
FAIR VALUE AT APRIL 30, 2010 -------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION(a) IDENTICAL ASSETS INPUTS INPUTS TOTAL - -------------------------------------------------------------------------------------------- Equity Securities Common Stocks(b) Aerospace & Defense $-- $297,219 $-- $297,219 Air Freight & Logistics -- 381,250 -- 381,250 Beverages -- 1,396,823 -- 1,396,823 Capital Markets 406,720 415,699 -- 822,419 Chemicals 177,965 455,457 -- 633,422 Commercial Banks -- 2,078,867 -- 2,078,867 Commercial Services & Supplies -- 163,634 -- 163,634 Computers & Peripherals -- 509,301 -- 509,301 Construction & Engineering -- 336,657 -- 336,657 Diversified Telecommunication Services 1,512,337 857,153 -- 2,369,490 Electric Utilities 351,890 519,272 -- 871,162 Electronic Equipment, Instruments & Components -- 654,774 -- 654,774 Food Products -- 217,550 -- 217,550 Gas Utilities -- 347,841 -- 347,841 Hotels, Restaurants & Leisure -- 173,214 -- 173,214 Insurance -- 1,303,654 -- 1,303,654 IT Services -- 191,016 -- 191,016 Machinery -- 320,497 -- 320,497 Media -- 1,211,445 -- 1,211,445 Metals & Mining 329,927 231,415 -- 561,342 Multi-Utilities -- 300,386 -- 300,386 Oil, Gas & Consumable Fuels 2,114,138 2,525,289 -- 4,639,427 Paper & Forest Products -- 163,313 -- 163,313 Personal Products -- 284,581 -- 284,581 Pharmaceuticals 1,513,391 996,732 -- 2,510,123 Real Estate Investment Trusts (REITs) 338,340 815,061 -- 1,153,401
- -------------------------------------------------------------------------------- 16 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED)
FAIR VALUE AT APRIL 30, 2010 -------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION(a) IDENTICAL ASSETS INPUTS INPUTS TOTAL - -------------------------------------------------------------------------------------------- Real Estate Management & Development $-- $760,081 $-- $760,081 Semiconductors & Semiconductor Equipment -- 281,885 -- 281,885 Software -- 844,878 -- 844,878 Tobacco 1,291,861 397,699 -- 1,689,560 Wireless Telecommunication Services -- 570,243 -- 570,243 Other Industries 1,370,241 -- -- 1,370,241 - -------------------------------------------------------------------------------------------- Total Equity Securities 9,406,810 20,002,886 -- 29,409,696 - -------------------------------------------------------------------------------------------- Bonds Corporate Debt Securities Electric 395,995 395,995 Metals -- -- 690,613 690,613 - -------------------------------------------------------------------------------------------- Total Bonds -- 395,995 690,613 1,086,608 - -------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(c) 448,890 -- -- 448,890 Investments of Cash Collateral Received for Securities on Loan -- 2,109,535 -- 2,109,535 - -------------------------------------------------------------------------------------------- Total Other 448,890 2,109,535 -- 2,558,425 - -------------------------------------------------------------------------------------------- Total $9,855,700 $22,508,416 $690,613 $33,054,729 - --------------------------------------------------------------------------------------------
(a) See the Portfolio of Investments for all investment classifications not indicated in the table. (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 April 30, 2010. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- 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, 2009 $618,029 Accrued discounts/premiums 32,901 Realized gain (loss) -- Change in unrealized appreciation (depreciation)* 39,683 Net purchases (sales) -- Transfers in and/or out of Level 3 -- - ----------------------------------------------------------------- Balance as of April 30, 2010 $690,613 - -----------------------------------------------------------------
* Change in unrealized appreciation (depreciation) relating to securities held at April 30, 2010 was $39,683. 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 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 800.221.2450. - -------------------------------------------------------------------------------- 18 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- APRIL 30, 2010 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $25,332,992) $30,496,304 Affiliated money market fund (identified cost $448,890) 448,890 Investments of cash collateral received for securities on loan (identified cost $2,109,535) 2,109,535 - ------------------------------------------------------------------------------ Total investments in securities (identified cost $27,891,417) 33,054,729 Foreign currency holdings (identified cost $129,243) 131,745 Capital shares receivable 31,591 Dividends and accrued interest receivable 196,811 Receivable from the Investment Manager 14,564 - ------------------------------------------------------------------------------ Total assets 33,429,440 - ------------------------------------------------------------------------------ LIABILITIES Capital shares payable 48,998 Payable upon return of securities loaned 2,109,535 Accrued investment management services fees 689 Accrued distribution fees 244 Accrued transfer agency fees 137 Accrued administrative services fees 69 Other accrued expenses 51,958 - ------------------------------------------------------------------------------ Total liabilities 2,211,630 - ------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $31,217,810 - ------------------------------------------------------------------------------ REPRESENTED BY Capital stock -- $.01 par value $ 35,030 Additional paid-in capital 27,317,833 Undistributed net investment income 54,106 Accumulated net realized gain (loss) (1,354,149) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 5,164,990 - ------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $31,217,810 - ------------------------------------------------------------------------------ *Value of securities on loan $ 1,995,696 - ------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 19 STATEMENT OF ASSETS AND LIABILITIES (continued) -------------------------------- APRIL 30, 2010 (UNAUDITED)
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $23,906,604 2,682,621 $8.91(1) Class B $ 2,278,967 256,312 $8.89 Class C $ 593,685 66,809 $8.89 Class I $ 4,400,481 493,000 $8.93 Class R2 $ 9,195 1,031 $8.92 Class R3 $ 8,920 1,000 $8.92 Class R4 $ 11,034 1,237 $8.92 Class R5 $ 8,924 1,000 $8.92 - -----------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $9.45. 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. - -------------------------------------------------------------------------------- 20 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED APRIL 30, 2010 (UNAUDITED)
INVESTMENT INCOME Income: Dividends $ 708,035 Interest 70,606 Income distributions from affiliated money market fund 481 Income from securities lending -- net 14,489 Less foreign taxes withheld (51,775) - ----------------------------------------------------------------------------- Total income 741,836 - ----------------------------------------------------------------------------- Expenses: Investment management services fees 104,159 Distribution fees Class A 28,600 Class B 11,099 Class C 2,592 Class R2 22 Class R3 11 Transfer agency fees Class A 20,996 Class B 2,178 Class C 489 Class R2 2 Class R3 2 Class R4 3 Class R5 2 Administrative services fees 12,002 Plan administration services fees Class R2 11 Class R3 11 Class R4 14 Compensation of board members 520 Custodian fees 3,740 Printing and postage 9,820 Registration fees 25,745 Professional fees 13,770 Other 5,216 - ----------------------------------------------------------------------------- Total expenses 241,004 Expenses waived/reimbursed by the Investment Manager and its affiliates (37,413) - ----------------------------------------------------------------------------- Total net expenses 203,591 - ----------------------------------------------------------------------------- Investment income (loss) -- net 538,245 - -----------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 21 STATEMENT OF OPERATIONS (continued) -------------------------------------------- SIX MONTHS ENDED APRIL 30, 2010 (UNAUDITED)
REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $ 202,724 Foreign currency transactions 9,350 - ----------------------------------------------------------------------------- Net realized gain (loss) on investments 212,074 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,431,026 - ----------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 1,643,100 - ----------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $2,181,345 - -----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 22 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 538,245 $ 878,788 Net realized gain (loss) on investments 212,074 (1,378,960) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,431,026 6,134,900 - -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 2,181,345 5,634,728 - -------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (583,983) (424,203) Class B (48,485) (34,776) Class C (11,088) (5,653) Class I (120,800) (104,698) Class R2 (212) (165) Class R3 (222) (182) Class R4 (286) (207) Class R5 (243) (209) - -------------------------------------------------------------------------------------------------- Total distributions (765,319) (570,093) - --------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 23 STATEMENTS OF CHANGES IN NET ASSETS (continued) --------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 (UNAUDITED) CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 3,601,479 $15,276,944 Class B shares 202,093 1,551,236 Class C shares 118,779 352,555 Class R2 shares 275 -- Class R4 shares -- 8,500 Reinvestment of distributions at net asset value Class A shares 570,441 416,219 Class B shares 47,438 34,203 Class C shares 10,484 5,149 Class R2 shares 1 -- Class R4 shares 54 11 Conversions from Class B to Class A Class A shares -- 359,240 Class B shares -- (359,240) Payments for redemptions Class A shares (2,419,605) (4,280,739) Class B shares (144,154) (303,100) Class C shares (7,276) (35,779) Class R4 shares -- (7,133) - -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 1,980,009 13,018,066 - -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 3,396,035 18,082,701 Net assets at beginning of period 27,821,775 9,739,074 - -------------------------------------------------------------------------------------------------- Net assets at end of period $31,217,810 $27,821,775 - -------------------------------------------------------------------------------------------------- Undistributed net investment income $ 54,106 $ 281,180 - --------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 24 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL 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 SIX MONTHS ENDED ------------------- PER SHARE DATA APRIL 30, 2010 2009 2008(a) (UNAUDITED) Net asset value, beginning of period $8.49 $7.24 $9.96 - -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .16 .30 .07 Net gains (losses) (both realized and unrealized) .49 1.14 (2.77) - -------------------------------------------------------------------------------------------- Total from investment operations .65 1.44 (2.70) - -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.23) (.19) (.02) Tax return of capital -- -- (.00)(b) - -------------------------------------------------------------------------------------------- Total distributions (.23) (.19) (.02) - -------------------------------------------------------------------------------------------- Net asset value, end of period $8.91 $8.49 $7.24 - -------------------------------------------------------------------------------------------- TOTAL RETURN 7.71% 20.16% (27.12%) - -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.60%(d) 2.35% 4.71%(d) - -------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.34%(d) 1.50% 1.45%(d) - -------------------------------------------------------------------------------------------- Net investment income (loss) 3.60%(d) 4.19% 3.78%(d) - -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $24 $21 $5 - -------------------------------------------------------------------------------------------- Portfolio turnover rate 12% 45% 10% - --------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 25 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS B SIX MONTHS ENDED ------------------- PER SHARE DATA APRIL 30, 2010 2009 2008(a) (UNAUDITED) Net asset value, beginning of period $8.47 $7.24 $9.96 - -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .12 .26 .06 Net gains (losses) (both realized and unrealized) .50 1.11 (2.76) - -------------------------------------------------------------------------------------------- Total from investment operations .62 1.37 (2.70) - -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.20) (.14) (.02) Tax return of capital -- -- (.00)(b) - -------------------------------------------------------------------------------------------- Total distributions (.20) (.14) (.02) - -------------------------------------------------------------------------------------------- Net asset value, end of period $8.89 $8.47 $7.24 - -------------------------------------------------------------------------------------------- TOTAL RETURN 7.33% 19.14% (27.15%) - -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 2.36%(d) 3.18% 5.48%(d) - -------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 2.10%(d) 2.26% 2.21%(d) - -------------------------------------------------------------------------------------------- Net investment income (loss) 2.84%(d) 3.64% 3.11%(d) - -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $2 $1 - -------------------------------------------------------------------------------------------- Portfolio turnover rate 12% 45% 10% - --------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 26 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS C SIX MONTHS ENDED ------------------- PER SHARE DATA APRIL 30, 2010 2009 2008(a) (UNAUDITED) Net asset value, beginning of period $8.47 $7.24 $9.96 - -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .13 .25 .07 Net gains (losses) (both realized and unrealized) .49 1.13 (2.77) - -------------------------------------------------------------------------------------------- Total from investment operations .62 1.38 (2.70) - -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.20) (.15) (.02) Tax return of capital -- -- (.00)(b) - -------------------------------------------------------------------------------------------- Total distributions (.20) (.15) (.02) - -------------------------------------------------------------------------------------------- Net asset value, end of period $8.89 $8.47 $7.24 - -------------------------------------------------------------------------------------------- TOTAL RETURN 7.36% 19.21% (27.18%) - -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 2.36%(d) 3.05% 5.15%(d) - -------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 2.10%(d) 2.25% 2.21%(d) - -------------------------------------------------------------------------------------------- Net investment income (loss) 2.92%(d) 3.44% 3.31%(d) - -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $-- $-- - -------------------------------------------------------------------------------------------- Portfolio turnover rate 12% 45% 10% - --------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 27 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS I SIX MONTHS ENDED ------------------- PER SHARE DATA APRIL 30, 2010 2009 2008(a) (UNAUDITED) Net asset value, beginning of period $8.50 $7.25 $9.96 - -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .17 .33 .09 Net gains (losses) (both realized and unrealized) .51 1.13 (2.77) - -------------------------------------------------------------------------------------------- Total from investment operations .68 1.46 (2.68) - -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.25) (.21) (.03) Tax return of capital -- -- (.00)(b) - -------------------------------------------------------------------------------------------- Total distributions (.25) (.21) (.03) - -------------------------------------------------------------------------------------------- Net asset value, end of period $8.93 $8.50 $7.25 - -------------------------------------------------------------------------------------------- TOTAL RETURN 8.02% 20.53% (27.00%) - -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.17%(d) 1.88% 4.12%(d) - -------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) .96%(d) 1.09% 1.07%(d) - -------------------------------------------------------------------------------------------- Net investment income (loss) 3.97%(d) 4.52% 3.95%(d) - -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $4 $4 $4 - -------------------------------------------------------------------------------------------- Portfolio turnover rate 12% 45% 10% - --------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 28 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R2 SIX MONTHS ENDED ------------------- PER SHARE DATA APRIL 30, 2010 2009 2008(a) (UNAUDITED) Net asset value, beginning of period $8.49 $7.25 $9.96 - -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .14 .27 .07 Net gains (losses) (both realized and unrealized) .50 1.13 (2.77) - -------------------------------------------------------------------------------------------- Total from investment operations .64 1.40 (2.70) - -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.21) (.16) (.01) Tax return of capital -- -- (.00)(b) - -------------------------------------------------------------------------------------------- Total distributions (.21) (.16) (.01) - -------------------------------------------------------------------------------------------- Net asset value, end of period $8.92 $8.49 $7.25 - -------------------------------------------------------------------------------------------- TOTAL RETURN 7.62% 19.63% (27.10%) - -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.95%(d) 2.68% 4.92%(d) - -------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.75%(d) 1.83% 1.72%(d) - -------------------------------------------------------------------------------------------- Net investment income (loss) 3.20%(d) 3.78% 3.36%(d) - -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - -------------------------------------------------------------------------------------------- Portfolio turnover rate 12% 45% 10% - --------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 29 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS R3 SIX MONTHS ENDED ------------------- PER SHARE DATA APRIL 30, 2010 2009 2008(a) (UNAUDITED) Net asset value, beginning of period $8.50 $7.25 $9.96 - -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .15 .29 .08 Net gains (losses) (both realized and unrealized) .49 1.14 (2.77) - -------------------------------------------------------------------------------------------- Total from investment operations .64 1.43 (2.69) - -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.22) (.18) (.02) Tax return of capital -- -- (.00)(b) - -------------------------------------------------------------------------------------------- Total distributions (.22) (.18) (.02) - -------------------------------------------------------------------------------------------- Net asset value, end of period $8.92 $8.50 $7.25 - -------------------------------------------------------------------------------------------- TOTAL RETURN 7.61% 20.04% (27.07%) - -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.70%(d) 2.43% 4.68%(d) - -------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.50%(d) 1.58% 1.47%(d) - -------------------------------------------------------------------------------------------- Net investment income (loss) 3.43%(d) 4.03% 3.61%(d) - -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - -------------------------------------------------------------------------------------------- Portfolio turnover rate 12% 45% 10% - --------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 30 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R4 SIX MONTHS ENDED ------------------- PER SHARE DATA APRIL 30, 2010 2009 2008(a) (UNAUDITED) Net asset value, beginning of period $8.50 $7.25 $9.96 - -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .16 .28 .08 Net gains (losses) (both realized and unrealized) .49 1.17 (2.77) - -------------------------------------------------------------------------------------------- Total from investment operations .65 1.45 (2.69) - -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.23) (.20) (.02) Tax return of capital -- -- (.00)(b) - -------------------------------------------------------------------------------------------- Total distributions (.23) (.20) (.02) - -------------------------------------------------------------------------------------------- Net asset value, end of period $8.92 $8.50 $7.25 - -------------------------------------------------------------------------------------------- TOTAL RETURN 7.75% 20.26% (27.04%) - -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.47%(d) 2.20% 4.42%(d) - -------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.26%(d) 1.33% 1.24%(d) - -------------------------------------------------------------------------------------------- Net investment income (loss) 3.66%(d) 4.02% 3.89%(d) - -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - -------------------------------------------------------------------------------------------- Portfolio turnover rate 12% 45% 10% - --------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 31 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS R5 SIX MONTHS ENDED ------------------- PER SHARE DATA APRIL 30, 2010 2009 2008(a) (UNAUDITED) Net asset value, beginning of period $8.50 $7.25 $9.96 - -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .17 .32 .09 Net gains (losses) (both realized and unrealized) .49 1.14 (2.77) - -------------------------------------------------------------------------------------------- Total from investment operations .66 1.46 (2.68) - -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.24) (.21) (.03) Tax return of capital -- -- (.00)(b) - -------------------------------------------------------------------------------------------- Total distributions (.24) (.21) (.03) - -------------------------------------------------------------------------------------------- Net asset value, end of period $8.92 $8.50 $7.25 - -------------------------------------------------------------------------------------------- TOTAL RETURN 7.87% 20.47% (27.00%) - -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.21%(d) 1.93% 4.17%(d) - -------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.00%(d) 1.14% 1.12%(d) - -------------------------------------------------------------------------------------------- Net investment income (loss) 3.93%(d) 4.47% 3.91%(d) - -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - -------------------------------------------------------------------------------------------- Portfolio turnover rate 12% 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. - -------------------------------------------------------------------------------- 32 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS OF APRIL 30, 2010) 1. ORGANIZATION Threadneedle Global Equity Income Fund (the Fund) is a series of RiverSource Global Series, Inc. (the Corporation) and is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified, open-end management investment company. The Corporation has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Corporation'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. 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 April 30, 2010, RiverSource Investment, LLC* (the Investment Manager) owned 100% of Class I, Class R3 and Class R5 shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. * Effective May 1, 2010, RiverSource Investments, LLC is known as Columbia Management Investment Advisers, LLC. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 from the primary exchange. 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 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. The fair value of a security is likely to be different from the quoted or published price, if available. - -------------------------------------------------------------------------------- 34 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 April 30, 2010, foreign currency holdings consisted of multiple denominations. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements. Generally, securities received as collateral subject to repurchase agreements are deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral. 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 INCOME FUND -- 2010 SEMIANNUAL REPORT 35 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 tax returns filed for the last three years. FOREIGN CAPITAL GAINS TAXES Realized gains in certain countries may be subject to foreign taxes at the fund level, at rates ranging from approximately 10% to 15%. The Fund pays such foreign taxes on net realized gains at the appropriate rate for each jurisdiction. RECENT ACCOUNTING PRONOUNCEMENT On Jan. 21, 2010, the Financial Accounting Standards Board issued an Accounting Standards Update (the amendment), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which provides guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities to disclose the input and valuation techniques used to measure fair value for both recurring and non-recurring fair value measurements for Level 2 and Level 3 positions. The amendment also requires that transfers between all levels (including Level 1 and Level 2) be disclosed on a gross basis (i.e., transfers out must be disclosed separately from transfers in), and the reason(s) for the transfer. Additionally purchases, sales, issuances and settlements must be disclosed on a gross basis in the Level 3 rollforward. The effective date of the amendment is for interim and annual periods beginning after Dec. 15, 2009, however, the requirement to provide the Level 3 activity for purchases, sales, issuances and settlements on a gross basis will be effective for interim and annual periods beginning after Dec. 15, 2010. At this time the Fund is evaluating the implications of the amendment and the impact to the financial statements. DIVIDENDS TO SHAREHOLDERS Dividends from net investment income, declared and paid each calendar quarter, when available, are reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the last income dividend of the calendar year. - -------------------------------------------------------------------------------- 36 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 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. Investments in derivative instruments may expose the Fund to certain additional risks, including those detailed below. 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. 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 - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 APRIL 30, 2010 At April 30, 2010, the Fund had no outstanding derivatives. EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME - ------------------------------------------------------------------------------ RISK EXPOSURE CATEGORY FORWARD FOREIGN CURRENCY CONTRACTS - ------------------------------------------------------------------------------ Foreign exchange contracts $3,579 - ------------------------------------------------------------------------------ Total $3,579 - ------------------------------------------------------------------------------
