-----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, HFGYaywS8QabBIVky8gbN8Ew3QLvleCHBWOMMl6bXEOkaURoipDY+eKzgPfmhPPi Hxn9AFbkdwtVfsNFXg26PQ== 0000950134-08-012340.txt : 20080703 0000950134-08-012340.hdr.sgml : 20080703 20080703090308 ACCESSION NUMBER: 0000950134-08-012340 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20080430 FILED AS OF DATE: 20080703 DATE AS OF CHANGE: 20080703 EFFECTIVENESS DATE: 20080703 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: 08936567 BUSINESS ADDRESS: STREET 1: 50606 AMERIPRSE FINANCIAL CENTER STREET 2: H27/5228 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 BUSINESS PHONE: 6126714321 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 0000842918 S000003514 RiverSource Emerging Markets Bond Fund C000009729 RiverSource Emerging Markets Bond Fund Class A REBAX C000009730 RiverSource Emerging Markets Bond Fund Class B C000009731 RiverSource Emerging Markets Bond Fund Class C REBCX C000009732 RiverSource Emerging Markets Bond Fund Class I RSMIX C000043005 RiverSource Emerging Markets Bond Fund Class R4 C000043006 RiverSource Emerging Markets Bond Fund Class W REMWX 0000842918 S000003516 RiverSource Global Bond Fund C000009739 RiverSource Global Bond Fund Class A IGBFX C000009740 RiverSource Global Bond Fund Class B IGLOX C000009741 RiverSource Global Bond Fund Class C AGBCX C000009742 RiverSource Global Bond Fund Class I AGBIX C000043007 RiverSource Global Bond Fund Class R4 RGBRX C000043008 RiverSource Global Bond Fund Class W RGBWX 0000842918 S000003517 Threadneedle Global Equity Fund C000009743 Threadneedle Global Equity Fund Class C RGCEX C000009744 Threadneedle Global Equity Fund Class A IGLGX C000009745 Threadneedle Global Equity Fund Class B IDGBX C000043009 Threadneedle Global Equity Fund Class R4 IDGYX C000043010 Threadneedle Global Equity Fund Class R5 RGERX C000043011 Threadneedle Global Equity Fund Class W C000043012 Threadneedle Global Equity Fund Class R2 C000043013 Threadneedle Global Equity Fund Class R3 0000842918 S000003518 RiverSource Global Technology Fund C000009747 RiverSource Global Technology Fund Class I C000009749 RiverSource Global Technology Fund Class A AXIAX C000009750 RiverSource Global Technology Fund Class B INVBX C000009751 RiverSource Global Technology Fund Class C AXICX C000043014 RiverSource Global Technology Fund Class R4 RSGTX 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 N-CSRS 1 c26984nvcsrs.txt CERTIFIED SHAREHOLDER REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act File Number 811-5696 RIVERSOURCE GLOBAL SERIES, INC. (Exact name of registrant as specified in charter) 50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (Address of principal executive offices) (Zip code) Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474 (Name and address of agent for service) Registrant's telephone number, including area code: (612) 671-1947 Date of fiscal year end: 10/31 Date of reporting period: 4/30 Semiannual Report (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2008 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND SEEKS TO PROVIDE SHAREHOLDERS WITH POSITIVE ABSOLUTE RETURN. (ADVANCED ALPHA(SM) STRATEGIES ICON) TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance............... 2 Manager Commentary.................. 6 Fund Expenses Example............... 10 Portfolio of Investments............ 12 Financial Statements................ 19 Notes to Financial Statements....... 24 Approval of Investment Management Services Agreement............... 43 Proxy Voting........................ 45
(DALBAR LOGO) The RiverSource mutual fund shareholder reports have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Absolute Return Currency and Income Fund's (the Fund) Class A shares declined 3.51% (excluding sales charge) for the six months ended April 30, 2008. > The Fund underperformed its benchmark, the Citigroup 3-month U.S. Treasury Bill Index (Citigroup Index), which increased 1.48% during the same period. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2008) - --------------------------------------------------------------------------------
Since 6 months* 1 year inception(a) - ------------------------------------------------------------------------------- RiverSource Absolute Return Currency and Income Fund Class A (excluding sales charge) -3.51% +0.22% +4.51% - ------------------------------------------------------------------------------- Citigroup 3-month U.S. Treasury Bill Index(1) (unmanaged) +1.48% +3.90% +4.43% - -------------------------------------------------------------------------------
* Not annualized. (a) Fund data is from June 15, 2006. Citigroup 3-month U.S. Treasury Bill Index is from July 1, 2006. 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 institution or visiting riversource.com/funds. The 3.00% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The index does not reflect the effects of sales charges, expenses and taxes. It is not possible to invest directly in an index. (1) The Citigroup 3-month U.S. Treasury Bill Index, an unmanaged index, represents the performance of three-month Treasury bills. The index reflects reinvestment of all distributions and changes in market prices. - -------------------------------------------------------------------------------- 2 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSE RATIO (as of the current prospectus) - --------------------------------------------------------------------------------
Total Net Expenses - -------------------------------------------------------------------------------------- Class A 1.36% 1.36% - -------------------------------------------------------------------------------------- Class B 2.10% 2.10% - -------------------------------------------------------------------------------------- Class C 2.12% 2.12% - -------------------------------------------------------------------------------------- Class I 1.07% 1.07% - -------------------------------------------------------------------------------------- Class R4 1.39% 1.35%(a) - -------------------------------------------------------------------------------------- Class R5 1.06% 1.06% - -------------------------------------------------------------------------------------- Class W 1.54% 1.54% - --------------------------------------------------------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Oct. 31, 2008, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), will not exceed 1.35% for Class R4. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT APRIL 30, 2008 SINCE WITHOUT SALES CHARGE 6 MONTHS* 1 YEAR INCEPTION Class A (inception 6/15/06) -3.51% +0.22% +4.51% - ----------------------------------------------------------------------- Class B (inception 6/15/06) -3.84% -0.20% +3.91% - ----------------------------------------------------------------------- Class C (inception 6/15/06) -3.79% -0.16% +3.93% - ----------------------------------------------------------------------- Class I (inception 6/15/06) -3.37% +0.71% +4.96% - ----------------------------------------------------------------------- Class R4 (inception 6/15/06) -3.39% +0.67% +4.76% - ----------------------------------------------------------------------- Class R5 (inception 10/18/07) -3.29% N/A -2.86%* - ----------------------------------------------------------------------- Class W (inception 12/1/06) -3.55% +0.28% +3.75% - ----------------------------------------------------------------------- WITH SALES CHARGE Class A (inception 6/15/06) -6.43% -4.57% +1.82% - ----------------------------------------------------------------------- Class B (inception 6/15/06) -8.44% -4.90% +1.88% - ----------------------------------------------------------------------- Class C (inception 6/15/06) -4.71% -1.10% +3.93% - -----------------------------------------------------------------------
- -------------------------------------------------------------------------------- 4 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
AT MARCH 31, 2008 SINCE WITHOUT SALES CHARGE 6 MONTHS* 1 YEAR INCEPTION Class A (inception 6/15/06) -2.84% +1.28% +4.59% - ----------------------------------------------------------------------- Class B (inception 6/15/06) -3.22% +0.76% +3.99% - ----------------------------------------------------------------------- Class C (inception 6/15/06) -3.27% +0.71% +3.96% - ----------------------------------------------------------------------- Class I (inception 6/15/06) -2.72% +1.78% +5.05% - ----------------------------------------------------------------------- Class R4 (inception 6/15/06) -2.78% +1.59% +4.82% - ----------------------------------------------------------------------- Class R5 (inception 10/18/07) N/A N/A -3.20%* - ----------------------------------------------------------------------- Class W (inception 12/1/06) -3.01% +1.35% +3.82% - ----------------------------------------------------------------------- WITH SALES CHARGE Class A (inception 6/15/06) -7.42% -3.51% +1.77% - ----------------------------------------------------------------------- Class B (inception 6/15/06) -7.84% -3.97% +1.87% - ----------------------------------------------------------------------- Class C (inception 6/15/06) -4.19% -0.24% +3.96% - -----------------------------------------------------------------------
On Oct. 18, 2007, the maximum sales charge for Class A shares changed from 4.75% to 3.00%. Class A share performance for the 6-month period ended April 30, 2008 reflects the maximum sales charge of 3.00%, which was in effect on Nov. 1, 2007. Class A share performance for all other periods reflects the maximum sales charge of 4.75%, which was in effect at the beginning of those periods. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R4, Class R5 and Class W shares. Class I, Class R4 and Class R5 are available to institutional investors only. Class W shares are offered through qualifying discretionary accounts. * Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 5 MANAGER COMMENTARY ------------------------------------------------------------- (UNAUDITED) At April 30, 2008, approximately 34% of the Fund's shares were owned in the aggregate by affiliated funds-of-funds managed by RiverSource Investments, LLC (RiverSource). As a result of asset allocation decisions by RiverSource, it is possible that RiverSource Absolute Return Currency and Income Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds (see page 32, Class I capital share transactions for related activity during the most recent fiscal period). RiverSource seeks to minimize the impact of these transactions by structuring them over a reasonable period of time. RiverSource Absolute Return Currency and Income Fund may experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated funds-of-funds. For more information on the Fund's expenses, see the discussions beginning on pages 10 and 29. Dear Shareholders, RiverSource Absolute Return Currency and Income Fund's Class A shares declined 3.51% (excluding sales charge) for the six months ended April 30, 2008. The Fund underperformed its benchmark, the Citigroup 3-month U.S. Treasury Bill Index (Citigroup Index), which increased 1.48% during the same period. SIGNIFICANT PERFORMANCE FACTORS We use a two-part investment process. The first part includes investments in primarily high quality, short-term fixed income securities with minimal interest rate risk with a goal to generate positive total return. These short-term investments are also designated, as necessary, to cover obligations invested in through the second component of our strategy, which is based on a proprietary quantitative model. Our model uses various fundamental and technical factors, including current and historical data, to rank the anticipated value of nine different currencies from developed countries relative to the U.S. dollar. Based on that ranking, we enter into long forward currency contracts for the three most attractive currencies compared to the U.S. dollar and enter into short forward currency contracts for the three least attractive currencies compared to the U.S. dollar. The Fund experiences profits or losses to the extent the value of the currency appreciates or depreciates relative to the U.S. dollar. - -------------------------------------------------------------------------------- 6 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- During the period, we were able to generate positive total return from our investment in short-term fixed income securities, while our proprietary quantitative model detracted from total returns. For the six months ended April 30, 2008, the Fund's positioning in the New Zealand dollar and Canadian dollar benefited the Fund's results. Positioning in the Japanese yen, Swedish krona, Australian dollar, British pound, euro, Norwegian krone, and Swiss franc detracted from the Fund's performance. SECTOR DIVERSIFICATION (at April 30, 2008; % of bond and cash & cash equivalents portfolio assets) - ----------------------------------------------------------------- Asset-Backed 6.0% - -------------------------------------------------------------- Commercial Mortgage-Backed 1.7% - -------------------------------------------------------------- Consumer Discretionary 1.3% - -------------------------------------------------------------- Consumer Staples 0.3% - -------------------------------------------------------------- Energy 0.6% - -------------------------------------------------------------- Financials 3.5% - -------------------------------------------------------------- Health Care 0.9% - -------------------------------------------------------------- Industrials 1.8% - -------------------------------------------------------------- Mortgage-Backed 0.5% - -------------------------------------------------------------- Telecommunication 0.8% - -------------------------------------------------------------- Utilities 0.6% - -------------------------------------------------------------- Other (1) 82.0% - --------------------------------------------------------------
(1) Cash & Cash Equivalents. QUALITY BREAKDOWN (at April 30, 2008; % of portfolio assets excluding cash equivalents and equities) - ----------------------------------------------------------------- AAA bonds 46.1% - -------------------------------------------------------------- AA bonds 8.8% - -------------------------------------------------------------- A bonds 29.8% - -------------------------------------------------------------- BBB bonds 15.3% - -------------------------------------------------------------- Non-investment grade bonds --% - --------------------------------------------------------------
Bond ratings apply to the underlying holdings of the Fund and not the Fund itself. Whenever possible, the Standard and Poor's rating is used to determine the credit quality of a security. Standard and Poor's rates the creditworthiness of corporate bonds, with 15 categories, ranging from AAA (highest) to D (lowest). Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. If Standard and Poor's doesn't rate a security, then Moody's rating is used. RiverSource Investments, LLC, the Fund's investment manager, rates a security using an internal rating system when Moody's doesn't provide a rating. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- The Fund experiences profits or losses to the extent the value of the currency appreciates or depreciates relative to the U.S. dollar. OUR CURRENT INVESTMENT STRATEGY We run our quantitative model weekly and reset currency positions as needed, applying the output of this model on a systematic basis. We generally seek neutral exposure to the U.S. dollar, which is the base currency. In our view, remaining neutral to the U.S. dollar helps control overall volatility of the investment strategy. We also use an externally developed but fully integrated risk management system to help us monitor and manage market risk. We believe the Fund is designed to do well in either rising or falling dollar environments. OUR FUTURE STRATEGY We intend to stay disciplined to our systematic investment strategy. Through the use of our proprietary quantitative model, which determines the Fund's positions in forward foreign currency contracts relative to the U.S. dollar, we will continue to seek an absolute return that is unrelated to general movements in the U.S. dollar and other types of financial assets. Overall, we will continue to seek to generate positive total returns from the income produced by the Fund's investments in short-term debt obligations, plus or minus the gain or loss resulting from the fluctuations in the values of various foreign currencies relative to the U.S. dollar. - -------------------------------------------------------------------------------- 8 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- It is important to remember that the Fund does not actually take ownership of foreign currencies or sell actual foreign currencies. Rather, through forward currency contracts, the Fund gains economic exposure comparable to the exposure that it would have if it had bought or sold the currencies directly. Because the establishment of the Fund's forward foreign currency contracts requires little cash outlay, the Fund's assets will consist primarily of (i) U.S. dollar-denominated non-government, corporate and structured debt securities rated investment grade, or if unrated, determined to be of comparable quality by the investment manager, and (ii) shares of an affiliated money market fund. (PHOTO - NIC PIFER) Nic Pifer, CFA(R) Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a RiverSource fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any RiverSource fund. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 9 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the acquired funds' expense ratio as of the 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, 2008. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 10 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2007 APRIL 30, 2008 THE PERIOD(A) EXPENSE RATIO - -------------------------------------------------------------------------------------------- Class A - -------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 964.90 $ 6.99 1.43% - -------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.75 $ 7.17 1.43% - -------------------------------------------------------------------------------------------- Class B - -------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 961.60 $10.88 2.23% - -------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,013.77 $11.17 2.23% - -------------------------------------------------------------------------------------------- Class C - -------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 962.10 $10.73 2.20% - -------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,013.92 $11.02 2.20% - -------------------------------------------------------------------------------------------- Class I - -------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 966.30 $ 5.13 1.05% - -------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.64 $ 5.27 1.05% - -------------------------------------------------------------------------------------------- Class R4 - -------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 966.10 $ 6.60 1.35% - -------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.15 $ 6.77 1.35% - -------------------------------------------------------------------------------------------- Class R5 - -------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 967.10 $ 5.33 1.09% - -------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.66 $ 5.53 1.09% - -------------------------------------------------------------------------------------------- Class W - -------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 964.50 $ 7.86 1.61% - -------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.86 $ 8.07 1.61% - --------------------------------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2008: -3.51% for Class A, - 3.84% for Class B, -3.79% for Class C, -3.37% for Class I, -3.39% for Class R4, -3.29% for Class R5 and -3.55% for Class W. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2008 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
BONDS (17.9%) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) ASSET-BACKED (6.0%) Capital Auto Receivables Asset Trust Series 2006-SN1A Cl A4B 03-20-10 2.91% $1,500,000(d,g) $1,484,876 Capital Auto Receivables Asset Trust Series 2007-SN2 Cl A2 01-15-10 3.50 1,250,000(d,g) 1,240,039 Capital One Multi-Asset Execution Trust Series 2003-A3 Cl A3 05-16-11 2.97 2,000,000(g) 1,995,000 Citibank Credit Card Issuance Trust Series 2003-A9 Cl A9 11-22-10 3.15 455,000(g) 453,705 Citibank Credit Card Issuance Trust Series 2007-A1 Cl A1 03-22-12 2.59 1,000,000(g) 977,813 College Loan Corp Trust Series 2003-2 Cl A3 07-25-13 3.12 776,444(g) 772,441 College Loan Corp Trust Series 2004-1 Cl A2 04-25-16 3.03 2,500,000(g) 2,494,399 Countrywide Asset-backed Ctfs Series 2007-7 Cl 2A2 10-25-37 3.06 1,000,000(g) 849,844 Countrywide Home Equity Loan Trust Series 2005-H Cl 2A (FGIC) 12-15-35 2.96 194,782(e,g) 109,660 Countrywide Home Equity Loan Trust Series 2005-M Cl A2 (MBIA) 02-15-36 2.84 15,012(e,g) 14,967 CPS Auto Trust Series 2006-C Cl A2 (XLCA) 03-15-10 5.31 360,084(d,e) 358,857 Ford Credit Floorplan Master Owner Trust Series 2006-3 Cl A 06-15-11 2.90 900,000(g) 870,338
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) ASSET-BACKED (CONT.) Hertz Vehicle Financing LLC Series 2004-1A Cl A3 (MBIA) 05-25-09 2.85% $166,667(d,e) $166,667 Keycorp Student Loan Trust Series 2003-A Cl 2A2 (MBIA) 10-25-25 3.23 726,587(e,g) 704,903 Northstar Education Finance Series 2007-1 Cl A2 01-29-46 2.93 750,000(g) 735,352 Providian Master Note Trust Series 2006-A1A Cl A 01-15-13 2.75 1,000,000(d,g) 992,969 Residential Asset Securities Series 2006-KS2 Cl A2 03-25-36 3.03 279,297(g) 274,017 SLC Student Loan Trust Series 2006-A Cl A4 01-15-19 2.83 1,800,000(g) 1,799,438 SLM Student Loan Trust Series 2003-10A Cl A2 12-16-19 2.96 1,000,000(d,g) 997,031 SLM Student Loan Trust Series 2004-3 Cl A3 04-25-16 3.01 580,776(g) 579,072 SLM Student Loan Trust Series 2005-5 Cl A1 01-25-18 2.92 65,077(g) 64,890 SLM Student Loan Trust Series 2005-5 Cl A2 10-25-21 3.00 1,000,000(g) 972,813 SLM Student Loan Trust Series 2005-8 Cl A2 07-25-22 3.01 1,500,000(g) 1,479,557 SLM Student Loan Trust Series 2005-B Cl A1 12-16-19 2.84 503,536(g) 499,208
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 12 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND - 2008 SEMIANNUAL REPORT
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) ASSET-BACKED (CONT.) SLM Student Loan Trust Series 2006-2 Cl A2 01-25-17 2.92% $107,192(g) $106,658 SLM Student Loan Trust Series 2006-5 Cl A2 07-25-17 2.91 708,936(g) 704,062 SLM Student Loan Trust Series 2006-A Cl A1 03-16-20 2.82 1,597,139(g) 1,574,867 SLM Student Loan Trust Series 2006-A Cl A2 12-15-20 2.88 2,000,000(g) 1,906,081 SLM Student Loan Trust Series 2006-C Cl A2 09-15-20 2.85 1,000,000(g) 974,531 SLM Student Loan Trust Series 2007-2 Cl A2 07-25-17 2.92 1,000,000(g) 957,656 Superior Wholesale Inventory Financing Trust Series 2005-B12 Cl A 06-15-10 2.92 2,000,000(g) 1,998,660 --------------- Total 29,110,371 - ------------------------------------------------------------------------------------ COMMERCIAL MORTGAGE-BACKED (1.7%)(f) Commercial Mtge Acceptance Series 1999-C1 Cl A2 06-15-31 7.03 2,191,962 2,228,540 First Union-Lehman Brothers-Bank of America Series 1998-C2 Cl A2 11-18-35 6.56 35,251 35,182 GS Mtge Securities II Series 2007-EOP Cl A2 03-06-20 2.87 1,200,000(d,g) 1,111,725 GS Mtge Securities II Series 2007-EOP Cl A3 03-06-20 2.92 1,770,000(d,g) 1,642,866 JP Morgan Chase Commercial Mtge Securities Series 2005-LDP1 Cl A1 03-15-46 4.12 1,801,364 1,794,999 Morgan Stanley Dean Witter Capital I Series 2002-TOP7 Cl A1 01-15-39 5.38 1,358,974 1,368,447 --------------- Total 8,181,759 - ------------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) MORTGAGE-BACKED (0.5%)(f) Deutsche Bank Alternate Mtge Loan Trust Collateralized Mtge Obligation Series 2006-AR6 Cl A3 02-25-37 2.99% $434,758(g) $424,981 Downey Savings & Loan Assn Mtge Loan Trust Collateralized Mtge Obligation Series 2006-AR2 Cl 2AB1 11-19-37 2.89 634,924(b) 579,248 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2006-12 Cl 2A11 01-19-38 2.89 637,381(b) 602,066 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2006-8 Cl 2A1B 08-21-36 3.05 1,010,750(b) 696,779 --------------- Total 2,303,074 - ------------------------------------------------------------------------------------ AUTOMOTIVE (0.6%) American Honda Finance 07-11-08 2.80 400,000(d,g) 399,901 02-05-10 3.50 2,500,000(d,g) 2,499,825 --------------- Total 2,899,726 - ------------------------------------------------------------------------------------ BANKING (2.0%) ANZ Natl Intl Bank Guaranteed 08-07-09 3.17 750,000(c,d,g) 748,323 Bank of America Sr Unsecured 02-17-09 3.22 640,000(g) 638,557 Bank of New York Mellon Sr Unsecured 02-05-10 3.50 3,000,000(g) 2,982,122 Citigroup Sr Unsecured 06-09-09 3.13 640,000(g) 635,537 Credit Suisse First Boston USA 12-09-08 3.12 640,000(g) 637,791 Rabobank Nederland Sr Nts 01-15-09 2.73 600,000(c,d,g) 599,239 Santander US Debt Unipersonal Bank Guaranteed 09-19-08 2.66 640,000(c,d,g) 638,413
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND - 2008 SEMIANNUAL REPORT 13
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) BANKING (CONT.) US Bancorp Sr Unsecured 02-04-10 3.51% $1,250,000(g) $1,242,463 Wachovia Mtge FSB Sr Unsecured 03-02-09 3.20 400,000(g) 400,787 Wachovia Sr Unsecured 10-28-08 2.95 640,000(g) 638,474 Washington Mutual Sr Unsecured 01-15-10 3.01 750,000(g) 694,996 --------------- Total 9,856,702 - ------------------------------------------------------------------------------------ BROKERAGE (0.5%) Bear Stearns Companies 03-30-09 2.79 750,000(g) 723,724 Lehman Brothers Holdings Sr Unsecured 10-22-08 3.00 640,000(g) 637,944 Merrill Lynch & Co 08-22-08 3.17 640,000(g) 633,164 Morgan Stanley Sr Unsecured 02-09-09 3.21 640,000(g) 634,321 --------------- Total 2,629,153 - ------------------------------------------------------------------------------------ CONSTRUCTION MACHINERY (1.7%) Caterpillar Financial Services Sr Unsecured 10-28-08 2.98 1,005,000(g) 1,004,351 02-08-10 3.58 2,000,000(g) 1,996,580 John Deere Capital Sr Unsecured 06-10-08 3.12 640,000(g) 639,844 01-18-11 3.43 4,500,000(g) 4,487,175 --------------- Total 8,127,950 - ------------------------------------------------------------------------------------ ELECTRIC (0.6%) Dominion Resources Sr Unsecured Series B 11-14-08 3.25 3,000,000(g) 2,985,744 - ------------------------------------------------------------------------------------ FOOD AND BEVERAGE (0.3%) Diageo Capital 11-10-08 3.20 1,640,000(c,g) 1,635,226 - ------------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) HEALTH CARE (0.4%) Cardinal Health Sr Unsecured 10-02-09 2.96% $2,080,000(g) $2,030,685 - ------------------------------------------------------------------------------------ HEALTH CARE INSURANCE (0.4%) UnitedHealth Group Sr Unsecured 03-02-09 3.16 750,000(g) 737,936 06-21-10 2.78 1,500,000(g) 1,417,638 --------------- Total 2,155,574 - ------------------------------------------------------------------------------------ INDEPENDENT ENERGY (0.6%) Anadarko Petroleum Sr Unsecured 09-15-09 3.20 3,000,000(g) 2,948,667 - ------------------------------------------------------------------------------------ LIFE INSURANCE (0.8%) Lincoln Natl Sr Unsecured 04-06-09 2.84 2,275,000(g) 2,245,803 Pacific Life Global Funding 11-13-08 3.16 400,000(d,g) 400,098 Pricoa Global Funding I 09-12-08 2.91 640,000(d,g) 639,716 12-15-09 2.85 400,000(d,g) 396,048 --------------- Total 3,681,665 - ------------------------------------------------------------------------------------ MEDIA CABLE (0.6%) Comcast 07-14-09 3.01 2,920,000(g) 2,867,700 - ------------------------------------------------------------------------------------ NON CAPTIVE DIVERSIFIED (0.1%) General Electric Capital Sr Unsecured 12-01-08 3.23 640,000(g) 638,877 - ------------------------------------------------------------------------------------ RETAILERS (0.1%) Home Depot Sr Unsecured 12-16-09 2.93 750,000(g) 716,820 - ------------------------------------------------------------------------------------ TRANSPORTATION SERVICES (0.2%) ERAC USA Finance 04-30-09 3.15 825,000(d,g) 822,135 - ------------------------------------------------------------------------------------ WIRELINES (0.8%) BellSouth 08-15-08 3.17 750,000(g) 749,056
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 14 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND - 2008 SEMIANNUAL REPORT
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) WIRELINES (CONT.) Telefonica Emisiones 06-19-09 2.84% $3,190,000(c,g) $3,155,507 --------------- Total 3,904,563 - ------------------------------------------------------------------------------------ TOTAL BONDS (Cost: $88,867,231) $87,496,391 - ------------------------------------------------------------------------------------
MONEY MARKET FUND (49.7%) SHARES VALUE(A) RiverSource Short-Term Cash Fund, 2.72% 242,251,388(h) $242,251,388 - ------------------------------------------------------------------------------------ TOTAL MONEY MARKET FUND (Cost: $242,251,388) $242,251,388 - ------------------------------------------------------------------------------------
SHORT-TERM SECURITIES (31.7%) AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(A) U.S. GOVERNMENT AGENCIES (30.7%) Federal Home Loan Bank Disc Nts 05-06-08 2.29% $10,000,000 $9,996,230 06-04-08 1.93 15,000,000 14,972,270 06-25-08 1.96 10,000,000 9,969,971 07-07-08 1.96 15,000,000 14,945,565 Federal Home Loan Mtge Corp Disc Nts 05-15-08 2.05 10,000,000 9,991,578 06-02-08 2.02 15,000,000 14,972,678 06-30-08 1.90 15,000,000 14,952,495 07-14-08 1.96 14,250,000 14,192,886
SHORT-TERM SECURITIES (CONTINUED) AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(A) U.S. GOVERNMENT AGENCIES (CONT.) Federal Natl Mtge Assn Disc Nts 05-07-08 2.04% $5,500,000 $5,497,844 05-09-08 2.11 3,500,000 3,498,176 05-14-08 2.02 8,000,000 7,993,818 05-21-08 1.48 13,700,000 13,688,374 05-28-08 1.83 5,000,000 4,992,975 06-25-08 1.96 10,000,000 9,969,971 --------------- Total 149,634,831 - ------------------------------------------------------------------------------------ ASSET-BACKED (1.0%) Cheyne Finance LLC 11-20-07 4.99 1,626,589(i,j) 1,125,600 12-11-07 4.91 1,627,444(i,j) 1,126,191 WhistleJacket Capital LLC 11-20-08 3.26 3,000,000(i,j) 2,871,000 --------------- Total 5,122,791 - ------------------------------------------------------------------------------------ TOTAL SHORT-TERM SECURITIES (Cost: $155,853,819) $154,757,622 - ------------------------------------------------------------------------------------ TOTAL INVESTMENTS IN SECURITIES (Cost: $486,972,438)(k) $484,505,401 ====================================================================================
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND - 2008 SEMIANNUAL REPORT 15 INVESTMENTS IN DERIVATIVES FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT APRIL 30, 2008
CURRENCY TO BE CURRENCY TO BE UNREALIZED UNREALIZED EXCHANGE DATE DELIVERED RECEIVED APPRECIATION DEPRECIATION - ------------------------------------------------------------------------------------------------------ May 14, 2008 48,385,000 44,541,538 $-- $(1,038,114) Australian Dollar U.S. Dollar - ------------------------------------------------------------------------------------------------------ May 14, 2008 465,000 436,821 -- (1,219) Australian Dollar U.S. Dollar - ------------------------------------------------------------------------------------------------------ May 14, 2008 75,032,000 70,238,581 -- (443,085) Australian Dollar U.S. Dollar - ------------------------------------------------------------------------------------------------------ May 14, 2008 637,000 598,143 -- (2,867) Australian Dollar U.S. Dollar - ------------------------------------------------------------------------------------------------------ May 14, 2008 6,947,790,000 67,899,906 1,023,078 -- Japanese Yen U.S. Dollar - ------------------------------------------------------------------------------------------------------ May 14, 2008 328,268,000 3,187,068 27,283 -- Japanese Yen U.S. Dollar - ------------------------------------------------------------------------------------------------------ May 14, 2008 65,206,000 624,100 -- (3,061) Japanese Yen U.S. Dollar - ------------------------------------------------------------------------------------------------------ May 14, 2008 273,147,000 45,786,628 181,526 -- Swedish Krona U.S. Dollar - ------------------------------------------------------------------------------------------------------ May 14, 2008 4,904,000 832,668 13,888 -- Swedish Krona U.S. Dollar - ------------------------------------------------------------------------------------------------------ May 14, 2008 3,187,000 531,043 -- (1,437) Swedish Krona U.S. Dollar - ------------------------------------------------------------------------------------------------------ May 14, 2008 66,211,927 33,360,000 60,981 -- U.S. Dollar British Pound - ------------------------------------------------------------------------------------------------------ May 14, 2008 48,061,943 24,278,000 168,683 -- U.S. Dollar British Pound - ------------------------------------------------------------------------------------------------------ May 14, 2008 818,962 414,000 3,489 -- U.S. Dollar British Pound - ------------------------------------------------------------------------------------------------------ May 14, 2008 550,074 276,000 -- (1,772) U.S. Dollar British Pound - ------------------------------------------------------------------------------------------------------ May 14, 2008 1,809,358 915,000 9,844 -- U.S. Dollar British Pound - ------------------------------------------------------------------------------------------------------ May 14, 2008 68,436,593 86,327,000 -- (1,115,323) U.S. Dollar New Zealand Dollar - ------------------------------------------------------------------------------------------------------ May 14, 2008 402,410 509,000 -- (5,472) U.S. Dollar New Zealand Dollar - ------------------------------------------------------------------------------------------------------ May 14, 2008 1,507,658 1,921,000 -- (9,585) U.S. Dollar New Zealand Dollar - ------------------------------------------------------------------------------------------------------ May 14, 2008 900,674 1,154,000 1,062 -- U.S. Dollar New Zealand Dollar - ------------------------------------------------------------------------------------------------------ May 14, 2008 44,336,515 225,296,000 -- (107,124) U.S. Dollar Norwegian Krone - ------------------------------------------------------------------------------------------------------ May 14, 2008 866,877 4,332,000 -- (16,433) U.S. Dollar Norwegian Krone - ------------------------------------------------------------------------------------------------------ May 14, 2008 1,498,030 7,641,000 2,027 -- U.S. Dollar Norwegian Krone - ------------------------------------------------------------------------------------------------------ May 14, 2008 461,404 2,360,000 2,496 -- U.S. Dollar Norwegian Krone - ------------------------------------------------------------------------------------------------------ Total $1,494,357 $(2,745,492) - ------------------------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 16 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND - 2008 SEMIANNUAL REPORT NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using procedures described in Note 1 to the financial statements. (b) Adjustable rate mortgage; interest rate varies to reflect current market conditions; rate shown is the effective rate on April 30, 2008. (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, 2008, the value of foreign securities represented 1.4% of net assets. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security may be determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2008, the value of these securities amounted to $15,138,728 or 3.1% of net assets. (e) The following abbreviations are used in the portfolio security descriptions to identify the insurer of the issue: FGIC -- Financial Guaranty Insurance Company MBIA -- MBIA Insurance Corporation XLCA -- XL Capital Assurance
(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, 2008. (h) Affiliated Money Market Fund - See Note 5 to the financial statements. The rate shown is the seven-day current annualized yield at April 30, 2008. (i) Denotes investments in structured investment vehicles ("SIVS"). See Note 7 to the financial statements. (j) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities may be valued at fair value according to procedures approved, in good faith, by the Fund's Board of Directors. Information concerning such security holdings at April 30, 2008, is as follows:
ACQUISITION SECURITY DATES COST - --------------------------------------------------------------------------------- Cheyne Finance LLC 4.99% 2007 05-22-07 $1,626,589 4.91% 2007 06-11-07 1,627,444 WhistleJacket Capital LLC 3.26% 2008 03-23-07 3,000,005
- -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 17 NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (k) At April 30, 2008, the cost of securities for federal income tax purposes was approximately $486,972,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $145,000 Unrealized depreciation (2,612,000) - ------------------------------------------------------------------------------ Net unrealized depreciation $(2,467,000) - ------------------------------------------------------------------------------
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com/funds. - -------------------------------------------------------------------------------- 18 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT FINANCIAL STATEMENTS ----------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 2008 (UNAUDITED) ASSETS Investments in securities, at value Unaffiliated issuers (identified cost $244,721,050) $242,254,013 Affiliated money market fund (identified cost $242,251,388) 242,251,388 - ---------------------------------------------------------------------------- Total investments in securities (identified cost $486,972,438) 484,505,401 Cash 12,584 Capital shares receivable 4,875,432 Dividends and accrued interest receivable 333,782 Receivable for investment securities sold 1,065,168 Unrealized appreciation on forward foreign currency contracts 1,494,357 Cash deposits and collateral held with brokers 370,000 - ---------------------------------------------------------------------------- Total assets 492,656,724 - ---------------------------------------------------------------------------- LIABILITIES Capital shares payable 651,726 Payable for investment securities purchased 1,380,815 Unrealized depreciation on forward foreign currency contracts 2,745,492 Accrued investment management services fee 11,689 Accrued distribution fee 2,353 Accrued transfer agency fee 1,361 Accrued administrative services fee 1,051 Accrued plan administration services fee 1 Other accrued expenses 52,520 - ---------------------------------------------------------------------------- Total liabilities 4,847,008 - ---------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $487,809,716 ============================================================================
- -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 19 STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) APRIL 30, 2008 (UNAUDITED) REPRESENTED BY Capital stock -- $.01 par value $ 501,031 Additional paid-in capital 506,303,081 Undistributed net investment income 1,232 Accumulated net realized gain (loss) (15,277,456) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (3,718,172) - ---------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $487,809,716 ============================================================================
Net assets applicable to outstanding shares: Class A $123,488,859 Class B $ 1,326,895 Class C $ 7,142,979 Class I $165,945,132 Class R4 $ 75,115 Class R5 $ 9,180 Class W $189,821,556 Net asset value per share of outstanding Class A capital stock: shares(1) 12,688,886 $ 9.73 Class B shares 136,377 $ 9.73 Class C shares 735,196 $ 9.72 Class I shares 17,031,138 $ 9.74 Class R4 shares 7,718 $ 9.73 Class R5 shares 942 $ 9.75 Class W shares 19,502,840 $ 9.73 - -------------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $10.03. 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. - -------------------------------------------------------------------------------- 20 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT STATEMENT OF OPERATIONS SIX MONTHS ENDED APRIL 30, 2008 (UNAUDITED) INVESTMENT INCOME Income: Interest $ 3,278,792 Income distributions from affiliated money market fund 2,778,019 Less foreign taxes withheld (9,778) - ---------------------------------------------------------------------------- Total income 6,047,033 - ---------------------------------------------------------------------------- Expenses: Investment management services fee 1,466,151 Distribution fee Class A 92,802 Class B 1,430 Class C 17,853 Class W 76,410 Transfer agency fee Class A 34,455 Class B 148 Class C 1,713 Class R4 15 Class R5 2 Class W 61,128 Administrative services fee 131,533 Plan administration services fee -- Class R4 73 Compensation of board members 3,822 Custodian fees 7,960 Printing and postage 17,150 Registration fees 118,089 Professional fees 17,907 Other 9,259 - ---------------------------------------------------------------------------- Total expenses 2,057,900 Expenses waived/reimbursed by the Investment Manager and its affiliates (232) Earnings and bank fee credits on cash balances (220) - ---------------------------------------------------------------------------- Total net expenses 2,057,448 - ---------------------------------------------------------------------------- Investment income (loss) -- net 3,989,585 - ---------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions 13,531 Foreign currency transactions (15,125,678) - ---------------------------------------------------------------------------- Net realized gain (loss) on investments (15,112,147) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (3,674,199) - ---------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (18,786,346) - ---------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(14,796,761) ============================================================================
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 21 STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2008 OCT. 31, 2007 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) - net $ 3,989,585 $ 4,270,377 Net realized gain (loss) on investments (15,112,147) 5,699,827 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (3,674,199) (119,494) - ----------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (14,796,761) 9,850,710 - ----------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (886,703) (203,734) Class B (2,189) (336) Class C (27,910) (605) Class I (2,556,350) (4,073,834) Class R4 (889) (464) Class R5 (137) (35) Class W (600,741) (179) Net realized gain Class A (1,516,443) (98,464) Class B (355) (99) Class C (52,812) (99) Class I (4,183,105) (704,931) Class R4 (1,945) (99) Class R5 (334) -- Class W (175) (49) - ----------------------------------------------------------------------------------------- Total distributions (9,830,088) (5,082,928) - -----------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 22 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2008 OCT. 31, 2007 (UNAUDITED) CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $144,824,658 $ 8,607,654 Class B shares 1,410,082 -- Class C shares 7,274,900 209,110 Class I shares 138,952,573 46,377,881 Class R4 shares 48,000 28,800 Class R5 shares -- 10,000 Class W shares 202,357,575 5,000 Reinvestment of distributions at net asset value Class A shares 2,348,103 20,454 Class B shares 2,079 -- Class C shares 73,184 261 Class I shares 6,738,952 4,778,225 Class R4 shares 2,333 44 Class W shares 452,931 -- Payments for redemptions Class A shares (27,378,528) (10,093,640) Class B shares (78,627) -- Class C shares (197,295) -- Class I shares (88,081,694) (1,818,898) Class R4 shares (10,152) -- Class W shares (7,408,622) -- - ----------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 381,330,452 48,124,891 - ----------------------------------------------------------------------------------------- Total increase (decrease) in net assets 356,703,603 52,892,673 Net assets at beginning of period 131,106,113 78,213,440 - ----------------------------------------------------------------------------------------- Net assets at end of period $487,809,716 $131,106,113 ========================================================================================= Undistributed net investment income $ 1,232 $ 86,566 - -----------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS TO APRIL 30, 2008) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RiverSource Absolute Return Currency and Income Fund (the Fund) is a series of RiverSource Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a non-diversified, open-end management investment company. RiverSource Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund invests primarily in short-term debt obligations and forward foreign currency contracts. The Fund offers Class A, Class B, Class C, Class I, Class R4, Class R5 and Class W shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. Class B of RiverSource Absolute Return Currency and Income Fund is currently closed to investors for new purchases. - - Class C shares may be subject to a CDSC. - - Class I, Class R4 and Class R5 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. - - Class W shares are sold without a front-end sales charge or CDSC and are offered through qualifying discretionary accounts. At April 30, 2008, RiverSource Investments, LLC (the Investment Manager) and the RiverSource affiliated funds-of-funds owned 100% of Class I shares, and the Investment Manager owned 100% of Class R5 shares. At April 30, 2008, the Investment Manager and the RiverSource affiliated funds- of-funds owned approximately 34% of the total outstanding Fund shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. - -------------------------------------------------------------------------------- 24 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange 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 New York Stock Exchange, 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 New York Stock Exchange. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. ILLIQUID SECURITIES At April 30, 2008, 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, 2008 was $5,122,791 representing 1.05% of net assets. These securities may be valued at fair value according to procedures approved, in good faith, by the Board. According to Board guidelines, certain unregistered securities are determined to be liquid and are not included within the 15% limitation specified above. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 25 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, 2008, the Fund had no outstanding forward-commitments. The Fund also enters into transactions to sell purchase commitments to third parties at current market values and concurrently acquires other purchase commitments for similar securities at later dates. As an inducement for the Fund to "roll over" its purchase commitments, the Fund receives negotiated amounts in the form of reductions of the purchase price of the commitment. The Fund records the incremental difference between the forward purchase and sale of each forward roll realized gain or loss. Losses may arise due to changes in the value of the securities or if a counterparty does not perform under the terms of the agreement. If a counterparty files for bankruptcy or becomes insolvent, the Fund's right to repurchase or sell securities may be limited. The Fund did not enter into any mortgage dollar roll transactions during the six months ended April 30, 2008. OPTION TRANSACTIONS To produce incremental earnings, protect gains, and facilitate buying and selling of securities for investments, the Fund may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. Cash collateral may be collected by the Fund to secure certain over-the-counter options trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. The Fund also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. At April 30, 2008, and for the six months then ended, the Fund had no outstanding option contracts. - -------------------------------------------------------------------------------- 26 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Futures are valued daily based upon the last sale price at the close of market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. At April 30, 2008, the Fund had no outstanding futures contracts. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Fund may enter into forward foreign currency exchange contracts to produce incremental earnings, for operational purposes, or to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete its contract obligations. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 27 made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. The Fund has adopted Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes," which is effective for fiscal periods beginning after Dec. 15, 2006. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 prescribes a two-step process to recognize and measure a tax position taken or expected to be taken in a tax return. The first step is to determine whether a tax position has met the more-likely-than-not recognition threshold and the second step is to measure a tax position that meets the threshold to determine the amount of benefit to recognize. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of the deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. RECENT ACCOUNTING PRONOUNCEMENTS In March 2008, the FASB issued Statement on Financial Accounting Standards No. 161 (SFAS "161"), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. Funds are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, - -------------------------------------------------------------------------------- 28 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 2008. As of April 30, 2008, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. On Sept. 20, 2006, the FASB released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. The application of SFAS 157 will be effective for the Fund's fiscal year beginning Nov. 1, 2008. The adoption of SFAS 157 is not anticipated to have a material impact on the Fund's financial statements; however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. DIVIDENDS TO SHAREHOLDERS Dividends from net investment income, declared daily and payable monthly, when available, are reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the last income dividend of the calendar year. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. EXPENSES AND SALES CHARGES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.89% to 0.70% annually as the Fund's assets increase. The management fee for the six months ended April 30, 2008 was 0.89% of the Fund's average daily net assets. Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. The fee for the six months ended April 30, 2008 was 0.08% of the Fund's average daily net assets. Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 29 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, 2008, other expenses paid to this company were $108. Compensation of Board members includes, for a former Board Chair, compensation as well as retirement benefits. Certain other aspects of a former Board Chair's compensation, including health benefits and payment of certain other expenses, are included under other expenses. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $20.50 for Class A, $21.50 for Class B and $21.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R4 and Class R5 shares and an annual asset-based fee at a rate of 0.20% of the Fund's average daily net assets attributable to Class W shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the Statement of Operations. 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. The Fund has an agreement with RiverSource 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. Sales charges received by the Distributor for distributing Fund shares were $206,019 for Class A and $859 for Class C for the six months ended April 30, 2008. - -------------------------------------------------------------------------------- 30 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 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. For the six months ended April 30, 2008, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds) were 2.23% for Class B and 1.10% for Class R4. Of these waived fees and expenses, the transfer agency fees at the class level were $62 for Class B and $3 for Class R4, the plan administration services fee at the class level was $73 for Class R4, and the management fees at the Fund level were $94. Effective Nov. 1, 2007, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds) will not exceed 1.47% for Class A, 2.23% for Class B, 2.22% for Class C, 1.17% for Class I, 1.35% for Class R4, 1.22% for Class R5 and 1.62% for Class W of the Fund's average daily net assets until Oct. 31, 2008, unless sooner terminated at the discretion of the Board. During the six months ended April 30, 2008, the Fund's transfer agency fees were reduced by $220 as a result of bank fee credits from overnight cash balances. The Fund pays custodian fees to Ameriprise Trust Company, an affiliate of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $54,980,317 and $13,742,705, respectively, for the six months ended April 30, 2008. Realized gains and losses are determined on an identified cost basis. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 31 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED APRIL 30, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ----------------------------------------------------------------------------------------- Class A 14,399,769 235,100 (2,782,258) 11,852,611 Class B 143,231 213 (8,067) 135,377 Class C 727,263 7,332 (20,225) 714,370 Class I 13,882,895 673,125 (9,040,373) 5,515,647 Class R4 4,723 233 (971) 3,985 Class W 20,211,414 46,380 (755,448) 19,502,346 - -----------------------------------------------------------------------------------------
YEAR ENDED OCT. 31, 2007 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ----------------------------------------------------------------------------------------- Class A 815,101 1,939 (976,765) (159,725) Class C 19,801 25 -- 19,826 Class I 4,483,439 462,890 (173,987) 4,772,342 Class R4 2,729 4 -- 2,733 Class R5* 942 -- -- 942 Class W** 494 -- -- 494 - -----------------------------------------------------------------------------------------
* For the period from Oct. 18, 2007 (inception date) to Oct. 31, 2007. ** For the period from Dec. 1, 2006 (inception date) to Oct. 31, 2007. 5. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term Cash Fund aggregated $549,816,037 and $367,471,129, respectively, for the six months ended April 30, 2008. 6. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective on Oct. 18, 2007, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $500 million. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus - -------------------------------------------------------------------------------- 32 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 0.30%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. Under the prior credit facility, a Fund paid interest on its outstanding borrowings at a rate equal to either the higher of the federal funds effective rate plus 0.40% or the JPMCB Prime Commercial Lending Rate. The Fund had no borrowings during the six months ended April 30, 2008. 7. INVESTMENTS IN STRUCTURED INVESTMENT VEHICLES Structured investment vehicles ("SIVs") have generally experienced a significant decrease in liquidity as a result of the reduction in demand for asset backed commercial paper as well as the lack of liquidity and overall volatility in the markets for the collateral underlying these investment structures. As of April 30, 2008, the Fund had two SIVs which remain outstanding, Cheyne Finance and Whistlejacket Capital LLC, with an aggregate value of $5.1 million, representing 1.1% of net assets. On Aug. 28, 2007, Cheyne Finance breached a financial covenant relating to the market value of its underlying collateral, resulting in the occurrence of an "enforcement event." This led to the appointment of receivers on Sept. 4, 2007. On Oct. 17, 2007, the receivers declared Cheyne Finance to be insolvent. The Fund's holdings in Cheyne Finance are in default as of their Nov. 20, 2007 and Dec. 11, 2007 maturity dates. On April 17, 2008, the Fund received a payment from Cheyne of $0.7 million, reducing the Fund's total remaining outstanding principal to $3.3 million. The receivers are currently developing a restructuring plan which will likely result in the Fund receiving less than full payment on its investment. Accordingly, these holdings have been determined to be illiquid. On Feb. 11, 2008, Whistlejacket Capital LLC (WJC) breached a financial covenant relating to the market value of its underlying collateral, resulting in the occurrence of an "enforcement event." This resulted in the appointment of receivers on Feb. 12, 2008. On Feb. 15, 2008, the receivers declared WJC to be insolvent. The Fund's position in WJC is in default as its Feb. 25, 2008 maturity date. The receivers are currently developing a restructuring plan which may result in the Fund receiving less than full payment on its investment. This holding has been determined to be illiquid. As of April 30, 2008, the Fund's holdings in Cheyne and WJC were fair valued at $2.3 million and $2.9 million, respectively, down from their respective amortized costs of $3.3 million and $3.0 million. As of June 17, 2008 the remaining position of Cheyne has been fair valued at $2.2 million and WJC has been fair valued at 2.9 million. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 33 8. RISKS RELATING TO CERTAIN INVESTMENTS DIVERSIFICATION RISK The Fund is non-diversified. A non-diversified fund may invest more of its assets in fewer companies than if it were a diversified fund. The Fund may be more exposed to the risks of loss and volatility than a fund that invests more broadly. FOREIGN CURRENCY RISK The Fund's exposure to foreign currencies subjects the Fund to constantly changing exchange rates and the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of short positions, that the U.S. dollar will decline in value relative to the currency being sold forward. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates and economic or political developments in the U.S. or abroad. GEOGRAPHIC CONCENTRATION RISK The Fund may be particularly susceptible to economic, political or regulatory events affecting companies and countries within the specific geographic region in 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. 9. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to defendants' motion to dismiss the complaint, the 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 on August 8, 2007. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. - -------------------------------------------------------------------------------- 34 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT (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. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 35 10. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results. CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(L) 2007 2006(B) Net asset value, beginning of period $10.58 $10.09 $9.98 - ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .11(c) .41(c) .12 Net gains (losses) (both realized and unrealized) (.47) .57 .11 - ----------------------------------------------------------------------------------------------- Total from investment operations (.36) .98 .23 - ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.14) (.39) (.12) Distributions from realized gains (.35) (.10) -- - ----------------------------------------------------------------------------------------------- Total distributions (.49) (.49) (.12) - ----------------------------------------------------------------------------------------------- Net asset value, end of period $9.73 $10.58 $10.09 - ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $123 $9 $10 - ----------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement (d),(e) 1.43%(f) 1.36% 1.59%(f) - ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.43%(f) 1.36% 1.37%(f) - ----------------------------------------------------------------------------------------------- Net investment income (loss) 2.22%(f) 3.98% 3.89%(f) - ----------------------------------------------------------------------------------------------- Portfolio turnover rate 19% 36% 12% - ----------------------------------------------------------------------------------------------- Total return(i) (3.51%)(j) 9.96%(k) 2.37%(j) - -----------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 15, 2006 (when shares became publicly available) to Oct. 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) During the year ended Oct. 31, 2007, Ameriprise Financial reimbursed the Fund for a loss on a trading error. Had the Fund not received this reimbursement, total return figures would have been lower by 0.05%. (l) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- 36 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(L) 2007 2006(B) Net asset value, beginning of period $10.58 $10.09 $9.97 - ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04(c) .34(c) .09 Net gains (losses) (both realized and unrealized) (.44) .59 .12 - ----------------------------------------------------------------------------------------------- Total from investment operations (.40) .93 .21 - ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.10) (.34) (.09) Distributions from realized gains (.35) (.10) -- - ----------------------------------------------------------------------------------------------- Total distributions (.45) (.44) (.09) - ----------------------------------------------------------------------------------------------- Net asset value, end of period $9.73 $10.58 $10.09 - ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $-- $-- - ----------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 2.34%(f) 2.10% 2.38%(f) - ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 2.23%(f) 2.10% 2.16%(f) - ----------------------------------------------------------------------------------------------- Net investment income (loss) .81%(f) 3.26% 3.11%(f) - ----------------------------------------------------------------------------------------------- Portfolio turnover rate 19% 36% 12% - ----------------------------------------------------------------------------------------------- Total return(i) (3.84%)(j) 9.38%(k) 2.16%(j) - -----------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 15, 2006 (when shares became publicly available) to Oct. 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) During the year ended Oct. 31, 2007, Ameriprise Financial reimbursed the Fund for a loss on a trading error. Had the Fund not received this reimbursement, total return figures would have been lower by 0.05%. (l) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 37 CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(L) 2007 2006(B) Net asset value, beginning of period $10.57 $10.09 $9.97 - ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .06(c) .34(c) .09 Net gains (losses) (both realized and unrealized) (.45) .58 .12 - ----------------------------------------------------------------------------------------------- Total from investment operations (.39) .92 .21 - ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.11) (.34) (.09) Distributions from realized gains (.35) (.10) -- - ----------------------------------------------------------------------------------------------- Total distributions (.46) (.44) (.09) - ----------------------------------------------------------------------------------------------- Net asset value, end of period $9.72 $10.57 $10.09 - ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $7 $-- $-- - ----------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 2.20%(f) 2.12% 2.38%(f) - ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 2.20%(f) 2.12% 2.16%(f) - ----------------------------------------------------------------------------------------------- Net investment income (loss) 1.33%(f) 3.42% 3.11%(f) - ----------------------------------------------------------------------------------------------- Portfolio turnover rate 19% 36% 12% - ----------------------------------------------------------------------------------------------- Total return(i) (3.79%)(j) 9.37%(k) 2.16%(j) - -----------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 15, 2006 (when shares became publicly available) to Oct. 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is and before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) During the year ended Oct. 31, 2007, Ameriprise Financial reimbursed the Fund for a loss on a trading error. Had the Fund not received this reimbursement, total return figures would have been lower by 0.05%. (l) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- 38 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(L) 2007 2006(B) Net asset value, beginning of period $10.59 $10.10 $9.98 - ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .14(c) .44(c) .13 Net gains (losses) (both realized and unrealized) (.49) .59 .12 - ----------------------------------------------------------------------------------------------- Total from investment operations (.35) 1.03 .25 - ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.15) (.44) (.13) Distributions from realized gains (.35) (.10) -- - ----------------------------------------------------------------------------------------------- Total distributions (.50) (.54) (.13) - ----------------------------------------------------------------------------------------------- Net asset value, end of period $9.74 $10.59 $10.10 - ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $166 $122 $68 - ----------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.05%(f) 1.07% 1.34%(f) - ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.05%(f) 1.07% 1.12%(f) - ----------------------------------------------------------------------------------------------- Net investment income (loss) 2.86%(f) 4.30% 4.37%(f) - ----------------------------------------------------------------------------------------------- Portfolio turnover rate 19% 36% 12% - ----------------------------------------------------------------------------------------------- Total return(i) (3.37%)(j) 10.49%(k) 2.56%(j) - -----------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 15, 2006 (when shares became publicly available) to Oct. 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) During the year ended Oct. 31, 2007, Ameriprise Financial reimbursed the Fund for a loss on a trading error. Had the Fund not received this reimbursement, total return figures would have been lower by 0.05%. (l) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 39 CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(L) 2007 2006(B) Net asset value, beginning of period $10.58 $10.09 $9.98 - ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .14(c) .42(c) .13 Net gains (losses) (both realized and unrealized) (.49) .59 .11 - ----------------------------------------------------------------------------------------------- Total from investment operations (.35) 1.01 .24 - ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.15) (.42) (.13) Distributions from realized gains (.35) (.10) -- - ----------------------------------------------------------------------------------------------- Total distributions (.50) (.52) (.13) - ----------------------------------------------------------------------------------------------- Net asset value, end of period $9.73 $10.58 $10.09 - ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - ----------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.36%(f) 1.36% 1.45%(f) - ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.10%(f) 1.31% 1.23%(f) - ----------------------------------------------------------------------------------------------- Net investment income (loss) 2.89%(f) 4.13% 4.04%(f) - ----------------------------------------------------------------------------------------------- Portfolio turnover rate 19% 36% 12% - ----------------------------------------------------------------------------------------------- Total return(i) (3.39%)(j) 10.27%(k) 2.42%(j) - -----------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 15, 2006 (when shares became publicly available) to Oct. 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) During the year ended Oct. 31, 2007, Ameriprise Financial reimbursed the Fund for a loss on a trading error. Had the Fund not received this reimbursement, total return figures would have been lower by 0.05%. (l) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- 40 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(L) 2007(B) Net asset value, beginning of period $10.59 $10.58 - ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .15 .02 Net gains (losses) (both realized and unrealized) (.49) .03 - ----------------------------------------------------------------------------------------------- Total from investment operations (.34) .05 - ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.15) (.04) Distributions from realized gains (.35) -- - ----------------------------------------------------------------------------------------------- Total distributions (.50) (.04) - ----------------------------------------------------------------------------------------------- Net asset value, end of period $9.75 $10.59 - ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - ----------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.09%(f) 1.06%(f) - ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.09%(f) 1.06%(f) - ----------------------------------------------------------------------------------------------- Net investment income (loss) 2.99%(f) 4.43%(f) - ----------------------------------------------------------------------------------------------- Portfolio turnover rate 19% 36% - ----------------------------------------------------------------------------------------------- Total return(i) (3.29%)(j) .44%(j),(k) - -----------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Oct. 18, 2007 (inception date) to Oct. 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) During the year ended Oct. 31, 2007, Ameriprise Financial reimbursed the Fund for a loss on a trading error. Had the Fund not received this reimbursement, total return figures would have been lower by 0.05%. (l) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 41 CLASS W
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(L) 2007(B) Net asset value, beginning of period $10.58 $10.13 - ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .07 .36 Net gains (losses) (both realized and unrealized) (.44) .55 - ----------------------------------------------------------------------------------------------- Total from investment operations (.37) .91 - ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.13) (.36) Distributions from realized gains (.35) (.10) - ----------------------------------------------------------------------------------------------- Total distributions (.48) (.46) - ----------------------------------------------------------------------------------------------- Net asset value, end of period $9.73 $10.58 - ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $190 $-- - ----------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.61%(f) 1.54%(f) - ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.61%(f) 1.54%(f) - ----------------------------------------------------------------------------------------------- Net investment income (loss) 1.39%(f) 3.88%(f) - ----------------------------------------------------------------------------------------------- Portfolio turnover rate 19% 36% - ----------------------------------------------------------------------------------------------- Total return(i) (3.55%)(j) 9.21%(j),(k) - -----------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 1, 2006 (inception date) to Oct. 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratio. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) During the year ended Oct. 31, 2007, Ameriprise Financial reimbursed the Fund for a loss on a trading error. Had the Fund not received this reimbursement, total return figures would have been lower by 0.05%. (l) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- 42 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- RiverSource Investments, LLC ("RiverSource Investments" or the "investment manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement") RiverSource Investments provides investment advice and other services to the Fund and all 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. RiverSource Investments prepared detailed reports for the Board and its Contracts Committee in March and April 2008, including reports based on data provided by independent organizations to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource Investments addressing the services RiverSource Investments provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts, Investment Review and Compliance Committees in determining whether to continue the IMS Agreement. At the April 9-10, 2008 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by RiverSource Investments: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource Investments, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource Investments, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, particularly in the areas of trading systems, new product initiatives, legal and compliance. Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource Investments, the Board considered the quality of the administrative and transfer agency services provided by RiverSource Investments' affiliates to the Fund. The Board also reviewed the financial condition of RiverSource Investments (and its affiliates) and each entity's ability to carry out its responsibilities under the IMS Agreement. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by RiverSource Investments). The Board concluded that the services being performed under the - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 43 IMS Agreement were of a reasonably high quality, particularly in light of recent market conditions. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that RiverSource Investments and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods (including since inception), recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2006 to December 2007. The Board observed that the Fund's investment performance met expectations. Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource Investments and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board observed that there has not yet developed an adequate comparable peer group against which to compare the Fund's expense ratio. The Board did take into account that the investment management services and administrative fee schedules were in line with those applicable to other global fixed income funds in the Fund's family. 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 the expected profitability of RiverSource Investments and its affiliates in connection with RiverSource Investments providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource Investments and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability since inception. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource Investments as the Fund grows and - -------------------------------------------------------------------------------- 44 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 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 10, 2008, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement. 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 RiverSource Funds at (888) 791-3380; contacting your financial institution; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND -- 2008 SEMIANNUAL REPORT 45 RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. These companies are part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C) 2008 RiverSource Distributors, Inc. S-6512 C (6/08)
Semiannual Report (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE EMERGING MARKETS BOND FUND SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2008 RIVERSOURCE EMERGING MARKETS BOND FUND SEEKS TO PROVIDE SHAREHOLDERS WITH HIGH TOTAL RETURN THROUGH CURRENT INCOME AND CAPITAL APPRECIATION. (SINGLE STRATEGY FUNDS ICON) TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance............... 2 Manager Commentary.................. 5 Fund Expenses Example............... 10 Portfolio of Investments............ 12 Financial Statements................ 17 Notes to Financial Statements....... 22 Approval of Investment Management Services Agreement............... 39 Proxy Voting........................ 41
(DALBAR LOGO) The RiverSource mutual fund shareholder reports have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Emerging Markets Bond Fund's (the Fund) Class A shares declined 0.31% (excluding sales charge) for the six months ended April 30, 2008. > The Fund underperformed its benchmark, the J.P. Morgan Emerging Markets Bond Index-Global (J.P. Morgan EMBI-Global), which rose 1.90%. > The Fund closely tracked the Lipper Emerging Markets Debt Funds Index, representing the Fund's peer group, which fell 0.29% during the same period. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2008) - --------------------------------------------------------------------------------
Since 6 months* 1 year inception(a) - ------------------------------------------------------------------------------ RiverSource Emerging Markets Bond Fund Class A (excluding sales charge) -0.31% +2.10% +6.71% - ------------------------------------------------------------------------------ J.P. Morgan EMBI-Global(1) (unmanaged) +1.90% +4.60% +7.63% - ------------------------------------------------------------------------------ Lipper Emerging Markets Debt Funds Index(2) -0.29% +2.46% +6.35% - ------------------------------------------------------------------------------
* Not annualized. (a) Fund data is from Feb. 16, 2006. J.P. Morgan EMBI-Global and Lipper peer group data is from March 1, 2006. 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 institution or visiting riversource.com/funds. The 4.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. (1) 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. - -------------------------------------------------------------------------------- 2 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- STYLE MATRIX - ----------------------------------------
DURATION SHORT INT. LONG HIGH MEDIUM QUALITY X LOW
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. PORTFOLIO STATISTICS (at April 30, 2008) - ---------------------------------------- Weighted average life(1) 13.2 years - -------------------------------------------- Effective duration(2) 7.3 years - -------------------------------------------- Weighted average bond rating(3) BB - --------------------------------------------
ANNUAL OPERATING EXPENSE RATIO (as of the current prospectus) - ----------------------------------------
Total - ------------------------------------- Class A 1.33% - ------------------------------------- Class B 2.13% - ------------------------------------- Class C 2.13% - ------------------------------------- Class I 0.93% - ------------------------------------- Class R4 1.25% - ------------------------------------- Class W 1.33% - -------------------------------------
(1) WEIGHTED AVERAGE LIFE measures a bond's maturity, which takes into consideration the possibility that the issuer may call the bond before its maturity date. (2) EFFECTIVE DURATION measures the sensitivity of a security's price to parallel shifts in the yield curve (the graphical depiction of the levels of interest rates from two years out to 30 years). Positive duration means that as rates rise, the price decreases, and negative duration means that as rates rise, the price increases. (3) WEIGHTED AVERAGE BOND RATING represents the average credit quality of the underlying bonds in the portfolio. There are risks associated with an investment in a bond funds, including credit risk, interest rate risk, and prepayment and extension risk. See the Fund's prospectus for information on these and other risks associated with the Fund. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. Non-investment grade securities, commonly called "high-yield" or "junk" bonds, generally have more volatile prices and carry more risk to principal and income than investment grade securities. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT APRIL 30, 2008 SINCE WITHOUT SALES CHARGE 6 MONTHS* 1 YEAR INCEPTION Class A (inception 2/16/06) -0.31% +2.10% +6.71% - ----------------------------------------------------------------------- Class B (inception 2/16/06) -0.69% +1.36% +5.92% - ----------------------------------------------------------------------- Class C (inception 2/16/06) -0.58% +1.43% +5.91% - ----------------------------------------------------------------------- Class I (inception 2/16/06) -0.07% +2.59% +7.10% - ----------------------------------------------------------------------- Class R4 (inception 2/16/06) +0.15% +2.62% +6.99% - ----------------------------------------------------------------------- Class W (inception 12/1/06) -0.22% +2.15% +5.78% - ----------------------------------------------------------------------- WITH SALES CHARGE Class A (inception 2/16/06) -5.07% -2.77% +4.37% - ----------------------------------------------------------------------- Class B (inception 2/16/06) -5.47% -3.40% +4.21% - ----------------------------------------------------------------------- Class C (inception 2/16/06) -1.54% +0.48% +5.91% - ----------------------------------------------------------------------- AT MARCH 31, 2008 SINCE WITHOUT SALES CHARGE 6 MONTHS* 1 YEAR INCEPTION Class A (inception 2/16/06) +0.65% +2.55% +6.32% - ----------------------------------------------------------------------- Class B (inception 2/16/06) +0.27% +1.71% +5.53% - ----------------------------------------------------------------------- Class C (inception 2/16/06) +0.27% +1.78% +5.51% - ----------------------------------------------------------------------- Class I (inception 2/16/06) +0.90% +3.04% +6.71% - ----------------------------------------------------------------------- Class R4 (inception 2/16/06) +0.97% +2.92% +6.58% - ----------------------------------------------------------------------- Class W (inception 12/1/06) +0.66% +2.51% +5.10% - ----------------------------------------------------------------------- WITH SALES CHARGE - ----------------------------------------------------------------------- Class A (inception 2/16/06) -4.15% -2.31% +3.89% - ----------------------------------------------------------------------- Class B (inception 2/16/06) -4.56% -3.08% +3.74% - ----------------------------------------------------------------------- Class C (inception 2/16/06) -0.69% +0.82% +5.51% - -----------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 4.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R4 and Class W shares. Class I and Class R4 are available to institutional investors only. Class W shares are offered through qualifying discretionary accounts. * Not annualized. - -------------------------------------------------------------------------------- 4 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT MANAGER COMMENTARY ------------------------------------------------------------- (UNAUDITED) At April 30, 2008, approximately 76% of the Fund's shares were owned in aggregate by affiliated funds-of-funds managed by RiverSource Investments, LLC (RiverSource). As a result of asset allocation decisions by RiverSource, it is possible RiverSource Emerging Markets Bond Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds (see page 29, Class I capital share transactions for related activity during the most recent fiscal period). RiverSource seeks to minimize the impact of these transactions by structuring them over a reasonable period of time. RiverSource Emerging Markets Bond Fund may experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated funds-of-funds. For more information on the Fund's expenses, see the discussions beginning on pages 10 and 27. Dear Shareholders, RiverSource Emerging Markets Bond Fund's Class A shares declined 0.31% (excluding sales charge) for the six months ended April 30, 2008. The Fund underperformed its benchmark, the J.P. Morgan Emerging Markets Bond Index-Global (J.P. Morgan EMBI-Global), which rose 1.90%. The Fund closely tracked the Lipper Emerging Markets Debt Funds Index, representing the Fund's peer group, which fell 0.29% during the same period. SIGNIFICANT PERFORMANCE FACTORS From a broad perspective, performance in the emerging markets bond asset class was muted during the period by heightened financial market volatility. Equity market volatility, contagion from the subprime crisis, surging commodity prices and a weak U.S. dollar combined to increase investors' aversion to risk assets. There were also concerns about the real economic impacts of these factors, including much slower growth in the developed market nations and rising inflation in emerging market nations. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 5 MANAGER COMMENTARY (continued) ------------------------------------------------- Exposure to local currencies was the primary contributor to the Fund's performance, as several emerging market currencies strengthened against the U.S. dollar during the period. Fund holdings of bonds denominated in the Brazilian real, the Colombian peso and the Uruguayan peso contributed the most. The Fund's holdings of assets with average yields higher than the J.P. Morgan EMBI-Global also contributed significantly to results. Country selection detracted from the Fund's performance. Modest exposure to Brazil and Venezuela, which contributed to results, did not fully offset the negative performance from overweight exposures to Argentina, Indonesia and Turkey. The portfolio's emerging market corporate bonds underperformed the J.P. Morgan EMBI-Global during the period, detracting from performance. While holdings of local currencies helped relative performance, non-U.S. interest rates, including those in Brazil, Colombia and Uruguay, generally trended higher and hurt Fund PORTFOLIO BREAKDOWN BY COUNTRY (at April 30, 2008; % of portfolio assets) - ----------------------------------------------------------------- Argentina 7.1% - -------------------------------------------------------------- Brazil 12.9% - -------------------------------------------------------------- Cayman Islands 3.7% - -------------------------------------------------------------- Colombia 5.4% - -------------------------------------------------------------- Dominican Republic 2.5% - -------------------------------------------------------------- El Salvador 1.8% - -------------------------------------------------------------- Indonesia 6.5% - -------------------------------------------------------------- Jamaica 1.0% - -------------------------------------------------------------- Kazakhstan 1.1% - -------------------------------------------------------------- Luxembourg 7.3% - -------------------------------------------------------------- Mexico 9.7% - -------------------------------------------------------------- Netherlands 3.0% - -------------------------------------------------------------- Pakistan 0.6% - -------------------------------------------------------------- Panama 0.4% - -------------------------------------------------------------- Peru 0.9% - -------------------------------------------------------------- Philippine Islands 7.1% - -------------------------------------------------------------- Russia 4.2% - -------------------------------------------------------------- Turkey 8.5% - -------------------------------------------------------------- Ukraine 2.0% - -------------------------------------------------------------- United Kingdom 0.8% - -------------------------------------------------------------- Uruguay 4.6% - -------------------------------------------------------------- Venezuela 8.2% - -------------------------------------------------------------- Other(1) 0.7% - --------------------------------------------------------------
(1) Cash and Cash Equivalents. - -------------------------------------------------------------------------------- 6 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- performance because the prices of these underlying bonds declined as rates increased. In addition, U.S. interest rates declined during the semiannual period. An underexposure to U.S. dollar-denominated sovereign bonds compared with the J.P. Morgan EMBI-Global detracted because lower rates caused the prices of these bonds to increase. CHANGES TO THE FUND'S PORTFOLIO We made modest changes to the Fund's portfolio during the period. We slightly reduced the portfolio's exposure to corporate bonds. Also, because fundamentals continue to support the strength of many foreign currencies relative to the U.S. dollar, we gradually and opportunistically increased the portfolio's foreign currency exposure. As of April 30, 2008, approximately 77% of the Fund's net assets were invested in sovereign debt and approximately 23% in corporate emerging market debt. The Fund had its most significant allocations relative to the J.P. Morgan EMBI-Global in the bond markets of Uruguay, Argentina, Colombia, Indonesia and El Salvador. Conversely, the Fund had its most modest exposures relative to the J.P. Morgan EMBI-Global in the bond markets of Brazil, Russia, Mexico, Peru and Panama. QUALITY BREAKDOWN (at April 30, 2008; % of portfolio assets excluding cash equivalents and equities) - ----------------------------------------------------------------- AA bonds 5.3% - -------------------------------------------------------------- A bonds 1.6% - -------------------------------------------------------------- BBB bonds 14.2% - -------------------------------------------------------------- BB bonds 56.1% - -------------------------------------------------------------- B bonds 21.5% - -------------------------------------------------------------- Non-rated bonds 1.3% - --------------------------------------------------------------
Bond ratings apply to the underlying holdings of the Fund and not the Fund itself. Whenever possible, the Standard and Poor's rating is used to determine the credit quality of a security. Standard and Poor's rates the creditworthiness of corporate bonds, with 15 categories, ranging from AAA (highest) to D (lowest). Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. If Standard and Poor's doesn't rate a security, then Moody's rating is used. RiverSource Investments, LLC, the Fund's investment manager, rates a security using an internal rating system when Moody's doesn't provide a rating. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- We continue to seek opportunities to invest in local currency denominated sovereign bonds, particularly in countries benefiting from higher commodity prices. OUR FUTURE STRATEGY In our opinion, we are likely closer to the end of the U.S. financial and credit market crisis than to the beginning. That said, a good number of unanswered questions remain regarding the extent of the impact of recent financial volatility and turmoil on U.S. economic growth. Causing further uncertainty for the view ahead is the fact that at the end of April, commodity prices remained at or near historic highs. While high commodity prices historically have been a boon to commodity-exporting emerging market economies, this time the specter of higher inflation, especially in food, complicates the picture. Indeed, several emerging market nations raised their interest rates during the semiannual period in an effort to stave off inflation. Still, it is important to keep in mind that most of these countries came into this period of higher financial market volatility with low budget deficits, healthy current account balances and relatively low debt load. With flexible exchange rates and lower reliance on international capital, many of the vulnerabilities that triggered past crises are less of an issue today. We continue to seek opportunities to invest in local currency denominated sovereign bonds, particularly in countries benefiting from higher commodity prices. Additionally, we look to see if these countries exhibit strong internal and external balance sheets. This strategy is based on our current view and value analysis. - -------------------------------------------------------------------------------- 8 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- Looking ahead, we deem several factors important. Among them are the creditworthiness of each country, the strength of its economic policies, the soundness of its fundamentals and the attractiveness of its local interest rates. Using our top-down investment approach, we intend to continually evaluate these factors as we seek to identify individual securities and local currency investments that present attractive value opportunities. (PHOTO - NICOLAS PIFER) Nic Pifer, CFA Portfolio Manager Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a RiverSource fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any RiverSource fund. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 9 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the acquired funds' expense ratio as of the 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, 2008. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 10 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2007 APRIL 30, 2008 THE PERIOD(A) EXPENSE RATIO - ------------------------------------------------------------------------------------------- Class A - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 996.90 $ 6.95 1.40% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.90 $ 7.02 1.40% - ------------------------------------------------------------------------------------------- Class B - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 993.10 $10.75 2.17% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.07 $10.87 2.17% - ------------------------------------------------------------------------------------------- Class C - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 994.20 $10.71 2.16% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.12 $10.82 2.16% - ------------------------------------------------------------------------------------------- Class I - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 999.30 $ 4.57 .92% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,020.29 $ 4.62 .92% - ------------------------------------------------------------------------------------------- Class R4 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,001.50 $ 6.22 1.25% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.65 $ 6.27 1.25% - ------------------------------------------------------------------------------------------- Class W - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 997.80 $ 6.76 1.36% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.10 $ 6.82 1.36% - -------------------------------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2008: -0.31% for Class A, -0.69% for Class B, -0.58% for Class C, -0.07% for Class I, +0.15% for Class R4 and -0.22% for Class W. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2008 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