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 April 30, 2010 the Fund had no outstanding forward foreign currency contracts. The average gross notional amount of forward foreign currency contracts opened and closed was $122,000 for the six months ended April 30, 2010. 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 decreased the - -------------------------------------------------------------------------------- 38 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- management fee by $15,859 for the six months ended April 30, 2010. The management fee for the six months ended April 30, 2010 was 0.69% 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 six months ended April 30, 2010 was 0.08% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended April 30, 2010, other expenses paid to this company were $75. 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 RiverSource, Seligman and Threadneedle 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 * Effective May 1, 2010, RiverSource Service Corporation is known as Columbia Management Investment Services Corp. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 $97,000 and $6,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of Jan. 31, 2010, 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. * Effective May 1, 2010, RiverSource Fund Distributors, Inc. is known as Columbia Management Investment Distributors, Inc. SALES CHARGES Sales charges, including front-end and CDSCs, received by the Distributor for distributing Fund shares were $22,501 for Class A for the six months ended April 30, 2010. - -------------------------------------------------------------------------------- 40 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended April 30, 2010, 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.............................................. 1.34% Class B.............................................. 2.10 Class C.............................................. 2.10 Class I.............................................. 0.96 Class R2............................................. 1.75 Class R3............................................. 1.50 Class R4............................................. 1.26 Class R5............................................. 1.00
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class A............................................. $4,979 Class B............................................. 513 Class C............................................. 113
The management fees waived/reimbursed at the Fund level were $31,808. The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Dec. 31, 2010, unless sooner terminated at the sole 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. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $5,029,671 and $3,537,739, respectively, for the six months ended April 30, 2010. 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:
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 - ---------------------------------------------------------------------- CLASS A Sold 407,345 2,236,131 Converted from Class B* -- 44,959 Reinvested distributions 65,356 54,237 Redeemed (273,495) (601,493) - ---------------------------------------------------------------------- Net increase (decrease) 199,206 1,733,834 - ---------------------------------------------------------------------- CLASS B Sold 23,035 235,158 Reinvested distributions 5,448 4,436 Converted to Class A* -- (45,070) Redeemed (16,276) (40,049) - ---------------------------------------------------------------------- Net increase (decrease) 12,207 154,475 - ---------------------------------------------------------------------- CLASS C Sold 13,354 49,579 Reinvested distributions 1,204 660 Redeemed (811) (5,153) - ---------------------------------------------------------------------- Net increase (decrease) 13,747 45,086 - ---------------------------------------------------------------------- CLASS R2 Sold 31 -- - ---------------------------------------------------------------------- Net increase (decrease) 31 -- - ---------------------------------------------------------------------- CLASS R4 Sold -- 1,151 Reinvested distributions 7 2 Redeemed -- (1,122) - ---------------------------------------------------------------------- Net increase (decrease) 7 31 - ----------------------------------------------------------------------
* Automatic conversion of Class B shares to Class A shares based on the original purchase date. - -------------------------------------------------------------------------------- 42 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 7. LENDING OF PORTFOLIO SECURITIES 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 are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At April 30, 2010, securities valued at $1,995,696 were on loan, secured by cash collateral of $2,109,535 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 $14,489 earned from securities lending for the six months ended April 30, 2010 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 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 RiverSource, Seligman and Threadneedle funds and other institutional clients of the Investment Manager. The cost of the Fund's purchases and proceeds from sales of shares of - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 43 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- RiverSource Short-Term Cash Fund aggregated $3,647,772 and $3,542,671, respectively, for the six months ended April 30, 2010. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at April 30, 2010, 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 agreement, which is a collective agreement between the Fund and certain other RiverSource, Seligman and Threadneedle 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 (i) 1.25% per annum plus (ii) 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. The Fund had no borrowings during the six months ended April 30, 2010. 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. - -------------------------------------------------------------------------------- 44 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 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 - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 45 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 (the Supreme Court), asking the Supreme Court to stay the District Court proceedings while the 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. On March 30, 2010, the Supreme Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit's decision in the Gallus case and remanded the case to the Eighth Circuit for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. 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. 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 - -------------------------------------------------------------------------------- 46 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 47 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- Columbia Management Investment Advisers, LLC ("Columbia Management" or the "investment manager"), formerly known as RiverSource Investments, LLC, a wholly- owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), Columbia Management provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). In addition, under the subadvisory agreement (the "Subadvisory Agreement") between Columbia Management and Threadneedle International Limited (the "Subadviser"), the Subadviser performs portfolio management and related services for the Fund. On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of each of the IMS Agreement and the Subadvisory Agreement (together, the "Advisory Agreements"). Columbia Management prepared detailed reports for the Board and its Contracts Committee in March and April 2010, including reports based on data provided by independent organizations and a comprehensive response to each item of information requested by independent legal counsel to the Independent Directors ("Independent Legal Counsel") in a letter to the investment manager, to assist the Board in making these determinations. All of the materials presented in March and April were first supplied in draft form to designated representatives of the Independent Directors, i.e., Independent Legal Counsel, the Chair and the Chair of the Contracts Committee (including materials relating to the Fund's expense cap), and the final materials were revised to reflect comments provided by these Board representatives. In addition, throughout the year, the Board (or its committees) reviews information prepared by Columbia Management addressing the services Columbia Management provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts Committee, the Investment Review Committee and the Compliance Committee in determining whether to continue the Advisory Agreements. At the April 6-8, 2010 in-person Board meeting, Independent Legal Counsel reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory and subadvisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the Advisory Agreements. Nature, Extent and Quality of Services Provided by Columbia Management and the Subadviser: The Board analyzed various reports and presentations it had received detailing the services performed by Columbia Management and the - -------------------------------------------------------------------------------- 48 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- Subadviser, as well as their expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by Columbia Management, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, most notably, management's announcement of the massive investment made in the acquisition of the long-term asset management business of Columbia Management Group, LLC (the "Columbia Transaction") and the completed integration of J. & W. Seligman & Co. Incorporated, acquisitions which should continue to enhance investment capabilities and provide access to a greater depth of experienced portfolio managers in key categories. The Board noted, in particular, that upon the close of the Columbia Transaction, RiverSource will have grown to 10 investment offices (compared to 6 in 2009). In addition, the Board reviewed information concerning the investment manager's new Chief Investment Officer upon the close of the Columbia Transaction, including the application of his particular investment philosophy, which is intended to enhance the risk and portfolio management oversight of the entire fund family. Moreover, in connection with the Board's evaluation of the overall package of services provided by Columbia Management, the Board considered the quality of the administrative and transfer agency services provided by Columbia Management's affiliates to the Fund. The Board also reviewed the financial condition of Columbia Management and its affiliates (including the Subadviser), and each entity's ability to carry out its responsibilities under the Advisory Agreements. Further, the Board considered Columbia Management's ability to retain key personnel in certain targeted areas and its expectations in this regard. The Board also discussed the acceptability of the terms of the Advisory Agreements (including the relatively broad scope of services required to be performed by Columbia Management). The Board concluded that the services being performed under the Advisory Agreements were of a reasonably high quality. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that Columbia Management and its affiliates, including the Subadviser, were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the Advisory Agreements, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered detailed reports containing data prepared by an independent - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 49 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund. The Board observed that the Fund's investment performance was appropriate in light of the particular management style. Additionally, the Board reviewed the performance of the Subadviser and Columbia Management's processes for monitoring the Subadviser. The Board considered, in particular, management's rationale for recommending the continued retention of the Subadviser. Comparative Fees, Costs of Services Provided and the Profits Realized By Columbia Management and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under each of the Advisory Agreements. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to Columbia Management's profitability. The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund (with few defined exceptions) are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund (excluding the effect of a performance incentive adjustment), with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) was below the peer group's median expense ratio shown in the reports. The Board also considered the Fund's performance incentive adjustment and noted its continued appropriateness. The Board further observed that the subadvisory fees paid under the Subadvisory Agreement are borne by the investment manager and not the Fund. Based on its review, the Board concluded that the fees paid under each of the Advisory Agreements were fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered various preliminary integration plans in connection with the Columbia Transaction which, if implemented, would impact the fee structures of various RiverSource Funds. The Board was satisfied with the principles underlying these plans, which, at their preliminary stage, are designed to achieve a rational, consistent pricing model across the combined fund families, as well as preserve the "pricing philosophy" of the Funds. - -------------------------------------------------------------------------------- 50 THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- The Board also considered the expected profitability of Columbia Management and its affiliates in connection with Columbia Management providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to Columbia Management and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. In this regard, the Board observed slightly reduced profitability in 2009 vs. 2008. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by Columbia Management as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees and subadvisory fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 8, 2010, the Board, including all of the Independent Directors, approved the renewal of each of the Advisory Agreements for an additional annual period. PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling 800.221.2450; contacting your financial intermediary; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY INCOME FUND -- 2010 SEMIANNUAL REPORT 51 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. Threadneedle(R) mutual funds are distributed by Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.), member FINRA and managed by Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC). Threadneedle mutual funds are subadvised by Threadneedle International Limited, an affiliate of Columbia Management. (C)2010 Columbia Management Investment Advisers, LLC. All (COLUMBIA MANAGEMENT LOGO) rights reserved. S-6531 C (6/10)