BONDS (95.6%)(c) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) ARGENTINA (6.8%) Alto Palermo Sr Unsecured 05-11-17 7.88% $500,000(d) $400,580 Banco Hipotecario Sr Unsecured 04-27-16 9.75 975,000(d) 858,000 Industrias Metalurgicas Pescarmona Sr Unsecured 10-22-14 11.25 2,250,000(d) 2,140,313 Republic of Argentina 09-12-13 7.00 2,850,000 2,244,375 04-17-17 7.00 1,670,000 1,160,650 12-15-35 5.00 9,450,000(b) 1,096,200 Republic of Argentina (Argentine Peso) Sr Unsecured 06-12-12 10.50 2,200,000 521,739 --------------- Total 8,421,857 - ---------------------------------------------------------------------------------- BRAZIL (12.3%) Bertin Ltda Sr Unsecured 10-05-16 10.25 1,380,000(d) 1,438,650 Eletropaulo Metropolitana de Sao Paulo (Brazilian Real) Sr Unsecured 06-28-10 19.13 3,400,000(d) 2,230,245 Federative Republic of Brazil 01-20-34 8.25 358,000 454,660 Federative Republic of Brazil Sr Unsecured 01-17-17 6.00 1,050,000 1,097,250 10-14-19 8.88 1,738,000 2,239,761 JBS Sr Unsub 08-04-16 10.50 350,000(d) 365,313 Marfrig Overseas 11-16-16 9.63 1,330,000(d) 1,343,300
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) BRAZIL (CONT.) Merrill Lynch & Co (Brazilian Real) Sr Unsecured 03-08-17 10.71% 5,300,000 $2,930,357 Morgan Stanley (Brazilian Real) Sr Unsecured 05-03-17 10.09 6,650,000(d) 3,321,597 --------------- Total 15,421,133 - ---------------------------------------------------------------------------------- CAYMAN ISLANDS (3.5%) EEB Intl 10-31-14 8.75 1,050,000(d) 1,115,625 Odebrecht Finance 10-18-17 7.50 1,100,000(d) 1,166,319 Peru Enhanced Pass-Thru Sr Secured Zero Coupon 05-31-18 3.78 1,084,000(d,g) 731,700 TGI Intl 10-03-17 9.50 1,300,000(d) 1,383,200 --------------- Total 4,396,844 - ---------------------------------------------------------------------------------- COLOMBIA (5.2%) Republic of Colombia 09-18-37 7.38 1,850,000 2,062,750 Republic of Colombia (Colombian Peso) 03-01-10 11.75 1,000,000,000 576,705 10-22-15 12.00 4,218,000,000 2,569,145 06-28-27 9.85 966,000,000 516,042 Santa Fe de Bogota (Colombian Peso) Sr Unsub 07-26-28 9.75 1,377,000,000(d) 678,485 --------------- Total 6,403,127 - ---------------------------------------------------------------------------------- DOMINICAN REPUBLIC (2.4%) Aes Dominicana Energia Finance 12-13-15 11.00 1,050,000(d) 1,018,500
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 12 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) DOMINICAN REPUBLIC (CONT.) Cerveceria Nacional Dominicana Sr Unsub 03-27-12 16.00% $1,450,000(d,f) $1,421,000 Dominican Republic Sr Unsecured 04-20-27 8.63 150,000(d) 159,750 EGE Haina Finance 04-26-17 9.50 450,000(d) 412,313 --------------- Total 3,011,563 - ---------------------------------------------------------------------------------- EL SALVADOR (1.7%) Republic of El Salvador Sr Unsecured 06-15-35 7.65 2,010,000(d) 2,150,700 - ---------------------------------------------------------------------------------- INDONESIA (6.3%) Republic of Indonesia (Indonesian Rupiah) 10-15-14 11.00 13,000,000,000 1,309,054 07-15-17 10.00 15,000,000,000 1,383,929 07-15-22 10.25 18,200,000,000 1,600,594 Republic of Indonesia Sr Unsecured 01-17-18 6.88 200,000(d) 204,250 10-12-35 8.50 1,040,000(d) 1,133,600 02-17-37 6.63 2,450,000(d) 2,180,500 --------------- Total 7,811,927 - ---------------------------------------------------------------------------------- JAMAICA (1.0%) Govt of Jamaica Sr Unsecured 03-15-39 8.00 1,280,000 1,235,200 - ---------------------------------------------------------------------------------- KAZAKHSTAN (1.0%) Kazkommerts Intl 11-03-15 8.00 450,000(d) 360,000 Temir Capital for JSC TemirBank 05-21-14 9.50 850,000(d) 916,408 --------------- Total 1,276,408 - ---------------------------------------------------------------------------------- LUXEMBOURG (7.0%) Gaz Capital Sr Unsecured 11-22-16 6.21 2,050,000(d) 1,965,949 03-07-22 6.51 900,000(d) 823,500 08-16-37 7.29 1,650,000(d) 1,577,813
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) LUXEMBOURG (CONT.) MHP 11-30-11 10.25% $1,650,000(d) $1,650,000 TNK-BP Finance 07-18-16 7.50 400,000(d) 385,268 03-20-17 6.63 800,000(d) 729,965 03-13-18 7.88 1,525,000(d) 1,530,384 --------------- Total 8,662,879 - ---------------------------------------------------------------------------------- MEXICO (9.3%) Controladora Comerical Mexicana (Mexican Peso) 03-30-27 8.70 31,700,000(d) 2,948,588 Mexican Fixed Rate Bonds (Mexican Peso) 12-20-12 9.00 9,600,000 953,364 12-18-14 9.50 9,500,000 979,122 Pemex Project Funding Master Trust 03-01-18 5.75 1,000,000(d) 1,030,000 06-15-35 6.63 3,304,000 3,441,994 Vitro 02-01-17 9.13 2,620,000 2,249,270 --------------- Total 11,602,338 - ---------------------------------------------------------------------------------- NETHERLANDS (2.9%) Intergas Finance 05-14-17 6.38 500,000(d) 432,145 Majapahit Holding 10-17-16 7.75 1,600,000(d) 1,575,999 06-28-17 7.25 1,450,000(d) 1,419,507 06-29-37 7.88 200,000(d) 181,760 --------------- Total 3,609,411 - ---------------------------------------------------------------------------------- PAKISTAN (0.6%) Islamic Republic of Pakistan 06-01-17 6.88 850,000(d) 732,063 - ---------------------------------------------------------------------------------- PANAMA (0.4%) Republic of Panama 04-28-34 8.13 175,000 212,625 Republic of Panama Sr Unsecured 01-26-36 6.70 250,000 259,375 --------------- Total 472,000 - ----------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 13
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) PERU (0.9%) Banco de Credito del Peru Sub Nts 11-07-21 6.95% $800,000(d,f) $838,624 Republic of Peru Sr Unsecured 03-14-37 6.55 256,000 268,800 --------------- Total 1,107,424 - ---------------------------------------------------------------------------------- PHILIPPINE ISLANDS (6.8%) Natl Power 11-02-16 6.88 900,000(d) 917,604 Republic of Philippines 10-07-16 8.75 100,000(d) 119,750 01-15-19 9.88 550,000 706,750 10-21-24 9.50 1,821,000 2,317,223 01-14-31 7.75 3,906,000 4,404,015 --------------- Total 8,465,342 - ---------------------------------------------------------------------------------- RUSSIA (4.1%) Alfa MTN Markets/ABH Financial 06-25-12 8.20 850,000(d) 824,500 Gazstream 07-22-13 5.63 706,378(d) 707,261 Russian Federation 03-31-30 7.50 1,980,835(d) 2,268,057 Russian Standard Finance Sr Unsub 05-05-11 8.63 1,350,000(d) 1,242,001 --------------- Total 5,041,819 - ---------------------------------------------------------------------------------- TURKEY (8.2%) Republic of Turkey 03-15-15 7.25 679,000 707,009 04-03-18 6.75 350,000 350,875 02-05-25 7.38 2,100,000 2,128,875 02-14-34 8.00 1,320,000 1,397,550 03-17-36 6.88 6,000,000 5,550,599 --------------- Total 10,134,908 - ---------------------------------------------------------------------------------- UKRAINE (1.9%) Credit Suisse First Boston Intl for City of Kiev Ukraine 11-06-15 8.00 100,000(d) 95,000
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) UKRAINE (CONT.) Credit Suisse First Boston Intl for Ex-Im Bank of Ukraine 02-09-16 8.40% $300,000 $291,390 Govt of Ukraine 06-26-12 6.39 1,700,000(d) 1,781,048 Standard Bank London Holdings for NAK Naftogaz Ukrainy Secured 09-30-09 8.13 200,000 192,460 --------------- Total 2,359,898 - ---------------------------------------------------------------------------------- UNITED KINGDOM (0.8%) UK SPV Credit Finance for JSC Commercial Bank Privatbank 02-06-12 8.00 1,100,000(d) 996,991 - ---------------------------------------------------------------------------------- URUGUAY (4.5%) Republic of Uruguay Pay-in-kind 01-15-33 7.88 500(e) 543 Republica Orient Uruguay (Uruguay Peso) 04-05-27 4.25 73,706,880(i) 3,816,493 06-26-37 3.07 15,043,773(i) 684,423 Republica Orient Uruguay Sr Unsecured 03-21-36 7.63 983,939 1,038,056 --------------- Total 5,539,515 - ---------------------------------------------------------------------------------- VENEZUELA (7.9%) Petroleos de Venezuela 04-12-17 5.25 4,450,000 2,937,000 Republic of Venezuela 02-26-16 5.75 4,480,000 3,528,000 12-09-20 6.00 200,000 140,000 04-21-25 7.65 250,000 191,850 Republic of Venezuela Sr Unsecured 10-08-14 8.50 2,994,000 2,806,875 01-13-34 9.38 231,000 209,055 --------------- Total 9,812,780 - ---------------------------------------------------------------------------------- TOTAL BONDS (Cost: $120,982,840) $118,666,127 - ----------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 14 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT
MONEY MARKET FUND (0.7%) SHARES VALUE(A) RiverSource Short-Term Cash Fund, 2.72% 830,133(h) $830,133 - ------------------------------------------------------------------------------------ TOTAL MONEY MARKET FUND (Cost: $830,133) $830,133 - ------------------------------------------------------------------------------------ TOTAL INVESTMENTS IN SECURITIES (Cost: $121,812,973)(j) $119,496,260 ====================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using procedures described in Note 1 to the financial statements. (b) 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. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security may be determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2008, the value of these securities amounted to $53,904,125 or 43.4% of net assets. (e) 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. (f) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on April 30, 2008. (g) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield on the date of acquisition. (h) Affiliated Money Market Fund - See Note 5 to the financial statements. The rate shown is the seven-day current annualized yield at April 30, 2008. (i) 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. (j) At April 30, 2008, the cost of securities for federal income tax purposes was approximately $121,813,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $3,034,000 Unrealized depreciation (5,351,000) - ------------------------------------------------------------------------------ Net unrealized depreciation $(2,317,000) - ------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 15 HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com/funds. - -------------------------------------------------------------------------------- 16 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT FINANCIAL STATEMENTS ----------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 2008 (UNAUDITED) ASSETS Investments in securities, at value Unaffiliated issuers (identified cost $120,982,840) $118,666,127 Affiliated money market fund (identified cost $830,133) 830,133 - ---------------------------------------------------------------------------- Total investments in securities (identified cost $121,812,973) 119,496,260 Foreign currency holdings (identified cost $172,834) 178,020 Capital shares receivable 591,368 Dividends and accrued interest receivable 2,125,931 Receivable for investment securities sold 2,256,526 - ---------------------------------------------------------------------------- Total assets 124,648,105 - ---------------------------------------------------------------------------- LIABILITIES Disbursements in excess of cash 16,078 Capital shares payable 403,723 Accrued investment management services fee 2,513 Accrued distribution fee 235 Accrued transfer agency fee 113 Accrued administrative services fee 279 Other accrued expenses 44,532 - ---------------------------------------------------------------------------- Total liabilities 467,473 - ---------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $124,180,632 ============================================================================
- -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 17 STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) APRIL 30, 2008 (UNAUDITED) REPRESENTED BY Capital stock -- $.01 par value $ 123,060 Additional paid-in capital 125,307,208 Undistributed net investment income 347,039 Accumulated net realized gain (loss) 675,278 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (2,271,953) - ---------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $124,180,632 ============================================================================
Net assets applicable to outstanding shares: Class A $ 7,496,115 Class B $ 1,563,250 Class C $ 258,082 Class I $ 94,804,907 Class R4 $ 20,779 Class W $ 20,037,499 Net asset value per share of outstanding Class A capital stock: shares(1) 742,628 $ 10.09 Class B shares 155,018 $ 10.08 Class C shares 25,626 $ 10.07 Class I shares 9,393,323 $ 10.09 Class R4 shares 2,060 $ 10.09 Class W shares 1,987,328 $ 10.08 - -------------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $10.59. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 4.75%. The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 18 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT STATEMENT OF OPERATIONS SIX MONTHS ENDED APRIL 30, 2008 (UNAUDITED) INVESTMENT INCOME Income: Interest $ 6,520,689 Income distributions from affiliated money market fund 117,426 Less foreign taxes withheld (1,749) - --------------------------------------------------------------------------- Total income 6,636,366 - --------------------------------------------------------------------------- Expenses: Investment management services fee 595,508 Distribution fee Class A 7,416 Class B 6,469 Class C 993 Class W 32,259 Transfer agency fee Class A 7,788 Class B 1,798 Class C 268 Class R4 5 Class W 25,807 Administrative services fee 66,167 Plan administration services fee -- Class R4 23 Compensation of board members 1,680 Custodian fees 19,350 Printing and postage 8,460 Registration fees 47,915 Professional fees 14,647 Other 3,396 - --------------------------------------------------------------------------- Total expenses 839,949 Expenses waived/reimbursed by the Investment Manager and its affiliates (2,262) Earnings and bank fee credits on cash balances (37) - --------------------------------------------------------------------------- Total net expenses 837,650 - --------------------------------------------------------------------------- Investment income (loss) -- net 5,798,716 - --------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions 697,814 Foreign currency transactions 47,569 - --------------------------------------------------------------------------- Net realized gain (loss) on investments 745,383 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (7,037,031) - --------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (6,291,648) - --------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (492,932) ===========================================================================
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 19 STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2008 OCT. 31, 2007 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 5,798,716 $ 6,058,237 Net realized gain (loss) on investments 745,383 1,803,817 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (7,037,031) 2,593,776 Net increase (decrease) in net assets resulting from operations (492,932) 10,455,830 - ----------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (210,131) (501,538) Class B (40,292) (32,727) Class C (6,356) (4,490) Class I (4,721,860) (4,198,103) Class R4 (705) (838) Class W (874,339) (1,049,016) Net realized gain Class A (47,559) (18,393) Class B (11,052) (880) Class C (1,687) (83) Class I (1,321,379) (59,853) Class R4 (167) (22) Class W (304,713) (8) - ----------------------------------------------------------------------------------------- Total distributions (7,540,240) (5,865,951) - -----------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 20 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2008 OCT. 31, 2007 (UNAUDITED) CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 3,695,661 $ 3,695,695 Class B shares 791,003 934,159 Class C shares 144,278 131,955 Class I shares 5,815,553 105,338,850 Class R4 shares 7,693 6,989 Class W shares 12,526,711 73,570,698 Reinvestment of distributions at net asset value Class A shares 248,644 167,200 Class B shares 43,844 28,622 Class C shares 6,456 3,686 Class I shares 6,042,771 4,257,340 Class R4 shares 393 273 Class W shares 1,178,836 1,048,760 Payments for redemptions Class A shares (870,179) (11,436,832) Class B shares (361,833) (358,088) Class C shares (53,217) (7,430) Class I shares (57,884,927) (13,150,244) Class R4 shares (2,688) (6,001) Class W shares (30,152,262) (37,405,273) - ----------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (58,823,263) 126,820,359 - ----------------------------------------------------------------------------------------- Total increase (decrease) in net assets (66,856,435) 131,410,238 Net assets at beginning of period 191,037,067 59,626,829 - ----------------------------------------------------------------------------------------- Net assets at end of period $124,180,632 $191,037,067 ========================================================================================= Undistributed net investment income $ 347,039 $ 402,006 - -----------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 21 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS TO APRIL 30, 2008) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RiverSource Emerging Markets Bond Fund (the Fund) is a series of RiverSource Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a non-diversified, open-end management investment company. RiverSource Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund invests primarily in fixed income securities of emerging market issuers. The Fund offers Class A, Class B, Class C, Class I, Class R4 and Class W shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class I and Class R4 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. - - Class W shares are sold without a front-end sales charge or CDSC and are offered through qualifying discretionary accounts. At April 30, 2008, RiverSource Investments, LLC (the Investment Manager) and the RiverSource affiliated funds-of-funds owned 100% of Class I shares. At April 30, 2008, the Investment Manager and the RiverSource affiliated funds- of-funds owned approximately 76% of the total outstanding Fund shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at - -------------------------------------------------------------------------------- 22 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange 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 New York Stock Exchange, 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 New York Stock Exchange. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. 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, 2008, the Fund had no outstanding forward-commitments. The Fund also enters into transactions to sell purchase commitments to third parties at current market values and concurrently acquires other purchase commitments for similar securities at later dates. As an inducement for the Fund to "roll over" its purchase commitments, the Fund receives negotiated amounts in the form of reductions of the purchase price of the commitment. The Fund records the incremental difference between the forward purchase and sale of each forward - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 23 roll as realized gain or loss. Losses may arise due to changes in the value of the securities or if the counterparty does not perform under the terms of the agreement. If the counterparty files for bankruptcy or becomes insolvent, the Fund's right to repurchase or sell securities may be limited. The Fund did not enter into any mortgage dollar roll transactions during the six months ended April 30, 2008. OPTION TRANSACTIONS To produce incremental earnings, protect gains, and facilitate buying and selling of securities for investments, the Fund may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. Cash collateral may be collected by the Fund to secure certain over-the-counter options trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. The Fund also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. At April 30, 2008, and for the six months then ended, the Fund had no outstanding option contracts. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Futures are valued daily based upon the last sale price at the close of 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 - -------------------------------------------------------------------------------- 24 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. At April 30, 2008, the Fund had no outstanding futures contracts. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At April 30, 2008, foreign currency holdings were entirely comprised of Mexican pesos. The Fund may enter into forward foreign currency contracts to produce incremental earnings, for operational purposes, or to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete its contract obligations. At April 30, 2008, the Fund had no outstanding forward foreign currency contracts. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. The Fund has adopted Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes" which is effective for fiscal periods beginning after Dec. 15, 2006. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 25 Statement 109, "Accounting for Income Taxes." FIN 48 prescribes a two-step process to recognize and measure a tax position taken or expected to be taken in a tax return. The first step is to determine whether a tax position has met the more-likely-than-not recognition threshold and the second step is to measure a tax position that meets the threshold to determine the amount of benefit to recognize. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of the deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. RECENT ACCOUNTING PRONOUNCEMENTS In March 2008, the FASB issued Statement on Financial Accounting Standards No. 161 (SFAS "161"), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of April 30, 2008, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. On Sept. 20, 2006, the FASB released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. The application of SFAS 157 will be effective for the Fund's fiscal year beginning Nov. 1, 2008. The adoption of SFAS 157 is not anticipated to have a material impact on the Fund's financial - -------------------------------------------------------------------------------- 26 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT statements; however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. DIVIDENDS TO SHAREHOLDERS Dividends from net investment income, declared daily and payable monthly, when available, are reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the last income dividend of the calendar year. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income, if any, is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. EXPENSES AND SALES CHARGES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.72% to 0.52% annually as the Fund's assets increase. The management fee for the six months ended April 30, 2008 was 0.72% of the Fund's average daily net assets. Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. The fee for the six months ended April 30, 2008 was 0.08% of the Fund's average daily net assets. 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, 2008, other expenses paid to this company were $678. Compensation of Board members includes, for a former Board Chair, compensation as well as retirement benefits. Certain other aspects of a former Board Chair's compensation, including health benefits and payment of certain other expenses, are included under other expenses. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 27 value changes and remains in the Fund until distributed in accordance with the Plan. Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $20.50 for Class A, $21.50 for Class B and $21.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R4 shares and an annual asset-based fee at a rate of 0.20% of the Fund's average daily net assets attributable to Class W shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the Statement of Operations. 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. The Fund has an agreement with RiverSource 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. Sales charges received by the Distributor for distributing Fund shares were $24,247 for Class A, $615 for Class B and $186 for Class C for the six months ended April 30, 2008. 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. For the six months ended April 30, 2008, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds) were 1.40% for Class A, 2.16% for Class B, 2.16% for Class C, 0.99% for Class R4 and 1.36% for Class W. Of these waived/reimbursed fees and expenses, the transfer agency fees at the class level were $1,789, $389 and $61 for Class A, Class B, and Class C, respectively and the plan administration services fee at the class level was $23 for Class R4. In addition, the Investment Manager and its affiliates have contractually agreed to - -------------------------------------------------------------------------------- 28 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT waive certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds) will not exceed 1.40% for Class A, 2.17% for Class B, 2.16% for Class C, 0.95% for Class I, 1.25% for Class R4 and 1.40% for Class W of the Fund's average daily net assets until Oct. 31, 2008, unless sooner terminated at the discretion of the Board. During the six months ended April 30, 2008, the Fund's transfer agency fees were reduced by $37 as a result of bank fee credits from overnight cash balances. The Fund pays custodian fees to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $11,405,120 and $66,719,984, respectively, for the six months ended April 30, 2008. Realized gains and losses are determined on an identified cost basis. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED APRIL 30, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ---------------------------------------------------------------------------------------------- Class A 360,778 24,490 (85,048) 300,220 Class B 77,536 4,323 (35,511) 46,348 Class C 14,125 637 (5,205) 9,557 Class I 560,799 594,458 (5,685,674) (4,530,417) Class R4 749 39 (263) 525 Class W 1,217,753 116,063 (2,939,592) (1,605,776) - ----------------------------------------------------------------------------------------------
YEAR ENDED OCT. 31, 2007 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ---------------------------------------------------------------------------------------------- Class A 355,415 16,082 (1,076,628) (705,131) Class B 90,068 2,759 (34,366) 58,461 Class C 12,620 355 (724) 12,251 Class I 10,129,478 409,766 (1,279,390) 9,259,854 Class R4 677 26 (583) 120 Class W* 7,065,923 101,109 (3,573,928) 3,593,104 - ----------------------------------------------------------------------------------------------
* For the period from Dec. 1, 2006 (inception date) to Oct. 31, 2007. - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 29 5. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $44,802,292 and $51,669,698, respectively, for the six months ended April 30, 2008. 6. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $500 million. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.30%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. The Fund had no borrowings during the six months ended April 30, 2008. 7. RISKS RELATING TO CERTAIN INVESTMENTS DIVERSIFICATION RISK The Fund is non-diversified. A non-diversified fund may invest more of its assets in fewer companies than if it were a diversified fund. The Fund may be more exposed to the risks of loss and volatility than a fund that invests more broadly. FOREIGN/EMERGING MARKETS RISK Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging markets may accentuate these risks. 8. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they - -------------------------------------------------------------------------------- 30 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 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. In response to defendants' motion to dismiss the complaint, the 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 on August 8, 2007. 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 - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 31 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. - -------------------------------------------------------------------------------- 32 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 9. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results. CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(K) 2007 2006(B) Net asset value, beginning of period $10.57 $10.16 $9.98 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .35(c) .59(c) .33 Net gains (losses) (both realized and unrealized) (.39) .39 .18 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.04) .98 .51 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.35) (.55) (.33) Distributions from realized gains (.09) (.02) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.44) (.57) (.33) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.09 $10.57 $10.16 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $7 $5 $12 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.46%(f) 1.33% 1.81%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.40%(f) 1.33% 1.39%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 6.84%(f) 5.61% 5.20%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 7% 41% 32% - ----------------------------------------------------------------------------------------------------------- Total return(i) (.31%)(j) 9.94% 5.25%(j) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 16, 2006 (when shares became publicly available) to Oct. 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 33 CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(K) 2007 2006(B) Net asset value, beginning of period $10.55 $10.16 $9.97 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .31(c) .52(c) .28 Net gains (losses) (both realized and unrealized) (.38) .37 .19 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.07) .89 .47 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.31) (.48) (.28) Distributions from realized gains (.09) (.02) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.40) (.50) (.28) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.08 $10.55 $10.16 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $1 $1 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 2.22%(f) 2.13% 2.62%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 2.16%(f) 2.13% 2.20%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 6.05%(f) 4.90% 4.51%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 7% 41% 32% - ----------------------------------------------------------------------------------------------------------- Total return(i) (.69%)(j) 8.94% 4.80%(j) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 16, 2006 (when shares became publicly available) to Oct. 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- 34 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(K) 2007 2006(B) Net asset value, beginning of period $10.54 $10.15 $9.97 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .31(c) .53(c) .28 Net gains (losses) (both realized and unrealized) (.37) .36 .18 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.06) .89 .46 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.32) (.48) (.28) Distributions from realized gains (.09) (.02) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.41) (.50) (.28) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.07 $10.54 $10.15 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 2.22%(f) 2.13% 2.61%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 2.16%(f) 2.13% 2.19%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 6.11%(f) 5.00% 4.46%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 7% 41% 32% - ----------------------------------------------------------------------------------------------------------- Total return(i) (.58%)(j) 8.94% 4.75%(j) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 16, 2006 (when shares became publicly available) to Oct. 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 35 CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(K) 2007 2006(B) Net asset value, beginning of period $10.57 $10.16 $9.98 - ------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .37(c) .65(c) .35 Net gains (losses) (both realized and unrealized) (.38) .38 .17 - ------------------------------------------------------------------------------------------------------------ Total from investment operations (.01) 1.03 .52 - ------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.38) (.60) (.34) Distributions from realized gains (.09) (.02) -- - ------------------------------------------------------------------------------------------------------------ Total distributions (.47) (.62) (.34) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $10.09 $10.57 $10.16 - ------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $95 $147 $47 - ------------------------------------------------------------------------------------------------------------ Gross expenses prior to expense waiver/reimbursement(d),(e) .92%(f) .93% 1.52%(f) - ------------------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement(e),(g),(h) .92%(f) .93% 1.10%(f) - ------------------------------------------------------------------------------------------------------------ Net investment income (loss) 7.12%(f) 6.14% 5.70%(f) - ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 7% 41% 32% - ------------------------------------------------------------------------------------------------------------ Total return(i) (.07%)(j) 10.38% 5.44%(j) - ------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 16, 2006 (when shares became publicly available) to Oct. 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- 36 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(K) 2007 2006(B) Net asset value, beginning of period $10.56 $10.16 $9.98 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .36(c) .60(c) .34 Net gains (losses) (both realized and unrealized) (.35) .39 .18 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .01 .99 .52 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.39) (.57) (.34) Distributions from realized gains (.09) (.02) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.48) (.59) (.34) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.09 $10.56 $10.16 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.25%(f) 1.24% 1.67%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .99%(f) 1.24% 1.25%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 7.18%(f) 5.75% 5.37%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 7% 41% 32% - ----------------------------------------------------------------------------------------------------------- Total return(i) .15%(j) 9.97% 5.36%(j) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 16, 2006 (when shares became publicly available) to Oct. 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 37 CLASS W
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(K) 2007(B) Net asset value, beginning of period $10.55 $10.24 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .34 .57 Net gains (losses) (both realized and unrealized) (.37) .28 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.03) .85 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.35) (.52) Distributions from realized gains (.09) (.02) - ----------------------------------------------------------------------------------------------------------- Total distributions (.44) (.54) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.08 $10.55 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $20 $38 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.36%(f) 1.33%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.36%(f) 1.33%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 6.58%(f) 5.86%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 7% 41% - ----------------------------------------------------------------------------------------------------------- Total return(i) (.22%)(j) 8.49%(j) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 1, 2006 (inception date) to Oct. 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- 38 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- RiverSource Investments, LLC ("RiverSource Investments" or the "investment manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement") RiverSource Investments provides investment advice and other services to the Fund and all 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. RiverSource Investments prepared detailed reports for the Board and its Contracts Committee in March and April 2008, including reports based on data provided by independent organizations to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource Investments addressing the services RiverSource Investments provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts, Investment Review and Compliance Committees in determining whether to continue the IMS Agreement. At the April 9-10, 2008 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by RiverSource Investments: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource Investments, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource Investments, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, particularly in the areas of trading systems, new product initiatives, legal and compliance. Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource Investments, the Board considered the quality of the administrative and transfer agency services provided by RiverSource Investments' affiliates to the Fund. The Board also reviewed the financial condition of RiverSource Investments (and its affiliates) and each entity's ability to carry out its responsibilities under the IMS Agreement. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by RiverSource Investments). - -------------------------------------------------------------------------------- RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT 39 The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality, particularly in light of recent market conditions. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that RiverSource Investments and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods (including since inception), recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2006 to December 2007. The Board observed that the Fund's investment performance met expectations. Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource Investments and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to RiverSource Investments' profitability. The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board observed that the Fund's 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 the expected profitability of RiverSource Investments and its affiliates in connection with RiverSource Investments providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource Investments and - -------------------------------------------------------------------------------- 40 RIVERSOURCE EMERGING MARKETS BOND FUND -- 2008 SEMIANNUAL REPORT Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability since inception. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource Investments as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 10, 2008, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement. 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 RiverSource Funds at (888) 791-3380; contacting your financial institution; 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 -- 2008 SEMIANNUAL REPORT 41 RIVERSOURCE EMERGING MARKETS BOND FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. These companies are part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C) 2008 RiverSource Distributors, Inc. S-6511 D (6/08)
Semiannual Report (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE GLOBAL BOND FUND SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2008 RIVERSOURCE GLOBAL BOND FUND SEEKS TO PROVIDE SHAREHOLDERS WITH HIGH TOTAL RETURN THROUGH INCOME AND GROWTH OF CAPITAL. (SINGLE STRATEGY FUNDS ICON) TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance............... 2 Manager Commentary.................. 5 Fund Expenses Example............... 10 Portfolio of Investments............ 12 Financial Statements................ 26 Notes to Financial Statements....... 32 Approval of Investment Management Services Agreement............... 49 Proxy Voting........................ 51
(DALBAR LOGO) The RiverSource mutual fund shareholder reports have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Global Bond Fund's (the Fund) Class A shares gained 3.94% (excluding sales charge) for the six months ended April 30, 2008. > The Fund underperformed its benchmark, the Lehman Brothers Global Aggregate Index, which rose 6.27%. > The Fund outperformed the Lipper Global Income Funds Index, representing the Fund's peer group, which increased 3.21% during the same period. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2008) - --------------------------------------------------------------------------------
6 months* 1 year 3 years 5 years 10 years - ----------------------------------------------------------------------------------- RiverSource Global Bond Fund Class A (excluding sales charge) +3.94% +8.65% +4.47% +6.03% +5.26% - ----------------------------------------------------------------------------------- Lehman Brothers Global Aggregate Index(1) (unmanaged) +6.27% +11.78% +5.54% +6.63% +6.30% - ----------------------------------------------------------------------------------- Lipper Global Income Funds Index(2) +3.21% +7.04% +4.93% +6.09% +5.41% - -----------------------------------------------------------------------------------
* 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 institution or visiting riversource.com/funds. The 4.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. (1) The Lehman Brothers Global Aggregate Index, an unmanaged market capitalization weighted benchmark, tracks the performance of investment grade fixed income securities denominated in 13 currencies. The index reflects reinvestment of all distributions and changes in market prices. (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. - -------------------------------------------------------------------------------- 2 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- STYLE MATRIX - ----------------------------------------
DURATION SHORT INT. LONG X HIGH MEDIUM QUALITY LOW
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. PORTFOLIO STATISTICS (at April 30, 2008) - ---------------------------------------- Weighted average life(1) 6.8 years - -------------------------------------------- Effective duration(2) 4.9 years - -------------------------------------------- Weighted average bond rating(3) BB - --------------------------------------------
ANNUAL OPERATING EXPENSE RATIO (as of the current prospectus) - ----------------------------------------
Total Net Expenses(a) - ------------------------------------------------------- Class A 1.37% 1.25% - ------------------------------------------------------- Class B 2.13% 2.01% - ------------------------------------------------------- Class C 2.13% 2.01% - ------------------------------------------------------- Class I 0.87% 0.82% - ------------------------------------------------------- Class R4 1.17% 1.12% - ------------------------------------------------------- Class W 1.35% 1.27% - -------------------------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Oct. 31, 2008, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds) will not exceed 1.25% for Class A, 2.01% for Class B, 2.01% for Class C, 0.82% for Class I, 1.12% for Class R4 and 1.27% for Class W. (1) WEIGHTED AVERAGE LIFE measures a bond's maturity, which takes into consideration the possibility that the issuer may call the bond before its maturity date. (2) EFFECTIVE DURATION measures the sensitivity of a security's price to parallel shifts in the yield curve (the graphical depiction of the levels of interest rates from two years out to 30 years). Positive duration means that as rates rise, the price decreases, and negative duration means that as rates rise, the price increases. (3) WEIGHTED AVERAGE BOND RATING represents the average credit quality of the underlying bonds in the portfolio. 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 GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT APRIL 30, 2008 SINCE WITHOUT SALES CHARGE 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 3/20/89) +3.94% +8.65% +4.47% +6.03% +5.26% N/A - --------------------------------------------------------------------------------------------------------- Class B (inception 3/20/95) +3.53% +7.73% +3.64% +5.20% +4.44% N/A - --------------------------------------------------------------------------------------------------------- Class C (inception 6/26/00) +3.60% +7.86% +3.63% +5.21% N/A +6.11% - --------------------------------------------------------------------------------------------------------- Class I (inception 3/4/04) +4.16% +9.10% +4.84% N/A N/A +5.77% - --------------------------------------------------------------------------------------------------------- Class R4 (inception 3/20/95) +4.24% +9.06% +4.71% +6.24% +5.47% N/A - --------------------------------------------------------------------------------------------------------- Class W (inception 12/1/06) +4.00% +8.80% N/A N/A N/A +6.94% - --------------------------------------------------------------------------------------------------------- WITH SALES CHARGE Class A (inception 3/20/89) -0.95% +3.53% +2.77% +5.01% +4.72% N/A - --------------------------------------------------------------------------------------------------------- Class B (inception 3/20/95) -1.47% +2.73% +2.38% +4.87% +4.44% N/A - --------------------------------------------------------------------------------------------------------- Class C (inception 6/26/00) +2.60% +6.86% +3.63% +5.21% N/A +6.11% - ---------------------------------------------------------------------------------------------------------
AT MARCH 31, 2008 SINCE WITHOUT SALES CHARGE 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 3/20/89) +6.22% +10.74% +5.12% +6.54% +5.40% N/A - --------------------------------------------------------------------------------------------------------- Class B (inception 3/20/95) +5.77% +9.77% +4.28% +5.74% +4.59% N/A - --------------------------------------------------------------------------------------------------------- Class C (inception 6/26/00) +5.86% +9.92% +4.32% +5.75% N/A +6.31% - --------------------------------------------------------------------------------------------------------- Class I (inception 3/4/04) +6.45% +11.04% +5.49% N/A N/A +6.11% - --------------------------------------------------------------------------------------------------------- Class R4 (inception 3/20/95) +6.52% +11.16% +5.36% +6.79% +5.61% N/A - --------------------------------------------------------------------------------------------------------- Class W (inception 12/1/06) +6.28% +10.73% N/A N/A N/A +8.08% - --------------------------------------------------------------------------------------------------------- WITH SALES CHARGE Class A (inception 3/20/89) +1.16% +5.47% +3.44% +5.51% +4.86% N/A - --------------------------------------------------------------------------------------------------------- Class B (inception 3/20/95) +0.77% +4.77% +3.04% +5.41% +4.59% N/A - --------------------------------------------------------------------------------------------------------- Class C (inception 6/26/00) +4.86% +8.92% +4.32% +5.75% N/A +6.31% - ---------------------------------------------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 4.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R4 and Class W shares. Class I and Class R4 are available to institutional investors only. Class W shares are offered through qualifying discretionary accounts. * Not annualized. ** For classes with less than 10 years performance. - -------------------------------------------------------------------------------- 4 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT MANAGER COMMENTARY ------------------------------------------------------------- (UNAUDITED) At April 30, 2008, approximately 28% of the Fund's shares were owned in aggregate by affiliated funds-of-funds managed by RiverSource Investments, LLC (RiverSource). As a result of asset allocation decisions by RiverSource, it is possible RiverSource Global Bond Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds (see page 40, Class I capital share transactions for related activity during the most recent fiscal period). RiverSource seeks to minimize the impact of these transactions by structuring them over a reasonable period of time. RiverSource Global Bond Fund may experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated funds-of-funds. For more information on the Fund's expenses, see the discussions beginning on pages 10 and 38. Dear Shareholders, RiverSource Global Bond Fund's Class A shares gained 3.94% (excluding sales charge) for the six months ended April 30, 2008. The Fund underperformed its benchmark, the Lehman Brothers Global Aggregate Index (Lehman Global Index), which rose 6.27%. However, the Fund outperformed the Lipper Global Income Funds Index, representing the Fund's peer group, which increased 3.21% during the same period. SECTOR BREAKDOWN (at April 30, 2008; % of portfolio assets) - ----------------------------------------------------------------- Asset-Backed 1.5% - -------------------------------------------------------------- Commercial Mortgage-Backed 6.8% - -------------------------------------------------------------- Consumer Discretionary 1.6% - -------------------------------------------------------------- Consumer Staples 1.2% - -------------------------------------------------------------- Energy 1.1% - -------------------------------------------------------------- Financials 7.3% - -------------------------------------------------------------- Foreign Government 55.2% - -------------------------------------------------------------- Health Care 0.6% - -------------------------------------------------------------- Industrials 1.0% - -------------------------------------------------------------- Materials 0.2% - -------------------------------------------------------------- Mortgage-Backed 10.9% - -------------------------------------------------------------- Telecommunication 5.2% - -------------------------------------------------------------- U.S. Government Obligations & Agencies 5.4% - -------------------------------------------------------------- Utilities 1.8% - -------------------------------------------------------------- Other(1) 0.2% - --------------------------------------------------------------
(1) Cash & Cash Equivalents. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 5 MANAGER COMMENTARY (continued) ------------------------------------------------- SIGNIFICANT PERFORMANCE FACTORS At the start of the period, the Fund had approximately 51% of its net assets exposed to foreign currencies, which had a positive impact on performance. The U.S. dollar fell 3.70% on a trade-weighted basis for the semiannual period. As the value of the U.S. dollar decreases, the dollar value of foreign investments typically increases and vice versa. One of the key factors driving the U.S. dollar lower was the sharp drop in U.S. interest rates relative to interest rates in major foreign economies. The decline in U.S. rates reflected increasingly dislocated financial markets, fears the U.S. economy might slip into recession and aggressive monetary easing by the Federal Open Market Committee (the FOMC). Over the six-month period, the Fed cut the targeted federal funds rate to 2.00% from 4.50%, a dramatic 2.50% reduction. Positive returns from its fixed income holdings, as measured in local currency terms (i.e., before the impact of currency fluctuations are taken into account) further boosted the Fund's results. In general, foreign bond markets underperformed the U.S. bond market in local currency terms, reflecting more resilient economic performance, tighter central bank policy and less advantageous bond yield movements overseas. Relative to the Lehman Global Index, the Fund was hurt during the semiannual period by several of our investment decisions. The Fund was impacted most by its currency positioning, especially its underexposure to the Japanese yen, which appreciated 10.31% against the U.S. dollar during the period. The Japanese yen is a perpetually low-yielding currency and global investors tend to underweight or short it to fund investment in other TOP TEN COUNTRIES (at April 30, 2008; % of portfolio assets) - ----------------------------------------------------------------- United States 35.8% - -------------------------------------------------------------- Japan 11.0% - -------------------------------------------------------------- Germany 10.4% - -------------------------------------------------------------- United Kingdom 6.4% - -------------------------------------------------------------- France 5.0% - -------------------------------------------------------------- Netherlands 4.9% - -------------------------------------------------------------- Canada 3.7% - -------------------------------------------------------------- Italy 3.6% - -------------------------------------------------------------- Spain 3.0% - -------------------------------------------------------------- Belgium 2.1% - --------------------------------------------------------------
- -------------------------------------------------------------------------------- 6 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- The Fund was impacted most by its currency positioning, especially its underexposure to the Japanese yen, which appreciated 10.31% against the U.S. dollar during the period. currencies that offer higher yields. This strategy tends to work well over time, but it often causes the yen's value to abruptly rise during periods of market crisis, as sentiment deteriorates and investors look to reduce risk. We saw just this sort of move in the yen during the semiannual period when signs of stress in the financial markets multiplied. Given its underweight position, the Fund derived less benefit from the yen's appreciation than its benchmark. Our views on the broad direction of interest rates and the Fund's yield curve positioning across the maturity spectrum also detracted from performance relative to the Lehman Global Index during the period. The sharp drop in U.S. Treasury yields, especially at the short-term end of the yield curve, hurt performance in particular. On balance, our allocations to various segments of the global bond market also took a toll: The negative impact of an overexposure to U.S. commercial mortgage-backed securities and a small allocation to high yield bonds more than offset the positive effect of the Fund's underweight position in agency securities and investment grade corporate bonds. Relative to the Fund's peer group, the Fund likely benefited from its generally conservative approach toward riskier fixed income assets, such as emerging market bonds, medium and lower quality corporate bonds and non-agency U.S. mortgage-backed securities. This conservative stance may have insulated the Fund better than some of its peers when financial market stress and forced debt payoffs roiled the markets for these riskier assets. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- CHANGES TO THE FUND'S PORTFOLIO We made several adjustments to portfolio positioning during the period. For example, we added exposure to Japanese interest rates, as that country began to show signs of slower growth. We reduced interest rate exposure in the U.S. with the view that investors had started to price in too many interest rate cuts from the Fed. Within the Fund's currency positioning, we modestly scaled back an overweight position in the U.S. dollar and added some exposure to both the Japanese yen and the euro. The most significant change we made to the Fund's portfolio during the period was to eliminate its long-standing underweight position in investment grade corporate bonds, a shift we made primarily during the second half of the semiannual period. A year ago, we felt the relative value in corporate bonds was poor, with yield spreads (the difference in yields between investment grade corporate bonds and U.S. Treasuries) near historically tight levels. The market turmoil that unfolded in July 2007 and increased over the following months took yield spreads on investment grade corporate bonds back to historically wide levels not seen since 2002. With this in mind, we accomplished this shift by adding mostly to our position in U.S. dollar-denominated corporate bonds, where we see better value than foreign currency-denominated corporate bonds. Within the riskier segments of the fixed income market, we decreased the Fund's already modest exposure to high yield corporate bonds, where we expect default rates to rise. Additionally, we increased the Fund's allocation to sovereign emerging market debt. OUR FUTURE STRATEGY The dislocation across the global fixed income markets reached an extreme in the early months of 2008. Falling asset prices led to margin calls that required assets to be sold, which in turn reduced asset prices further. This vicious cycle, in addition to other investor concerns, grabbed hold of the markets. However, the dramatic steps taken by the Fed (including the Fed's unprecedented financial support for JPMorgan's purchase of Bear Stearns in mid-March) and other central banks appear to have broken the cycle. Indeed, market sentiment improved substantially after the Bear Stearns takeover and such sentiment continued to get better through the end of the semiannual period, suggesting that the worst of the financial market crisis may finally be behind us. If so, we expect to see a gradual process of normalization across the global bond markets - including plenty of - -------------------------------------------------------------------------------- 8 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- setbacks along the way - that eventually reverses many of the sharp movements in yields, spreads and currencies seen during the period. In this environment, we believe it makes sense to continue adding exposure to bonds that were unfairly punished during the market turmoil, since their valuations remain attractive from a longer-term perspective. As always, we constantly monitor the market for changing conditions and regularly review the Fund's duration, country, sector, yield curve, and currency positioning in an effort to seek an attractive balance between risk and potential return. Our sector teams remain focused on careful individual security selection, as we continue to seek opportunities to capitalize on attractively valued bonds. (PHOTO - NICOLAS PIFER) Nic Pifer, CFA(R) Portfolio Manager Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a RiverSource fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any RiverSource fund. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 9 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the acquired funds' expense ratio as of the 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, 2008. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 10 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2007 APRIL 30, 2008 THE PERIOD(A) EXPENSE RATIO - -------------------------------------------------------------------------------------------- Class A - -------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,039.40 $ 6.34 1.25% - -------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.65 $ 6.27 1.25% - -------------------------------------------------------------------------------------------- Class B - -------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,035.30 $10.17 2.01% - -------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.87 $10.07 2.01% - -------------------------------------------------------------------------------------------- Class C - -------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,036.00 $10.17 2.01% - -------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.87 $10.07 2.01% - -------------------------------------------------------------------------------------------- Class I - -------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,041.60 $ 4.16 .82% - -------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,020.79 $ 4.12 .82% - -------------------------------------------------------------------------------------------- Class R4 - -------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,042.40 $ 5.69 1.12% - -------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.29 $ 5.62 1.12% - -------------------------------------------------------------------------------------------- Class W - -------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,040.00 $ 6.44 1.27% - -------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.55 $ 6.37 1.27% - --------------------------------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2008: +3.94% for Class A, +3.53% for Class B, +3.60% for Class C, +4.16% for Class I, +4.24% for Class R4 and +4.00% for Class W. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2008 (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 (0.1%) Republic of Argentina 09-12-13 7.00% $748,000 $589,050 04-17-17 7.00 300,000 208,500 12-15-35 0.00 2,900,000(g) 336,400 --------------- Total 1,133,950 - ------------------------------------------------------------------------------------ AUSTRALIA (1.3%) Commonwealth Bank of Australia (European Monetary Unit) Sr Unsub 11-12-09 3.38 745,000 1,136,565 New South Wales Treasury (Australian Dollar) 05-01-12 6.00 9,410,000 8,564,879 Telstra Sr Unsub 04-01-12 6.38 500,000 526,988 --------------- Total 10,228,432 - ------------------------------------------------------------------------------------ AUSTRIA (1.0%) Republic of Austria (European Monetary Unit) 01-15-10 5.50 5,200,000 8,317,389 - ------------------------------------------------------------------------------------ BELGIUM (2.0%) Fortis Bank (European Monetary Unit) Sr Unsecured 05-30-14 4.50 420,000 631,605 Kingdom of Belgium (European Monetary Unit) 03-28-10 3.00 9,945,000 15,256,378 --------------- Total 15,887,983 - ------------------------------------------------------------------------------------ BRAZIL (0.1%) Federative Republic of Brazil 01-15-18 8.00 699,000 796,860 - ------------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) CANADA (3.5%) Canadian Natl Railway Sr Unsecured 05-15-18 5.55% $390,000(b) $395,653 Canadian Natural Resources Sr Unsecured 02-01-39 6.75 310,000 325,032 Canadian Pacific Railway (Canadian Dollar) 06-15-10 4.90 380,000(d) 380,570 EnCana 11-01-11 6.30 1,510,000 1,582,451 Molson Coors Capital Finance 09-22-10 4.85 1,000,000 1,002,531 Province of British Columbia (Canadian Dollar) 08-23-10 6.38 5,600,000 5,938,725 Province of Ontario (Canadian Dollar) 03-08-14 5.00 6,885,000 7,232,326 Province of Quebec (Canadian Dollar) 12-01-17 4.50 1,820,000 1,819,729 TELUS Sr Unsecured 06-01-11 8.00 6,480,000 6,990,591 Thomson 10-01-14 5.70 2,465,000 2,392,776 --------------- Total 28,060,384 - ------------------------------------------------------------------------------------ COLOMBIA (0.1%) Republic of Colombia 01-27-17 7.38 380,000 424,650 09-18-37 7.38 320,000 356,800 --------------- Total 781,450 - ------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 12 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) CZECH REPUBLIC (0.4%) Czech Republic (Czech Koruna) 10-18-10 2.55% 31,230,000 $1,856,974 06-16-13 3.70 28,500,000 1,700,617 --------------- Total 3,557,591 - ------------------------------------------------------------------------------------ DENMARK (0.6%) Danske Bank (European Monetary Unit) Sr Nts 03-16-10 4.66 750,000(e) 1,165,942 Nykredit Realkredit (Danish Krone) 10-01-28 5.00 17,155,255 3,491,717 --------------- Total 4,657,659 - ------------------------------------------------------------------------------------ FRANCE (4.8%) BNP Paribas (European Monetary Unit) Sr Unsub 10-20-08 4.78 750,000(e) 1,168,746 Compagnie de Financement Foncier (European Monetary Unit) 01-29-09 2.38 1,500,000 2,304,982 France Telecom (European Monetary Unit) Sr Unsub 02-21-17 4.75 1,565,000 2,347,582 Govt of France (European Monetary Unit) 04-25-12 5.00 5,920,000 9,570,798 04-25-13 4.00 10,630,000 16,562,990 10-25-16 5.00 3,275,000 5,385,831 Societe Generale (European Monetary Unit) Sr Unsecured 11-28-08 4.40 750,000(e) 1,168,531 --------------- Total 38,509,460 - ------------------------------------------------------------------------------------ GERMANY (10.0%) Bayerische Landesbank (Japanese Yen) Sr Nts 04-22-13 1.40 300,000,000 2,896,023 Bundesobligation (European Monetary Unit) 04-13-12 4.00 4,700,000 7,358,540
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) GERMANY (CONT.) Bundesrepublik Deutschland (European Monetary Unit) 07-04-27 6.50% 8,500,000 $16,402,341 07-04-28 4.75 3,915,000 6,205,490 07-04-34 4.75 7,315,000 11,573,775 Bundesschatzanweisungen (European Monetary Unit) 09-12-08 3.50 11,780,000 18,353,926 COREALCREDIT BANK (European Monetary Unit) Series 501 09-02-09 5.00 1,800,000(d) 2,823,178 DEPFA Deutsche Pfandbriefbank (European Monetary Unit) Series G6 01-15-10 5.50 2,200,000 3,492,638 Deutsche Bank (European Monetary Unit) Sr Unsub 07-28-09 4.25 700,000 1,088,896 KfW (British Pound) 12-07-15 5.50 2,815,000 5,765,297 Rheinische Hypothekenbank (European Monetary Unit) Series 803 07-05-10 5.75 2,225,000(d) 3,568,130 --------------- Total 79,528,234 - ------------------------------------------------------------------------------------ GREECE (1.0%) Hellenic Republic (European Monetary Unit) Sr Unsub 10-22-22 5.90 4,650,000 8,030,413 - ------------------------------------------------------------------------------------ INDONESIA (0.4%) Republic of Indonesia (Indonesian Rupiah) 07-15-22 10.25 26,129,000,000 2,297,906 Republic of Indonesia Sr Unsecured 01-17-18 6.88 550,000(d) 561,688 10-12-35 8.50 190,000(d) 207,100 --------------- Total 3,066,694 - ------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 13
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) ITALY (3.4%) Buoni Poliennali Del Tesoro (European Monetary Unit) 01-15-10 3.00% 6,250,000 $9,598,217 08-01-15 3.75 2,400,000 3,626,057 02-01-19 4.25 2,610,000 3,974,268 11-01-26 7.25 3,636,283 7,287,317 11-01-27 6.50 1,500,000 2,794,242 --------------- Total 27,280,101 - ------------------------------------------------------------------------------------ JAPAN (10.6%) Development Bank of Japan (Japanese Yen) 06-20-12 1.40 582,000,000 5,640,894 Govt of Japan CPI Linked (Japanese Yen) 12-10-17 1.20 740,740,000(i) 7,047,539 Govt of Japan (Japanese Yen) 09-20-10 0.80 962,000,000 9,248,431 06-20-12 1.40 774,000,000 7,541,695 12-20-12 1.00 1,455,000,000 13,915,213 12-20-14 1.30 398,000,000 3,833,348 09-20-17 1.70 100,000,000(b) 978,405 09-20-17 1.70 1,610,000,000 15,752,325 12-20-22 1.40 380,000,000 3,388,056 12-20-26 2.10 1,374,000,000 13,047,436 12-20-34 2.40 100,000,000(b) 958,272 12-20-34 2.40 268,000,000 2,568,168 --------------- Total 83,919,783 - ------------------------------------------------------------------------------------ JERSEY (0.2%) ASIF III Jersey (European Monetary Unit) Sr Secured 11-25-08 4.52 1,100,000(e) 1,704,495 - ------------------------------------------------------------------------------------ LUXEMBOURG (0.7%) Gaz Capital Sr Unsecured 08-16-37 7.29 230,000(d) 219,938 Telecom Italia Capital 11-15-13 5.25 5,725,000 5,489,072 --------------- Total 5,709,010 - ------------------------------------------------------------------------------------ MALAYSIA (0.2%) Petronas Capital 05-22-12 7.00 1,500,000(d) 1,640,778 - ------------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) MEXICO (1.3%) Mexican Fixed Rate Bonds (Mexican Peso) 12-24-09 9.00% 60,230,000 $5,846,402 12-20-12 9.00 40,110,000 3,983,272 United Mexican States Sr Unsecured 09-27-34 6.75 270,000 298,890 --------------- Total 10,128,564 - ------------------------------------------------------------------------------------ NETHERLANDS (4.6%) BMW Finance (European Monetary Unit) 01-22-14 4.25 875,000 1,324,425 Deutsche Telekom Intl Finance (European Monetary Unit) 01-19-15 4.00 1,695,000 2,440,894 Govt of Netherlands (European Monetary Unit) 07-15-12 5.00 5,750,000 9,316,700 07-15-13 4.25 11,990,000 18,916,818 ING Groep (European Monetary Unit) Sr Unsecured 05-31-17 4.75 1,005,000 1,511,531 Rabobank Nederland (European Monetary Unit) Sr Unsub 04-04-12 4.13 830,000 1,274,937 Telefonica Europe 09-15-10 7.75 2,010,000 2,155,828 --------------- Total 36,941,133 - ------------------------------------------------------------------------------------ NEW ZEALAND (0.8%) Govt of New Zealand (New Zealand Dollar) 04-15-13 6.50 7,750,000 6,001,452 - ------------------------------------------------------------------------------------ NORWAY (1.0%) Govt of Norway (Norwegian Krone) 05-16-11 6.00 38,150,000 7,759,036 - ------------------------------------------------------------------------------------ PHILIPPINE ISLANDS (0.1%) Republic of Philippines 01-15-19 9.88 150,000 192,750 01-14-31 7.75 440,000 496,100 --------------- Total 688,850 - ------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 14 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) POLAND (1.8%) Republic of Poland (Polish Zloty) 03-24-10 5.75% 31,130,000 $13,972,899 - ------------------------------------------------------------------------------------ SOUTH AFRICA (0.2%) Republic of South Africa (South African Rand) 08-31-10 13.00 12,207,500 1,700,314 - ------------------------------------------------------------------------------------ SOUTH KOREA (0.3%) Korea Development Bank (Japanese Yen) Series 21RG 06-25-08 0.98 70,000,000 672,509 Korea Development Bank (Japanese Yen) Series 23BR 06-28-10 0.87 200,000,000 1,899,831 --------------- Total 2,572,340 - ------------------------------------------------------------------------------------ SPAIN (2.9%) AyT Cedular Cajas Global (European Monetary Unit) Series 8 06-14-18 4.25 1,500,000 2,144,002 Caja de Ahorros y Monte de Piedad de Madrid (European Monetary Unit) 03-25-11 3.50 2,900,000 4,386,445 Govt of Spain (European Monetary Unit) 07-30-09 5.15 10,250,000 16,210,163 --------------- Total 22,740,610 - ------------------------------------------------------------------------------------ SUPRA-NATIONAL (0.8%) European Investment Bank (British Pound) Sr Unsecured 12-07-08 6.25 385,000 769,023 12-07-11 5.50 2,930,000 5,924,277 --------------- Total 6,693,300 - ------------------------------------------------------------------------------------ SWEDEN (0.7%) Govt of Sweden (Swedish Krona) 01-28-09 5.00 15,250,000 2,562,475 03-15-11 5.25 18,360,000 3,170,023 --------------- Total 5,732,498 - ------------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) TURKEY (0.1%) Republic of Turkey 04-03-18 6.75% $150,000 $150,375 03-17-36 6.88 540,000 499,554 --------------- Total 649,929 - ------------------------------------------------------------------------------------ UKRAINE (0.1%) Govt of Ukraine Sr Unsecured 11-14-17 6.75 480,000(d) 473,179 - ------------------------------------------------------------------------------------ UNITED KINGDOM (6.1%) Abbey Natl Treasury Services (European Monetary Unit) 05-27-09 4.50 850,000(e) 1,324,673 British Sky Broadcasting Group 02-15-18 6.10 2,590,000(d) 2,635,297 BT Group Sr Unsecured 12-15-10 8.63 550,000(l) 598,556 Diageo Capital 01-30-13 5.20 300,000 306,011 HBOS Treasury Services (European Monetary Unit) 02-12-09 3.50 1,600,000 2,466,657 United Kingdom Treasury (British Pound) 03-07-12 5.00 7,350,000 14,944,684 09-07-14 5.00 8,810,000 18,054,993 09-07-15 4.75 1,400,000 2,822,585 03-07-18 5.00 2,700,000 5,509,424 --------------- Total 48,662,880 - ------------------------------------------------------------------------------------ UNITED STATES (33.8%) AmeriCredit Automobile Receivables Trust Series 2007-DF Cl A3A (FSA) 07-06-12 5.49 1,025,000(j) 1,019,875 Anadarko Petroleum Sr Unsecured 09-15-16 5.95 970,000 997,557 AT&T Sr Unsecured 01-15-38 6.30 3,655,000(l) 3,657,997 Banc of America Commercial Mtge Series 2005-1 Cl A4 11-10-42 4.99 750,000(f) 747,916
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 15
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) UNITED STATES (CONT.) Banc of America Commercial Mtge Sr Unsecured Series 2007-1 Cl A3 01-15-49 5.45% $2,075,000(f) $2,004,053 Bank of America Sr Unsecured 05-01-18 5.65 2,390,000(b) 2,386,257 Bear Stearns Commercial Mtge Securities Series 2003-T10 Cl A1 03-13-40 4.00 351,935(f) 343,865 Bear Stearns Commercial Mtge Securities Series 2007-T26 Cl A4 01-12-45 5.47 1,050,000(f) 1,022,354 Brandywine Operating Partnership LP 05-01-17 5.70 370,000(l) 311,758 Cadbury Schweppes US Finance LLC 10-01-08 3.88 2,820,000(d,l) 2,813,900 California State Teachers' Retirement System Trust Series 2002-C6 Cl A3 11-20-14 4.46 1,784,131(d,f) 1,810,473 Capital One Multi-Asset Execution Trust Series 2007-A7 Cl A7 07-15-20 5.75 400,000 393,140 CenterPoint Energy Resources Sr Unsecured 02-15-11 7.75 250,000 266,995 Citigroup Commercial Mtge Trust Series 2005-EMG Cl A1 09-20-51 4.15 160,195(d,f) 159,691 Citigroup Commercial Mtge Trust Series 2006-C5 Cl A4 10-15-49 5.43 1,700,000(f) 1,664,816 Citigroup Commercial Mtge Trust Series 2007-C6 Cl A4 12-10-49 5.70 1,900,000(f) 1,877,571 Citigroup (European Monetary Unit) Sr Unsecured 05-21-10 3.88 1,960,000 2,964,992 Citigroup Sr Unsecured 03-05-38 6.88 875,000 911,680 Clorox Sr Unsecured 03-01-13 5.00 1,565,000 1,549,053
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) UNITED STATES (CONT.) Colorado Interstate Gas Sr Unsecured 11-15-15 6.80% $2,235,000 $2,347,358 Comcast 03-15-16 5.90 1,305,000(l) 1,320,339 03-15-37 6.45 2,460,000 2,446,667 Commercial Mtge Pass-Through Ctfs Series 2006-CN2A Cl BFL 02-05-19 3.05 400,000(d,e,f) 372,621 Commercial Mtge Pass-Through Ctfs Series 2007-C9 Cl A4 12-10-49 5.82 1,050,000(f) 1,049,735 Communications & Power Inds 02-01-12 8.00 15,000 14,775 Cott Beverages USA 12-15-11 8.00 280,000 235,900 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-64CB Cl 1A1 12-25-35 5.50 1,507,311(f) 1,413,349 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-6CB Cl 1A1 04-25-35 7.50 807,421(f) 769,243 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2006-22R Cl 1A2 05-25-36 6.00 1,542,200(f) 1,442,047 Coventry Health Care Sr Unsecured 08-15-14 6.30 460,000 448,974 CPS Auto Trust Series 2007-A Cl A3 (MBIA) 09-15-11 5.04 849,999(d,j) 808,417 Credit Suisse Mtge Capital Ctfs Series 2006-C2 Cl A3 03-15-39 5.66 900,000(f) 902,084 Credit Suisse Mtge Capital Ctfs Series 2007-C3 Cl A4 06-15-39 5.72 950,000(f) 943,134 Credit Suisse New York Sub Nts 02-15-18 6.00 590,000 598,626
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 16 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) UNITED STATES (CONT.) CS First Boston Mtge Securities Series 2003-CPN1 Cl A2 03-15-35 4.60% $600,000(f) $579,448 CSC Holdings Sr Unsecured Series B 07-15-09 8.13 166,000 169,320 CSX Sr Unsecured 03-15-13 5.75 2,295,000 2,324,858 Dr Pepper Snapple Group Sr Nts 05-01-18 6.82 590,000(d) 612,038 DRS Technologies 11-01-13 6.88 40,000 39,700 Dunkin Securitization Series 2006-1 Cl A2 (AMBAC) 06-20-31 5.78 1,600,000(d,j) 1,439,936 EchoStar DBS 10-01-13 7.00 40,000 39,900 02-01-16 7.13 80,000 78,600 Erac USA Finance 10-15-17 6.38 2,395,000(d) 2,204,095 ERP Operating LP Sr Unsecured 06-15-17 5.75 485,000 456,414 Exelon Sr Unsecured 06-15-10 4.45 1,000,000 998,480 Federal Home Loan Mtge Corp 05-28-10 2.38 6,400,000(f) 6,344,992 Federal Home Loan Mtge Corp #A11799 08-01-33 6.50 211,049(f) 219,728 Federal Home Loan Mtge Corp #A15881 11-01-33 5.00 1,126,263(f) 1,111,620 Federal Home Loan Mtge Corp #E91486 09-01-17 6.50 216,328(f) 224,276 Federal Home Loan Mtge Corp #E99684 10-01-18 5.00 563,746(f) 570,629 Federal Home Loan Mtge Corp #G01535 04-01-33 6.00 1,411,744(f) 1,464,468 Federal Natl Mtge Assn 10-15-14 4.63 10,230,000(f) 10,660,345 11-15-30 6.63 3,350,000(f) 4,106,939 Federal Natl Mtge Assn #254686 04-01-18 5.50 1,316,383(f) 1,347,467
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) UNITED STATES (CONT.) Federal Natl Mtge Assn #254722 05-01-18 5.50% $683,478(f) $699,617 Federal Natl Mtge Assn #357850 07-01-35 5.50 3,107,885(f,l) 3,130,306 Federal Natl Mtge Assn #360800 01-01-09 5.74 1,118,805(f) 1,129,629 Federal Natl Mtge Assn #545874 08-01-32 6.50 226,040(f) 237,208 Federal Natl Mtge Assn #555528 04-01-33 6.00 1,011,591(f) 1,040,401 Federal Natl Mtge Assn #555734 07-01-23 5.00 855,799(f) 852,442 Federal Natl Mtge Assn #555740 08-01-18 4.50 1,220,945(f) 1,216,700 Federal Natl Mtge Assn #555851 01-01-33 6.50 1,169,110(f) 1,218,848 Federal Natl Mtge Assn #575487 04-01-17 6.50 556,458(f) 584,158 Federal Natl Mtge Assn #621581 12-01-31 6.50 252,555(f) 265,940 Federal Natl Mtge Assn #633966 03-01-17 6.00 139,458(f) 144,033 Federal Natl Mtge Assn #634749 03-01-17 5.50 601,844(f) 617,221 Federal Natl Mtge Assn #640996 05-01-32 7.50 446,570(f) 479,866 Federal Natl Mtge Assn #643381 06-01-17 6.00 326,358(f) 337,064 Federal Natl Mtge Assn #645053 05-01-32 7.00 793,286(f) 843,406 Federal Natl Mtge Assn #646147 06-01-32 7.00 352,216(f) 378,461 Federal Natl Mtge Assn #652284 08-01-32 6.50 350,698(f) 365,070 Federal Natl Mtge Assn #653145 07-01-17 6.00 212,711(f) 220,177 Federal Natl Mtge Assn #653730 09-01-32 6.50 164,870(f) 172,820 Federal Natl Mtge Assn #655589 08-01-32 6.50 1,371,045(f) 1,446,504 Federal Natl Mtge Assn #666424 08-01-32 6.50 235,852(f) 245,517 Federal Natl Mtge Assn #670461 11-01-32 7.50 168,406(f) 180,963
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 17
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) UNITED STATES (CONT.) Federal Natl Mtge Assn #677333 01-01-33 6.00% $3,819,631(f) $3,928,416 Federal Natl Mtge Assn #688034 03-01-33 5.50 468,570(f) 474,673 Federal Natl Mtge Assn #688691 03-01-33 5.50 755,170(f) 761,916 Federal Natl Mtge Assn #711503 06-01-33 5.50 999,156(f) 1,012,331 Federal Natl Mtge Assn #725594 07-01-34 5.50 4,136,801(f,l) 4,171,170 Federal Natl Mtge Assn #735029 09-01-13 5.32 630,867(f) 642,187 Federal Natl Mtge Assn #741850 09-01-33 5.50 1,741,529(f) 1,757,087 Federal Natl Mtge Assn #753507 12-01-18 5.00 2,134,122(f) 2,158,122 Federal Natl Mtge Assn #755498 11-01-18 5.50 1,022,096(f) 1,046,794 Federal Natl Mtge Assn #756236 01-01-34 6.00 3,798,547(f,l) 3,933,987 Federal Natl Mtge Assn #756788 11-01-33 6.50 218,030(f) 227,155 Federal Natl Mtge Assn #759336 01-01-34 6.00 3,623,400(f,l) 3,751,648 Federal Natl Mtge Assn #765946 02-01-34 5.50 3,762,864(f) 3,796,478 Federal Natl Mtge Assn #845229 11-01-35 5.50 1,620,037(f) 1,631,725 Federal Natl Mtge Assn #886292 07-01-36 7.00 3,559,347(f,l) 3,761,835 Federal Natl Mtge Assn #888174 06-01-35 5.50 9,890,273(f) 9,972,444 Federal Natl Mtge Assn #928019 01-01-37 5.50 2,227,652(f) 2,242,679 Federal Natl Mtge Assn #928831 10-01-37 6.00 2,607,727(f) 2,668,404 Federal Natl Mtge Assn #948012 11-01-37 6.00 5,273,473(f) 5,396,178 FedEx 04-01-09 3.50 720,000 718,008 General Electric Capital Assurance Series 2003-1 Cl A4 05-12-35 5.25 450,000(d,f) 446,803
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) UNITED STATES (CONT.) General Electric Capital (British Pound) Sr Unsecured 12-15-08 4.50% 380,000 $748,931 General Electric Capital (New Zealand Dollar) Sr Unsecured 02-04-10 6.63 3,450,000 2,584,921 Genworth Financial (Japanese Yen) Sr Unsecured 06-20-11 1.60 198,000,000 1,811,600 GMAC Commercial Mtge Securities Series 2004-C3 Cl A5 12-10-41 4.86 4,475,000(f) 4,211,243 Goldman Sachs Group Sr Unsecured 04-01-18 6.15 400,000 405,576 Govt Natl Mtge Assn #604708 10-15-33 5.50 953,028(f) 968,368 Govt Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2002-80 Cl CI 01-20-32 58.78 556,345(f,h) 30,411 Greenwich Capital Commercial Funding Series 2004-GG1 Cl A5 06-10-36 4.88 500,000(f) 497,982 Greenwich Capital Commercial Funding Series 2007-GG9 Cl A4 03-10-39 5.44 950,000(f) 923,863 GS Mtge Securities II Series 2004-GG2 Cl A4 08-10-38 4.96 950,000(f) 948,689 GS Mtge Securities II Series 2007-EOP Cl J 03-06-20 3.59 1,250,000(d,e,f) 1,096,264 GS Mtge Securities II Series 2007-GG10 Cl F 08-10-45 5.80 775,000(f) 484,166 GSR Mtge Loan Trust Series 2004-10F Cl 6A1 09-25-34 5.00 4,349,197(f) 4,013,495 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2004-1 Cl A4 04-19-34 4.78 2,350,917(f,k) 2,072,851
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 18 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) UNITED STATES (CONT.) Hershey Sr Unsecured 04-01-13 5.00% $680,000 $684,663 Hertz Vehicle Financing LLC Series 2004-1A Cl A3 (MBIA) 05-25-09 2.85 66,667(d,j) 66,667 HJ Heinz Sr Unsecured 12-01-08 6.43 605,000(d) 612,393 Indiana Michigan Power Sr Unsecured 03-15-37 6.05 850,000 761,829 JPMorgan Chase & Co Sr Nts 01-15-18 6.00 965,000 999,962 JPMorgan Chase Bank Sub Nts 10-01-17 6.00 340,000 352,985 JPMorgan Chase Commercial Mtge Securities Series 2003-LN1 Cl A1 10-15-37 4.13 336,279(f) 330,736 JPMorgan Chase Commercial Mtge Securities Series 2003-ML1A Cl A1 03-12-39 3.97 175,920(f) 171,259 JPMorgan Chase Commercial Mtge Securities Series 2003-ML1A Cl A2 03-12-39 4.77 1,200,000(f) 1,165,440 JPMorgan Chase Commercial Mtge Securities Series 2005-LDP4 Cl AM 10-15-42 5.00 2,425,000(f) 2,268,388 JPMorgan Chase Commercial Mtge Securities Series 2005-LDP5 Cl A4 12-15-44 5.18 850,000(f) 839,066 JPMorgan Chase Commercial Mtge Securities Series 2006-LDP6 Cl A4 04-15-43 5.48 825,000(f) 814,006 JPMorgan Chase Commercial Mtge Securities Series 2006-LDP6 Cl ASB 04-15-43 5.49 1,150,000(f) 1,125,602 JPMorgan Chase Commercial Mtge Securities Series 2007-CB20 Cl A4 02-12-51 5.79 3,037,000(f) 3,010,765 JPMorgan Chase Commercial Mtge Securities Series 2007-CB20 Cl E 02-12-51 6.40 675,000(d,f) 462,665
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) UNITED STATES (CONT.) Kellogg Sr Unsecured 03-06-13 4.25% $575,000 $564,368 Kohl's Sr Unsecured 12-15-17 6.25 1,420,000 1,378,893 LB-UBS Commercial Mtge Trust Series 2008-C1 Cl A2 04-15-41 6.15 1,000,000(f) 1,024,140 LB-UBS Commercial Mtge Trust Series 2004-C2 Cl A3 03-15-29 3.97 750,000(f) 719,618 LB-UBS Commercial Mtge Trust Series 2006-C4 Cl AAB 06-15-32 5.86 750,000(f) 753,788 LB-UBS Commercial Mtge Trust Series 2006-C6 Cl A4 09-15-39 5.37 800,000(f) 778,796 LB-UBS Commercial Mtge Trust Series 2007-C1 Cl A4 02-15-40 5.42 850,000(f) 821,801 LB-UBS Commercial Mtge Trust Series 2007-C7 Cl A3 09-15-45 5.87 1,650,000(f) 1,637,843 Lehman Brothers Holdings Sr Unsecured 05-02-18 6.88 1,440,000 1,472,749 Lincoln Natl Sr Unsecured 10-09-37 6.30 220,000 210,305 Lockheed Martin Sr Unsecured 03-14-13 4.12 1,035,000 1,019,320 Macys Retail Holdings 07-15-09 4.80 725,000 712,933 Manufacturers & Traders Trust Sub Nts 12-01-21 5.63 1,500,000 1,165,309 Marathon Oil Sr Unsecured 03-15-18 5.90 850,000 858,109 McDonald's Sr Unsecured 03-01-18 5.35 1,690,000 1,714,360
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 19
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) UNITED STATES (CONT.) Merrill Lynch & Co 02-05-13 5.45% $225,000 $219,654 04-25-18 6.88 1,040,000 1,052,251 Metropolitan Life Global Funding I Sr Secured 04-10-13 5.13 765,000(d) 768,098 Morgan Stanley Capital I Series 2003-T11 Cl A2 06-13-41 4.34 382,416(f) 380,762 Morgan Stanley Capital I Series 2004-HQ4 Cl A5 04-14-40 4.59 750,000(f) 730,020 Morgan Stanley Capital I Series 2006-T23 Cl AAB 08-12-41 5.80 575,000(f) 574,963 Morgan Stanley Sr Unsecured 04-01-18 6.63 1,265,000 1,311,576 NALCO 11-15-11 7.75 255,000 262,013 Natl Collegiate Student Loan Trust Collateralized Mtge Obligation Interest Only Series 2006-3 Cl AIO 01-25-12 5.88 2,400,000(h) 558,720 Natl Collegiate Student Loan Trust Collateralized Mtge Obligation Interest Only Series 2007-2 Cl AIO 07-25-12 1.50 1,050,000(h) 288,960 News America 12-15-35 6.40 420,000 420,302 11-15-37 6.65 895,000 925,154 Norfolk Southern Sr Unsecured 04-01-18 5.75 180,000(d) 181,062 Northwest Pipeline Sr Unsecured 04-15-17 5.95 1,070,000 1,048,600 Omnicare 12-15-13 6.75 455,000 423,150 12-15-15 6.88 60,000 54,750
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) UNITED STATES (CONT.) Overseas Private Investment Series 1996A (U.S. Govt Guaranty) 09-15-08 6.99% $416,666 $424,475 Owens-Brockway Glass Container 05-15-13 8.25 745,000 774,800 Pacific Life Global Funding 04-15-13 5.15 765,000(d) 770,607 Pricoa Global Funding I Secured 10-18-12 5.40 1,210,000(d) 1,218,022 Principal Life Income Funding Trusts Sr Secured 04-24-13 5.30 1,140,000 1,153,349 Principal Life Income Funding Trusts Sr Secured 12-14-12 5.30 230,000 232,656 Prudential Financial Sr Unsecured 12-01-37 6.63 945,000 953,855 Renaissance Home Equity Loan Trust Series 2005-4 Cl A3 02-25-36 5.57 715,459 699,075 RH Donnelley Sr Unsecured 01-15-13 6.88 185,000 118,400 RR Donnelley & Sons Sr Unsecured 01-15-17 6.13 2,780,000 2,709,459 Sierra Pacific Power Series M 05-15-16 6.00 2,935,000(l) 2,914,502 Smurfit-Stone Container Enterprises Sr Unsecured 03-15-17 8.00 120,000 101,400 Southern Natural Gas Sr Unsecured 04-01-17 5.90 2,290,000(d) 2,280,304 Toyota Motor Credit (Japanese Yen) Sr Unsub 06-09-08 0.75 339,000,000 3,260,667 Transcontinental Gas Pipe Line Sr Unsecured 04-15-16 6.40 3,015,000 3,060,225
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 20 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) UNITED STATES (CONT.) U.S. Treasury 02-28-10 2.00% $600,000 $597,328 04-30-10 2.13 740,000 737,861 02-15-18 3.50 865,000 846,619 05-15-37 5.00 1,685,000 1,826,119 U.S. Treasury Inflation-Indexed Bond 01-15-14 2.00 11,747,820(i) 12,320,585 01-15-15 1.63 3,325,650(i) 3,423,162 UnitedHealth Group Sr Unsecured 11-15-37 6.63 625,000 589,230 02-15-38 6.88 1,880,000 1,840,671 Verizon Communications 04-15-38 6.90 920,000 990,914 Verizon New York Sr Unsecured Series A 04-01-12 6.88 2,050,000(l) 2,159,476 Verizon Pennsylvania Sr Unsecured Series A 11-15-11 5.65 970,000(l) 981,194 Wachovia Bank Commercial Mtge Trust Series 2003-C8 Cl A2 11-15-35 3.89 1,250,000(f) 1,244,907 Wachovia Bank Commercial Mtge Trust Series 2005-C18 Cl A4 04-15-42 4.94 750,000(f) 732,637 Wachovia Bank Commercial Mtge Trust Series 2005-C20 Cl A5 07-15-42 5.09 800,000(f) 790,101 Wachovia Bank Commercial Mtge Trust Series 2006-C24 Cl APB 03-15-45 5.58 500,000(f) 498,874 Wachovia Bank Commercial Mtge Trust Series 2006-C27 Cl APB 07-15-45 5.73 900,000(f) 902,057 Wachovia Bank Commercial Mtge Trust Series 2006-C29 Cl A4 11-15-48 5.31 6,150,000(f) 5,958,174 Windstream 08-01-16 8.63 800,000 838,000 03-15-19 7.00 70,000 66,150
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(A) UNITED STATES (CONT.) XTO Energy Sr Unsecured 02-01-14 4.90% $1,885,000 $1,859,797 01-31-15 5.00 720,000 704,024 06-30-15 5.30 1,475,000 1,477,419 --------------- Total 267,871,104 - ------------------------------------------------------------------------------------ URUGUAY (0.1%) Republica Orient Uruguay Sr Unsecured 03-21-36 7.63 825,000 870,375 - ------------------------------------------------------------------------------------ VENEZUELA (0.1%) Petroleos de Venezuela 04-12-17 5.25 770,000 508,200 Republic of Venezuela Sr Unsecured 10-08-14 8.50 160,000 150,000 --------------- Total 658,200 - ------------------------------------------------------------------------------------ TOTAL BONDS (Cost: $706,921,337) $756,927,329 - ------------------------------------------------------------------------------------
MUNICIPAL BONDS (0.1%) NAME OF ISSUER AND TITLE OF COUPON PRINCIPAL ISSUE RATE AMOUNT VALUE(A) UNITED STATES Tobacco Settlement Financing Corporation Revenue Bonds Series 2007A-1 06-01-46 6.71% $1,130,000 $998,208 - ------------------------------------------------------------------------------------ TOTAL MUNICIPAL BONDS (Cost: $1,129,887) $998,208 - ------------------------------------------------------------------------------------
SENIOR LOANS (0.4%)(n) COUPON PRINCIPAL BORROWER RATE AMOUNT VALUE(A) GERMANY (--%) Celanese Term Loan 04-02-14 4.19% $16(c) $16 - ------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 21
SENIOR LOANS (CONTINUED) COUPON PRINCIPAL BORROWER RATE AMOUNT VALUE(A) NETHERLANDS (0.1%) Nielsen Finance Term Loan 08-09-13 5.35% $516,500(c) $486,884 - ------------------------------------------------------------------------------------ UNITED STATES (0.3%) Charter Communications Term Loan 09-06-14 5.26 744,135 657,912 Community Health Systems Delayed Draw Term Loan TBD TBD 21,702(b,o,p) 20,757 Community Health Systems Term Loan 07-25-14 5.34 424,328 406,116 HCA Tranche B Term Loan 11-14-13 4.95 654,366 621,785 Idearc Tranche B Term Loan 11-17-14 4.70-4.86 551,869 453,912
SENIOR LOANS (CONTINUED) COUPON PRINCIPAL BORROWER RATE AMOUNT VALUE(A) UNITED STATES (CONT.) West Corp Tranche B2 Term Loan 10-24-13 5.24-5.47% $237,006 $217,083 --------------- Total 2,377,565 - ------------------------------------------------------------------------------------ TOTAL SENIOR LOANS (Cost: $3,144,168) $2,864,465 - ------------------------------------------------------------------------------------
MONEY MARKET FUND (0.2%) SHARES VALUE(A) RiverSource Short-Term Cash Fund, 2.72% 1,819,551(m) $1,819,551 - ----------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $1,819,551) $1,819,551 - ----------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $713,014,943)(q) $762,609,553 ===================================================================================
INVESTMENTS IN DERIVATIVES FUTURES CONTRACTS OUTSTANDING AT APRIL 30, 2008
NUMBER OF UNREALIZED CONTRACTS NOTIONAL EXPIRATION APPRECIATION CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION) - --------------------------------------------------------------------------------------------------- Euro-Bund, 10-year 158 $28,141,201 June 2008 $(509,216) Japanese Govt Bond, 10-year 8 10,476,099 June 2008 (208,888) United Kingdom Long GILT, 10-year 22 4,736,643 June 2008 (1,677) U.S. Long Bond, 20-year 64 7,481,000 June 2008 100,231 U.S. Treasury Note, 2-year 40 8,507,500 June 2008 (33,554) U.S. Treasury Note, 5-year (414) (46,361,533) June 2008 558,430 U.S. Treasury Note, 10-year (419) (48,525,438) June 2008 514,250 - --------------------------------------------------------------------------------------------------- Total $419,576 - ---------------------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 22 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT APRIL 30, 2008
EXCHANGE CURRENCY TO BE CURRENCY TO BE UNREALIZED UNREALIZED DATE DELIVERED RECEIVED APPRECIATION DEPRECIATION - ----------------------------------------------------------------------------------------------------------------- May 2, 2008 473,686 480,000 $2,978 $-- U.S. Dollar Canadian Dollar - ----------------------------------------------------------------------------------------------------------------- May 2, 2008 4,203,360 2,700,000 12,419 -- U.S. Dollar European Monetary Unit - ----------------------------------------------------------------------------------------------------------------- May 2, 2008 155,869 800,000 1,385 -- U.S. Dollar Norwegian Krone - ----------------------------------------------------------------------------------------------------------------- May 5, 2008 365,707 235,000 1,222 -- U.S. Dollar European Monetary Unit - ----------------------------------------------------------------------------------------------------------------- May 5, 2008 537,480 5,645,686 846 -- U.S. Dollar Mexican Peso - ----------------------------------------------------------------------------------------------------------------- May 5, 2008 943,281 2,091,726 2,987 -- U.S. Dollar Polish Zloty - ----------------------------------------------------------------------------------------------------------------- May 7, 2008 16,547,000 25,896,717 64,924 -- European Monetary Unit U.S. Dollar - ----------------------------------------------------------------------------------------------------------------- May 7, 2008 1,362,095,000 13,324,089 219,005 -- Japanese Yen U.S. Dollar - ----------------------------------------------------------------------------------------------------------------- May 9, 2008 39,268,000 3,707,676 -- (33,188) Mexican Peso U.S. Dollar - ----------------------------------------------------------------------------------------------------------------- May 9, 2008 3,430,000 326,365 -- (691) Mexican Peso U.S. Dollar - ----------------------------------------------------------------------------------------------------------------- May 9, 2008 1,522,843 2,100,000 26,283 -- U.S. Dollar Singapore Dollar - ----------------------------------------------------------------------------------------------------------------- May 12, 2008 966,935 1,220,000 -- (15,213) U.S. Dollar New Zealand Dollar - ----------------------------------------------------------------------------------------------------------------- May 16, 2008 58,060,000 3,670,850 77,307 -- Czech Koruna U.S. Dollar - ----------------------------------------------------------------------------------------------------------------- May 20, 2008 1,400,000 630,205 -- (3,136) Polish Zloty U.S. Dollar - ----------------------------------------------------------------------------------------------------------------- May 23, 2008 17,779,000 8,243,040 216,063 -- Polish Zloty U.S. Dollar - ----------------------------------------------------------------------------------------------------------------- May 23, 2008 3,153,600 1,600,000 23,037 -- U.S. Dollar British Pound - ----------------------------------------------------------------------------------------------------------------- May 29, 2008 9,650,000 1,921,086 29,658 -- Norwegian Krone U.S. Dollar - ----------------------------------------------------------------------------------------------------------------- June 4, 2008 30,500,000 5,069,763 -- (16,276) Swedish Krona U.S. Dollar - ----------------------------------------------------------------------------------------------------------------- June 6, 2008 6,050,000 6,011,944 4,239 -- Canadian Dollar U.S. Dollar - ----------------------------------------------------------------------------------------------------------------- Total $682,353 $(68,504) - -----------------------------------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 23 NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using procedures described in Note 1 to the financial statements. (b) At April 30, 2008, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $4,721,477. See Note 1 to the financial statements. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security may be determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2008, the value of these securities amounted to $30,633,914 or 3.9% of net assets. (e) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on April 30, 2008. (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) 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) Interest only represents securities that entitle holders to receive only interest payments on the underlying mortgages. The yield to maturity of an interest only is extremely sensitive to the rate of principal payments on the underlying mortgage assets. A rapid (slow) rate of principal repayments may have an adverse (positive) effect on yield to maturity. The principal amount shown is the notional amount of the underlying mortgages. Interest rate disclosed represents yield based upon the estimated timing and amount of future cash flows at April 30, 2008. (i) 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. (j) The following abbreviations are used in the portfolio security descriptions to identify the insurer of the issue: AMBAC -- Ambac Assurance Corporation FSA -- Financial Security Assurance MBIA -- MBIA Insurance Corporation
(k) Adjustable rate mortgage; interest rate varies to reflect current market conditions; rate shown is the effective rate on April 30, 2008. - -------------------------------------------------------------------------------- 24 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (l) At April 30, 2008, investments in securities included securities valued at $3,479,169 that were partially pledged as collateral to cover initial margin deposits on open interest rate futures contracts. (m) Affiliated Money Market Fund - See Note 5 to the financial statements. The rate shown is the seven-day current annualized yield at April 30, 2008. (n) 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. (o) At April 30, 2008, the Fund had unfunded senior loan commitments pursuant to the terms of the loan agreement. The Fund receives a stated coupon rate until the borrower draws on the loan commitment, at which time the rate will become the stated rate in the loan agreement.