Semiannual Report (COLUMBIA MANAGEMENT LOGO) THREADNEEDLE GLOBAL EXTENDED ALPHA FUND - -------------------------------------------------------------------------------- SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2010 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG- TERM CAPITAL GROWTH. NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 8 Portfolio of Investments........... 11 Statement of Assets and Liabilities...................... 20 Statement of Operations............ 22 Statements of Changes in Net Assets........................... 24 Financial Highlights............... 25 Notes to Financial Statements...... 30 Approval of Investment Management Services Agreement............... 47 Proxy Voting....................... 50
- -------------------------------------------------------------------------------- 2 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY - -------------------------------------------------------------------------------- > Threadneedle Global Extended Alpha Fund (the Fund) Class A shares gained 13.95% (excluding sales charge) for the six months ended April 30, 2010. > The Fund outperformed its benchmark, the Morgan Stanley Capital International (MSCI) All Country World Index, which advanced 10.03% for the six-month period. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2010) - --------------------------------------------------------------------------------
SINCE INCEPTION 6 MONTHS* 1 YEAR 8/1/08 - -------------------------------------------------------------------- Threadneedle Global Extended Alpha Fund Class A (excluding sales charge) +13.95% +45.63% +0.32% - -------------------------------------------------------------------- MSCI All Country World Index(1) (unmanaged) +10.03% +40.00% -3.27% - --------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 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. (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 -- 2010 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT APRIL 30, 2010 SINCE Without sales charge 6 MONTHS* 1 YEAR INCEPTION Class A (inception 8/1/08) +13.95% +45.63% +0.32% - -------------------------------------------------------------------- Class B (inception 8/1/08) +13.55% +44.59% -0.47% - -------------------------------------------------------------------- Class C (inception 8/1/08) +13.50% +44.50% -0.46% - -------------------------------------------------------------------- Class I (inception 8/1/08) +14.09% +46.08% +0.62% - -------------------------------------------------------------------- Class R2 (inception 8/1/08) +13.71% +45.00% -0.10% - -------------------------------------------------------------------- Class R3 (inception 8/1/08) +13.78% +45.28% +0.14% - -------------------------------------------------------------------- Class R4 (inception 8/1/08) +14.00% +45.76% +0.41% - -------------------------------------------------------------------- Class R5 (inception 8/1/08) +14.12% +46.05% +0.57% - -------------------------------------------------------------------- With sales charge Class A (inception 8/1/08) +7.40% +37.25% -3.03% - -------------------------------------------------------------------- Class B (inception 8/1/08) +8.55% +39.59% -2.73% - -------------------------------------------------------------------- Class C (inception 8/1/08) +12.50% +43.50% -0.46% - --------------------------------------------------------------------
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. * Not annualized. - -------------------------------------------------------------------------------- 4 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- MORNINGSTAR STYLE BOX(TM) - --------------------------------------------------------------------------------
Equity Style Value Blend Growth X Large Medium Size Small
The Morningstar Style Box(TM) reveals a fund's investment strategy. For equity funds, the vertical axis shows the market capitalization of the stocks owned, and the horizontal axis shows investment style (value, blend, or growth). Information shown is based on the most recent data provided by Morningstar. Threadneedle Global Extended Alpha Fund is designed for long-term investors with an above average risk tolerance. 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 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 proceeds from the short sales to invest in additional long securities. Leveraging 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. Derivative instruments are financial instruments that have a value dependent on the value of something else, such as one or more underlying securities. Gains or losses may be substantial, because a relatively small price movement in an underlying security may result in a substantial gain or loss for the Fund. See the Fund's prospectus for information on these and other risks associated with the Fund. 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. (C)2010 Morningstar, Inc. All rights reserved. The information contained herein is proprietary to Morningstar and/or its content providers, may not be copied or distributed and is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- PORTFOLIO BREAKDOWN BY COUNTRY(1) (at April 30, 2010; % of portfolio and portfolio swap(2)) - --------------------------------------------------------------------------------
LONG SHORT(3) NET Australia 1.4% 0.0% 1.4% - ------------------------------------------------------------------- Bermuda 1.1% -1.1% 0.0% - ------------------------------------------------------------------- Canada 2.0% 0.0% 2.0% - ------------------------------------------------------------------- China 0.9% 0.0% 0.9% - ------------------------------------------------------------------- Denmark 1.5% -1.2% 0.3% - ------------------------------------------------------------------- France 2.6% -0.9% 1.7% - ------------------------------------------------------------------- Germany 2.7% 0.0% 2.7% - ------------------------------------------------------------------- Hong Kong 2.9% 0.0% 2.9% - ------------------------------------------------------------------- India 1.8% 0.0% 1.8% - ------------------------------------------------------------------- Indonesia 2.5% 0.0% 2.5% - ------------------------------------------------------------------- Ireland 1.2% 0.0% 1.2% - ------------------------------------------------------------------- Japan 2.5% -1.4% 1.1% - ------------------------------------------------------------------- Mexico 1.2% 0.0% 1.2% - ------------------------------------------------------------------- Netherlands 2.9% -1.0% 1.9% - ------------------------------------------------------------------- Panama 1.5% 0.0% 1.5% - ------------------------------------------------------------------- Poland 0.7% 0.0% 0.7% - ------------------------------------------------------------------- Portugal 0.8% 0.0% 0.8% - ------------------------------------------------------------------- Singapore 1.1% 0.0% 1.1% - ------------------------------------------------------------------- South Korea 3.9% 0.0% 3.9% - ------------------------------------------------------------------- Spain 0.6% -1.0% -0.4% - ------------------------------------------------------------------- Switzerland 5.8% -0.9% 4.9% - ------------------------------------------------------------------- Taiwan 1.0% 0.0% 1.0% - ------------------------------------------------------------------- Turkey 1.5% 0.0% 1.5% - ------------------------------------------------------------------- United Kingdom 15.1% 0.0% 15.1% - ------------------------------------------------------------------- United States 60.4% -11.8% 48.6% - ------------------------------------------------------------------- Other(4) -0.3% 0.0% -0.3% - ------------------------------------------------------------------- 119.3% -19.3% 100.0% - -------------------------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. (2) The Fund has entered into a portfolio swap agreement. A portfolio swap allows the Fund to obtain exposure to a custom basket of securities and foreign markets (both long and short exposures) without owning or taking physical custody of such securities. The portfolio breakdown by country for each underlying position in the custom basket has been estimated by multiplying the notional amount of each security by its April 30, 2010 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. - -------------------------------------------------------------------------------- 6 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- (3) At April 30, 2010, the Fund had no short positions. However, the Fund had entered into a portfolio swap in order to gain short exposure to foreign equity markets. See Portfolio Swap Outstanding at April 30, 2010 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" pages 14-15. TOP TEN HOLDINGS(1) (at April 30, 2010) - ---------------------------------------------------------------------
Linde AG (Germany) 2.8% - ------------------------------------------------ IBM Corp. (United States) 2.7% - ------------------------------------------------ Ensco PLC, ADR (United Kingdom) 2.6% - ------------------------------------------------ Thermo Fisher Scientific, Inc. (United States) 2.4% - ------------------------------------------------ NHN Corp. (South Korea) 2.3% - ------------------------------------------------ Republic Services, Inc. (United States) 2.2% - ------------------------------------------------ Oracle Corp. (United States) 2.2% - ------------------------------------------------ Hewlett-Packard Co. (United States) 2.2% - ------------------------------------------------ Hartford Financial Services Group, Inc. (United States) 2.1% - ------------------------------------------------ Cisco Systems, Inc. (United States) 2.1% - ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and 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 GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments; and (ii) ongoing costs, which may include management fees; distribution and service (Rule 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 April 30, 2010. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses for each class. 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 actual expense ratio for each class and an assumed rate of return of 5% per year before expenses, which is not the actual return for the class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 8 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2009 APRIL 30, 2010 THE PERIOD(a) EXPENSE RATIO - ------------------------------------------------------------------------------------------- Class A - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,139.50 $ 8.27 1.55% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.20 $ 7.80 1.55% - ------------------------------------------------------------------------------------------- Class B - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,135.50 $12.30 2.31% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,013.41 $11.60 2.31% - ------------------------------------------------------------------------------------------- Class C - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,135.00 $12.24 2.30% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,013.46 $11.55 2.30% - ------------------------------------------------------------------------------------------- Class I - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,140.90 $ 6.46 1.21% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.90 $ 6.09 1.21% - ------------------------------------------------------------------------------------------- Class R2 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,137.10 $10.66 2.00% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.96 $10.05 2.00% - ------------------------------------------------------------------------------------------- Class R3 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,137.80 $ 9.33 1.75% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.21 $ 8.80 1.75% - ------------------------------------------------------------------------------------------- Class R4 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,140.00 $ 8.06 1.51% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.40 $ 7.59 1.51% - -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 9 FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2009 APRIL 30, 2010 THE PERIOD(a) EXPENSE RATIO - ------------------------------------------------------------------------------------------- Class R5 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,141.20 $ 6.73 1.26% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.65 $ 6.34 1.26% - -------------------------------------------------------------------------------------------
(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 182/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2010: +13.95% for Class A, +13.55% for Class B, +13.50% for Class C, +14.09% for Class I, +13.71% for Class R2, +13.78% for Class R3, +14.00% for Class R4 and +14.12% for Class R5. - -------------------------------------------------------------------------------- 10 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2010 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (95.6%)(c) ISSUER SHARES VALUE(a) AUSTRALIA (0.4%) Atlas Iron Ltd. 17,720(b) $40,527 - ------------------------------------------------------------------------------------- BERMUDA (1.1%) PartnerRe Ltd. 1,275 98,915 - ------------------------------------------------------------------------------------- CANADA (2.0%) CGI Group, Inc. Class A 9,500(b) 140,672 Nexen, Inc. 2,000 48,560 --------------- Total 189,232 - ------------------------------------------------------------------------------------- CHINA (0.9%) Focus Media Holding Ltd., ADR 5,000(b) 83,900 - ------------------------------------------------------------------------------------- DENMARK (1.5%) FLSmidth & Co. A/S 1,850(d) 139,396 - ------------------------------------------------------------------------------------- FRANCE (2.6%) Euler Hermes SA 1,600 132,327 Renault SA 2,400(b) 111,180 --------------- Total 243,507 - ------------------------------------------------------------------------------------- GERMANY (2.7%) Linde AG 2,090(d) 249,693 - ------------------------------------------------------------------------------------- HONG KONG (2.9%) China High Speed Transmission Equipment Group Co., Ltd. 40,000 94,798 Great Eagle Holdings Ltd. 30,359 84,958 The Hongkong & Shanghai Hotels 55,000 86,831 --------------- Total 266,587 - ------------------------------------------------------------------------------------- INDIA (1.8%) State Bank of India Ltd., GDR 400 40,721 State Bank of India Ltd., GDR 1,260(f,h) 128,274 --------------- Total 168,995 - ------------------------------------------------------------------------------------- INDONESIA (2.5%) Bank Rakyat Indonesia 135,000 132,263 Perusahaan Gas Negara PT 229,000 102,949 --------------- Total 235,212 - ------------------------------------------------------------------------------------- IRELAND (1.2%) Accenture PLC, Class A 2,646 115,471 - ------------------------------------------------------------------------------------- JAPAN (2.5%) Asahi Breweries Ltd. 8,000(d) 143,730 Ushio, Inc. 5,300 87,550 --------------- Total 231,280 - ------------------------------------------------------------------------------------- MEXICO (1.2%) America Movil SAB de CV, ADR, Series L 2,150 110,682 - ------------------------------------------------------------------------------------- NETHERLANDS (1.7%) Fugro NV 2,380 154,905 - ------------------------------------------------------------------------------------- PANAMA (1.5%) Copa Holdings SA, Class A 2,500 141,700 - ------------------------------------------------------------------------------------- POLAND (0.7%) KGHM Polska Miedz SA 1,800 67,175 - ------------------------------------------------------------------------------------- SINGAPORE (1.1%) DBS Group Holdings Ltd. 9,000 99,113 - ------------------------------------------------------------------------------------- SOUTH KOREA (4.0%) NHN Corp. 1,200(b) 200,112 Samsung Electronics Co., Ltd. 220 167,312 --------------- Total 367,424 - ------------------------------------------------------------------------------------- SPAIN (0.6%) Amadeus IT Holding SA, Series A 3,339(b) 53,343 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) SWITZERLAND (4.5%) Mettler-Toledo International, Inc. 1,000(b) $125,480 Nestle SA 2,750 134,566 Tyco Electronics Ltd. 5,000 160,600 --------------- Total 420,646 - ------------------------------------------------------------------------------------- TAIWAN (1.0%) Hon Hai Precision Industry Co., Ltd. 20,000 93,912 - ------------------------------------------------------------------------------------- TURKEY (1.5%) Turkiye Garanti Bankasi AS 29,000 140,680 - ------------------------------------------------------------------------------------- UNITED KINGDOM (13.2%) Aggreko PLC 7,800 145,288 Autonomy Corp., PLC 2,550(b) 69,947 BG Group PLC 7,500 126,765 Burberry Group PLC 11,767 120,513 Chemring Group PLC 2,500 139,282 Ensco PLC, ADR 4,850 228,823 Intercontinental Hotels Group PLC 8,000 141,042 The Weir Group PLC 8,800 132,102 Tullow Oil PLC 7,000 121,911 --------------- Total 1,225,673 - ------------------------------------------------------------------------------------- UNITED STATES (42.5%) Alliance Data Systems Corp. 800(b) 60,048 Altria Group, Inc. 5,059 107,200 American Tower Corp., Class A 2,391(b) 97,577 Bank of America Corp. 10,000 178,300 Best Buy Co., Inc. 1,500 68,400 Cisco Systems, Inc. 6,800(b) 183,056 Cloud Peak Energy, Inc. 5,075(b) 81,200 Colgate-Palmolive Co. 1,696 142,634 Dell, Inc. 10,655(b) 172,398 Flowserve Corp. 1,450 166,141 Hartford Financial Services Group, Inc. 6,445 184,133 Hewlett-Packard Co. 3,700 192,289 IBM Corp. 1,882 242,778 Johnson & Johnson 2,100 135,030 Jones Lang LaSalle, Inc. 1,201 94,735 Laboratory Corp of America Holdings 2,149(b) 168,847 Lowe's Companies, Inc. 4,000 108,480 McDonald's Corp. 2,300 162,356 Merck & Co., Inc. 3,300 115,632 Oracle Corp. 7,500 193,800 Republic Services, Inc. 6,300 195,489 The Coca-Cola Co. 2,149 114,864 The Goldman Sachs Group, Inc. 600 87,120 Thermo Fisher Scientific, Inc. 3,890(b) 215,039 Ultra Petroleum Corp. 1,200(b) 57,324 Union Pacific Corp. 1,400 105,924 Walgreen Co. 3,700 130,055 WESCO International, Inc. 4,300(b) 174,666 --------------- Total 3,935,515 - ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $7,675,299) $8,873,483 - ------------------------------------------------------------------------------------- MONEY MARKET FUND (5.0%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.21% 468,428(e) $468,428 - ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $468,428) $468,428 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 12 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (5.4%) AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) REPURCHASE AGREEMENTS(g) Goldman Sachs dated 04-30-10, matures 05-03-10, repurchase price $502,075 0.19% $502,067 $502,067 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $502,067) $502,067 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $8,645,794)(i) $9,843,978 =====================================================================================
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 April 30, 2010:
PERCENTAGE OF INDUSTRY NET ASSETS VALUE(a) - ---------------------------------------------------------------------- Aerospace & Defense 1.5% $139,282 Airlines 1.5 141,700 Automobiles 1.2 111,180 Beverages 2.8 258,594 Capital Markets 0.9 87,120 Chemicals 2.7 249,693 Commercial Banks 5.9 541,051 Commercial Services & Supplies 3.7 340,777 Communications Equipment 2.0 183,056 Computers & Peripherals 6.6 607,465 Construction & Engineering 1.5 139,396 Diversified Financial Services 1.9 178,300 Electrical Equipment 2.0 182,348 Electronic Equipment, Instruments & Components 2.7 254,512 Energy Equipment & Services 4.1 383,728 Food & Staples Retailing 1.4 130,055 Food Products 1.5 134,566 Gas Utilities 1.1 102,949 Health Care Providers & Services 1.8 168,847 Hotels, Restaurants & Leisure 4.8 443,572 Household Products 1.5 142,634 Insurance 4.5 415,375 Internet Software & Services 2.2 200,112
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- SUMMARY OF INVESTMENTS IN SECURITIES BY INDUSTRY (CONTINUED)
PERCENTAGE OF INDUSTRY NET ASSETS VALUE(a) - ---------------------------------------------------------------------- IT Services 3.4% $316,191 Life Sciences Tools & Services 3.7 340,519 Machinery 3.2 298,243 Media 0.9 83,900 Metals & Mining 1.2 107,702 Oil, Gas & Consumable Fuels 4.7 435,760 Pharmaceuticals 2.7 250,662 Real Estate Management & Development 1.9 179,693 Road & Rail 1.1 105,924 Semiconductors & Semiconductor Equipment 1.8 167,312 Software 2.8 263,747 Specialty Retail 1.9 176,880 Textiles, Apparel & Luxury Goods 1.3 120,513 Tobacco 1.2 107,200 Trading Companies & Distributors 1.9 174,666 Wireless Telecommunication Services 2.2 208,259 Other(1) 10.4 970,495 - ---------------------------------------------------------------------- Total $9,843,978 - ----------------------------------------------------------------------
(1) Cash & Cash Equivalents. 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. INVESTMENTS IN DERIVATIVES PORTFOLIO SWAP(1) OUTSTANDING AT APRIL 30, 2010
NEXT NET UNREALIZED COUNTERPARTY DESCRIPTION RESET DATE DEPRECIATION - ------------------------------------------------------------------------------ UBS The Fund receives (pays) the total May 10, 2010 $(22,990) 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 $(22,990) - ------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 14 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- PORTFOLIO SWAP((1)) OUTSTANDING AT APRIL 30, 2010 (CONTINUED) 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 April 30, 2010:
VALUE PERCENTAGE OF --------------------------------------- NET ASSETS LONG SHORT NET -------------------------------------------------------------------------------- Air Freight & Logistics -0.4% $-- $(36,666.00) $(36,666.00) Capital Markets -0.5% -- (46,008) (46,008) Chemicals -0.4% -- (33,864) (33,864) Commercial Banks 0.9% 80,021 -- 80,021 Computers & Peripherals 4.1% 378,624 -- 378,624 Construction & Engineering 2.8% 378,725 (120,780) 257,945 Construction Materials -2.3% -- (217,148) (217,148) Electric Utilities -1.5% -- (135,542) (135,542) Electrical Equipment -1.2% -- (109,833) (109,833) Energy Equipment & Services -1.1% -- (100,787) (100,787) Health Care Equipment & Supplies 2.3% 293,915 (83,293) 210,622 Health Care Providers & Services 1.6% 151,175 -- 151,175 Hotels, Restaurants & Leisure 0.1% 129,647 (122,199) 7,448 Machinery 0.4% 126,420 (93,670) 32,750 Metals & Mining 1.1% 103,397 -- 103,397 Multiline Retail 1.0% 154,284 (57,140) 97,144 Oil, Gas & Consumable Fuels 2.2% 300,361 (94,123) 206,238 Real Estate Investment Trusts (REITs) -2.5% -- (229,621) (229,621) Road & Rail -0.1% 56,050 (62,662) (6,612) Textiles, Apparel & Luxury Goods 0.5% 123,050 (79,321) 43,729 Water Utilities -1.9% -- (174,135) (174,135) Other(2) -5.4% (499,930) (1,937) (501,867) -------------------------------------------------------------------------------- -0.3% $1,775,739 $(1,798,729) $(22,990) --------------------------------------------------------------------------------
(1)The Fund has entered into a portfolio swap agreement. A portfolio swap allows the Fund to obtain exposure to a custom basket of securities and foreign markets (both long and short exposures) without owning or taking physical custody of such securities. Under the terms of the agreement, payments made by the Fund or the counterparty are based on the total return of the reference assets within the basket. That is, one party agrees to pay another party the return on the basket in return for a specified interest rate. The agreement allows the Investment Manager of the Fund to alter the composition of the custom basket by trading in and out of the notional security positions at its discretion. The notional amounts of the security positions held in the basket are not recorded in the financial statements. The portfolio swap is valued daily, and the change in value is recorded as unrealized appreciation (depreciation). The swap resets monthly at which time the Fund settles in cash with the counterparty. Payments received or made are recorded as realized gains (losses). (2)Cash equivalents NOTES TO PORTFOLIO OF INVESTMENTS ADR -- American Depositary Receipt GDR -- Global Depositary Receipt
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (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 April 30, 2010, 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 April 30, 2010. (f) Identifies issues considered to be illiquid as to their marketability (see Note 2 to the financial statements). The aggregate value of such securities at April 30, 2010 was $128,274, representing 1.38% of net assets. Information concerning such security holdings at April 30, 2010 was as follows:
ACQUISITION SECURITY DATES COST --------------------------------------------------------------------- State Bank of India Ltd., GDR 07-30-09 thru 12-21-09 $99,488
(g) The table below represents securities received as collateral for repurchase agreements. This collateral, which is generally high quality short-term obligations, is deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral.