UNFUNDED BORROWER COMMITMENT - ----------------------------------------------------------------------------- Community Health Systems $21,702
(p) Represents a senior loan purchased on a when-issued or delayed-delivery basis. Certain details associated with this purchase are not known prior to the settlement date of the transaction. In addition, senior loans typically trade without accrued interest and therefore a weighted average coupon rate is not available prior to settlement. At settlement, if still unknown, the borrower or counterparty will provide the Fund with the final weighted average coupon rate and maturity date. (q) At April 30, 2008, the cost of securities for federal income tax purposes was approximately $713,015,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $55,071,000 Unrealized depreciation (5,476,000) - ------------------------------------------------------------------------------ Net unrealized appreciation $49,595,000 - ------------------------------------------------------------------------------
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com/funds. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 25 FINANCIAL STATEMENTS ----------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 2008 (UNAUDITED) ASSETS Investments in securities, at value Unaffiliated issuers (identified cost $711,195,392) $760,790,002 Affiliated money market fund (identified cost $1,819,551) 1,819,551 - ---------------------------------------------------------------------------- Total investments in securities (identified cost $713,014,943) 762,609,553 Cash 4,985 Foreign currency holdings (identified cost $15,220,280) 15,302,909 Capital shares receivable 29,439,451 Dividends and accrued interest receivable 10,155,317 Receivable for investment securities sold 5,564,083 Unrealized appreciation on forward foreign currency contracts 682,353 - ---------------------------------------------------------------------------- Total assets 823,758,651 - ---------------------------------------------------------------------------- LIABILITIES Capital shares payable 877,986 Payable for investment securities purchased 26,959,864 Variation margin payable 204,885 Unrealized depreciation on forward foreign currency contracts 68,504 Accrued investment management services fee 14,907 Accrued distribution fee 5,157 Accrued transfer agency fee 2,842 Accrued administrative services fee 1,683 Accrued plan administration services fee 1 Other accrued expenses 90,570 - ---------------------------------------------------------------------------- Total liabilities 28,226,399 - ---------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $795,532,252 ============================================================================
- -------------------------------------------------------------------------------- 26 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) APRIL 30, 2008 (UNAUDITED) REPRESENTED BY Capital stock - $.01 par value $ 1,135,552 Additional paid-in capital 748,988,222 Excess of distributions over net investment income (1,679,627) Accumulated net realized gain (loss) (3,870,108) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 50,958,213 - ---------------------------------------------------------------------------- Total - representing net assets applicable to outstanding capital stock $795,532,252 ============================================================================
Net assets applicable to outstanding shares: Class A $299,738,263 Class B $ 58,312,475 Class C $ 4,624,850 Class I $225,304,776 Class R4 $ 144,110 Class W $207,407,778 Net asset value per share of outstanding capital stock: Class A shares(1) 42,773,883 $ 7.01 Class B shares 8,232,373 $ 7.08 Class C shares 657,842 $ 7.03 Class I shares 32,226,055 $ 6.99 Class R4 shares 20,556 $ 7.01 Class W shares 29,644,505 $ 7.00 - -------------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $7.36. 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 -- 2008 SEMIANNUAL REPORT 27 STATEMENT OF OPERATIONS SIX MONTHS ENDED APRIL 30, 2008 (UNAUDITED) INVESTMENT INCOME Income: Interest $13,802,682 Income distributions from affiliated money market fund 550,396 Less foreign taxes withheld (189,419) - --------------------------------------------------------------------------- Total income 14,163,659 - --------------------------------------------------------------------------- Expenses: Investment management services fee 2,267,841 Distribution fee Class A 341,636 Class B 259,844 Class C 16,370 Class W 136,643 Transfer agency fee Class A 311,190 Class B 62,686 Class C 3,825 Class R4 32 Class W 109,314 Administrative services fee 255,899 Plan administration services fee - Class R4 160 Compensation of board members 7,082 Custodian fees 59,500 Printing and postage 41,610 Registration fees 69,165 Professional fees 17,473 Other 12,935 - --------------------------------------------------------------------------- Total expenses 3,973,205 Expenses waived/reimbursed by the Investment Manager and its affiliates (152,361) Earnings and bank fee credits on cash balances (4,844) - --------------------------------------------------------------------------- Total net expenses 3,816,000 - --------------------------------------------------------------------------- Investment income (loss) - net 10,347,659 - ---------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 28 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT STATEMENT OF OPERATIONS (CONTINUED) SIX MONTHS ENDED APRIL 30, 2008 (UNAUDITED) REALIZED AND UNREALIZED GAIN (LOSS) - NET Net realized gain (loss) on: Security transactions $10,661,849 Foreign currency transactions (7,032,639) Futures contracts (1,776,492) Swap transactions (1,051,776) - --------------------------------------------------------------------------- Net realized gain (loss) on investments 800,942 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 13,870,549 - --------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 14,671,491 - --------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $25,019,150 ===========================================================================
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 29 STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2008 OCT. 31, 2007 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) - net $ 10,347,659 $ 15,158,284 Net realized gain (loss) on investments 800,942 1,812,931 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 13,870,549 22,918,455 - -------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 25,019,150 39,889,670 - -------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (5,650,138) (10,445,402) Class B (869,863) (1,830,230) Class C (52,370) (87,382) Class I (4,943,017) (6,698,983) Class R4 (2,821) (4,654) Class W (1,935,151) (324,071) - -------------------------------------------------------------------------------------- Total distributions (13,453,360) (19,390,722) - --------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 30 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2008 OCT. 31, 2007 (UNAUDITED) CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 64,636,297 $ 41,925,593 Class B shares 18,538,307 8,520,931 Class C shares 2,462,026 420,509 Class I shares 91,546,637 35,313,664 Class R4 shares 57,770 71,093 Class W shares 160,878,114 57,650,812 Reinvestment of distributions at net asset value Class A shares 5,301,684 9,776,138 Class B shares 816,688 1,714,958 Class C shares 47,779 79,537 Class I shares 4,942,785 6,698,564 Class R4 shares 2,821 4,654 Class W shares 1,935,040 323,864 Payments for redemptions Class A shares (33,708,501) (79,932,025) Class B shares (8,908,875) (28,554,355) Class C shares (479,371) (1,185,971) Class I shares (32,109,423) (35,536,448) Class R4 shares (31,300) (48,411) Class W shares (11,858,296) (5,063,418) - -------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 264,070,182 12,179,689 - -------------------------------------------------------------------------------------- Total increase (decrease) in net assets 275,635,972 32,678,637 Net assets at beginning of period 519,896,280 487,217,643 - -------------------------------------------------------------------------------------- Net assets at end of period $795,532,252 $519,896,280 ====================================================================================== Undistributed (excess of distributions over) net investment income $ (1,679,627) $ 1,426,074 - --------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS TO APRIL 30, 2008) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RiverSource Global Bond Fund (the Fund) is a series of RiverSource Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a non-diversified, open-end management investment company. RiverSource Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund invests primarily in debt obligations of U.S. and foreign issuers. The Fund offers Class A, Class B, Class C, Class I, Class R4 and Class W shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class I and Class R4 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. - - Class W shares are sold without a front-end sales charge or CDSC and are offered through qualifying discretionary accounts. At April 30, 2008, RiverSource Investments, LLC (the Investment Manager) and the RiverSource affiliated funds-of-funds owned 100% of Class I shares. At April 30, 2008, the Investment Manager and the RiverSource affiliated funds- of-funds owned approximately 28% of the total outstanding Fund shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at - -------------------------------------------------------------------------------- 32 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange 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 New York Stock Exchange, 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 New York Stock Exchange. Swap transactions are valued through an authorized pricing service, broker, or an internal model. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. SECURITIES PURCHASED ON A FORWARD-COMMITMENT BASIS AND UNFUNDED LOAN COMMITMENTS 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, 2008, the Fund has outstanding when-issued securities of $2,787,215 and other forward-commitments of $1,934,262. The Fund may enter into certain credit agreements, all or a portion of which may be unfunded. The Fund is obligated to fund these loan commitments at the borrower's discretion. These commitments are disclosed in the "Portfolio of - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 33 Investments." At April 30, 2008, the Fund has entered into unfunded loan commitments of $21,702. The Fund also enters into transactions to sell purchase commitments to third parties at current market values and concurrently acquires other purchase commitments for similar securities at later dates. As an inducement for the Fund to "roll over" its purchase commitments, the Fund receives negotiated amounts in the form of reductions of the purchase price of the commitment. The Fund records the incremental difference between the forward purchase and sale of each forward roll as realized gain or loss. Losses may arise due to changes in the value of the securities or if a counterparty does not perform under the terms of the agreement. If a counterparty files for bankruptcy or becomes insolvent, the Fund's right to repurchase or sell securities may be limited. The Fund did not enter into any mortgage dollar roll transactions during the six months ended April 30, 2008. OPTION TRANSACTIONS To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Fund may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. Cash collateral may be collected by the Fund to secure certain over-the-counter options trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. The Fund also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. At April 30, 2008, and for the six months then ended, the Fund had no outstanding option contracts. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an - -------------------------------------------------------------------------------- 34 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Futures are valued daily based upon the last sale price at the close of market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of 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, 2008, foreign currency holdings consisted of multiple denominations, primarily European monetary units. The Fund may enter into forward foreign currency contracts to produce incremental earnings, for operational purposes, or to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete its contract obligations. CMBS TOTAL RETURN SWAP TRANSACTIONS The Fund may enter into swap agreements to earn the total return on a specified security or index of fixed income securities. CMBS total return swaps are bilateral financial contracts designed to replicate synthetically the total returns of commercial mortgage-backed securities. Under the terms of the swaps, the Fund either receives or pays the total return on a reference security or index applied to a notional principal amount. In return, the Fund agrees to pay or receive from the counterparty a floating rate, which is reset periodically based on short-term interest rates, applied to the same notional amount. The notional amounts of swap contracts are not recorded in the financial statements. Swaps are valued daily, and the change in value is recorded as - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 35 unrealized appreciation (depreciation) until the termination of the swap, at which time realized gain (loss) is recorded. Payments received or made are recorded as realized gains (losses). Swap agreements may be subject to liquidity risk, which exists when a particular swap is difficult to purchase or sell. It may not be possible for the Fund to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses. Total return swaps are subject to the risk that the counterparty will default on its obligation to pay net amounts due to the Fund. At April 30, 2008, the Fund had no outstanding CMBS total return swap contracts. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to the shareholders. No provision for income or excise taxes is thus required. The Fund has adopted Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes," which is effective for fiscal periods beginning after Dec. 15, 2006. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 prescribes a two-step process to recognize and measure a tax position taken or expected to be taken in a tax return. The first step is to determine whether a tax position has met the more-likely-than-not recognition threshold and the second step is to measure a tax position that meets the threshold to determine the amount of benefit to recognize. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net - -------------------------------------------------------------------------------- 36 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. RECENT ACCOUNTING PRONOUNCEMENTS In March 2008, the FASB issued Statement on Financial Accounting Standards No. 161 (SFAS "161"), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of April 30, 2008, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. On Sept. 20, 2006, the FASB released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. The application of SFAS 157 will be effective for the Fund's fiscal year beginning Nov. 1, 2008. The adoption of SFAS 157 is not anticipated to have a material impact on the Fund's financial statements; however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. 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. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 37 2. EXPENSES AND SALES CHARGES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.72% to 0.52% annually as the Fund's assets increase. The management fee for the six months ended April 30, 2008 was 0.70% of the Fund's average daily net assets. Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. The fee for the six months ended April 30, 2008 was 0.08% of the Fund's average daily net assets. 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, 2008, other expenses paid to this company were $1,268. Compensation of Board members includes, for a former Board Chair, compensation as well as retirement benefits. Certain other aspects of a former Board Chair's compensation, including health benefits and payment of certain other expenses, are included under other expenses. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $20.50 for Class A, $21.50 for Class B and $21.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R4 shares and an annual asset-based fee at a rate of 0.20% of the Fund's average daily net assets attributable to Class W shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the Statement of Operations. 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 - -------------------------------------------------------------------------------- 38 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT attributable to Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. The Fund has an agreement with RiverSource 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. Sales charges received by the Distributor for distributing Fund shares were $203,933 for Class A, $16,264 for Class B and $291 for Class C for the six months ended April 30, 2008. 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. For the six months ended April 30, 2008, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds) were 1.25% for Class A, 2.01% for Class B, 2.01% for Class C, 0.82% for Class I, 0.87% for Class R4 and 1.27% for Class W. Of these waived/reimbursed fees and expenses, the transfer agency fees at the class level were $65,724, $13,578, $785 and $125 for Class A, Class B, Class C and Class W, respectively, the plan administration services fee at the class level was $160 for Class R4, and the management fees at the Fund level were $71,989. In addition, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds) will not exceed 1.25% for Class A, 2.01% for Class B, 2.01% for Class C, 0.82% for Class I, 1.12% for Class R4 and 1.27% for Class W of the Fund's average daily net assets until Oct. 31, 2008, unless sooner terminated at the discretion of the Board. During the six months ended April 30, 2008, the Fund's custodian and transfer agency fees were reduced by $4,844 as a result of earnings and bank fee credits from overnight cash balances. The Fund pays custodian fees to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $459,690,519 and $216,280,532, respectively, for the six - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 39 months ended April 30, 2008. Realized gains and losses are determined on an identified cost basis. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED APRIL 30, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - --------------------------------------------------------------------------------------------- Class A 9,274,103 778,208 (4,849,968) 5,202,343 Class B 2,634,372 118,795 (1,266,369) 1,486,798 Class C 351,706 6,977 (68,510) 290,173 Class I 13,212,527 726,689 (4,624,729) 9,314,487 Class R4 8,305 413 (4,473) 4,245 Class W 23,185,889 281,859 (1,701,217) 21,766,531 - ---------------------------------------------------------------------------------------------
YEAR ENDED OCT. 31, 2007 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - --------------------------------------------------------------------------------------------- Class A 6,327,232 1,485,288 (12,063,782) (4,251,262) Class B 1,270,247 258,114 (4,278,499) (2,750,138) Class C 63,080 12,039 (177,897) (102,778) Class I 5,334,334 1,019,550 (5,397,430) 956,454 Class R4 10,779 707 (7,379) 4,107 Class W* 8,592,701 48,662 (763,389) 7,877,974 - ---------------------------------------------------------------------------------------------
* For the period from Dec. 1, 2006 (inception date) to Oct. 31, 2007. 5. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term Cash Fund aggregated $182,129,896 and $194,933,989, respectively, for the six months ended April 30, 2008. 6. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $500 million. Interest is charged to each Fund - -------------------------------------------------------------------------------- 40 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT based on its borrowings at a rate equal to the federal funds rate plus 0.30%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. The Fund had no borrowings during the six months ended April 30, 2008. 7. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund had a capital loss carry-over of $4,163,824 at Oct. 31, 2007, that if not offset by capital gains will expire as follows:
2010 2014 $3,665,053 $498,771
It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. 8. RISKS RELATING TO CERTAIN INVESTMENTS DIVERSIFICATION RISK The Fund is non-diversified. A non-diversified fund may invest more of its assets in fewer companies than if it were a diversified fund. The Fund may be more exposed to the risks of loss and volatility than a fund that invests more broadly. FOREIGN/EMERGING MARKETS RISK Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging markets may accentuate these risks. 9. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the 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 - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 41 Minnesota. In response to defendants' motion to dismiss the complaint, the 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 on August 8, 2007. 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. - -------------------------------------------------------------------------------- 42 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 10. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results. CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(J) 2007 2006 2005 2004 Net asset value, beginning of period $6.89 $6.60 $6.59 $7.02 $6.57 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .11(b) .20(b) .19 .16 .17 Net gains (losses) (both realized and unrealized) .16 .35 .14 (.23) .52 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .27 .55 .33 (.07) .69 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.15) (.26) (.32) (.36) (.24) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.01 $6.89 $6.60 $6.59 $7.02 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $300 $259 $276 $353 $389 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.32%(e) 1.37% 1.39% 1.37% 1.34% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) 1.25%(e) 1.25% 1.25% 1.35% 1.34% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.12%(e) 3.08% 2.77% 2.42% 2.66% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 77% 68% 73% 92% - ----------------------------------------------------------------------------------------------------------- Total return(h) 3.94%(i) 8.63% 5.17% (1.18%) 10.70% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (g) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 43 CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(J) 2007 2006 2005 2004 Net asset value, beginning of period $6.96 $6.67 $6.59 $7.02 $6.57 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .08(b) .15(b) .13 .10 .14 Net gains (losses) (both realized and unrealized) .16 .35 .16 (.23) .50 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .24 .50 .29 (.13) .64 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.12) (.21) (.21) (.30) (.19) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.08 $6.96 $6.67 $6.59 $7.02 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $58 $47 $63 $111 $142 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 2.08%(e) 2.13% 2.16% 2.13% 2.10% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) 2.01%(e) 2.01% 2.02% 2.12% 2.10% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.36%(e) 2.30% 1.98% 1.65% 1.90% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 77% 68% 73% 92% - ----------------------------------------------------------------------------------------------------------- Total return(h) 3.53%(i) 7.68% 4.45% (1.98%) 9.83% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (g) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- 44 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(J) 2007 2006 2005 2004 Net asset value, beginning of period $6.91 $6.62 $6.57 $6.99 $6.55 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .08(b) .15(b) .14 .11 .14 Net gains (losses) (both realized and unrealized) .16 .35 .13 (.22) .49 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .24 .50 .27 (.11) .63 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.12) (.21) (.22) (.31) (.19) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.03 $6.91 $6.62 $6.57 $6.99 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $5 $3 $3 $4 $5 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 2.08%(e) 2.13% 2.16% 2.14% 2.09% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) 2.01%(e) 2.01% 2.02% 2.12% 2.09% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.36%(e) 2.32% 2.00% 1.65% 1.91% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 77% 68% 73% 92% - ----------------------------------------------------------------------------------------------------------- Total return(h) 3.60%(i) 7.75% 4.25% (1.83%) 9.72% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (g) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 45 CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(K) 2007 2006 2005 2004(B) Net asset value, beginning of period $6.87 $6.59 $6.61 $7.03 $6.77 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .12(c) .23(c) .21 .19 .16 Net gains (losses) (both realized and unrealized) .16 .34 .14 (.22) .24 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .28 .57 .35 (.03) .40 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.16) (.29) (.37) (.39) (.14) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.99 $6.87 $6.59 $6.61 $7.03 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $225 $157 $145 $89 $24 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) .84%(f) .87% .88% .91% .89%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .82%(f) .87% .88% .91% .89%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.55%(f) 3.47% 3.18% 2.87% 3.07%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 77% 68% 73% 92% - ----------------------------------------------------------------------------------------------------------- Total return(i) 4.16%(j) 8.91% 5.52% (.56%) 6.06%(j) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from March 4, 2004 (inception date) to Oct. 31, 2004. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- 46 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(J) 2007 2006 2005 2004 Net asset value, beginning of period $6.89 $6.60 $6.61 $7.04 $6.59 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .12(b) .22(b) .20 .16 .18 Net gains (losses) (both realized and unrealized) .17 .35 .13 (.22) .52 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .29 .57 .33 (.06) .70 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.17) (.28) (.34) (.37) (.25) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.01 $6.89 $6.60 $6.61 $7.04 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- $-- - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.14%(e) 1.17% 1.20% 1.20% 1.17% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) .87%(e) 1.08% 1.08% 1.18% 1.17% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.51%(e) 3.27% 2.95% 2.60% 2.83% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 77% 68% 73% 92% - ----------------------------------------------------------------------------------------------------------- Total return(h) 4.24%(i) 8.84% 5.29% (1.00%) 10.86% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (g) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 47 CLASS W
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(K) 2007(B) Net asset value, beginning of period $6.88 $6.79 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .11 .20 Net gains (losses) (both realized and unrealized) .16 .17 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .27 .37 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.15) (.28) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.00 $6.88 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $207 $54 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.30%(f) 1.35%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.27%(f) 1.26%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.10%(f) 3.34%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 77% - ----------------------------------------------------------------------------------------------------------- Total return(i) 4.00%(j) 5.71%(j) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 1, 2006 (inception date) to Oct. 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (h) Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- 48 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- RiverSource Investments, LLC ("RiverSource Investments" or the "investment manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement") RiverSource Investments provides investment advice and other services to the Fund and all 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. RiverSource Investments prepared detailed reports for the Board and its Contracts Committee in March and April 2008, including reports based on data provided by independent organizations to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource Investments addressing the services RiverSource Investments provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts, Investment Review and Compliance Committees in determining whether to continue the IMS Agreement. At the April 9-10, 2008 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by RiverSource Investments: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource Investments, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource Investments, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, particularly in the areas of trading systems, new product initiatives, legal and compliance. Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource Investments, the Board considered the quality of the administrative and transfer agency services provided by RiverSource Investments' affiliates to the Fund. The Board also reviewed the financial condition of RiverSource Investments (and its affiliates) and each entity's ability to carry out its responsibilities under the IMS Agreement. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by RiverSource Investments). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality, particularly in light of recent market conditions. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT 49 Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that RiverSource Investments and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods (including since inception), recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2006 to December 2007. The Board observed that the Fund's investment performance was appropriate in light of the particular management style and market conditions involved. Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource Investments and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to RiverSource Investments' profitability. The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, 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 the expected profitability of RiverSource Investments and its affiliates in connection with RiverSource Investments providing investment management services to the Fund. In this regard, the Board referred to a detailed - -------------------------------------------------------------------------------- 50 RIVERSOURCE GLOBAL BOND FUND -- 2008 SEMIANNUAL REPORT profitability report, discussing the profitability to RiverSource Investments and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource Investments as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 10, 2008, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement. 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 RiverSource Funds at (888) 791-3380; contacting your financial institution; 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 -- 2008 SEMIANNUAL REPORT 51 RIVERSOURCE GLOBAL BOND FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. These companies are part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C) 2008 RiverSource Distributors, Inc. S-6339 X (6/08)
Semiannual Report (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE GLOBAL TECHNOLOGY FUND SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2008 RIVERSOURCE GLOBAL TECHNOLOGY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. (SINGLE STRATEGY FUNDS ICON) TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance............... 2 Manager Commentary.................. 6 Fund Expenses Example............... 12 Portfolio of Investments............ 14 Financial Statements................ 16 Notes to Financial Statements....... 20 Approval of Investment Management Services Agreement............... 36 Proxy Voting........................ 38
(DALBAR LOGO) The RiverSource mutual fund shareholder reports have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Global Technology Fund's (the Fund) Class A shares (excluding sales charge) declined 16.12% for the six months ended April 30, 2008. > The Fund underperformed its benchmark, the unmanaged S&P North American Technology Sector Index(TM) (S&P NATS Index), formerly known as the S&P GSTI(TM) Composite Index, which declined 14.80% for the semiannual period. > The Fund also underperformed its peer group, represented by the Lipper Science and Technology Funds Index, which declined 15.65% during the same period. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2008) - --------------------------------------------------------------------------------
6 months* 1 year 3 years 5 years 10 years - ------------------------------------------------------------------------------------- RiverSource Global Technology Fund Class A (excluding sales charge) -16.12% -1.92% +13.37% +15.70% +3.30% - ------------------------------------------------------------------------------------- S&P NATS Index(1) (unmanaged) -14.80% +1.68% +11.08% +11.39% +2.45% - ------------------------------------------------------------------------------------- Lipper Science and Technology Funds Index(2) -15.65% +1.04% +10.62% +11.48% +2.78% - -------------------------------------------------------------------------------------
* 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 institution or visiting riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. - -------------------------------------------------------------------------------- 2 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- (1)The S&P NATS Index, formerly known as the S&P GSTI(TM) Composite Index, an unmanaged index, is a market capitalization-weighted index of approximately 200 stocks designed to measure the performance of companies in the technology sector. The index reflects reinvestment of all distributions and changes in market prices. (2)The Lipper Science and Technology Funds Index includes the 30 largest science and technology funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX - ----------------------------------------
STYLE VALUE BLEND GROWTH X LARGE X MEDIUM SIZE X SMALL
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. ANNUAL OPERATING EXPENSE RATIO (as of the current prospectus) - ----------------------------------------
Total - ------------------------------------- Class A 1.60% - ------------------------------------- Class B 2.38% - ------------------------------------- Class C 2.36% - ------------------------------------- Class I 0.99% - ------------------------------------- Class R4 1.34% - -------------------------------------
International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. The RiverSource Global Technology Fund is a narrowly-focused sector fund and it may exhibit higher volatility than funds with broader investment objectives. See the Fund's prospectus for specific risks associated with the Fund. - -------------------------------------------------------------------------------- 4 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT APRIL 30, 2008 SINCE WITHOUT SALES CHARGE 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 11/13/96) -16.12% -1.92% +13.37% +15.70% +3.30% N/A - ---------------------------------------------------------------------------------------------------- Class B (inception 11/13/96) -16.48% -2.68% +12.53% +14.87% +2.49% N/A - ---------------------------------------------------------------------------------------------------- Class C (inception 6/26/00) -16.79% -2.68% +12.28% +14.87% N/A -10.16% - ---------------------------------------------------------------------------------------------------- Class I (inception 7/15/04) -16.08% -1.51% +14.04% N/A N/A +11.97% - ---------------------------------------------------------------------------------------------------- Class R4 (inception 11/13/96) -15.96% -1.53% +13.60% +15.97% +3.42% N/A - ---------------------------------------------------------------------------------------------------- WITH SALES CHARGE Class A (inception 11/13/96) -21.05% -7.61% +11.09% +14.25% +2.77% N/A - ---------------------------------------------------------------------------------------------------- Class B (inception 11/13/96) -20.65% -7.54% +11.46% +14.64% +2.49% N/A - ---------------------------------------------------------------------------------------------------- Class C (inception 6/26/00) -17.63% -3.65% +12.28% +14.87% N/A -10.16% - ----------------------------------------------------------------------------------------------------
AT MARCH 31, 2008 SINCE WITHOUT SALES CHARGE 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 11/13/96) -17.71% -5.95% +9.20% +16.38% +2.64% N/A - ---------------------------------------------------------------------------------------------------- Class B (inception 11/13/96) -17.81% -6.88% +8.48% +15.44% +1.85% N/A - ---------------------------------------------------------------------------------------------------- Class C (inception 6/26/00) -18.15% -6.88% +8.48% +15.44% N/A -11.08% - ---------------------------------------------------------------------------------------------------- Class I (inception 7/15/04) -17.63% -5.45% +9.91% N/A N/A +10.11% - ---------------------------------------------------------------------------------------------------- Class R4 (inception 11/13/96) -17.53% -5.51% +9.66% +16.67% +2.77% N/A - ---------------------------------------------------------------------------------------------------- WITH SALES CHARGE Class A (inception 11/13/96) -22.55% -11.24% +7.09% +14.97% +2.12% N/A - ---------------------------------------------------------------------------------------------------- Class B (inception 11/13/96) -21.92% -11.54% +7.34% +15.22% +1.85% N/A - ---------------------------------------------------------------------------------------------------- Class C (inception 6/26/00) -18.96% -7.81% +8.48% +15.44% N/A -11.08% - ----------------------------------------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I and Class R4 shares. Class I and Class R4 shares are available to institutional investors only. * Not annualized. ** For classes with less than 10 years performance. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 5 MANAGER COMMENTARY ------------------------------------------------------------- (UNAUDITED) Below, portfolio managers Bob Ewing and Nick Thakore discuss the Fund's results and positioning for the semiannual period ended April 30, 2008. Mr. Ewing and Mr. Thakore lead a team of research analysts in determining the allocation of the portfolio among various sectors of the technology industry. Each research analyst on the team covers one or more of these sectors and, under the oversight of Mr. Ewing and Mr. Thakore, is responsible for selecting investments based on the portfolio sector allocation determination. DEAR SHAREHOLDERS, RiverSource Global Technology Fund's Class A shares (excluding sales charge) declined 16.12% for the six months ended April 30, 2008. The Fund underperformed its benchmark, the unmanaged S&P North American Technology Sector Index(TM) (S&P NATS Index), formerly known as the S&P GSTI(TM) Composite Index, which fell 14.80% and its peer group, represented by the Lipper Science and Technology Funds Index, which declined 15.65% during the same period. SECTOR DIVERSIFICATION(1) (at April 30, 2008; % of portfolio assets) - ----------------------------------------------------------------- Consumer Discretionary 0.9% - ------------------------------------------------- Information Technology 87.5% - ------------------------------------------------- Telecommunication Services 7.0% - ------------------------------------------------- Other(2) 4.6% - -------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. (2) Cash & Cash Equivalents. The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. - -------------------------------------------------------------------------------- 6 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- SIGNIFICANT PERFORMANCE FACTORS The first half of the Fund's fiscal year was a difficult time for the U.S. equity market. Stocks declined amid fallout from last summer's subprime mortgage crisis, fear of weaker economic growth and high energy prices. The technology sector underperformed the broader stock market during the period. Before the start of the current fiscal year, we had increased the Fund's emphasis on large-cap stocks, which we found attractive based on free cash flow yields and relatively low price-to-earnings multiples. This stance was advantageous during the volatile six-month period, as was the Fund's cash position. The Fund's sector allocations, which were generally similar to those of the S&P NATS Index, had little impact on relative performance, but overall stock selection was a negative factor. Stock selection in the software sector, however, added to return relative to the S&P NATS Index benchmark. The Fund's software holdings were larger than those of the S&P NATS Index, another positive. Results in the semiconductor industry were mixed, with some holdings adding to return and others detracting. Overall, stock selection among semiconductors had a negative impact on performance. TOP TEN HOLDINGS (at April 30, 2008; % of portfolio assets) - ----------------------------------------------------------------- Cisco Systems 7.5% - ------------------------------------------------- Microsoft 6.0% - ------------------------------------------------- Intel 6.0% - ------------------------------------------------- Apple 5.4% - ------------------------------------------------- Google CI A 5.3% - ------------------------------------------------- Hewlett-Packard 4.8% - ------------------------------------------------- Oracle 4.3% - ------------------------------------------------- IBM 4.0% - ------------------------------------------------- QUALCOMM 3.7% - ------------------------------------------------- Nokia ADR 2.7% - -------------------------------------------------
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. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- Individual contributors to the return of the Fund included holdings in BEA SYSTEMS, PMC-SIERRA and ON SEMICONDUCTOR. Software company BEA SYSTEMS benefited from its acquisition by Oracle during the period. PMC-SIERRA is a small company that produces semiconductors for computer storage, telecommunications equipment and fiber optics for the home market. Of these, the home market is their fastest growing business and PMC-SIERRA has the largest market share outside the United States. Other investors generally avoided ON SEMICONDUCTOR due to concerns about a recent acquisition. We anticipated significant cost savings from the purchase, which we didn't think were reflected in earnings estimates. The stock price has risen as the company has begun to realize its earnings potential. Detractors from return included not holding Research in Motion or Corning and having larger positions in MARVELL TECHNOLOGY GROUP and SPANSION than the S&P NATS Index. Research in Motion performed well as the Blackberry(R) smartphone continued to dominate the corporate market and the company also moved into the consumer market. Though the Fund did not hold Research in Motion, the portfolio includes other stocks with exposure to the mobile communications market, notably companies that make infrastructure components for mobile devices. We favor these companies because they are not dependent on the success of any specific mobile device. The Fund also did not hold Corning, a manufacturer of LCD panels for flat screen TVs, which outperformed in the first calendar quarter of 2008. We are seeing TV manufacturers stock piling inventory, either intentionally in anticipation of Olympic-related demand or due to slower consumer spending, and are concerned the inventory bloating could ripple back through the supply chain, cutting Corning's orders. We question whether two expected drivers of TV sales - the Olympics and disbursement of the government's economic stimulus payments - will have the anticipated impact. Semiconductor company MARVELL TECHNOLOGY GROUP acquired a wireless semiconductor business from Intel and was planning to bring manufacturing in-house, a potential cost savings and earnings boost. However, we started to doubt the product's strength and the magnitude of the cost savings. We sold the stock and invested in smaller semiconductor companies. SPANSION, a company that makes memory for cell phones, suffered as prices in the memory market fell faster than expected in 2007. - -------------------------------------------------------------------------------- 8 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- We continue to focus on companies with visible earnings drivers and attractive valuations. Since then, prices have stabilized and we think much of the negative news is behind the company. The stock remains very inexpensive, with an improving cash flow situation. CHANGES TO THE FUND'S PORTFOLIO Through much of the period, we continued to increase the Fund's average market capitalization, as we had been doing since mid-2007. Toward the end of the six months, we began to identify opportunities among small-cap stocks. Because investors perceived large-cap stocks as a safe haven, they held up better than smaller stocks during the market's decline, which increased their downside risk potential. Additionally, large-caps may face a less favorable currency environment going forward. Given how weak the U.S. dollar has been, a reversal is possible, which would create a neutral or negative currency situation for large-cap stocks. We have started to uncover attractive alternatives among stocks that suffered more significantly during the market's decline, particularly stocks in the small- and mid-cap segments. To summarize the Fund's industry allocations, the software, semiconductor and telecommunication services positions were modestly larger than the corresponding segments within the S&P NATS Index. Positions in the internet, computers and peripherals and communications equipment segments were smaller than the benchmark weightings. We continue to identify opportunities in the software sector, which we think is ripe for consolidation. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 9 MANAGER COMMENTARY (continued) ------------------------------------------------- OUR FUTURE STRATEGY Though we recognize that technology spending is slowing, we believe there are technology themes that could be beneficial regardless of spending levels. Examples include cost-saving technology, companies in the midst of new product cycles and telecommunications equipment companies that provide infrastructure for better and faster internet capabilities. We are cautiously optimistic about personal computer sales. We believe PC growth will be relatively strong because replacement rates are high and people are buying additional computers as prices come down. We also favor companies with exposure to emerging markets, a substantial growth opportunity for technology companies. While emerging markets represent 20% or less of total technology spending, they account for more than 30% of the spending growth. In addition, these markets are not suffering from the economic downturn affecting the United States. Though the next several months could be indecisive if economic data worsens, the second half of the year is traditionally stronger for the technology sector, as companies tend to spend more. If people start to feel better about the business environment, we could see increased investor interest in technology stocks, which are typically among the first segments to respond to economic improvement. We continue to focus on companies with visible earnings drivers and attractive valuations. - -------------------------------------------------------------------------------- 10 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- (PHOTO - BOB EWING) (PHOTO - NICK THAKORE) Bob Ewing, CFA(R) Nick Thakore Portfolio Manager Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a RiverSource fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any RiverSource fund. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 11 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the acquired funds' expense ratio as of the 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, 2008. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning - -------------------------------------------------------------------------------- 12 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2007 APRIL 30, 2008 THE PERIOD(A) EXPENSE RATIO - -------------------------------------------------------------------------------------------- Class A - -------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 838.80 $ 6.54 1.43% - -------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $ 1,017.75 $ 7.17 1.43% - -------------------------------------------------------------------------------------------- Class B - -------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 835.20 $10.04 2.20% - -------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $ 1,013.92 $11.02 2.20% - -------------------------------------------------------------------------------------------- Class C - -------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 832.10 $ 9.98 2.19% - -------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $ 1,013.97 $10.97 2.19% - -------------------------------------------------------------------------------------------- Class I - -------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 839.20 $ 3.70 .81% - -------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $ 1,020.84 $ 4.07 .81% - -------------------------------------------------------------------------------------------- Class R4 - -------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 840.40 $ 5.12 1.12% - -------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $ 1,019.29 $ 5.62 1.12% - --------------------------------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2008: -16.12% for Class A, -16.48% for Class B, -16.79% for Class C, -16.08% for Class I and -15.96% for Class R4. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2008 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (92.9%) ISSUER SHARES VALUE(A) COMMUNICATIONS EQUIPMENT (17.7%) Cisco Systems 411,951(b) $10,562,423 JDS Uniphase 94,689(b) 1,355,000 Juniper Networks 74,255(b) 2,050,923 Motorola 137,340 1,367,906 Nokia ADR 127,952(c) 3,847,517 QUALCOMM 120,892 5,221,325 Telefonaktiebolaget LM Ericsson ADR 52,539(c) 1,325,034 --------------- Total 25,730,128 - ------------------------------------------------------------------------------------ COMPUTERS & PERIPHERALS (18.8%) Apple 43,634(b) 7,590,134 Brocade Communications Systems 169,175(b) 1,211,293 Dell 163,453(b) 3,045,129 Hewlett-Packard 146,241 6,778,270 IBM 46,580 5,622,206 SanDisk 54,995(b) 1,489,815 Seagate Technology 91,678(c) 1,729,964 --------------- Total 27,466,811 - ------------------------------------------------------------------------------------ DIVERSIFIED TELECOMMUNICATION SERVICES (5.7%) Cbeyond 90,489(b) 1,786,253 Global Crossing 150,933(b,c) 2,523,600 Qwest Communications Intl 417,738 2,155,527 Time Warner Telecom Cl A 89,921(b) 1,762,452 --------------- Total 8,227,832 - ------------------------------------------------------------------------------------ ELECTRONIC EQUIPMENT & INSTRUMENTS (0.6%) Amphenol Cl A 18,720 864,490 - ------------------------------------------------------------------------------------ INTERNET SOFTWARE & SERVICES (7.3%) eBay 64,984(b) 2,033,349 Google Cl A 13,146(b) 7,549,617 Yahoo! 36,373(b) 996,984 --------------- Total 10,579,950 - ------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) IT SERVICES (4.5%) Accenture Cl A 39,796(c) $1,494,340 Cognizant Technology Solutions Cl A 53,801(b) 1,735,082 Fiserv 27,614(b) 1,395,888 Satyam Computer Services ADR 75,577(c) 1,940,817 --------------- Total 6,566,127 - ------------------------------------------------------------------------------------ MEDIA (0.9%) Virgin Media 98,276(d) 1,267,760 - ------------------------------------------------------------------------------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (18.5%) Cypress Semiconductor 44,620(b) 1,254,714 Infineon Technologies ADR 134,012(b,c) 1,238,271 Intel 381,047 8,482,106 Intersil Cl A 53,670 1,434,062 MEMC Electronic Materials 29,770(b) 1,874,617 Micron Technology 147,240(b) 1,136,693 NVIDIA 74,165(b) 1,524,091 ON Semiconductor 265,447(b) 1,982,889 PMC-Sierra 284,966(b) 2,214,186 Samsung Electronics 2,056(c) 1,458,898 Spansion Cl A 257,159(b) 848,625 Texas Instruments 117,235 3,418,573 --------------- Total 26,867,725 - ------------------------------------------------------------------------------------ SOFTWARE (17.7%) Adobe Systems 91,390(b) 3,407,933 Citrix Systems 36,400(b) 1,192,100 Electronic Arts 23,752(b) 1,222,515 Microsoft 298,344 8,508,770 Nintendo 4,300(c) 2,361,547 Oracle 295,082(b) 6,152,460 Synchronoss Technologies 93,233(b) 1,945,773 TIBCO Software 115,073(b) 882,610 --------------- Total 25,673,708 - ------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 14 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) WIRELESS TELECOMMUNICATION SERVICES (1.2%) Vodafone Group 542,387(c) $1,728,632 - ------------------------------------------------------------------------------------ TOTAL COMMON STOCKS (Cost: $133,913,211) $134,973,163 - ------------------------------------------------------------------------------------
MONEY MARKET FUND (4.5%) SHARES VALUE(A) RiverSource Short-Term Cash Fund, 2.72% 6,550,973(e) $6,550,973 - ------------------------------------------------------------------------------------ TOTAL MONEY MARKET FUND (Cost: $6,550,973) $6,550,973 - ------------------------------------------------------------------------------------ TOTAL INVESTMENTS IN SECURITIES (Cost: $140,464,184)(f) $141,524,136 ====================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At April 30, 2008, the value of foreign securities represented 13.5% of net assets. (d) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities may be valued at fair value according to procedures approved, in good faith, by the Fund's Board of Directors. Information concerning such security holdings at April 30, 2008, is as follows:
ACQUISITION SECURITY DATES COST - ---------------------------------------------------------------------------------- Virgin Media 01-16-08 thru 02-15-08 $1,371,748
(e) Affiliated Money Market Fund - See Note 5 to the financial statements. The rate shown is the seven-day current annualized yield at April 30, 2008. (f) At April 30, 2008, the cost of securities for federal income tax purposes was approximately $140,464,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $10,650,000 Unrealized depreciation (9,590,000) - ------------------------------------------------------------------------------ Net unrealized appreciation $1,060,000 - ------------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com/funds. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 15 FINANCIAL STATEMENTS ----------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 2008 (UNAUDITED) ASSETS Investments in securities, at value Unaffiliated issuers (identified cost $133,913,211) $134,973,163 Affiliated money market fund (identified cost $6,550,973) 6,550,973 - ---------------------------------------------------------------------------- Total investments in securities (identified cost $140,464,184) 141,524,136 Cash 31,015 Capital shares receivable 62,315 Dividends receivable 73,447 Receivable for investment securities sold 3,794,187 - ---------------------------------------------------------------------------- Total assets 145,485,100 - ---------------------------------------------------------------------------- LIABILITIES Capital shares payable 142,124 Accrued investment management services fee 2,880 Accrued distribution fee 1,736 Accrued transfer agency fee 1,235 Accrued administrative services fee 240 Accrued plan administration services fee 1 Other accrued expenses 55,458 - ---------------------------------------------------------------------------- Total liabilities 203,674 - ---------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $145,281,426 ============================================================================
- -------------------------------------------------------------------------------- 16 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) APRIL 30, 2008 (UNAUDITED) REPRESENTED BY Capital stock - $.01 par value $ 594,332 Additional paid-in capital 479,607,884 Net operating loss (418,485) Accumulated net realized gain (loss) (335,560,377) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,058,072 - ---------------------------------------------------------------------------- Total - representing net assets applicable to outstanding capital stock $145,281,426 ============================================================================
Net assets applicable to outstanding shares: Class A $109,417,766 Class B $ 32,448,750 Class C $ 3,255,874 Class I $ 15,377 Class R4 $ 143,659 Net asset value per share of outstanding Class A capital stock: shares(1) 42,967,976 $ 2.55 Class B shares 14,912,209 $ 2.18 Class C shares 1,491,539 $ 2.18 Class I shares 5,882 $ 2.61 Class R4 shares 55,601 $ 2.58 - -------------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $2.71. 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. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 17 STATEMENT OF OPERATIONS SIX MONTHS ENDED APRIL 30, 2008 (UNAUDITED) INVESTMENT INCOME Income: Dividends $ 601,420 Income distributions from affiliated money market fund 184,748 Fee income from securities lending 36,015 Less foreign taxes withheld (23,547) - ---------------------------------------------------------------------------- Total income 798,636 - ---------------------------------------------------------------------------- Expenses: Investment management services fee 471,395 Distribution fee Class A 142,996 Class B 173,212 Class C 16,930 Transfer agency fee Class A 207,702 Class B 66,352 Class C 6,310 Class R4 38 Administrative services fee 45,778 Plan administration services fee - R4 191 Compensation of board members 1,586 Custodian fees 10,260 Printing and postage 30,644 Registration fees 43,585 Professional fees 15,380 Other 3,078 - ---------------------------------------------------------------------------- Total expenses 1,235,437 Expenses waived/reimbursed by the Investment Manager and its affiliates (191) Earnings and bank fee credits on cash balances (2,915) - ---------------------------------------------------------------------------- Total net expenses 1,232,331 - ---------------------------------------------------------------------------- Investment income (loss) - net (433,695) - ---------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - NET Net realized gain (loss) on: Security transactions (3,336,118) Foreign currency transactions 18,598 - ---------------------------------------------------------------------------- Net realized gain (loss) on investments (3,317,520) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (26,857,770) - ---------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (30,175,290) - ---------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(30,608,985) ============================================================================
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 18 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2008 OCT. 31, 2007 (UNAUDITED) OPERATIONS Investment income (loss) - net $ (416,625) $ (1,731,686) Net realized gain (loss) on investments (3,334,590) 32,284,685 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (26,857,770) 8,992,097 - -------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (30,608,985) 39,545,096 - -------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares 8,902,421 21,370,119 Class B shares 1,431,977 3,823,491 Class C shares 362,324 784,042 Class R4 shares 33,980 221,867 Payments for redemptions Class A shares (15,319,313) (35,029,639) Class B shares (4,495,720) (13,037,111) Class C shares (445,499) (989,760) Class R4 shares (32,818) (653,020) - -------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (9,562,648) (23,510,011) - -------------------------------------------------------------------------------------- Total increase (decrease) in net assets (40,171,633) 16,035,085 Net assets at beginning of period 185,453,059 169,417,974 - -------------------------------------------------------------------------------------- Net assets at end of period $145,281,426 $185,453,059 ====================================================================================== Excess of distributions over net investment income $ (418,485) $ (1,860) - --------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 19 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS TO APRIL 30, 2008) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RiverSource Global Technology Fund (the Fund) is a series of RiverSource Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund invests primarily in equity securities of companies in the information technology industry throughout the world. The Fund offers Class A, Class B, Class C, Class I and Class R4 shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class I and Class R4 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. At April 30, 2008, RiverSource Investments, LLC (the Investment Manager) owned 100% of Class I shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate - -------------------------------------------------------------------------------- 20 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange 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 New York Stock Exchange, 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 New York Stock Exchange. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. ILLIQUID SECURITIES At April 30, 2008, 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, 2008 was $1,267,760 representing 0.87% of net assets. These securities may be valued at fair value according to procedures approved, in good faith, by the Board. According to Board guidelines, certain unregistered securities are determined to be liquid and are not included within the 15% limitation specified above. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. OPTION TRANSACTIONS To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the fund may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligations depends upon the credit standing of the other party. Cash collateral may be collected by the Fund to secure certain over-the-counter options trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. The Fund also may buy and sell put and call options and write covered call options on portfolio - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 21 securities as well as write cash-secured put options. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. During the six months ended April 30, 2008, the Fund had no outstanding option contracts. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Futures are valued daily based upon the last sale price at the close of market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. At April 30, 2008, the Fund had no outstanding futures contracts. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. - -------------------------------------------------------------------------------- 22 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT The Fund may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete its contract obligations. At April 30, 2008, the Fund had no outstanding forward foreign currency contracts. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to the shareholders. No provision for income or excise taxes is thus required. The Fund has adopted Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes," which is effective for fiscal periods beginning after Dec. 15, 2006. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 prescribes a two-step process to recognize and measure a tax position taken or expected to be taken in a tax return. The first step is to determine whether a tax position has met the more-likely-than-not recognition threshold and the second step is to measure a tax position that meets the threshold to determine the amount of benefit to recognize. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 23 characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. RECENT ACCOUNTING PRONOUNCEMENTS In March 2008, the FASB issued Statement on Financial Accounting Standards No. 161 (SFAS "161"), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of April 30, 2008, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. On Sept. 20, 2006, the FASB released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. The application of SFAS 157 will be effective for the Fund's fiscal year beginning Nov. 1, 2008. The adoption of SFAS 157 is not anticipated to have a material impact on the Fund's financial statements; however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. 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. - -------------------------------------------------------------------------------- 24 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 2. EXPENSES AND SALES CHARGES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.72% to 0.595% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment determined monthly by measuring the percentage difference over a rolling 12-month period between the performance of one Class A share of the Fund and the change in the Lipper Science and Technology Funds Index. In certain circumstances, the Board may approve a change in the index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment decreased the fee by $77,943 for the six months ended April 30, 2008. The management fee for the year ended April 30, 2008 was 0.62% of the Fund's average daily net assets, including an adjustment under the terms of the performance incentive arrangement. Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% annually as the Fund's assets increase. The fee for the six months ended April 30, 2008 was 0.06% of the Fund's average daily net assets. 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, 2008, other expenses paid to this company were $536. Compensation of Board members includes, for a former Board Chair, compensation as well as retirement benefits. Certain other aspects of a former Board Chair's compensation, including health benefits and payment of certain other expenses, are included under other expenses. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50 for Class B and $20.00 for Class C for this service. The Fund also pays the - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 25 Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R4 shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the Statement of Operations. Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Funds average daily net assets attributable to Class R4 shares for the provision of various administrative record keeping, communication and educational services. The Fund has an agreement with RiverSource 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 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. Sales charges received by the Distributor for distributing Fund shares were $103,640 for Class A, $9,765 for Class B and $398 for Class C for the six months ended April 30, 2008. 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 nonaffiliated 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. For the six months ended April 30, 2008, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds) were 0.87% for Class R4. Of these waived/reimbursed fees and expenses, the plan administration services fee at the class level was $191 for Class R4. In addition, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Oct. 31, 2008, such that net expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment, will not exceed 1.41% of the Fund's average daily net assets for Class R4, unless sooner terminated at the discretion of the Board. During the six months ended April 30, 2008, the Fund's transfer agency fees were reduced by $2,915 as a result of bank fee credits from overnight cash balances. The Fund pays custodian fees to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. - -------------------------------------------------------------------------------- 26 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $42,886,160 and $50,574,563 respectively, for the six months ended April 30, 2008. Realized gains and losses are determined on an identified cost basis. Income from securities lending amounted to $36,015 for the six months ended April 30, 2008. Expenses paid to the Investment Manager as securities lending agent were $474 for the six months ended April 30, 2008, which are included in other expenses on the Statement of Operations. The risks to the fund of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. At April 30, 2008, the Fund had no outstanding securities lending. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED APRIL 30, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ----------------------------------------------------------------------------------------------- Class A 3,398,839 -- (6,000,980) (2,602,141) Class B 642,390 -- (2,066,924) (1,424,534) Class C 167,926 -- (209,037) (41,111) Class R4 11,895 -- (11,843) 52 - -----------------------------------------------------------------------------------------------
YEAR ENDED OCT. 31, 2007 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ----------------------------------------------------------------------------------------------- Class A 8,002,124 -- (13,306,617) (5,304,493) Class B 1,671,730 -- (5,677,043) (4,005,313) Class C 339,430 -- (436,868) (97,438) Class R4 88,006 -- (256,250) (168,244) - -----------------------------------------------------------------------------------------------
5. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term Cash Fund aggregated $25,176,530 and $30,219,672, respectively, for the six months ended April 30, 2008. - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 27 6. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective on Oct. 18, 2007, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly permits collective borrowings up to $500 million. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.30%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. Under the prior credit facility, a Fund paid interest on its outstanding borrowings at a rate equal to either the higher of the federal funds effective rate plus 0.40% or the JPMCB Prime Commercial Lending Rate. The Fund had no borrowings during the six months ended April 30, 2008. 7. CAPITAL LOSS CARRY-OVER For federal income tax purposes the Fund had a capital loss carry-over of $331,644,553 at Oct. 31, 2007, that if not offset by capital gains will expire as follows:
2009 2010 $250,345,326 $81,299,227
It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. 8. RISKS RELATING TO CERTAIN INVESTMENTS SECTOR RISK The Fund invests a significant part of its total assets in securities of companies primarily engaged in the technology, media or telecommunications sectors. This may result in greater fluctuations in value than would be the case for a fund invested in a wider variety of unrelated industries. As these sectors increase or decrease in favor with the investing public, the price of securities of companies that rely heavily on those sectors could become increasingly sensitive to downswings in the economy. FOREIGN RISK Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. - -------------------------------------------------------------------------------- 28 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 9. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to defendants' motion to dismiss the complaint, the 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 on August 8, 2007. 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 - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 29 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. - -------------------------------------------------------------------------------- 30 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 10. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results. CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(I) 2007 2006 2005 2004 Net asset value, beginning of period $3.04 $2.42 $1.99 $1.83 $1.72 - ------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .00(b),(c) (.02)(b) (.02) (.02) (.03) Net gains (losses) (both realized and unrealized) (.49) .64 .45 .18 .14 - ------------------------------------------------------------------------------------------------------------- Total from investment operations (.49) .62 .43 .16 .11 - ------------------------------------------------------------------------------------------------------------- Net asset value, end of period $2.55 $3.04 $2.42 $1.99 $1.83 - ------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $109 $139 $123 $120 $146 - ------------------------------------------------------------------------------------------------------------- Total expenses(d),(e) 1.43%(f) 1.60% 1.69% 1.75% 1.74% - ------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.36%)(f) (.80%) (.89%) (.92%) (1.48%) - ------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 29% 167% 196% 115% 349% - ------------------------------------------------------------------------------------------------------------- Total return(g) (16.12%)(h) 25.62% 21.61% 8.74% 6.40% - -------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Rounds to zero. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Total return does not reflect payment of a sales charge. (h) Not annualized. (i) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 31 CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(H) 2007 2006 2005 2004 Net asset value, beginning of period $2.61 $2.09 $1.74 $1.60 $1.53 - ------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01)(b) (.04)(b) (.03) (.03) (.04) Net gains (losses) (both realized and unrealized) (.42) .56 .38 .17 .11 - ------------------------------------------------------------------------------------------------------------ Total from investment operations (.43) .52 .35 .14 .07 - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $2.18 $2.61 $2.09 $1.74 $1.60 - ------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $32 $43 $42 $46 $59 - ------------------------------------------------------------------------------------------------------------ Total expenses(c),(d) 2.20%(e) 2.38% 2.47% 2.53% 2.52% - ------------------------------------------------------------------------------------------------------------ Net investment income (loss) (1.12%)(e) (1.58%) (1.66%) (1.71%) (2.26%) - ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 29% 167% 196% 115% 349% - ------------------------------------------------------------------------------------------------------------ Total return(f) (16.48%)(g) 24.88% 20.12% 8.75% 4.58% - ------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of a sales charge. (g) Not annualized. (h) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- 32 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2008(H) 2007 2006 2005 2004 Net asset value, beginning of period $2.62 $2.10 $1.74 $1.61 $1.53 - ------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01)(b) (.04)(b) (.03) (.03) (.04) Net gains (losses) (both realized and unrealized) (.43) .56 .39 .16 .12 - ------------------------------------------------------------------------------------------------------------ Total from investment operations (.44) .52 .36 .13 .08 - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $2.18 $2.62 $2.10 $1.74 $1.61 - ------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $3 $4 $3 $3 $4 - ------------------------------------------------------------------------------------------------------------ Total expenses(c),(d) 2.19%(e) 2.36% 2.45% 2.52% 2.49% - ------------------------------------------------------------------------------------------------------------ Net investment income (loss) (1.12%)(e) (1.56%) (1.66%) (1.69%) (2.23%) - ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 29% 167% 196% 115% 349% - ------------------------------------------------------------------------------------------------------------ Total return(f) (16.79%)(g) 24.76% 20.69% 8.07% 5.23% - ------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of a sales charge. (g) Not annualized. (h) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 33 CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(J) 2007 2006 2005 2004(B) Net asset value, beginning of period $3.11 $2.46 $2.01 $1.83 $1.70 - ------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .00(c),(d) (.01)(c) (.01) (.01) (.02) Net gains (losses) (both realized and unrealized) (.50) .66 .46 .19 .15 - ------------------------------------------------------------------------------------------------------------ Total from investment operations (.50) .65 .45 .18 .13 - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $2.61 $3.11 $2.46 $2.01 $1.83 - ------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- $-- - ------------------------------------------------------------------------------------------------------------ Total expenses(e),(f) .81%(g) .99% 1.01% 1.04% 1.03%(g) - ------------------------------------------------------------------------------------------------------------ Net investment income (loss) .25%(g) (.19%) (.22%) (.21%) (.73%)(g) - ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 29% 167% 196% 115% 349% - ------------------------------------------------------------------------------------------------------------ Total return(h) (16.08%)(i) 26.42% 22.39% 9.84% 7.65%(i) - ------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from July 15, 2004 (inception date) to Oct. 31, 2004. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Rounds to zero. (e) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (f) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (g) Adjusted to an annual basis. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- 34 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(K) 2007 2006 2005 2004 Net asset value, beginning of period $3.07 $2.43 $2.00 $1.83 $1.72 - ------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .00(b),(c) (.01)(b) (.02) (.02) (.02) Net gains (losses) (both realized and unrealized) (.49) .65 .45 .19 .13 - ------------------------------------------------------------------------------------------------------------ Total from investment operations (.49) .64 .43 .17 .11 - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $2.58 $3.07 $2.43 $2.00 $1.83 - ------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $1 $-- $-- - ------------------------------------------------------------------------------------------------------------ Gross expenses prior to expense waiver/reimbursement(d),(e) 1.12%(f) 1.34% 1.47% 1.54% 1.55% - ------------------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement(e),(g),(h) .87%(f) 1.34% 1.47% 1.54% 1.55% - ------------------------------------------------------------------------------------------------------------ Net investment income (loss) .22%(f) (.52%) (.68%) (.73%) (1.28%) - ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 29% 167% 196% 115% 349% - ------------------------------------------------------------------------------------------------------------ Total return(i) (15.96%)(j) 26.34% 21.50% 9.29% 6.40% - ------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Rounds to zero. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 35 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- RiverSource Investments, LLC ("RiverSource Investments" or the "investment manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement") RiverSource Investments provides investment advice and other services to the Fund and all 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. RiverSource Investments prepared detailed reports for the Board and its Contracts Committee in March and April 2008, including reports based on data provided by independent organizations to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource Investments addressing the services RiverSource Investments provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts, Investment Review and Compliance Committees in determining whether to continue the IMS Agreement. At the April 9-10, 2008 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by RiverSource Investments: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource Investments, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource Investments, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, particularly in the areas of trading systems, new product initiatives, legal and compliance. Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource Investments, the Board considered the quality of the administrative and transfer agency services provided by RiverSource Investments' affiliates to the Fund. The Board also reviewed the financial condition of RiverSource Investments (and its affiliates) and each entity's ability to carry out its responsibilities under the IMS Agreement. The Board also discussed the acceptability of the terms of the IMS Agreement (including the - -------------------------------------------------------------------------------- 36 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT relatively broad scope of services required to be performed by RiverSource Investments). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality, particularly in light of recent market conditions. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that RiverSource Investments and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods (including since inception), recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2006 to December 2007. The Board observed that the Fund's investment performance was appropriate in light of the particular management style and market conditions involved. Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource Investments and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to RiverSource Investments' profitability. The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, 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. Based on its review, the Board concluded that the Fund's - -------------------------------------------------------------------------------- RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT 37 management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered the expected profitability of RiverSource Investments and its affiliates in connection with RiverSource Investments providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource Investments and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource Investments as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 10, 2008, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement. 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 RiverSource Funds at (888) 791-3380; contacting your financial institution; 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. - -------------------------------------------------------------------------------- 38 RIVERSOURCE GLOBAL TECHNOLOGY FUND -- 2008 SEMIANNUAL REPORT RIVERSOURCE GLOBAL TECHNOLOGY FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. These companies are part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C) 2008 RiverSource Distributors, Inc. S-6396 K (6/08)
Semiannual Report (THREADNEEDLE LOGO) THREADNEEDLE EMERGING MARKETS FUND (FORMERLY RIVERSOURCE EMERGING MARKETS FUND) SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2008 THREADNEEDLE EMERGING MARKETS FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. (SINGLE STRATEGY FUNDS ICON) TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance............... 2 Manager Commentary.................. 5 Fund Expenses Example............... 11 Portfolio of Investments............ 13 Financial Statements................ 17 Notes to Financial Statements....... 21 Approval of Investment Management Services Agreement............... 36 Proxy Voting........................ 39
RIVERSOURCE COMPLEX OF FUNDS Threadneedle Funds are a part of the RiverSource complex of funds that includes funds branded "RiverSource," "RiverSource Partners," and "Threadneedle." These funds share the same Board of Directors/Trustees and officers. Please see the back of this report for a list of mutual funds that are included in the RiverSource complex of funds. (DALBAR LOGO) The RiverSource mutual fund shareholder reports have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY - -------------------------------------------------------------------------------- > Threadneedle Emerging Markets Fund (the Fund) (formerly RiverSource Emerging Markets Fund) Class A shares declined 11.91% (excluding sales charge) for the six months ended April 30, 2008. > The Fund underperformed its benchmark, the Morgan Stanley Capital International (MSCI) Emerging Markets Index, which declined 10.18% during the six-month period. > The Fund's peer group, the Lipper Emerging Markets Funds Index, declined 9.84% for the same period. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2008) - --------------------------------------------------------------------------------
6 months* 1 year 3 years 5 years 10 years - ------------------------------------------------------------------------------- Threadneedle Emerging Markets Fund Class A (excluding sales charge) -11.91% +24.57% +33.72% +33.60% +12.20% - ------------------------------------------------------------------------------- MSCI Emerging Markets Index(1) (unmanaged) -10.18% +25.71% +34.27% +35.76% +13.54% - ------------------------------------------------------------------------------- Lipper Emerging Markets Funds Index(2) -9.84% +21.02% +31.98% +34.20% +12.80% - -------------------------------------------------------------------------------
* 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 institution or visiting riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. (1) The Morgan Stanley Capital International (MSCI) Emerging Markets Index, an unmanaged market capitalization-weighted index, is designed to measure equity market performance in the global 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. - -------------------------------------------------------------------------------- 2 THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- STYLE MATRIX - ----------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. ANNUAL OPERATING EXPENSE RATIO (as of the current prospectus) - ----------------------------------------
Total - ------------------------------------- Class A 1.83% - ------------------------------------- Class B 2.58% - ------------------------------------- Class C 2.59% - ------------------------------------- Class I 1.39% - ------------------------------------- Class R4 1.64% - -------------------------------------
International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT APRIL 30, 2008 SINCE WITHOUT SALES CHARGE 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 11/13/96) -11.91% +24.57% +33.72% +33.60% +12.20% N/A - --------------------------------------------------------------------------------------------------------- Class B (inception 11/13/96) -12.30% +23.50% +32.66% +32.57% +11.33% N/A - --------------------------------------------------------------------------------------------------------- Class C (inception 6/26/00) -12.30% +23.56% +32.65% +32.60% N/A +13.94% - --------------------------------------------------------------------------------------------------------- Class I (inception 3/4/04) -11.78% +25.05% +34.34% N/A N/A +26.50% - --------------------------------------------------------------------------------------------------------- Class R4 (inception 11/13/96) -11.68% +24.93% +34.02% +33.88% +12.45% N/A - --------------------------------------------------------------------------------------------------------- WITH SALES CHARGE Class A (inception 11/13/96) -16.95% +17.37% +31.10% +32.06% +11.63% N/A - --------------------------------------------------------------------------------------------------------- Class B (inception 11/13/96) -15.68% +18.74% +31.89% +32.44% +11.33% N/A - --------------------------------------------------------------------------------------------------------- Class C (inception 6/26/00) -12.98% +22.61% +32.65% +32.60% N/A +13.94% - ---------------------------------------------------------------------------------------------------------
AT MARCH 31, 2008 SINCE WITHOUT SALES CHARGE 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 11/13/96) -6.26% +19.63% +29.56% +33.07% +11.34% N/A - --------------------------------------------------------------------------------------------------------- Class B (inception 11/13/96) -6.58% +18.79% +28.62% +32.02% +10.49% N/A - --------------------------------------------------------------------------------------------------------- Class C (inception 6/26/00) -6.65% +18.72% +28.57% +32.02% N/A +13.07% - --------------------------------------------------------------------------------------------------------- Class I (inception 3/4/04) -6.03% +20.25% +30.17% N/A N/A +24.91% - --------------------------------------------------------------------------------------------------------- Class R4 (inception 11/13/96) -5.99% +20.18% +29.87% +33.35% +11.58% N/A - --------------------------------------------------------------------------------------------------------- WITH SALES CHARGE Class A (inception 11/13/96) -11.65% +12.73% +27.02% +31.52% +10.77% N/A - --------------------------------------------------------------------------------------------------------- Class B (inception 11/13/96) -10.19% +14.21% +27.80% +31.89% +10.49% N/A - --------------------------------------------------------------------------------------------------------- Class C (inception 6/26/00) -7.37% +17.81% +28.57% +32.02% N/A +13.07% - ---------------------------------------------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I and Class R4 shares. Class I and Class R4 shares are available to institutional investors only. * Not annualized. ** For classes with less than 10 years performance. - -------------------------------------------------------------------------------- 4 THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT MANAGER COMMENTARY ------------------------------------------------------------- (UNAUDITED) Below, Threadneedle Emerging Markets Fund portfolio managers Julian Thompson and Jules Mort of Threadneedle International Limited (Threadneedle) discuss the Fund's results and positioning for the semiannual period ended April 30, 2008. Threadneedle, an indirect wholly-owned subsidiary of Ameriprise Financial, Inc., acts as the subadvisor to the Fund. Dear Shareholders, The Fund's Class A shares declined 11.91% (excluding sales charge) for the six months ended April 30, 2008. The Fund underperformed its benchmark, the Morgan Stanley Capital International (MSCI) Emerging Markets Index, which fell 10.18%. The Fund's peer group, the Lipper Emerging Markets Funds Index, declined 9.84% for the period. COUNTRY DIVERSIFICATION (at April 30, 2008; % of portfolio assets) - ----------------------------------------------------------------- Brazil 19.0% - -------------------------------------------------------------- Canada 0.7% - -------------------------------------------------------------- China 6.8% - -------------------------------------------------------------- Egypt 0.3% - -------------------------------------------------------------- Hong Kong 4.7% - -------------------------------------------------------------- India 5.0% - -------------------------------------------------------------- Indonesia 2.0% - -------------------------------------------------------------- Israel 3.6% - -------------------------------------------------------------- Malaysia 2.3% - -------------------------------------------------------------- Mexico 7.7% - -------------------------------------------------------------- Norway 0.3% - -------------------------------------------------------------- Pakistan 0.6% - -------------------------------------------------------------- Peru 0.8% - -------------------------------------------------------------- Russia 16.3% - -------------------------------------------------------------- South Africa 5.6% - -------------------------------------------------------------- South Korea 13.3% - -------------------------------------------------------------- Taiwan 8.0% - -------------------------------------------------------------- Thailand 1.0% - -------------------------------------------------------------- Turkey 1.0% - -------------------------------------------------------------- United Kingdom 0.4% - -------------------------------------------------------------- Other(1) 0.6% - --------------------------------------------------------------
(1) Cash & Cash Equivalents. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT 5 MANAGER COMMENTARY (continued) ------------------------------------------------- SIGNIFICANT PERFORMANCE FACTORS During the semiannual period, emerging market equities underperformed global equities, as represented by the MSCI World Index(1), and U.S. equities, as represented by the S&P 500 Index(2). Increased risk aversion brought on by the spreading credit crisis and slowing economic growth was primarily responsible for the weakness in emerging markets. When the worst expectations for slower growth failed to materialize, confidence improved and the emerging market segment rebounded toward the end of the period. Latin America was the best performing region in the emerging market universe, fueled by favorable results in Brazil. Improving fundamentals, evidenced by an upgrade to an investment grade credit rating and higher commodity prices, contributed to Brazil's strong performance. Results were decidedly weaker in Asia where markets in China, India and South Korea fell significantly. Eastern Europe, the Mid East and Africa declined, but the Russian market was little affected due to the cushioning provided by its oil exposure. TOP TEN HOLDINGS (at April 30, 2008; % of portfolio assets) - ----------------------------------------------------------------- Petroleo Brasileiro ADR (Brazil) 5.8% - --------------------------------------------------------- Companhia Vale do Rio Doce ADR (Brazil) 4.2% - --------------------------------------------------------- Gazprom ADR (Russia) 4.0% - --------------------------------------------------------- China Mobile (Hong Kong) 3.7% - --------------------------------------------------------- Samsung Electronics (South Korea) 3.2% - --------------------------------------------------------- America Movil ADR Series L (Mexico) 3.1% - --------------------------------------------------------- CNOOC (China) 2.7% - --------------------------------------------------------- Banco Bradesco (Brazil) 2.7% - --------------------------------------------------------- KT Corp (South Korea) 2.3% - --------------------------------------------------------- Redecard (Brazil) 2.0% - ---------------------------------------------------------