GOLDMAN SACHS (0.19%) SECURITY DESCRIPTION VALUE(a) - ---------------------------------------------------------- Fannie Mae Pool $368,204 Freddie Mac Gold Pool 124,083 Freddie Mac Non Gold Pool 19,821 - ---------------------------------------------------------- Total market value of collateral securities $512,108 - ----------------------------------------------------------
(h) 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. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2010, the value of these securities amounted to $128,274 or 1.38% of net assets. (i) At April 30, 2010, the cost of securities for federal income tax purposes was approximately $8,646,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $1,253,000 Unrealized depreciation (55,000) ---------------------------------------------------------- Net unrealized appreciation $1,198,000 ----------------------------------------------------------
- -------------------------------------------------------------------------------- 16 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL 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. 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 - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- 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 April 30, 2010:
FAIR VALUE AT APRIL 30, 2010 ------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION(a) IDENTICAL ASSETS INPUTS INPUTS TOTAL - -------------------------------------------------------------------------------------------- Equity Securities Common Stocks(b) Aerospace & Defense $-- $139,282 $-- $139,282 Automobiles -- 111,180 -- 111,180 Beverages 114,864 143,730 -- 258,594 Chemicals -- 249,693 -- 249,693 Commercial Banks -- 541,051 -- 541,051 Commercial Services & Supplies 195,489 145,288 -- 340,777 Construction & Engineering -- 139,396 -- 139,396 Electrical Equipment -- 182,348 -- 182,348 Electronic Equipment, Instruments & Components 160,600 93,912 -- 254,512 Energy Equipment & Services 228,823 154,905 -- 383,728 Food Products -- 134,566 -- 134,566 Gas Utilities 102,949 -- 102,949 Hotels, Restaurants & Leisure 162,357 281,215 -- 443,572 Insurance 283,048 132,327 -- 415,375 Internet Software & Services -- 200,112 -- 200,112 Machinery 166,141 132,102 -- 298,243 Metals & Mining -- 107,702 -- 107,702 Oil, Gas & Consumable Fuels 187,084 248,676 -- 435,760 Real Estate Management & Development 94,735 84,958 -- 179,693 Semiconductors & Semiconductor Equipment -- 167,312 -- 167,312
- -------------------------------------------------------------------------------- 18 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED)
FAIR VALUE AT APRIL 30, 2010 ------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION(a) IDENTICAL ASSETS INPUTS INPUTS TOTAL - -------------------------------------------------------------------------------------------- Software $193,800 $69,947 $-- $263,747 Textiles, Apparel & Luxury Goods -- 120,513 -- 120,513 All Other Industries 3,403,378 -- -- 3,403,378 - -------------------------------------------------------------------------------------------- Total Equity Securities 5,190,319 3,683,164 -- 8,873,483 - -------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(c) 468,428 -- -- 468,428 Investments of Cash Collateral Received for Securities on Loan -- 502,067 -- 502,067 - -------------------------------------------------------------------------------------------- Total Other 468,428 502,067 -- 970,495 - -------------------------------------------------------------------------------------------- Investments in Securities 5,658,747 4,185,231 -- 9,843,978 Other Financial Instruments(d) -- (22,990) -- (22,990) - -------------------------------------------------------------------------------------------- Total $5,658,747 $4,162,241 $-- $9,820,988 - --------------------------------------------------------------------------------------------
(a) See the Portfolio of Investments for all investment classifications not indicated in the table. (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 April 30, 2010. (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. 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 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 800.221.2450. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 19 STATEMENT OF ASSETS AND LIABILITIES ------------------------------------------- APRIL 30, 2010 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $7,675,299) $ 8,873,483 Affiliated money market fund (identified cost $468,428) 468,428 Investments of cash collateral received for securities on loan (identified cost $502,067) 502,067 - ------------------------------------------------------------------------------ Total investments in securities (identified cost $8,645,794) 9,843,978 Cash 1,392 Foreign currency holdings (identified cost $201,994) 205,530 Capital shares receivable 1,250 Dividends and accrued interest receivable 6,294 Receivable for investment securities sold 278 Reclaims receivable 4,725 - ------------------------------------------------------------------------------ Total assets 10,063,447 - ------------------------------------------------------------------------------ LIABILITIES Payable for investment securities purchased 225,397 Payable upon return of securities loaned 502,067 Unrealized depreciation on swap contracts 22,990 Accrued investment management services fees 270 Accrued distribution fees 42 Accrued transfer agency fees 14 Accrued administrative services fees 21 Accrued plan administration services fees 1 Other accrued expenses 35,536 - ------------------------------------------------------------------------------ Total liabilities 786,338 - ------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $ 9,277,109 - ------------------------------------------------------------------------------ REPRESENTED BY Capital stock -- $.01 par value $ 4,727 Additional paid-in capital 8,895,090 Excess of distributions over net investment income (4,123) Accumulated net realized gain (loss) (797,254) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,178,669 - ------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $ 9,277,109 - ------------------------------------------------------------------------------ *Value of securities on loan $ 480,217 - ------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 20 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $3,676,471 187,502 $19.61(1) Class B $ 438,199 22,508 $19.47 Class C $ 166,903 8,581 $19.45 Class I $4,846,906 246,500 $19.66 Class R2 $ 9,770 500 $19.54 Class R3 $ 9,792 500 $19.58 Class R4 $ 119,241 6,081 $19.61 Class R5 $ 9,827 500 $19.65 - ----------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $20.81. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 5.75%. The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 21 STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED APRIL 30, 2010 (UNAUDITED)
INVESTMENT INCOME Income: Dividends $ 60,310 Interest 903 Income distributions from affiliated money market fund 359 Income from securities lending -- net 393 Less foreign taxes withheld (3,091) - ----------------------------------------------------------------------------- Total income 58,874 - ----------------------------------------------------------------------------- Expenses: Investment management services fees 43,419 Distribution fees Class A 3,747 Class B 1,903 Class C 732 Class R2 23 Class R3 12 Transfer agency fees Class A 1,751 Class B 234 Class C 88 Class R2 2 Class R3 2 Class R4 23 Class R5 2 Administrative services fees 3,308 Plan administration services fees Class R2 12 Class R3 12 Class R4 114 Compensation of board members 143 Custodian fees 5,800 Printing and postage 15,832 Registration fees 14,920 Professional fees 12,836 Other 2,616 - ----------------------------------------------------------------------------- Total expenses 107,531 Expenses waived/reimbursed by the Investment Manager and its affiliates (49,315) - ----------------------------------------------------------------------------- Total net expenses 58,216 - ----------------------------------------------------------------------------- Investment income (loss) -- net 658 - -----------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 22 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $ 619,621 Foreign currency transactions 1,108 Swap transactions 98,809 - ----------------------------------------------------------------------------- Net realized gain (loss) on investments 719,538 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 338,321 - ----------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 1,057,859 - ----------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $1,058,517 - -----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 23 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 658 $ 46,023 Net realized gain (loss) on investments 719,538 (839,697) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 338,321 2,246,014 - -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 1,058,517 1,452,340 - -------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (67,438) -- Class B (6,160) -- Class C (2,835) -- Class I (127,867) -- Class R2 (199) -- Class R3 (218) -- Class R4 (2,332) -- Class R5 (256) -- - -------------------------------------------------------------------------------------------------- Total distributions (207,305) -- - -------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares 1,552,462 1,183,549 Class B shares 137,435 152,947 Class C shares 24,837 65,424 Class R4 shares 49,958 31,011 Reinvestment of distributions at net asset value Class A shares 64,358 -- Class B shares 5,630 -- Class C shares 1,903 -- Class R4 shares 2,083 -- Conversions from Class B to Class A Class A shares -- 49,083 Class B shares -- (49,083) Payments for redemptions Class A shares (896,239) (1,216,964) Class B shares -- (155,807) Class C shares -- (56,896) Class R4 shares -- (1,985) - -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 942,427 1,279 - -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 1,793,639 1,453,619 Net assets at beginning of period 7,483,470 6,029,851 - -------------------------------------------------------------------------------------------------- Net assets at end of period $9,277,109 $ 7,483,470 - -------------------------------------------------------------------------------------------------- Undistributed (excess of distributions over) net investment income $ (4,123) $ 202,524 - --------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 24 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL 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. 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 SIX MONTHS ENDED ------------------- PER SHARE DATA APRIL 30, 2010 2009 2008(a) (UNAUDITED) Net asset value, beginning of period $17.65 $13.97 $20.00 - -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01) .09 .00(b) Net gains (losses) (both realized and unrealized) 2.44 3.59 (6.03) - -------------------------------------------------------------------------------------------- Total from investment operations 2.43 3.68 (6.03) - -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.47) -- -- - -------------------------------------------------------------------------------------------- Net asset value, end of period $19.61 $17.65 $13.97 - -------------------------------------------------------------------------------------------- TOTAL RETURN 13.95% 26.34% (30.15%) - -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 2.78%(d) 3.78% 5.55%(d) - -------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.55%(d) 1.55% 1.55%(d) - -------------------------------------------------------------------------------------------- Net investment income (loss) (.09%)(d) .59% (.07%)(d) - -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $4 $3 $2 - -------------------------------------------------------------------------------------------- Portfolio turnover rate 53% 133% 36% - --------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 25 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS B SIX MONTHS ENDED ------------------- PER SHARE DATA APRIL 30, 2010 2009 2008(a) (UNAUDITED) Net asset value, beginning of period $17.47 $13.94 $20.00 - -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.08) (.01) (.02) Net gains (losses) (both realized and unrealized) 2.42 3.54 (6.04) - -------------------------------------------------------------------------------------------- Total from investment operations 2.34 3.53 (6.06) - -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.34) -- -- - -------------------------------------------------------------------------------------------- Net asset value, end of period $19.47 $17.47 $13.94 - -------------------------------------------------------------------------------------------- TOTAL RETURN 13.55% 25.32% (30.30%) - -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 3.51%(d) 4.52% 6.33%(d) - -------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 2.31%(d) 2.31% 2.31%(d) - -------------------------------------------------------------------------------------------- Net investment income (loss) (.90%)(d) (.05%) (.55%)(d) - -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - -------------------------------------------------------------------------------------------- Portfolio turnover rate 53% 133% 36% - --------------------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS C SIX MONTHS ENDED ------------------- PER SHARE DATA APRIL 30, 2010 2009 2008(a) (UNAUDITED) Net asset value, beginning of period $17.48 $13.94 $20.00 - -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.08) (.02) (.03) Net gains (losses) (both realized and unrealized) 2.41 3.56 (6.03) - -------------------------------------------------------------------------------------------- Total from investment operations 2.33 3.54 (6.06) - -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.36) -- -- - -------------------------------------------------------------------------------------------- Net asset value, end of period $19.45 $17.48 $13.94 - -------------------------------------------------------------------------------------------- TOTAL RETURN 13.50% 25.39% (30.30%) - -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 3.51%(d) 4.58% 6.22%(d) - -------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 2.30%(d) 2.30% 2.30%(d) - -------------------------------------------------------------------------------------------- Net investment income (loss) (.89%)(d) (.12%) (.79%)(d) - -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - -------------------------------------------------------------------------------------------- Portfolio turnover rate 53% 133% 36% - --------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 26 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS I SIX MONTHS ENDED ------------------- PER SHARE DATA APRIL 30, 2010 2009 2008(a) (UNAUDITED) Net asset value, beginning of period $17.72 $13.98 $20.00 - -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02 .14 .03 Net gains (losses) (both realized and unrealized) 2.44 3.60 (6.05) - -------------------------------------------------------------------------------------------- Total from investment operations 2.46 3.74 (6.02) - -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.52) -- -- - -------------------------------------------------------------------------------------------- Net asset value, end of period $19.66 $17.72 $13.98 - -------------------------------------------------------------------------------------------- TOTAL RETURN 14.09% 26.75% (30.10%) - -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 2.38%(d) 3.42% 4.94%(d) - -------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.21%(d) 1.22% 1.21%(d) - -------------------------------------------------------------------------------------------- Net investment income (loss) .19%(d) .94% .63%(d) - -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $5 $4 $3 - -------------------------------------------------------------------------------------------- Portfolio turnover rate 53% 133% 36% - --------------------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R2 SIX MONTHS ENDED ------------------- PER SHARE DATA APRIL 30, 2010 2009 2008(a) (UNAUDITED) Net asset value, beginning of period $17.56 $13.96 $20.00 - -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.06) .03 .00(b) Net gains (losses) (both realized and unrealized) 2.44 3.57 (6.04) - -------------------------------------------------------------------------------------------- Total from investment operations 2.38 3.60 (6.04) - -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.40) -- -- - -------------------------------------------------------------------------------------------- Net asset value, end of period $19.54 $17.56 $13.96 - -------------------------------------------------------------------------------------------- TOTAL RETURN 13.71% 25.79% (30.20%) - -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 3.17%(d) 4.22% 5.74%(d) - -------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 2.00%(d) 1.96% 1.81%(d) - -------------------------------------------------------------------------------------------- Net investment income (loss) (.61%)(d) .19% .03%(d) - -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - -------------------------------------------------------------------------------------------- Portfolio turnover rate 53% 133% 36% - --------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 27 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED OCT. 31, CLASS R3 SIX MONTHS ENDED ------------------- PER SHARE DATA APRIL 30, 2010 2009 2008(a) (UNAUDITED) Net asset value, beginning of period $17.62 $13.97 $20.00 - -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.03) .06 .01 Net gains (losses) (both realized and unrealized) 2.43 3.59 (6.04) - -------------------------------------------------------------------------------------------- Total from investment operations 2.40 3.65 (6.03) - -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.44) -- -- - -------------------------------------------------------------------------------------------- Net asset value, end of period $19.58 $17.62 $13.97 - -------------------------------------------------------------------------------------------- TOTAL RETURN 13.78% 26.13% (30.15%) - -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 2.92%(d) 3.97% 5.49%(d) - -------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.75%(d) 1.71% 1.56%(d) - -------------------------------------------------------------------------------------------- Net investment income (loss) (.36%)(d) .44% .28%(d) - -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - -------------------------------------------------------------------------------------------- Portfolio turnover rate 53% 133% 36% - --------------------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R4 SIX MONTHS ENDED ------------------- PER SHARE DATA APRIL 30, 2010 2009 2008(a) (UNAUDITED) Net asset value, beginning of period $17.67 $13.98 $20.00 - -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01) .08 .01 Net gains (losses) (both realized and unrealized) 2.45 3.61 (6.03) - -------------------------------------------------------------------------------------------- Total from investment operations 2.44 3.69 (6.02) - -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.50) -- -- - -------------------------------------------------------------------------------------------- Net asset value, end of period $19.61 $17.67 $13.98 - -------------------------------------------------------------------------------------------- TOTAL RETURN 14.00% 26.40% (30.10%) - -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 2.73%(d) 3.92% 5.38%(d) - -------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.51%(d) 1.47% 1.36%(d) - -------------------------------------------------------------------------------------------- Net investment income (loss) (.06%)(d) .52% .30%(d) - -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - -------------------------------------------------------------------------------------------- Portfolio turnover rate 53% 133% 36% - --------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. - -------------------------------------------------------------------------------- 28 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
YEAR ENDED OCT. 31, CLASS R5 SIX MONTHS ENDED ------------------- PER SHARE DATA APRIL 30, 2010 2009 2008(a) (UNAUDITED) Net asset value, beginning of period $17.70 $13.98 $20.00 - -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .01 .13 .02 Net gains (losses) (both realized and unrealized) 2.45 3.59 (6.04) - -------------------------------------------------------------------------------------------- Total from investment operations 2.46 3.72 (6.02) - -------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.51) -- -- - -------------------------------------------------------------------------------------------- Net asset value, end of period $19.65 $17.70 $13.98 - -------------------------------------------------------------------------------------------- TOTAL RETURN 14.12% 26.61% (30.10%) - -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 2.42%(d) 3.47% 4.99%(d) - -------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.26%(d) 1.27% 1.26%(d) - -------------------------------------------------------------------------------------------- Net investment income (loss) .14%(d) .88% .58%(d) - -------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - -------------------------------------------------------------------------------------------- Portfolio turnover rate 53% 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 -- 2010 SEMIANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS ------------------------------------------------- (UNAUDITED AS OF APRIL 30, 2010) 1. ORGANIZATION Threadneedle Global Extended Alpha Fund (the Fund) is a series of RiverSource Global Series, Inc. (the Corporation) and is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified, open-end management investment company. The Corporation has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Corporation'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. 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 April 30, 2010, RiverSource Investments, LLC* (the Investment Manager) owned 100% of Class I, Class R2, Class R3 and Class R5 shares. At April 30, 2010, the Investment Manager owned approximately 53% 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 * Effective May 1, 2010, RiverSource Investments, LLC is known as Columbia Management Investment Advisers, LLC. - -------------------------------------------------------------------------------- 30 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 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 from the primary exchange. 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 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 - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. The fair value of a security is likely to be different from the quoted or published price, if available. Swap transactions are valued through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs. 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 April 30, 2010, foreign currency holdings consisted of multiple denominations, primarily Brazilian reais. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements. Generally, securities received as collateral subject to repurchase agreements are deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral. ILLIQUID SECURITIES At April 30, 2010, investments in securities included issues that are illiquid which the Fund currently limits to 15% of net assets, at market value, at the time of purchase. The aggregate value of such securities at April 30, 2010 was $128,274 representing 1.38% of net assets. Certain illiquid securities may be - -------------------------------------------------------------------------------- 32 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. SECURITIES SOLD SHORT The Fund may enter into short sales of securities that it concurrently holds or for which it holds no corresponding position. Short selling is the practice of selling securities which have been borrowed from a third party in anticipation of a decline in the market price of that security. Securities which have been sold short represent a liability of the Fund to acquire specific securities at prevailing market prices at a future date in order to satisfy the obligation to deliver the securities sold. The Fund is required to return securities 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, if any. The collateral required is determined daily based on the market value of the securities sold short. At April 30, 2010, the Fund had no outstanding securities sold short. The Fund is liable to pay the counterparty for any dividends accrued on a security it has borrowed and sold short and to pay interest for any net financing costs incurred during the time the short position is held by the Fund. Such dividends (recognized on ex-date) and interest are recorded as an expense and shown in the Statement of Operations. During the six months ended April 30, 2010, 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 - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 tax returns filed for the last three years. FOREIGN CAPITAL GAINS TAXES Realized gains in certain countries may be subject to foreign taxes at the fund level, at rates ranging from approximately 10% to 15%. The Fund pays such foreign taxes on net realized gains at the appropriate rate for each jurisdiction. RECENT ACCOUNTING PRONOUNCEMENT On Jan. 21, 2010, the Financial Accounting Standards Board issued an Accounting Standards Update (the amendment), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which provides guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities to disclose the input and valuation techniques used to measure fair value for both recurring and non-recurring fair value measurements for Level 2 and Level 3 positions. The amendment also requires that transfers between all levels (including Level 1 and Level 2) be disclosed on a gross basis (i.e., transfers out must be disclosed separately from transfers in), and the reason(s) for the transfer. Additionally purchases, sales, issuances and settlements must be disclosed on a gross basis in the Level 3 rollforward. The effective date of the amendment is for interim and annual periods beginning after Dec. 15, 2009, however, the requirement to provide the Level 3 activity for purchases, sales, issuances and settlements on a gross basis will be effective for interim and annual periods beginning after Dec. 15, 2010. At this time the Fund is evaluating the implications of the amendment and the impact to the financial statements. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, - -------------------------------------------------------------------------------- 34 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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. Investments in derivative instruments may expose the Fund to certain additional risks, including those detailed below. 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 April 30, 2010, 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 - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 35 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 swap transactions are also subject to the risk of the counterparty not fulfilling its obligations under the contract (counterparty credit risk). The Fund attempts to mitigate counterparty credit risk by entering into portfolio swap transactions only with counterparties that meet prescribed levels of creditworthiness, as determined by the Investment Manager. The Fund and any counterparty are required to maintain an agreement that requires the Fund and that counterparty to monitor (on a daily basis) the net market value of all derivative transactions entered into pursuant to the contract between the Fund and such counterparty. If the net market value of such derivatives transactions between the Fund and that counterparty exceeds a certain threshold (as defined in the agreement), the Fund or the counterparty is required to post cash and/or securities as collateral. Market values of derivatives transactions presented in the financial statements are not netted with the market values of other derivatives transactions or with any collateral amounts posted by the Fund or any counterparty. At April 30, 2010, no collateral had been posted by either the Fund or the counterparty. 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 - -------------------------------------------------------------------------------- 36 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 APRIL 30, 2010
ASSET DERIVATIVES LIABILITY DERIVATIVES ------------------------------- ------------------------------- STATEMENT OF ASSETS STATEMENT OF ASSETS RISK EXPOSURE AND LIABILITIES AND LIABILITIES CATEGORY LOCATION FAIR VALUE LOCATION FAIR VALUE - ------------------------------------------------------------------------------------------- Unrealized depreciation on Equity contracts N/A N/A swap transactions $22,990 - ------------------------------------------------------------------------------------------- Total N/A $22,990 - -------------------------------------------------------------------------------------------
EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME - ------------------------------------------------------------------------------ FORWARD FOREIGN RISK EXPOSURE CATEGORY CURRENCY CONTRACTS SWAPS TOTAL - ------------------------------------------------------------------------------ Equity contracts $ -- $98,809 $98,809 - ------------------------------------------------------------------------------ Foreign exchange contracts 699 -- $ 699 - ------------------------------------------------------------------------------ Total $699 $98,809 $99,508 - ------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME - ------------------------------------------------------------------------------- FORWARD FOREIGN RISK EXPOSURE CATEGORY CURRENCY CONTRACTS SWAPS TOTAL - ------------------------------------------------------------------------------- Equity contracts $-- $(26,962) $(26,962) - ------------------------------------------------------------------------------- Foreign exchange contracts -- -- $ -- - ------------------------------------------------------------------------------- Total $-- $(26,962) $(26,962) - -------------------------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY FORWARD FOREIGN CURRENCY CONTRACTS At April 30, 2010, the Fund had no outstanding forward foreign currency contracts. The monthly average gross notional amount for these contracts was $4,000 for the six months ended April 30, 2010. SWAPS The gross notional amount of contracts outstanding was $10,000 at April 30, 2010. The monthly average gross notional amount for these contracts was - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- $10,000 for the six months ended April 30, 2010. The fair value of such contracts on April 30, 2010 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 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 six months ended April 30, 2010 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 six months ended April 30, 2010 was 0.08% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended April 30, 2010, other expenses paid to this company were $19. - -------------------------------------------------------------------------------- 38 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 RiverSource, Seligman and Threadneedle 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. * Effective May 1, 2010, RiverSource Service Corporation is known as Columbia Management Investment Services Corp. 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. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- The amount of distribution expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $36,000 and $1,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of Jan. 31, 2010, 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. ** Effective May 1, 2010, RiverSource Fund Distributors, Inc. is known as Columbia Management Investment Distributors, Inc. SALES CHARGES Sales charges, including front-end and CDSCs, received by the Distributor for distributing Fund shares were $5,397 for Class A for the six months ended April 30, 2010. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended April 30, 2010, 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.............................................. 1.21 Class R2............................................. 2.00 Class R3............................................. 1.75 Class R4............................................. 1.51 Class R5............................................. 1.26