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. (1) Morgan Stanley Capital International (MSCI) World Index is an unmanaged index, compiled from a composite of more than 1,500 companies listed in the stock exchanges of North America, Europe, Australia, New Zealand and the Far East. (2) Standard & Poor's 500 Index (S&P 500 Index) is an unmanaged index of common stocks, frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices. - -------------------------------------------------------------------------------- 6 THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- Latin America was the best performing region in the emerging market universe, fueled by favorable results in Brazil. The Fund benefited from its allocation to Latin America, which was larger than that of the MSCI Emerging Markets Index. Having a smaller weighting in Asia, including China, India and South Korea, compared to the MSCI Emerging Markets Index, was also advantageous. The Fund's allocations to Brazil and Russia were the two largest overweights compared to the MSCI Emerging Markets Index and both added to relative performance. Conversely, the Fund had less exposure to Taiwan than the MSCI Emerging Markets Index, which was a disadvantage. The election of a new government that favors stronger ties to mainland China has raised hopes for an economic renaissance in Taiwan. Stock selection was primarily responsible for the Fund's underperformance relative to the MSCI Emerging Markets Index, largely due to holdings of property stocks in Brazil, Mexico, China and India. Property stocks, which are not a significant component of the MSCI Emerging Markets Index, have suffered from the contagion effect of the U.S. subprime mortgage crisis. Examples of Fund holdings that underperformed include CHINA OVERSEAS LAND AND INVESTMENT and AGILE PROPERTY HOLDINGS, two Chinese companies traded on the Hong Kong Stock Exchange, and DLF in India. We continue to believe the long-term supply and demand situation in emerging markets is favorable for property developers. Though risks have risen in the near term, particularly a lack of available funding, we remain confident in the business models of the property companies we hold. The Fund de-emphasized financial stocks, an advantage since the sector performed poorly. Within the MSCI Emerging Markets Index, consumer - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- staples, materials and energy were the strongest sectors, and the Fund benefited from overweights in materials and energy. However, the positive effects were not enough to offset the impact of the Fund's property exposure. CHANGES TO THE FUND'S PORTFOLIO We kept the Fund's country allocations broadly the same over the course of the six months. Brazil and Russia remained the two largest overweights relative to the MSCI Emerging Markets Index, although we slightly reduced holdings in Brazil and increased the Fund's weighting in Russia. We added to the Fund's holdings in Mexico and Taiwan, while keeping both positions smaller than those of the MSCI Emerging Markets Index. We reduced the Fund's positions in China and India, which also remained smaller than the MSCI Emerging Markets Index. Looking more closely at China, we believe the market is still relatively expensive, particularly consumer-related stocks. We also think China's central bank could take further steps to tighten the money supply, which might restrain enthusiasm for the Chinese market. Although we are not significantly underweight in China, we are generally finding more attractive companies in other regions. That said, we have been selectively adding to holdings in certain sectors within China, including banks, property stocks and telecommunication services. Our outlook for India is similar, since India is also a retail-driven market with a central bank that may continue to restrain liquidity through a tighter monetary policy. We are attracted to countries where performance has been driven by strong fundamentals, such as Brazil. We also see potential in Russia, where high oil prices have been a major windfall. We increased exposure to Taiwan and South Korea, two major industrialized economies in Asia. Both have experienced recent changes in government -- Taiwan with a pro-mainland China government and South Korea with a pro-business administration. In addition, South Korea will likely be among the early beneficiaries of any improvement in the U.S. economy. - -------------------------------------------------------------------------------- 8 THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- The Fund now has a larger energy position than it did at the start of the period. We also increased exposure to the telecommunication services sector. In general, we favor mobile telecommunications, an area that is not very economically sensitive, has a business model that works well in emerging markets and tends to have relatively high return on capital due to less competition. OUR FUTURE STRATEGY We believe the emerging markets are very well positioned for this economic environment. We see three important growth drivers for this universe: relative immunity to the continued credit problems in developed nations, high commodity prices and infrastructure spending. While credit concerns remain an issue in the developed world, emerging markets tend to rely less on borrowing, particularly consumers. As large commodity producers, emerging markets continue to benefit from a supply and demand balance that generally favors producers. China's growth is still very solid, and we believe that will continue to support commodity prices. Meanwhile, infrastructure spending further reinforces commodity prices and is also a positive for manufacturing companies in emerging markets. One potential concern is higher inflation levels, but we believe emerging market currencies will continue to appreciate against the U.S. dollar, helping to offset inflationary pressures. In general, emerging market countries are not being aggressive in tightening their money supply to stem inflation and that reduces the risk that central banks will go too far and stifle the growth cycle. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT 9 MANAGER COMMENTARY (continued) ------------------------------------------------- Our expectations for individual companies are also favorable. We anticipate an average of about 18% earnings growth from emerging market companies in 2008 and approximately 12% earnings growth in 2009. We believe stocks are still reasonably valued based on that growth forecast. Consequently, our outlook for emerging markets, even in this period of high risk aversion, remains very favorable. (PHOTO - Julian (PHOTO - Jules Thompson) Mort) Julian Thompson Jules Mort Portfolio Manager Deputy Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a RiverSource fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any RiverSource fund. - -------------------------------------------------------------------------------- 10 THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the acquired funds' expense ratio as of the 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, 2008. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT 11 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2007 APRIL 30, 2008 THE PERIOD(A) EXPENSE RATIO - ------------------------------------------------------------------------------------------- Class A - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 880.90 $ 8.56 1.83% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,015.76 $ 9.17 1.83% - ------------------------------------------------------------------------------------------- Class B - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 877.00 $12.09 2.59% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,011.98 $12.96 2.59% - ------------------------------------------------------------------------------------------- Class C - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 877.00 $12.09 2.59% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,011.98 $12.96 2.59% - ------------------------------------------------------------------------------------------- Class I - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 882.20 $ 6.65 1.42% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.80 $ 7.12 1.42% - ------------------------------------------------------------------------------------------- Class R4 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 883.20 $ 8.01 1.71% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.36 $ 8.57 1.71% - -------------------------------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2008: -11.91% for Class A, -12.30% for Class B, -12.30% for Class C, -11.78% for Class I and -11.68% for Class R4. - -------------------------------------------------------------------------------- 12 THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2008 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (95.5%)(c) ISSUER SHARES VALUE(A) BRAZIL (16.1%) Bradespar 253,500 $7,479,753 Companhia Vale do Rio Doce ADR 768,088 30,016,878 Cyrela Brazil Realty 498,400 8,263,176 Even Construtora e Incorporadora 533,900 3,402,540 MRV Engenharia e Participacoes 202,100 4,074,352 Multiplan Empreendimentos Imobiliarios 449,549(b) 5,681,247 Petroleo Brasileiro ADR 339,394 41,209,219 Positivo Informatica 115,700 1,469,140 Redecard 769,500 14,355,479 --------------- Total 115,951,784 - ------------------------------------------------------------------------------------ CANADA (0.7%) Yamana Gold 371,847 4,767,079 - ------------------------------------------------------------------------------------ CHINA (6.8%) China Construction Bank Series H 9,289,000 8,391,233 China Merchants Bank Series H 1,421,000 5,935,117 China Shenhua Energy Series H 681,500 3,130,640 CNOOC 11,001,000 19,423,825 Industrial & Commercial Bank of China Series H 10,935,000 8,657,413 Minth Group 2,838,000 3,182,790 --------------- Total 48,721,018 - ------------------------------------------------------------------------------------ EGYPT (0.3%) Orascom Construction Inds 25,499 2,090,444 - ------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) HONG KONG (4.6%) China Mobile 1,517,500 $26,112,091 China Overseas Land & Investment 3,350,000 7,049,736 --------------- Total 33,161,827 - ------------------------------------------------------------------------------------ INDIA (4.9%) Bharat Heavy Electricals 128,872 6,048,208 Bharti Airtel 438,239(b) 9,712,514 DLF 245,437 4,270,168 Larsen & Toubro 64,345 4,767,928 Reliance Inds 163,138(b) 10,523,669 --------------- Total 35,322,487 - ------------------------------------------------------------------------------------ INDONESIA (2.0%) Bumi Resources 5,873,000 4,238,247 Intl Nickel Indonesia 7,731,500 5,579,433 Perusahaan Gas Negara 3,398,000 4,461,834 --------------- Total 14,279,514 - ------------------------------------------------------------------------------------ ISRAEL (3.6%) Israel Chemicals 764,869 14,087,632 Teva Pharmaceutical Inds ADR 251,334 11,757,404 --------------- Total 25,845,036 - ------------------------------------------------------------------------------------ MALAYSIA (2.2%) IOI 3,500,500 8,091,720 KNM Group 3,966,600 8,038,708 --------------- Total 16,130,428 - ------------------------------------------------------------------------------------ MEXICO (7.6%) America Movil ADR Series L 387,263 22,445,763 Desarrolladora Homex ADR 145,409(b) 8,663,469
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT 13
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) MEXICO (CONT.) Grupo Financiero Banorte Series O 2,101,000 $9,091,145 Grupo Mexico Series B 985,400 7,187,900 Urbi Desarrollos Urbanos 2,380,200(b) 7,637,066 --------------- Total 55,025,343 - ------------------------------------------------------------------------------------ NORWAY (0.3%) Copeinca 308,200(b) 2,120,378 - ------------------------------------------------------------------------------------ PAKISTAN (0.6%) United Bank GDR 492,437(d,e) 4,360,278 - ------------------------------------------------------------------------------------ PERU (0.8%) Compania de Minas Buenaventura ADR 92,591 5,793,419 - ------------------------------------------------------------------------------------ RUSSIA (16.1%) Eurasia Drilling GDR 266,036(b,d,e) 6,172,035 Gazprom ADR 541,880 28,692,546 Mechel ADR 60,314 8,793,782 MMC Norilsk Nickel ADR 315,731 8,518,422 Mobile Telesystems ADR 159,820 12,398,835 Novolipetsk Steel GDR 158,726(d,e) 7,050,609 Pharmstandard Cl S 74,180(b) 4,936,679 Rosneft Oil GDR 1,109,571(d,e) 10,818,317 Sberbank Cl S 2,721,077 8,857,106 Sibirskiy Cement 24,589 4,561,260 TMK GDR 154,534(d,e) 4,945,088 Vimpel-Communications ADR 360,173 10,862,818 --------------- Total 116,607,497 - ------------------------------------------------------------------------------------ SOUTH AFRICA (5.5%) Aveng 907,638 6,851,843 Impala Platinum Holdings 265,982 10,840,319 MTN Group 523,874 10,016,910 Sasol 208,641 11,871,544 --------------- Total 39,580,616 - ------------------------------------------------------------------------------------ SOUTH KOREA (13.2%) Daelim Industrial 49,931 6,752,146 Doosan Infracore 288,450 9,355,913
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) SOUTH KOREA (CONT.) Hyundai Motor 89,235 $7,534,213 Infopia 83,756 3,949,572 KT Corp 352,520 16,289,097 NHN 28,231(b) 6,564,693 Samsung Electronics 32,080 22,763,353 Shinhan Financial Group 186,834 10,796,096 SK Communications 105,351(b) 1,566,597 Yuhan 43,676 9,589,541 --------------- Total 95,161,221 - ------------------------------------------------------------------------------------ TAIWAN (7.9%) Asustek Computer 2,498,485 8,102,751 Chinatrust Financial Holding 8,555,000(b) 8,915,846 Chunghwa Telecom 1,997,000 5,145,725 First Financial Holding 4,318,000 5,244,248 High Tech Computer 254,000 6,544,888 Taiwan Fertilizer 1,517,000 7,344,740 Taiwan Semiconductor Mfg ADR 1,075,624 12,090,014 Tripod Technology 1,067,920 3,628,089 --------------- Total 57,016,301 - ------------------------------------------------------------------------------------ THAILAND (1.0%) Kasikornbank 2,603,000 7,251,155 - ------------------------------------------------------------------------------------ TURKEY (1.0%) Turkcell 907,184(b) 7,263,739 - ------------------------------------------------------------------------------------ UNITED KINGDOM (0.4%) Hochschild Mining 388,386 2,895,706 - ------------------------------------------------------------------------------------ TOTAL COMMON STOCKS (Cost: $589,519,282) $689,345,270 - ------------------------------------------------------------------------------------
PREFERRED STOCKS (2.7%)(c) ISSUER SHARES VALUE(A) BRAZIL Banco Bradesco 834,250 $19,328,775 - ------------------------------------------------------------------------------------ TOTAL PREFERRED STOCKS (Cost: $17,843,687) $19,328,775 - ------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 14 THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT
MONEY MARKET FUND (0.6%) ISSUER SHARES VALUE(A) RiverSource Short-Term Cash Fund, 2.72% 4,610,259(f) $4,610,259 - ------------------------------------------------------------------------------------ TOTAL MONEY MARKET FUND (Cost: $4,610,259) $4,610,259 - ------------------------------------------------------------------------------------ TOTAL INVESTMENTS IN SECURITIES (Cost: $611,973,228)(g) $713,284,304 ====================================================================================
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, 2008:
PERCENTAGE OF INDUSTRY NET ASSETS VALUE - ----------------------------------------------------------------------------------------- Auto Components 0.4% $3,182,790 Automobiles 1.0 7,534,213 Chemicals 3.0 21,432,372 Commercial Banks 13.4 96,828,412 Computers & Peripherals 2.2 16,116,779 Construction & Engineering 2.8 20,462,361 Diversified Financial Services 1.0 7,479,753 Diversified Telecommunication Services 3.0 21,434,822 Electrical Equipment 0.8 6,048,208 Electronic Equipment & Instruments 0.5 3,628,089 Energy Equipment & Services 2.7 19,155,831 Food Products 1.4 10,212,098 Gas Utilities 0.6 4,461,834 Health Care Equipment & Supplies 0.5 3,949,572 Household Durables 3.4 24,563,711 Internet Software & Services 1.1 8,131,290 IT Services 2.0 14,355,479 Machinery 1.3 9,355,913 Metals & Mining 12.7 91,443,547 Multi-Utilities 0.6 4,561,260 Oil, Gas & Consumable Fuels 18.0 129,908,007 Pharmaceuticals 3.6 26,283,624 Real Estate Investment Trusts (REITs) 3.4 24,478,043 Semiconductors & Semiconductor Equipment 4.8 34,853,367 Wireless Telecommunication Services 13.7 98,812,670 Other(1) 0.6 4,610,259 - ----------------------------------------------------------------------------------------- $713,284,304 - -----------------------------------------------------------------------------------------
(1) Cash & Cash Equivalents. NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using procedures described in Note 1 to the financial statements. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT 15 NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security may be determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2008, the value of these securities amounted to $33,346,327 or 4.6% of net assets. (e) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities may be valued at fair value according to procedures approved, in good faith, by the Fund's Board of Directors. Information concerning such security holdings at April 30, 2008, is as follows:
ACQUISITION SECURITY DATES COST - ---------------------------------------------------------------------------------- Eurasia Drilling GDR* 11-02-07 thru 04-15-08 $6,267,169 Novolipetsk Steel GDR* 06-06-07 thru 04-15-08 4,404,564 Rosneft Oil GDR* 04-07-08 thru 04-15-08 10,540,818 TMK GDR* 04-07-08 thru 04-17-08 4,949,515 United Bank GDR* 06-25-07 5,089,277
* Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. (f) Affiliated Money Market Fund - See Note 5 to the financial statements. The rate shown is the seven-day current annualized yield at April 30, 2008. (g) At April 30, 2008, the cost of securities for federal income tax purposes was approximately $611,973,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $125,950,000 Unrealized depreciation (24,639,000) - ------------------------------------------------------------------------------ Net unrealized appreciation $101,311,000 - ------------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com/funds. - -------------------------------------------------------------------------------- 16 THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT FINANCIAL STATEMENTS ----------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 2008 (UNAUDITED) ASSETS Investments in securities, at value Unaffiliated issuers (identified cost $607,362,969) $708,674,045 Affiliated money market fund (identified cost $4,610,259) 4,610,259 - ---------------------------------------------------------------------------- Total investments in securities (identified cost $611,973,228) 713,284,304 Foreign currency holdings (identified cost $8,153,230) 8,105,283 Capital shares receivable 619,760 Dividends receivable 826,444 Receivable for investment securities sold 1,615,727 - ---------------------------------------------------------------------------- Total assets 724,451,518 - ---------------------------------------------------------------------------- LIABILITIES Capital shares payable 1,012,393 Payable for investment securities purchased 1,503,059 Accrued investment management services fee 21,050 Accrued distribution fee 6,114 Accrued transfer agency fee 2,361 Accrued administrative services fee 1,529 Accrued plan administration services fee 12 Other accrued expenses 348,715 - ---------------------------------------------------------------------------- Total liabilities 2,895,233 - ---------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $721,556,285 ============================================================================
- -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT 17 STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) APRIL 30, 2008 (UNAUDITED) REPRESENTED BY Capital stock -- $.01 par value $ 704,668 Additional paid-in capital 552,201,225 Excess of distributions over net investment income (5,642,783) Accumulated net realized gain (loss) 73,029,469 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 101,263,706 - ---------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $721,556,285 ============================================================================
Net assets applicable to outstanding Class A shares: $556,867,072 $ 80,469,095 Class B $ 6,837,200 Class C $ 75,546,847 Class I $ 1,836,071 Class R4 Net asset value per share of outstanding Class A shares(1) capital stock: 53,814,851 $ 10.35 8,658,997 $ 9.29 Class B shares 734,282 $ 9.31 Class C shares 7,087,152 $ 10.66 Class I shares 171,561 $ 10.70 Class R4 shares - -------------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $10.98. 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. - -------------------------------------------------------------------------------- 18 THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT STATEMENT OF OPERATIONS SIX MONTHS ENDED APRIL 30, 2008 (UNAUDITED) INVESTMENT INCOME Income: Dividends $ 10,368,822 Interest 63,407 Income distributions from affiliated money market fund 244,724 Less foreign taxes withheld (464,282) - ----------------------------------------------------------------------------- Total income 10,212,671 - ----------------------------------------------------------------------------- Expenses: Investment management services fee 4,044,432 Distribution fee Class A 704,401 Class B 406,184 Class C 33,400 Transfer agency fee Class A 473,965 Class B 72,684 Class C 5,825 Class R4 485 Administrative services fee 276,368 Plan administration services fee -- Class R4 2,424 Compensation of board members 7,371 Custodian fees 328,600 Printing and postage 54,600 Registration fees 48,899 Professional fees 49,414 Other 152,498 - ----------------------------------------------------------------------------- Total expenses 6,661,550 Expenses waived/reimbursed by the Investment Manager and its affiliates (2,490) Earnings and bank fee credits on cash balances (10,102) - ----------------------------------------------------------------------------- Total net expenses 6,648,958 - ----------------------------------------------------------------------------- Investment income (loss) - net 3,563,713 - ----------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions 64,918,996 Foreign currency transactions (101,584) - ----------------------------------------------------------------------------- Net realized gain (loss) on investments 64,817,412 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (166,871,156) - ----------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (102,053,744) - ----------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (98,490,031) =============================================================================
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT 19 STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2008 OCT. 31, 2007 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) - net $ 3,563,713 $ 1,517,079 Net realized gain (loss) on investments 64,817,412 156,013,553 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (166,871,156) 189,936,461 - ---------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (98,490,031) 347,467,093 - ---------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (7,733,482) -- Class B (584,169) -- Class C (60,487) -- Class I (828,121) -- Class R4 (23,143) -- Net realized gain Class A (117,775,823) (98,239,230) Class B (18,510,075) (18,762,771) Class C (1,520,014) (1,196,069) Class I (9,800,247) (9,664,518) Class R4 (416,434) (1,447,673) - ---------------------------------------------------------------------------------------- Total distributions (157,251,995) (129,310,261) - ---------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares 50,831,229 91,841,700 Class B shares 8,498,357 12,086,529 Class C shares 1,465,695 1,969,066 Class I shares 28,950,852 5,204,952 Class R4 shares 415,260 3,407,128 Reinvestment of distributions at net asset value Class A shares 124,102,492 97,170,044 Class B shares 18,787,330 18,551,177 Class C shares 1,531,576 1,147,176 Class I shares 10,623,826 9,658,984 Class R4 shares 439,576 1,447,453 Payments for redemptions Class A shares (73,929,504) (127,473,312) Class B shares (9,824,406) (38,310,114) Class C shares (1,329,911) (2,015,974) Class I shares (3,258,381) (16,607,477) Class R4 shares (582,397) (9,169,513) - ---------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 156,721,594 48,907,819 - ---------------------------------------------------------------------------------------- Total increase (decrease) in net assets (99,020,432) 267,064,651 Net assets at beginning of period 820,576,717 553,512,066 - ---------------------------------------------------------------------------------------- Net assets at end of period $ 721,556,285 $ 820,576,717 ======================================================================================== Undistributed (excess of distributions over) net investment income $ (5,642,783) $ 22,906 - ----------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 20 THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS TO APRIL 30, 2008) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Threadneedle Emerging Markets Fund (the Fund) (formerly RiverSource Emerging Markets Fund) is a series of RiverSource Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open- end management investment company. RiverSource Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund invests primarily in equity securities of emerging markets companies. The Fund offers Class A, Class B, Class C, Class I and Class R4 shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class I and Class R4 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. At April 30, 2008, RiverSource Investments, LLC (the Investment Manager) and the RiverSource affiliated funds-of-funds owned 100% of Class I shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT 21 are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange 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 New York Stock Exchange, 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 New York Stock Exchange. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. ILLIQUID SECURITIES At April 30, 2008, 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, 2008 was $33,346,327 representing 4.62% of net assets. These securities may be valued at fair value according to procedures approved, in good faith, by the Board. According to Board guidelines, certain unregistered securities are determined to be liquid and are not included within the 15% limitation specified above. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. OPTION TRANSACTIONS To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Fund may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. Cash collateral may be collected by the Fund to secure certain over-the-counter options trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. The Fund also - -------------------------------------------------------------------------------- 22 THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. At April 30, 2008, and for the six months then ended, the Fund had no outstanding option contracts. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Futures are valued daily based upon the last sale price at the close of market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. At April 30, 2008, the Fund had no outstanding futures contracts. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT 23 dividends, interest income and foreign withholding taxes. At April 30, 2008, foreign currency holdings consisted of multiple denominations. The Fund may enter into forward foreign currency contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete its contract obligations. At April 30, 2008, the Fund had no outstanding forward foreign currency contracts. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. The Fund has adopted Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes," which is effective for fiscal periods beginning after Dec. 15, 2006. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 prescribes a two-step process to recognize and measure a tax position taken or expected to be taken in a tax return. The first step is to determine whether a tax position has met the more-likely-than-not recognition threshold and the second step is to measure a tax position that meets the threshold to determine the amount of benefit to recognize. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes and losses deferred due to "wash sale" - -------------------------------------------------------------------------------- 24 THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. RECENT ACCOUNTING PRONOUNCEMENT In March 2008, the FASB issued Statement on Financial Accounting Standards No. 161 (SFAS "161"), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of April 30, 2008, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. On Sept. 20, 2006, the FASB released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. The application of SFAS 157 will be effective for the Fund's fiscal year beginning Nov. 1, 2008. The adoption of SFAS 157 is not anticipated to have a material impact on the Fund's financial statements; however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. 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, - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT 25 including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. EXPENSES AND SALES CHARGES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 1.10% to 0.90% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment determined monthly by measuring the percentage difference over a rolling 12-month period between the performance of one Class A share of the Fund and the change in 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 increased the management fee by $240,150 for the six months ended April 30, 2008. The management fee for the six months ended April 30, 2008 was 1.15% of the Fund's average daily net assets, including the adjustment under the terms of the performance incentive arrangement. 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. Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines 0.08% to 0.05% annually as the Fund's assets increase. The fee for the six months ended April 30, 2008 was 0.08% of the Fund's average daily net assets. 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, 2008, other expenses paid to this company were $2,409. Compensation of Board members includes, for a former Board Chair, compensation as well as retirement benefits. Certain other aspects of a former Board Chair's compensation, including health benefits and payment of certain other expenses, are included under other expenses. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other - -------------------------------------------------------------------------------- 26 THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50 for Class B and $20.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average net assets attributable to Class R4 shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the Statement of Operations. 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. The Fund has an agreement with RiverSource 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 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. Sales charges received by the Distributor for distributing Fund shares were $480,426 for Class A, $19,903 for Class B and $587 for Class C for the six months ended April 30, 2008. 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. For the six months ended April 30, 2008, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds) were 1.46% for Class R4. Of these waived/reimbursed fees and expenses, the transfer agency fee at the class level was $66 for Class R4 and the plan administration services fee was $2,424 for Class R4. In addition, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Oct. 31, 2008, such that net expenses (excluding fees and expenses of acquired funds), before giving effect to any - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT 27 performance incentive adjustment, will not exceed 1.64% of the Fund's average daily net assets for Class R4, unless sooner terminated at the discretion of the Board. During the six months ended April 30, 2008, the Fund's custodian and transfer agency fees were reduced by $10,102 as a result of earnings and bank fee credits from overnight cash balances. The Fund pays custodian fees to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $490,170,681 and $484,256,536, respectively, for the six months ended April 30, 2008. Realized gains and losses are determined on an identified cost basis. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED APRIL 30, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ---------------------------------------------------------------------------------------------- Class A 4,617,996 11,944,424 (6,851,400) 9,711,020 Class B 856,083 2,007,193 (1,033,432) 1,829,844 Class C 148,156 163,281 (134,817) 176,620 Class I 2,779,849 993,810 (296,091) 3,477,568 Class R4 34,574 40,967 (54,358) 21,183 - ----------------------------------------------------------------------------------------------
YEAR ENDED OCT. 31, 2007 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ---------------------------------------------------------------------------------------------- Class A 8,019,411 9,935,587 (11,422,639) 6,532,359 Class B 1,163,544 2,056,671 (3,595,546) (375,331) Class C 179,156 126,760 (198,413) 107,503 Class I 463,963 966,865 (1,397,671) 33,157 Class R4 313,574 145,035 (806,884) (348,275) - ----------------------------------------------------------------------------------------------
5. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of the shares of the RiverSource Short-Term - -------------------------------------------------------------------------------- 28 THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT Cash Fund aggregated $250,810,221 and $253,871,051, respectively, for the six months ended April 30, 2008. 6. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective on Oct. 18, 2007, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $500 million. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.30%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. Under the prior credit facility, a Fund paid interest on its outstanding borrowings at a rate equal to either the higher of the federal funds effective rate plus 0.40% or the JPMBC Prime Commercial Lending Rate. The Fund had no borrowings during the six months ended April 30, 2008. 7. 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. 8. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to defendants' motion to dismiss the complaint, the Court - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT 29 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 on August 8, 2007. 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. - -------------------------------------------------------------------------------- 30 THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT 9. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results. CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(J) 2007 2006 2005 2004 Net asset value, beginning of period $14.99 $11.32 $8.23 $6.27 $5.46 - ---------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .06(b) .04(b) .01 .04 .03 Net gains (losses) (both realized and unrealized) (1.83) 6.27 3.10 1.95 .84 - ---------------------------------------------------------------------------------------------------------------- Total from investment operations (1.77) 6.31 3.11 1.99 .87 - ---------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.18) -- (.02) (.03) (.06) Distributions from realized gains (2.69) (2.64) -- -- -- - ---------------------------------------------------------------------------------------------------------------- Total distributions (2.87) (2.64) (.02) (.03) (.06) - ---------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.35 $14.99 $11.32 $8.23 $6.27 - ---------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $557 $661 $425 $295 $191 - ---------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.83%(e) 1.83% 1.81% 1.79% 1.83% - ---------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) 1.83%(e) 1.82% 1.81% 1.79% 1.83% - ---------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.08%(e) .31% .19% .54% .41% - ---------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 69% 125% 145% 124% 128% - ---------------------------------------------------------------------------------------------------------------- Total return(h) (11.91%)(i) 68.21% 37.85% 31.83% 16.09% - ----------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT 31 CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(J) 2007 2006 2005 2004 Net asset value, beginning of period $13.73 $10.63 $7.77 $5.95 $5.19 - ---------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02(b) (.05)(b) (.05) (.01) (.02) Net gains (losses) (both realized and unrealized) (1.69) 5.79 2.91 1.83 .81 - ---------------------------------------------------------------------------------------------------------------- Total from investment operations (1.67) 5.74 2.86 1.82 .79 - ---------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) -- -- -- (.03) Distributions from realized gains (2.69) (2.64) -- -- -- - ---------------------------------------------------------------------------------------------------------------- Total distributions (2.77) (2.64) -- -- (.03) - ---------------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.29 $13.73 $10.63 $7.77 $5.95 - ---------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $80 $94 $77 $74 $73 - ---------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 2.59%(e) 2.58% 2.57% 2.55% 2.59% - ---------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) 2.59%(e) 2.57% 2.57% 2.55% 2.59% - ---------------------------------------------------------------------------------------------------------------- Net investment income (loss) .34%(e) (.48%) (.55%) (.24%) (.32%) - ---------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 69% 125% 145% 124% 128% - ---------------------------------------------------------------------------------------------------------------- Total return(h) (12.30%)(i) 66.95% 36.81% 30.59% 15.18% - ----------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- 32 THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(J) 2007 2006 2005 2004 Net asset value, beginning of period $13.78 $10.66 $7.79 $5.97 $5.20 - ---------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02(b) (.05)(b) (.06) -- (.01) Net gains (losses) (both realized and unrealized) (1.69) 5.81 2.93 1.82 .81 - ---------------------------------------------------------------------------------------------------------------- Total from investment operations (1.67) 5.76 2.87 1.82 .80 - ---------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.11) -- -- -- (.03) Distributions from realized gains (2.69) (2.64) -- -- -- - ---------------------------------------------------------------------------------------------------------------- Total distributions (2.80) (2.64) -- -- (.03) - ---------------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.31 $13.78 $10.66 $7.79 $5.97 - ---------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $7 $8 $5 $3 $1 - ---------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 2.59%(e) 2.59% 2.58% 2.56% 2.60% - ---------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) 2.59%(e) 2.58% 2.58% 2.56% 2.60% - ---------------------------------------------------------------------------------------------------------------- Net investment income (loss) .35%(e) (.48%) (.57%) (.19%) (.34%) - ---------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 69% 125% 145% 124% 128% - ---------------------------------------------------------------------------------------------------------------- Total return(h) (12.30%)(i) 67.03% 36.84% 30.54% 15.37% - ----------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT 33 CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(K) 2007 2006 2005 2004(B) Net asset value, beginning of period $15.38 $11.50 $8.35 $6.36 $6.54 - ---------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .08(c) .09(c) .03 .06 .01 Net gains (losses) (both realized and unrealized) (1.88) 6.43 3.16 1.98 (.19) - ---------------------------------------------------------------------------------------------------------------- Total from investment operations (1.80) 6.52 3.19 2.04 (.18) - ---------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.23) -- (.04) (.05) -- Distributions from realized gains (2.69) (2.64) -- -- -- - ---------------------------------------------------------------------------------------------------------------- Total distributions (2.92) (2.64) (.04) (.05) -- - ---------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.66 $15.38 $11.50 $8.35 $6.36 - ---------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $76 $56 $41 $19 $13 - ---------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.42%(f) 1.39% 1.35% 1.30% 1.35%(f) - ---------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.42%(f) 1.38% 1.35% 1.30% 1.35%(f) - ---------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.48%(f) .75% .63% .97% .79%(f) - ---------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 69% 125% 145% 124% 128% - ---------------------------------------------------------------------------------------------------------------- Total return(i) (11.78%)(j) 69.07% 38.36% 32.32% (2.75%)(i) - ----------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from March 4, 2004 (inception date) to Oct. 31, 2004. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- 34 THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(J) 2007 2006 2005 2004 Net asset value, beginning of period $15.32 $11.50 $8.33 $6.35 $5.52 - ---------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .08(b) .05(b) .03 .05 .04 Net gains (losses) (both realized and unrealized) (1.86) 6.41 3.14 1.97 .86 - ---------------------------------------------------------------------------------------------------------------- Total from investment operations (1.78) 6.46 3.17 2.02 .90 - ---------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.15) -- -- (.04) (.07) Distributions from realized gains (2.69) (2.64) -- -- -- - ---------------------------------------------------------------------------------------------------------------- Total distributions (2.84) (2.64) -- (.04) (.07) - ---------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.70 $15.32 $11.50 $8.33 $6.35 - ---------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $2 $6 $2 $18 - ---------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.72%(e) 1.65% 1.63% 1.59% 1.65% - ---------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) 1.46%(e) 1.64%(e) 1.63% 1.59% 1.65% - ---------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.36%(e) .45% .41% .81% .61% - ---------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 69% 125% 145% 124% 128% - ---------------------------------------------------------------------------------------------------------------- Total return(h) (11.68%)(i) 68.51% 38.06% 31.87% 16.50% - ----------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT 35 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- RiverSource Investments, LLC ("RiverSource Investments" or the "investment manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement") RiverSource Investments provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). In addition, under the subadvisory agreement (the "Subadvisory Agreement") between RiverSource Investments and the subadviser (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 the IMS Agreement and the Subadvisory Agreement (together, the "Advisory Agreements"). RiverSource Investments prepared detailed reports for the Board and its Contracts Committee in March and April 2008, including reports based on data provided by independent organizations to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource Investments addressing the services RiverSource Investments provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts, Investment Review and Compliance Committees in determining whether to continue the Advisory Agreements. At the April 9-10, 2008 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the Advisory Agreements. Nature, Extent and Quality of Services Provided by RiverSource Investments and the Subadviser: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource Investments and the Subadviser, as well as their expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource Investments, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, particularly in the areas of trading systems, new product initiatives, legal and compliance. Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource Investments, the Board considered the quality of the administrative and transfer agency services provided by RiverSource Investments' affiliates to the Fund. The Board also reviewed the - -------------------------------------------------------------------------------- 36 THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- financial condition of RiverSource Investments (and its affiliates) and the Subadviser, and each entity's ability to carry out its responsibilities under the Advisory Agreements. The Board also discussed the acceptability of the terms of the Advisory Agreements (including the relatively broad scope of services required to be performed by RiverSource Investments and the Subadviser). The Board concluded that the services being performed under the Advisory Agreements were of a reasonably high quality, particularly in light of recent market conditions. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that RiverSource Investments, its affiliates and the Subadviser were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the Advisory Agreements, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods (including since inception), recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2006 to December 2007. The Board observed that the Fund's investment performance met expectations. Additionally, the Board reviewed the performance of the Subadviser and considered management's rationale for recommending the continued retention of the Subadviser. Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource Investments and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the Advisory Agreements. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to RiverSource Investments' profitability. The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product - -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 SEMIANNUAL REPORT 37 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- lines in the Funds' family, while assuring that the overall fees for each fund are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) was slightly below the peer group's median expense ratio shown in the reports. The Board also considered the Fund's performance incentive adjustment and noted its continued appropriateness. 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 the expected profitability of RiverSource Investments and its affiliates in connection with RiverSource Investments providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource Investments and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource Investments as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees and subadvisory fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 10, 2008, the Board, including all of the Independent Directors, approved the renewal of the Advisory Agreements. - -------------------------------------------------------------------------------- 38 THREADNEEDLE EMERGING MARKETS FUND -- 2008 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 RiverSource Funds at (888) 791-3380; contacting your financial institution; 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 -- 2008 SEMIANNUAL REPORT 39 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 RiverSource Distributors, Inc., Member FINRA, managed by RiverSource Investments, LLC, and subadvised by Threadneedle International Limited. These companies are part of Ameriprise Financial, Inc. (THREADNEEDLE LOGO) (C) 2008 RiverSource Distributors, Inc. S-6344 N (6/08)
Semiannual Report (THREADNEEDLE LOGO) THREADNEEDLE GLOBAL EQUITY FUND (FORMERLY RIVERSOURCE GLOBAL EQUITY FUND) SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2008 THREADNEEDLE GLOBAL EQUITY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. (SINGLE STRATEGY FUNDS ICON) TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance............... 2 Manager Commentary.................. 6 Fund Expenses Example............... 12 Portfolio of Investments............ 14 Financial Statements................ 19 Notes to Financial Statements....... 24 Approval of Investment Management Services Agreement............... 43 Proxy Voting........................ 46
RIVERSOURCE COMPLEX OF FUNDS Threadneedle Funds are a part of the RiverSource complex of funds that includes funds branded "RiverSource," "RiverSource Partners," and "Threadneedle." These funds share the same Board of Directors/Trustees and officers. Please see the back of this report for a list of mutual funds that are included in the RiverSource complex of funds. (DALBAR LOGO) The RiverSource mutual fund shareholder reports have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY - -------------------------------------------------------------------------------- > Threadneedle Global Equity Fund's (formerly RiverSource Global Equity Fund) (the Fund) Class A shares declined 11.90% (excluding sales charge) for the six months ended April 30, 2008. > The Fund underperformed its benchmark, the Morgan Stanley Capital International All Country World Index (MSCI Index), which fell 9.24% for the six-month period. > The Lipper Global Funds Index, representing the Fund's peer group, declined 9.49% over the same time frame. ANNUALIZED TOTAL RETURNS (for period ended April 30, 2008) - --------------------------------------------------------------------------------
6 months* 1 year 3 years 5 years 10 years - --------------------------------------------------------------------------------------- Threadneedle Global Equity Fund Class A (excluding sales charge) -11.90% +1.64% +15.94% +16.63% +3.70% - --------------------------------------------------------------------------------------- MSCI All Country World Index(1) (unmanaged) -9.24% +0.43% +14.52% +17.01% +6.01% - --------------------------------------------------------------------------------------- Lipper Global Funds Index(2) -9.49% -1.92% +12.88% +15.72% +5.80% - ---------------------------------------------------------------------------------------
* 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 institution or visiting riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. (1) The Morgan Stanley Capital International (MSCI) 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. - -------------------------------------------------------------------------------- 2 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- STYLE MATRIX - ----------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. ANNUAL OPERATING EXPENSE RATIO (as of the current prospectus) - ----------------------------------------
Total - ------------------------------------- Class A 1.39% - ------------------------------------- Class B 2.15% - ------------------------------------- Class C 2.15% - ------------------------------------- Class R2 1.74% - ------------------------------------- Class R3 1.49% - ------------------------------------- Class R4 1.24% - ------------------------------------- Class R5 0.99% - ------------------------------------- Class W 1.39% - -------------------------------------
International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT APRIL 30, 2008 SINCE WITHOUT SALES CHARGE 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 5/29/90) -11.90% +1.64% +15.94% +16.63% +3.70% N/A - -------------------------------------------------------------------------------------------------------- Class B (inception 3/20/95) -12.31% +0.76% +15.02% +15.74% +2.90% N/A - -------------------------------------------------------------------------------------------------------- Class C (inception 6/26/00) -12.21% +0.77% +15.05% +15.74% N/A +0.09% - -------------------------------------------------------------------------------------------------------- Class R2 (inception 12/11/06) -11.81% +1.48% N/A N/A N/A +6.31% - -------------------------------------------------------------------------------------------------------- Class R3 (inception 12/11/06) -11.79% +1.70% N/A N/A N/A +6.57% - -------------------------------------------------------------------------------------------------------- Class R4 (inception 3/20/95) -11.88% +1.76% +16.05% +16.83% +3.87% N/A - -------------------------------------------------------------------------------------------------------- Class R5 (inception 12/11/06) -11.81% +1.98% N/A N/A N/A +6.89% - -------------------------------------------------------------------------------------------------------- Class W (inception 12/1/06) -11.94% +1.63% N/A N/A N/A +6.96% - -------------------------------------------------------------------------------------------------------- WITH SALES CHARGE Class A (inception 5/29/90) -16.99% -4.22% +13.71% +15.28% +3.17% N/A - -------------------------------------------------------------------------------------------------------- Class B (inception 3/20/95) -16.69% -4.24% +14.01% +15.52% +2.90% N/A - -------------------------------------------------------------------------------------------------------- Class C (inception 6/26/00) -13.08% -0.23% +15.05% +15.74% N/A +0.09% - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 4 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