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class A.............................................. $402 Class B.............................................. 51 Class C.............................................. 22
The management fees and other Fund level expenses waived/reimbursed were $48,840. The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Dec. 31, 2010, unless sooner terminated at the sole 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: - -------------------------------------------------------------------------------- 40 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 $4,841,824 and $4,128,590, respectively, for the six months ended April 30, 2010. 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:
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 - ---------------------------------------------------------------------- CLASS A Sold 81,806 77,358 Converted from Class B* -- 2,995 Reinvested distributions 3,523 -- Redeemed (47,845) (88,344) - ---------------------------------------------------------------------- Net increase (decrease) 37,484 (7,991) - ---------------------------------------------------------------------- CLASS B Sold 7,411 10,919 Reinvested distributions 309 -- Converted to Class A* -- (3,019) Redeemed -- (10,228) - ---------------------------------------------------------------------- Net increase (decrease) 7,720 (2,328) - ----------------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2010 OCT. 31, 2009 - ---------------------------------------------------------------------- CLASS C Sold 1,322 4,412 Reinvested distributions 105 -- Redeemed -- (3,982) - ---------------------------------------------------------------------- Net increase (decrease) 1,427 430 - ---------------------------------------------------------------------- CLASS R4 Sold 2,622 1,836 Reinvested distributions 114 -- Redeemed -- (154) - ---------------------------------------------------------------------- Net increase (decrease) 2,736 1,682 - ----------------------------------------------------------------------
* Automatic conversion of Class B shares to Class A shares based on the original purchase date. 7. LENDING OF PORTFOLIO SECURITIES 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 are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At April 30, 2010, securities valued at $480,217 were on loan, secured by cash collateral of $502,067 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 - -------------------------------------------------------------------------------- 42 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 $393 earned from securities lending for the six months ended April 30, 2010 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 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 RiverSource, Seligman and Threadneedle funds and other institutional clients of the Investment Manager. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $2,857,657 and $2,680,539, respectively, for the six months ended April 30, 2010. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at April 30, 2010, 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 agreement, which is a collective agreement between the Fund and certain other RiverSource, Seligman and Threadneedle 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 (i) 1.25% per annum plus (ii) 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 - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 43 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- annum, in addition to an upfront fee equal to its pro rata share of 0.04% of the amount of the credit facility. The Fund had no borrowings during the six months ended April 30, 2010. 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. 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 - -------------------------------------------------------------------------------- 44 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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. 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 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 (the Supreme Court), asking the Supreme Court to stay the District Court proceedings while the 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. On March 30, 2010, the Supreme Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit's decision in the Gallus case and remanded the case to the Eighth Circuit for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 45 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. - -------------------------------------------------------------------------------- 46 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- Columbia Management Investment Advisers, LLC ("Columbia Management" or the "investment manager"), formerly known as RiverSource Investments, LLC, a wholly- owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), Columbia Management provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). In addition, under the subadvisory agreement (the "Subadvisory Agreement") between Columbia Management and Threadneedle International Limited (the "Subadviser"), the Subadviser performs portfolio management and related services for the Fund. On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of each of the IMS Agreement and the Subadvisory Agreement (together, the "Advisory Agreements"). Columbia Management prepared detailed reports for the Board and its Contracts Committee in March and April 2010, including reports based on data provided by independent organizations and a comprehensive response to each item of information requested by independent legal counsel to the Independent Directors ("Independent Legal Counsel") in a letter to the investment manager, to assist the Board in making these determinations. All of the materials presented in March and April were first supplied in draft form to designated representatives of the Independent Directors, i.e., Independent Legal Counsel, the Chair and the Chair of the Contracts Committee (including materials relating to the Fund's expense cap), and the final materials were revised to reflect comments provided by these Board representatives. In addition, throughout the year, the Board (or its committees) reviews information prepared by Columbia Management addressing the services Columbia Management provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts Committee, the Investment Review Committee and the Compliance Committee in determining whether to continue the Advisory Agreements. At the April 6-8, 2010 in-person Board meeting, Independent Legal Counsel reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory and subadvisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the Advisory Agreements. Nature, Extent and Quality of Services Provided by Columbia Management and the Subadviser: The Board analyzed various reports and presentations it had received detailing the services performed by Columbia Management and the - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 47 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- Subadviser, as well as their expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by Columbia Management, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, most notably, management's announcement of the massive investment made in the acquisition of the long-term asset management business of Columbia Management Group, LLC (the "Columbia Transaction") and the completed integration of J. & W. Seligman & Co. Incorporated, acquisitions which should continue to enhance investment capabilities and provide access to a greater depth of experienced portfolio managers in key categories. The Board noted, in particular, that upon the close of the Columbia Transaction, RiverSource will have grown to 10 investment offices (compared to 6 in 2009). In addition, the Board reviewed information concerning the investment manager's new Chief Investment Officer upon the close of the Columbia Transaction, including the application of his particular investment philosophy, which is intended to enhance the risk and portfolio management oversight of the entire fund family. Moreover, in connection with the Board's evaluation of the overall package of services provided by Columbia Management, the Board considered the quality of the administrative and transfer agency services provided by Columbia Management's affiliates to the Fund. The Board also reviewed the financial condition of Columbia Management and its affiliates (including the Subadviser), and each entity's ability to carry out its responsibilities under the Advisory Agreements. Further, the Board considered Columbia Management's ability to retain key personnel in certain targeted areas and its expectations in this regard. The Board also discussed the acceptability of the terms of the Advisory Agreements (including the relatively broad scope of services required to be performed by Columbia Management). The Board concluded that the services being performed under the Advisory Agreements were of a reasonably high quality. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that Columbia Management and its affiliates, including the Subadviser, were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the Advisory Agreements, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered detailed reports containing data prepared by an independent - -------------------------------------------------------------------------------- 48 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund. The Board observed that the Fund's investment performance met expectations. Additionally, the Board reviewed the performance of the Subadviser and Columbia Management's processes for monitoring the Subadviser. The Board considered, in particular, management's rationale for recommending the continued retention of the Subadviser. Comparative Fees, Costs of Services Provided and the Profits Realized By Columbia Management and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under each of the Advisory Agreements. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to Columbia Management's profitability. The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund (with few defined exceptions) are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund (excluding the effect of a performance incentive adjustment), with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) was below the peer group's median expense ratio shown in the reports. The Board also considered the Fund's performance incentive adjustment and noted its continued appropriateness. The Board further observed that the subadvisory fees paid under the Subadvisory Agreement are borne by the investment manager and not the Fund. Based on its review, the Board concluded that the fees paid under each of the Advisory Agreements were fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered various preliminary integration plans in connection with the Columbia Transaction which, if implemented, would impact the fee structures of various RiverSource Funds. The Board was satisfied with the principles underlying these plans, which, at their preliminary stage, are designed to achieve a rational, consistent pricing model across the combined fund families, as well as preserve the "pricing philosophy" of the Funds. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 49 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- The Board also considered the expected profitability of Columbia Management and its affiliates in connection with Columbia Management providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to Columbia Management and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. In this regard, the Board observed slightly reduced profitability in 2009 vs. 2008. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by Columbia Management as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees and subadvisory fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 8, 2010, the Board, including all of the Independent Directors, approved the renewal of each of the Advisory Agreements for an additional annual period. PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling 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. - -------------------------------------------------------------------------------- 50 THREADNEEDLE GLOBAL EXTENDED ALPHA FUND -- 2010 SEMIANNUAL REPORT 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. Threadneedle(R) mutual funds are distributed by Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.), member FINRA and managed by Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC). Threadneedle mutual funds are subadvised by Threadneedle International Limited, an affiliate of Columbia Management. (C)2010 Columbia Management Investment Advisers, LLC. All (COLUMBIA MANAGEMENT LOGO) rights reserved. S-6528 C (6/10)
Item 2. Code of Ethics. Not applicable for semi-annual reports. Item 3. Audit Committee Financial Expert. Not applicable for semi-annual reports. Item 4. Principal Accountant Fees and Services. Not applicable for semi-annual reports. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. 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) Not applicable for semi-annual reports. (a)(2) Separate certification for the Registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX.99.CERT. (a)(3) Not applicable. (b) A certification by the Registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached as EX.99.906 CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) RiverSource Global Series, Inc. By /s/ J. Kevin Connaughton --------------------------------- J. Kevin Connaughton President and Principal Executive Officer Date July 1, 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/ J. Kevin Connaughton --------------------------------- J. Kevin Connaughton President and Principal Executive Officer Date July 1, 2010 By /s/ Jeffrey P. Fox --------------------------------- Jeffrey P. Fox Treasurer and Principal Financial Officer Date July 1, 2010 EX-99.CERT 2 c58332exv99wcert.txt EX-99.CERT Certification Pursuant to 270.30a-2 of the Investment Company Act of 1940 I, J. Kevin Connaughton, 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: June 24, 2010 /s/ J. Kevin Connaughton - ---------------------------------------- Name: J. Kevin Connaughton 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: June 24, 2010 /s/ Jeffrey P. Fox - ---------------------------------------- Name: Jeffrey P. Fox Title: Treasurer and Principal Financial Officer EX-99.906CERT 3 c58332exv99w906cert.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: June 24, 2010 /s/ J. Kevin Connaughton --------------------------------- J. Kevin Connaughton President and Principal Executive Officer Date: June 24, 2010 /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-----