AT MARCH 31, 2008 SINCE WITHOUT SALES CHARGE 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 5/29/90) -11.18% +0.56% +13.06% +17.13% +3.41% N/A - -------------------------------------------------------------------------------------------------------- Class B (inception 3/20/95) -11.61% -0.26% +12.20% +16.27% +2.61% N/A - -------------------------------------------------------------------------------------------------------- Class C (inception 6/26/00) -11.49% -0.27% +12.21% +16.26% N/A -0.53% - -------------------------------------------------------------------------------------------------------- Class R2 (inception 12/11/06) -11.08% +0.41% N/A N/A N/A +2.83% - -------------------------------------------------------------------------------------------------------- Class R3 (inception 12/11/06) -10.97% +0.75% N/A N/A N/A +3.10% - -------------------------------------------------------------------------------------------------------- Class R4 (inception 3/20/95) -11.07% +0.69% +13.25% +17.33% +3.58% N/A - -------------------------------------------------------------------------------------------------------- Class R5 (inception 12/11/06) -11.01% +1.03% N/A N/A N/A +3.42% - -------------------------------------------------------------------------------------------------------- Class W (inception 12/1/06) -11.24% +0.43% N/A N/A N/A +3.47% - -------------------------------------------------------------------------------------------------------- WITH SALES CHARGE Class A (inception 5/29/90) -16.25% -5.23% +10.87% +15.74% +2.88% N/A - -------------------------------------------------------------------------------------------------------- Class B (inception 3/20/95) -16.03% -5.25% +11.13% +16.05% +2.61% N/A - -------------------------------------------------------------------------------------------------------- Class C (inception 6/26/00) -12.38% -1.26% +12.21% +16.26% N/A -0.53% - --------------------------------------------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class R2, Class R3, Class R4, Class R5 and Class W shares. Class R2, Class R3, Class R4 and Class R5 are available to institutional investors only. Class W shares are offered through qualifying discretionary accounts. * Not annualized. ** For classes with less than 10 years performance. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 5 MANAGER COMMENTARY ------------------------------------------------------------- (UNAUDITED) Below, Threadneedle Global Equity Fund portfolio managers Dominic Rossi and Stephen Thornber of Threadneedle International Limited (Threadneedle) discuss the Fund's results and positioning for the six months ended April 30, 2008. Threadneedle, an indirect wholly-owned subsidiary of Ameriprise Financial, Inc., acts as the subadvisor to the Fund. Dear Shareholders, The Fund's Class A shares declined 11.90% (excluding sales charge) for the six months ended April 30, 2008. The Fund underperformed its benchmark, the Morgan Stanley Capital International All Country World Index (MSCI Index), which fell 9.24% for the period. The Lipper Global Funds Index, representing the Fund's peer group, declined 9.49% over the same time frame. COUNTRY DIVERSIFICATION (at April 30, 2008; % of portfolio assets) - ----------------------------------------------------------------- Australia 2.2% - --------------------------------------------------------- Bermuda 1.0% - --------------------------------------------------------- Brazil 5.2% - --------------------------------------------------------- Canada 1.8% - --------------------------------------------------------- Denmark 0.4% - --------------------------------------------------------- Finland 0.8% - --------------------------------------------------------- Germany 5.6% - --------------------------------------------------------- Greece 0.5% - --------------------------------------------------------- Hong Kong 4.1% - --------------------------------------------------------- India 1.3% - --------------------------------------------------------- Ireland 0.5% - --------------------------------------------------------- Japan 9.1% - --------------------------------------------------------- Mexico 1.8% - --------------------------------------------------------- Netherlands 0.7% - --------------------------------------------------------- Portugal 1.0% - --------------------------------------------------------- Russia 0.8% - --------------------------------------------------------- Singapore 1.0% - --------------------------------------------------------- South Africa 1.1% - --------------------------------------------------------- South Korea 0.5% - ---------------------------------------------------------
- -------------------------------------------------------------------------------- 6 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- Spain 1.1% - --------------------------------------------------------- Sweden 0.2% - --------------------------------------------------------- Switzerland 8.1% - --------------------------------------------------------- Taiwan 1.9% - --------------------------------------------------------- United Kingdom 11.4% - --------------------------------------------------------- United States 36.2% - --------------------------------------------------------- Other(1) 1.7% - ---------------------------------------------------------
(1) Cash & Cash Equivalents.(2) (2) Of the 1.7%, 1.0% is due to security lending activity and 0.7% is the Fund's cash equivalent position. SIGNIFICANT PERFORMANCE FACTORS As the credit crisis broadened over the course of the six months, investors generally sought to reduce their investment risk. This had a negative effect on the Fund's results in the latter part of the period, as investors rotated out of many stocks and sectors that had performed well for the Fund last year. Positioning in the materials sector hampered the Fund's results. At the start of the period, the Fund had a significantly larger materials position than the MSCI Index, which was advantageous. However, stock selection detracted, as some individual holdings that had previously performed well for the Fund suffered from profit-taking. TOP TEN HOLDINGS (at April 30, 2008; % of portfolio assets) - ----------------------------------------------------------------- Microsoft (United States) 2.2% - --------------------------------------------------------- Nestle (Switzerland) 2.2% - --------------------------------------------------------- IBM (United States) 1.9% - --------------------------------------------------------- Google Cl A (United States) 1.8% - --------------------------------------------------------- Roche Holding (Switzerland) 1.7% - --------------------------------------------------------- Exxon Mobil (United States) 1.7% - --------------------------------------------------------- Johnson & Johnson (United States) 1.6% - --------------------------------------------------------- PepsiCo (United States) 1.6% - --------------------------------------------------------- Petroleo Brasileiro ADR (Brazil) 1.5% - --------------------------------------------------------- Devon Energy (United States) 1.5% - ---------------------------------------------------------
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 -- 2008 SEMIANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- In the consumer discretionary sector, stock selection detracted from return. Within the sector, retail stocks were a particularly weak segment and the Fund had a larger allocation than the MSCI Index. South African retailer Massmart was a notable detractor. The company was negatively affected by economic turmoil and political uncertainty in South Africa, as well as the weakening of the Rand, South Africa's currency. On the positive side, the Fund's energy holdings favorably affected performance. Contributors included BG GROUP in the U.K. and PETROLEO BRASILEIRO in Brazil. Both companies benefited from news of a significant oil find in a field off the coast of Brazil. Another U.K. contributor, TULLOW OIL, announced a potentially large oil find in Ghana. Health care positioning was beneficial, primarily due to a larger weighting than the MSCI Index, while a smaller-than-benchmark weighting in financials proved to be also advantageous. During the period, we moved the Fund's financial weighting closer to that of the MSCI Index, but maintained an underweight. The Fund had meaningfully larger positions in Asia and Latin America relative to the MSCI Index and a smaller position in the United States. As concern about the economic situation took center stage, investors moved away from riskier investments, and areas that had previously performed well suffered from profit- taking. Asian markets declined sharply, while the United States, where many of the economic concerns originated, performed well due to investors' belief in its stability and defensive nature. Consequently, the Fund's overweight in Asia and underweight in the United States detracted. Positioning in the U.K. was advantageous, as the Fund benefited from investors' preference for lower risk investments, including oil stocks. Holdings of financial and insurance stocks within the U.K. also had a favorable impact. The Fund began the period underweight in U.K. equities, but ended the period with a larger position than the MSCI Index. Positioning in Latin America was a significant contributor to return. The Fund had a larger weighting in Latin America than the MSCI Index throughout the period. We believe there are stronger fundamental drivers in Latin America than in other regions. Additional individual contributors to return included NESTLE, a well run food company with strong global brands, and HIGH TECH COMPUTER, an Asian technology company. In a period when higher costs could have hampered earnings results, Nestle stood out due to effective cost controls. HIGH TECH COMPUTER has a particularly strong and well-received new product pipeline. Detractors included AGILE PROPERTY HOLDINGS, CHINA GRAND FORESTRY RESOURCES GROUP, WELLPOINT and BEAR STEARNS. Given the reversal in the Asian equity markets, property stocks such as AGILE PROPERTY performed poorly. Forestry, - -------------------------------------------------------------------------------- 8 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- WE BELIEVE THERE ARE STRONGER FUNDAMENTAL DRIVERS IN LATIN AMERICA THAN IN OTHER REGIONS. paper and pulp company CHINA GRAND FORESTRY RESOURCES had previously performed very well, leaving it vulnerable to profit-taking. U.S. health provider WELLPOINT reported only marginally disappointing earnings figures, but the news elicited a sharp response from investors. We eliminated WELLPOINT from the Fund's portfolio. The Federal Reserve brokered a deal for JP Morgan to acquire cash-strapped investment bank BEAR STEARNS. Though we sold BEAR STEARNS before the very end of the period, it still had a negative impact. CHANGES TO THE FUND'S PORTFOLIO Over the course of the six months, we positioned the Fund more defensively. Initially, the Fund was very underweight in large-cap stocks and favored emerging markets and growth-oriented sectors. By the end of the period, the Fund had a more substantial weighting in large-cap stocks than the MSCI Index. As part of the strategy shift, we increased the Fund's holdings in the U.K., moving from an underweight to an overweight relative to the MSCI Index. We reduced holdings in Asia, moving from a weighting larger than the MSCI Index, to one similar to that of the benchmark. We increased the Fund's holdings in Japan. Previously, the Fund's exposure was smaller than the MSCI Index, but we moved to a neutral weighting. We have begun to see individual opportunities in Japan, and since the Japanese market performed so poorly leading up to 2008, we feel a reversal is possible. We added to the U.S. allocation, but kept it smaller than that of the MSCI Index. Given our continued confidence in the fundamentals driving Latin American markets, we increased the Fund's holdings there. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 9 MANAGER COMMENTARY (continued) ------------------------------------------------- We took profits in the materials sector, reducing the Fund's overweight relative to the MSCI Index. We moved the Fund's consumer discretionary position from an overweight to a weighting similar to the benchmark. The Fund had a substantial underweight in financial stocks, which we moved to a small underweight. OUR FUTURE STRATEGY We believe the credit crisis will continue to unfold and are concerned that the worst is not yet over. We doubt that consumers - who have so far continued to spend - can escape the current squeeze on credit. Therefore, we expect continued pressure on consumer spending and on companies that depend on consumers. Though we anticipate economic slowing in developed countries, we remain positive on emerging markets and the Pacific region, where we believe domestic demand dynamics can offset sluggishness in export markets such as the United States. We think China will continue its massive infrastructure spending, which will trickle through to the domestic economy. Our outlook for commodity-related stocks, including energy and metals, remains positive, partly due to demand from China, India and Latin America. We would have expected to see commodity demand falling as prices have risen, but that has not been evident. Declines in gasoline sales in the United States and U.K. have been more than offset by continued growth in China, India, Russia and Latin America. Even more telling, there has been virtually no growth in production of commodities such as oil, coal, copper, iron ore or gold over the last five years, and we see little indication that supplies will increase measurably over the next five years. As long as domestic demand in emerging markets holds, it seems unlikely to us that commodity prices will fall with no excess capacity to be tapped and no visible supply growth. - -------------------------------------------------------------------------------- 10 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- We still see equities as offering good value. In our view, stocks were already inexpensively valued before the sell-off during the six-month period. Though we think there may be some downward earning revisions, we do not think they will be as large as prices currently seem to forecast. At this point, we find equity valuations extremely compelling. (PHOTO - DOMINIC ROSSI) (PHOTO - STEPHEN THORNBER) Dominic Rossi Stephen Thornber Portfolio Manager Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a RiverSource fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any RiverSource fund. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 11 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the acquired funds' expense ratio as of the 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, 2008. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 12 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2007 APRIL 30, 2008 THE PERIOD(A) EXPENSE RATIO - ------------------------------------------------------------------------------------------- Class A - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 881.00 $ 6.97 1.49% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.45 $ 7.47 1.49% - ------------------------------------------------------------------------------------------- Class B - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 876.90 $10.50 2.25% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,013.67 $11.27 2.25% - ------------------------------------------------------------------------------------------- Class C - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 877.90 $10.51 2.25% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,013.67 $11.27 2.25% - ------------------------------------------------------------------------------------------- Class R2 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 881.90 $ 8.61 1.84% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,015.71 $ 9.22 1.84% - ------------------------------------------------------------------------------------------- Class R3 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 882.10 $ 7.49 1.60% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.91 $ 8.02 1.60% - ------------------------------------------------------------------------------------------- Class R4 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 881.20 $ 6.27 1.34% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.20 $ 6.72 1.34% - ------------------------------------------------------------------------------------------- Class R5 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 881.90 $ 5.10 1.09% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.44 $ 5.47 1.09% - ------------------------------------------------------------------------------------------- Class W - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 880.60 $ 6.92 1.48% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.50 $ 7.42 1.48% - -------------------------------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2008: -11.90% for Class A, -12.31% for Class B, -12.21% for Class C, -11.81% for Class R2, -11.79% for Class R3, -11.88% for Class R4, -11.81% for Class R5 and -11.94% for Class W. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- APRIL 30, 2008 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (98.2%)(c) ISSUER SHARES VALUE(A) AUSTRALIA (2.2%) Boart Longyear Group 1,018,360 $1,811,151 CSL 252,566 9,481,803 Oxiana 1,810,470 5,602,827 --------------- Total 16,895,781 - ------------------------------------------------------------------------------------ BERMUDA (1.0%) PartnerRe 99,529 7,363,155 - ------------------------------------------------------------------------------------ BRAZIL (5.2%) Aracruz Celulose ADR 52,008 4,191,844 Braskem Series A 1,101,800 9,382,241 Cia Vale do Rio Doce ADR 242,910 7,734,254 Cyrela Brazil Realty 393,100 6,517,365 Petroleo Brasileiro ADR 93,651 11,371,104 --------------- Total 39,196,808 - ------------------------------------------------------------------------------------ CANADA (1.7%) Barrick Gold 151,249 5,841,236 Eastern Platinum 1,091,100(b) 3,142,195 Research In Motion 34,540(b) 4,201,100 --------------- Total 13,184,531 - ------------------------------------------------------------------------------------ DENMARK (0.4%) Vestas Wind Systems 30,400(b) 3,333,250 - ------------------------------------------------------------------------------------ FINLAND (0.8%) Nokia 203,305 6,259,924 - ------------------------------------------------------------------------------------ GERMANY (5.6%) Allianz 44,810 9,160,690 Daimler 19,809 1,544,323 Deutsche Boerse 46,194 6,795,834 E.ON 37,158(d) 7,583,597 MTU Aero Engines Holding 104,594 4,814,468 Munich Re Group 21,727 4,206,642 RWE 36,846 4,253,867 Siemens 34,250 4,041,328 --------------- Total 42,400,749 - ------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) GREECE (0.5%) Piraeus Bank 120,000 $4,092,116 - ------------------------------------------------------------------------------------ HONG KONG (4.1%) China Mobile 351,500 6,048,369 China Overseas Land & Investment 2,198,000 4,625,468 Esprit Holdings 591,900 7,283,684 Great Eagle Holdings 1,424,607 4,103,889 Hang Lung Properties 1,033,000 4,201,881 Hongkong & Shanghai Hotels 2,548,000 4,368,075 --------------- Total 30,631,366 - ------------------------------------------------------------------------------------ INDIA (1.3%) Bharti Airtel 303,173(b) 6,719,101 DLF 175,461 3,052,710 --------------- Total 9,771,811 - ------------------------------------------------------------------------------------ IRELAND (0.5%) Bank of Ireland 262,201 3,664,135 - ------------------------------------------------------------------------------------ JAPAN (9.2%) AMADA 707,000 5,875,233 Asahi Glass 361,000 4,302,001 Canon 222,800 11,143,214 Chiba Bank 412,000 3,245,437 GOLDCREST 308,020 8,887,756 Mitsubishi Estate 382,000 11,095,893 Mitsubishi UFJ Financial Group 260,700 2,868,527 Mizuho Financial Group 999 5,188,613 Nintendo 7,600 4,173,896 Sony Financial Holdings 1,500 6,333,558 Trend Micro 147,000 5,528,230 --------------- Total 68,642,358 - ------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 14 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) MEXICO (1.8%) America Movil ADR Series L 148,208 $8,590,135 CEMEX ADR 186,902(b) 5,167,840 --------------- Total 13,757,975 - ------------------------------------------------------------------------------------ NETHERLANDS (0.7%) ASML Holding 196,899 5,635,339 - ------------------------------------------------------------------------------------ PORTUGAL (1.0%) Galp Energia Series B 301,512 7,325,348 - ------------------------------------------------------------------------------------ RUSSIA (0.8%) Gazprom ADR 118,670 6,283,577 - ------------------------------------------------------------------------------------ SINGAPORE (1.0%) DBS Group Holdings 529,000 7,747,743 - ------------------------------------------------------------------------------------ SOUTH AFRICA (1.1%) First Uranium 625,000(b) 4,071,500 Massmart Holdings 459,574 4,302,501 --------------- Total 8,374,001 - ------------------------------------------------------------------------------------ SOUTH KOREA (0.4%) Hyundai Department Store 32,000 3,385,230 - ------------------------------------------------------------------------------------ SPAIN (1.1%) Inditex 150,000 8,192,664 - ------------------------------------------------------------------------------------ SWEDEN (0.2%) Holmen Series B 54,400 1,745,105 - ------------------------------------------------------------------------------------ SWITZERLAND (8.1%) Nestle 34,043 16,333,016 Novartis 73,682 3,748,471 Petroplus Holdings 104,424(b) 6,537,211 Roche Holding 78,300 13,061,338 Sika 2,040 3,544,744 Syngenta 29,351 8,769,316 Xstrata 113,931 8,938,376 --------------- Total 60,932,472 - ------------------------------------------------------------------------------------ TAIWAN (1.9%) Asustek Computer 1,763,000 5,717,525 High Tech Computer 137,500 3,543,000 Hon Hai Precision Industry 908,370 5,262,672 --------------- Total 14,523,197 - ------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) UNITED KINGDOM (11.4%) Anglo American 76,072 $4,944,238 Autonomy 168,171(b) 2,863,770 BG Group 372,092 9,106,847 Carphone Warehouse Group 1,020,227 5,512,213 Drax Group 247,726 2,965,021 HSBC Holdings 400,927 7,010,691 Intl Power 637,047 5,563,433 Lloyds TSB Group 1,253,509 10,778,870 Prudential 605,562 8,307,443 Standard Chartered 184,753 6,589,820 Tesco 547,994 4,674,043 Tullow Oil 632,070 9,475,370 Vodafone Group 2,498,637 7,963,360 --------------- Total 85,755,119 - ------------------------------------------------------------------------------------ UNITED STATES (36.2%) Abercrombie & Fitch Cl A 39,950 2,968,685 Adobe Systems 164,158(b) 6,121,452 American Express 111,457 5,352,165 American Intl Group 52,288 2,415,706 Arch Coal 95,587 5,482,870 AT&T 210,958 8,166,184 Automatic Data Processing 160,513 7,094,675 Bank of America 109,559 4,112,845 Cisco Systems 292,428(b) 7,497,854 Comcast Cl A 459,022 9,432,902 Devon Energy 98,611 11,182,487 Diamond Offshore Drilling 47,842 5,999,866 DST Systems 53,487(b) 3,200,662 eBay 68,235(b) 2,135,073 Expedia 71,728(b) 1,811,849 Exxon Mobil 135,343 12,596,374 Freeport-McMoRan Copper & Gold 55,969 6,366,475 Gilead Sciences 150,991(b) 7,815,294 Goldman Sachs Group 32,606 6,239,810 Google Cl A 23,662(b) 13,588,850 IBM 115,713 13,966,559 Johnson & Johnson 184,878 12,403,465 JPMorgan Chase & Co 133,333 6,353,317 Laboratory Corp of America Holdings 49,844(b) 3,769,203
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 15
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) UNITED STATES (CONT.) Macy's 211,909 $5,359,178 Merck & Co 80,417 3,059,063 Microsoft 584,936 16,682,374 Newmont Mining 78,548 3,472,607 Norfolk Southern 78,893 4,700,445 Oracle 255,638(b) 5,330,052 PepsiCo 180,936 12,399,544 Philip Morris Intl 116,017(b) 5,920,348 Plum Creek Timber 185,993 7,595,954 Procter & Gamble 110,000 7,375,500 Republic Services 161,173 5,123,690 Schlumberger 21,217 2,133,369 St. Jude Medical 152,190(b) 6,662,878 Thermo Fisher Scientific 138,839(b) 8,034,613 Travelers Companies 90,000 4,536,000 Wal-Mart Stores 145,096 8,412,666 --------------- Total 272,872,903 - ------------------------------------------------------------------------------------ TOTAL COMMON STOCKS (Cost: $689,913,434) $741,966,657 - ------------------------------------------------------------------------------------
MONEY MARKET FUND (1.7%) SHARES VALUE(A) RiverSource Short-Term Cash Fund, 2.72% 12,881,046(f) $12,881,046 - ----------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $12,881,046) $12,881,046 - ----------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $702,794,480)(g) $754,847,703 ===================================================================================
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, 2008:
PERCENTAGE OF INDUSTRY NET ASSETS VALUE - ----------------------------------------------------------------------------------------- Aerospace & Defense 0.6% $4,814,468 Automobiles 0.2 1,544,323 Beverages 1.6 12,399,544 Biotechnology 2.3 17,297,097 Building Products 0.6 4,302,001 Capital Markets 0.8 6,239,810 Chemicals 2.9 21,696,301 Commercial Banks 6.8 51,185,952 Commercial Services & Supplies 0.7 5,123,690 Communications Equipment 2.4 17,958,878 Computers & Peripherals 3.1 23,227,084 Construction & Engineering 0.2 1,811,151 Construction Materials 0.7 5,167,840 Consumer Finance 0.7 5,352,165 Diversified Financial Services 2.3 17,261,996 Diversified Telecommunication Services 1.1 8,166,184 Electric Utilities 1.0 7,583,597 Electrical Equipment 0.4 3,333,250 Electronic Equipment & Instruments 0.7 5,262,672 Energy Equipment & Services 1.1 8,133,235
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 16 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT
PERCENTAGE OF INDUSTRY NET ASSETS VALUE - ----------------------------------------------------------------------------------------- Food & Staples Retailing 2.3% $17,389,210 Food Products 2.2 16,333,016 Health Care Equipment & Supplies 0.9 6,662,878 Health Care Providers & Services 0.5 3,769,203 Hotels, Restaurants & Leisure 0.6 4,368,075 Household Durables 2.0 15,405,121 Household Products 1.0 7,375,500 Independent Power Producers & Energy Traders 1.1 8,528,454 Industrial Conglomerates 0.5 4,041,328 Insurance 5.6 42,323,194 Internet & Catalog Retail 0.2 1,811,849 Internet Software & Services 2.1 15,723,923 IT Services 1.4 10,295,337 Life Sciences Tools & Services 1.1 8,034,613 Machinery 0.8 5,875,233 Media 1.2 9,432,902 Metals & Mining 6.6 50,113,708 Multiline Retail 1.2 8,744,408 Multi-Utilities 0.6 4,253,867 Office Electronics 1.5 11,143,214 Oil, Gas & Consumable Fuels 10.5 79,361,188 Paper & Forest Products 0.8 5,936,949 Pharmaceuticals 4.3 32,272,337 Real Estate Investment Trusts (REITs) 1.0 7,595,954 Real Estate Management & Development 3.6 27,079,841 Road & Rail 0.6 4,700,445 Semiconductors & Semiconductor Equipment 0.7 5,635,339 Software 5.4 40,699,774 Specialty Retail 3.2 23,957,246 Tobacco 0.8 5,920,348 Wireless Telecommunication Services 3.9 29,320,965 Other(1) 1.7 12,881,046 - ----------------------------------------------------------------------------------------- Total $754,847,703 - ----------------------------------------------------------------------------------------- (1) Cash & Cash Equivalents.
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. (d) At April 30, 2008, security was partially or fully on loan. See Note 5 to the financial statements. (e) Cash collateral received from security lending activity is invested in an affiliated money market fund and represents 1.0% of net assets. See Note 5 to the financial statements. The Fund's cash equivalent position is 0.7% of net assets. (f) Affiliated Money Market Fund - See Note 6 to the financial statements. The rate shown is the seven-day current annualized yield at April 30, 2008. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 17 NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (g) At April 30, 2008, the cost of securities for federal income tax purposes was approximately $702,794,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $83,136,000 Unrealized depreciation (31,082,000) - ------------------------------------------------------------------------------ Net unrealized appreciation $52,054,000 - ------------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com/funds. - -------------------------------------------------------------------------------- 18 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT FINANCIAL STATEMENTS ----------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 2008 (UNAUDITED) ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $689,913,434) $ 741,966,657 Affiliated money market fund (identified cost $12,881,046) 12,881,046 - ------------------------------------------------------------------------------ Total investments in securities (identified cost $702,794,480) 754,847,703 Cash 94,111 Foreign currency holdings (identified cost $5,638,388) 5,670,873 Capital shares receivable 711,613 Dividends receivable 2,376,775 Receivable for investment securities sold 2,412,383 - ------------------------------------------------------------------------------ Total assets 766,113,458 - ------------------------------------------------------------------------------ LIABILITIES Capital shares payable 495,383 Payable for investment securities purchased 2,191,765 Payable upon return of securities loaned 7,344,750 Accrued investment management services fee 15,879 Accrued distribution fee 7,122 Accrued transfer agency fee 3,143 Accrued administrative services fee 1,605 Accrued plan administration services fee 59 Other accrued expenses 145,400 - ------------------------------------------------------------------------------ Total liabilities 10,205,106 - ------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $ 755,908,352 ==============================================================================
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 19 STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) APRIL 30, 2008 (UNAUDITED) REPRESENTED BY Capital stock -- $.01 par value $ 904,765 Additional paid-in capital 1,040,051,224 Undistributed net investment income 1,282,815 Accumulated net realized gain (loss) (338,494,426) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 52,163,974 - ------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $ 755,908,352 ==============================================================================
Net assets applicable to outstanding shares: Class A $ 645,891,505 Class B $ 93,237,899 Class C $ 8,085,577 Class R2 $ 5,362 Class R3 $ 5,369 Class R4 $ 8,671,856 Class R5 $ 5,374 Class W $ 5,410 Net asset value per share of outstanding capital stock: Class A 76,641,089 $ 8.43 shares(1) Class B shares 11,780,941 $ 7.91 Class C shares 1,031,700 $ 7.84 Class R2 shares 634 $ 8.46 Class R3 shares 634 $ 8.47 Class R4 shares 1,020,194 $ 8.50 Class R5 shares 634 $ 8.48 Class W shares 639 $ 8.47 - ------------------------------------------------------------------------------------------- * Including securities on loan, at value $ 7,143,150 - -------------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $8.94. 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 FUND -- 2008 SEMIANNUAL REPORT STATEMENT OF OPERATIONS SIX MONTHS ENDED APRIL 30, 2008 (UNAUDITED) INVESTMENT INCOME Income: Dividends $ 7,817,510 Interest 7,507 Income distributions from affiliated money market fund 168,093 Fee income from securities lending 36,042 Less foreign taxes withheld (461,645) - ----------------------------------------------------------------------------- Total income 7,567,507 - ----------------------------------------------------------------------------- Expenses: Investment management services fee 3,311,655 Distribution fee Class A 808,809 Class B 461,256 Class C 37,833 Class R2 13 Class R3 7 Class W 7 Transfer agency fee Class A 654,511 Class B 99,410 Class C 7,882 Class R2 2 Class R3 2 Class R4 2,224 Class R5 2 Class W 5 Administrative services fee 295,861 Plan administration services fee Class R2 7 Class R3 7 Class R4 11,118 Compensation of board members 7,957 Custodian fees 122,780 Printing and postage 86,260 Registration fees 60,550 Professional fees 18,440 Other 12,832 - ----------------------------------------------------------------------------- Total expenses 5,999,430 Expenses waived/reimbursed by the Investment Manager and its affiliates (955) Earnings and bank fee credits on cash balances (12,653) - ----------------------------------------------------------------------------- Total net expenses 5,985,822 - ----------------------------------------------------------------------------- Investment income (loss) -- net 1,581,685 - -----------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 21 STATEMENT OF OPERATIONS (CONTINUED) SIX MONTHS ENDED APRIL 30, 2008 (UNAUDITED) REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $ 6,547,457 Foreign currency transactions (19,614) - ----------------------------------------------------------------------------- Net realized gain (loss) on investments 6,527,843 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (111,715,297) - ----------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (105,187,454) - ----------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(103,605,769) =============================================================================
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 22 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2008 OCT. 31, 2007 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 1,581,685 $ 1,375,121 Net realized gain (loss) on investments 6,527,843 130,447,745 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (111,715,297) 67,887,744 - ------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (103,605,769) 199,710,610 - ------------------------------------------------------------------------------------------ Distributions to shareholders from: Net investment income Class A (2,895,413) (5,052,007) Class B -- (46,137) Class C -- (24,579) Class R2 (16) (60) Class R3 (28) (61) Class R4 (51,464) (77,098) Class R5 (43) (61) Class W (24) (61) - ------------------------------------------------------------------------------------------ Total distributions (2,946,988) (5,200,064) - ------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A 64,976,232 103,394,162 Class B 13,513,665 16,189,120 Class C 1,557,420 2,137,681 Class R2 -- 5,000 Class R3 -- 5,000 Class R4 1,488,296 2,445,834 Class R5 -- 5,000 Class W -- 5,000 Reinvestment of distributions at net asset value Class A 2,842,401 4,972,629 Class B -- 45,360 Class C -- 23,936 Class R4 51,464 77,098 Payments for redemptions Class A (67,274,329) (141,986,972) Class B (11,351,706) (50,692,015) Class C (696,292) (1,286,730) Class R4 (1,451,700) (4,449,426) - ------------------------------------------------------------------------------------------ Increase (decrease) in net assets from capital share transactions 3,655,451 (69,109,323) - ------------------------------------------------------------------------------------------ Total increase (decrease) in net assets (102,897,306) 125,401,223 Net assets at beginning of period 858,805,658 733,404,435 - ------------------------------------------------------------------------------------------ Net assets at the end of period $ 755,908,352 $ 858,805,658 ========================================================================================== Undistributed net investment income $ 1,282,815 $ 2,648,118 - ------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS TO APRIL 30, 2008) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Threadneedle Global Equity Fund (the Fund) (formerly RiverSource Global Equity Fund) is a series of RiverSource Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). Under normal market conditions, at least 80% of the Fund's net assets will be invested in equity securities, including companies located in developed and emerging countries. The Fund offers Class A, Class B, Class C, Class R2, Class R3, Class R4, Class R5 and Class W shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class R2, Class R3, Class R4 and Class R5 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. - - Class W shares are sold without a front-end sales charge or CDSC and are offered through qualifying discretionary accounts. At April 30, 2008, RiverSource Investments, LLC (the Investment Manager) owned 100% of Class R2, Class R3, Class R5 and Class W shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at - -------------------------------------------------------------------------------- 24 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange 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 New York Stock Exchange, 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 equity 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 New York Stock Exchange. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. OPTION TRANSACTIONS To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Fund may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. Cash collateral may be collected by the Fund to secure certain over-the-counter options trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. The Fund also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 25 is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. During the six months ended April 30, 2008, the Fund had no outstanding option contracts. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these future contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Futures are valued daily based upon the last sale price at the close of market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. At April 30, 2008, the Fund had no outstanding futures contracts. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At April 30, 2008, foreign currency holdings consisted of multiple denominations. The Fund may enter into forward foreign currency contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined - -------------------------------------------------------------------------------- 26 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete its contract obligations. At April 30, 2008, the Fund had no outstanding forward foreign currency contracts. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to the shareholders. No provision for income or excise taxes is thus required. The Fund has adopted Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes," which is effective for fiscal periods beginning after Dec. 15, 2006. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 prescribes a two-step process to recognize and measure a tax position taken or expected to be taken in a tax return. The first step is to determine whether a tax position has met the more-likely-than-not recognition threshold and the second step is to measure a tax position that meets the threshold to determine the amount of benefit to recognize. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 27 RECENT ACCOUNTING PRONOUNCEMENTS In March 2008, the FASB issued Statement on Financial Accounting Standards No. 161 (SFAS "161"), "Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of April 30, 2008, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. On Sept. 20, 2006, the FASB released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. The application of SFAS 157 will be effective for the Fund's fiscal year beginning Nov. 1, 2008. The adoption of SFAS 157 is not anticipated to have a material impact on the Fund's financial statements; however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. EXPENSES AND SALES CHARGES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.80% to - -------------------------------------------------------------------------------- 28 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 0.57% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment determined monthly by measuring the percentage difference over a rolling 12-month period between the annualized performance of one Class A share of the Fund and the annualized performance of the Lipper Global Funds Index. In certain circumstances, the Board may approve a change in the index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment increased the fee by $386,870 for the six months ended April 30, 2008. The management fee for the six months ended April 30, 2008 was 0.88% of the Fund's average daily net assets, including an adjustment under the terms of the performance incentive arrangement. 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. Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. The fee for the six months ended April 30, 2008 was 0.08% of the Fund's average daily net assets. 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, 2008, other expenses paid to this company were $2,529. Compensation of Board members includes, for a former Board Chair, compensation as well as retirement benefits. Certain other aspects of a former Board Chair's compensation, including health benefits and payment of certain other expenses, are included under other expenses. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $19.50 for Class A, - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 29 $20.50 for Class B and $20.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R2, Class R3, Class R4 and Class R5 shares and an annual asset-based fee at a rate of 0.20% of the Fund's average daily net assets attributable to Class W shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the Statement of Operations. 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. The Fund has an agreement with RiverSource 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. Sales charges received by the Distributor for distributing Fund shares were $455,305 for Class A, $23,865 for Class B and $497 for Class C for the six months ended April 30, 2008. 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. For the six months ended April 30, 2008, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds) were 1.59% for Class R2, 1.34% for Class R3 and 1.32% for Class R4. Of these waived/reimbursed fees and expenses, the plan administration services fees were $7, $7 and $941 for Class R2, Class R3 and Class R4, respectively. In addition, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Oct. 31, 2008, such that net expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment, will not exceed 1.27% of the Fund's average daily net assets for Class R4, unless sooner terminated at the discretion of the Board. - -------------------------------------------------------------------------------- 30 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT During the six months ended April 30, 2008, the Fund's transfer agency fees were reduced by $12,653 as a result of bank fee credits from overnight cash balances. The Fund pays custodian fees to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $356,585,861 and $353,144,605, respectively, for the six months ended April 30, 2008. Realized gains and losses are determined on an identified cost basis. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED APRIL 30, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - --------------------------------------------------------------------------------------- Class A 7,685,857 328,601 (8,025,325) (10,867) Class B 1,712,357 -- (1,440,701) 271,656 Class C 199,005 -- (90,132) 108,873 Class R4 174,907 5,909 (173,759) 7,057 - ---------------------------------------------------------------------------------------
YEAR ENDED OCT. 31, 2007 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - --------------------------------------------------------------------------------------- Class A 12,264,903 636,700 (17,108,766) (4,207,163) Class B 2,095,921 6,146 (6,192,934) (4,090,867) Class C 276,396 3,279 (164,135) 115,540 Class R2* 634 -- -- 634 Class R3* 634 -- -- 634 Class R4 288,576 9,796 (531,402) (233,030) Class R5* 634 -- -- 634 Class W** 639 -- -- 639 - ---------------------------------------------------------------------------------------
* For the period from Dec. 11, 2006 (inception date) to Oct. 31, 2007. ** For the period from Dec. 1, 2006 (inception date) to Oct. 31, 2007. 5. LENDING OF PORTFOLIO SECURITIES In order to generate additional income, the Fund may lend securities representing up to one-third of the value of its total assets (which includes collateral for securities on loan) to broker-dealers, banks, or other institutional borrowers of securities. The Fund receives collateral in the form of cash and U.S. government securities, equal to at least 100% of the value of securities loaned, which is marked - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 31 to the market value of the loaned securities daily until the securities are returned, e.g., if the value of the securities on loan increases, additional cash collateral is provided by the borrower. The Investment Manager serves as securities lending agent for the Fund under the Investment Management Services Agreement pursuant to which the Fund has agreed to reimburse the Investment Manager for expenses incurred by it in connection with the lending program, and pursuant to guidelines adopted by and under the oversight of the Board. At April 30, 2008, securities valued at $7,143,150 were on loan to brokers. For collateral, the Fund received $7,344,750 in cash. Cash collateral received is invested in an affiliated money market fund and short-term securities, including U.S. government securities or other high-grade debt obligations, which are included in the "Portfolio of Investments." Income from securities lending amounted to $36,042 for the six months ended April 30, 2008. Expenses paid to the Investment Manager were $455 for the six months ended April 30, 2008, which are included in other expenses on the Statement of Operations. The risks to the Fund of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. 6. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term Cash Fund aggregated $168,079,284 and $167,850,840, respectively, for the six months ended April 30, 2008. 7. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $500 million. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.30%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. The Fund had no borrowings during the six months ended April 30, 2008. - -------------------------------------------------------------------------------- 32 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 8. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund had a capital loss carry-over of $344,634,903 at Oct. 31, 2007, that if not offset by capital gains will expire as follows:
2009 2010 2011 $170,490,067 $143,634,885 $30,509,951
It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. 9. RISKS RELATING TO CERTAIN INVESTMENTS FOREIGN/EMERGING MARKETS RISK Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging markets may accentuate these risks. 10. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to defendants' motion to dismiss the complaint, the 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 on August 8, 2007. 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 - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 33 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. - -------------------------------------------------------------------------------- 34 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 11. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results. CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(H) 2007 2006 2005 2004 Net asset value, beginning of period $9.61 $7.52 $6.23 $5.16 $4.62 - ---------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02(b) .02(b) .01 .02 -- Net gains (losses) (both realized and unrealized) (1.16) 2.13 1.30 1.08 .54 - ---------------------------------------------------------------------------------------------------------------- Total from investment operations (1.14) 2.15 1.31 1.10 .54 - ---------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.06) (.02) (.03) -- - ---------------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.43 $9.61 $7.52 $6.23 $5.16 - ---------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $646 $737 $608 $446 $364 - ---------------------------------------------------------------------------------------------------------------- Total expenses(c),(d) 1.49%(e) 1.39% 1.51% 1.57% 1.41% - ---------------------------------------------------------------------------------------------------------------- Net investment income (loss) .52%(e) .28% .23% .33% .07% - ---------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 46% 100% 112% 93% 104% - ---------------------------------------------------------------------------------------------------------------- Total return(f) (11.90%)(g) 28.82% 21.01% 21.48% 11.72% - ----------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of a sales charge. (g) Not annualized. (h) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 35 CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(I) 2007 2006 2005 2004 Net asset value, beginning of period $9.02 $7.06 $5.88 $4.87 $4.40 - ---------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01)(b) (.04)(b) (.01) (.02) (.03) Net gains (losses) (both realized and unrealized) (1.10) 2.00 1.19 1.03 .50 - ---------------------------------------------------------------------------------------------------------------- Total from investment operations (1.11) 1.96 1.18 1.01 .47 - ---------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- .00(c) -- -- -- - ---------------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.91 $9.02 $7.06 $5.88 $4.87 - ---------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $93 $104 $110 $102 $104 - ---------------------------------------------------------------------------------------------------------------- Total expenses(d),(e) 2.25%(f) 2.15% 2.28% 2.34% 2.18% - ---------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.24%)(f) (.45%) (.54%) (.41%) (.66%) - ---------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 46% 100% 112% 93% 104% - ---------------------------------------------------------------------------------------------------------------- Total return(g) (12.31%)(h) 27.81% 20.07% 20.74% 10.68% - ----------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Rounds to zero. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Total return does not reflect payment of a sales charge. (h) Not annualized. (i) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- 36 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(H) 2007 2006 2005 2004 Net asset value, beginning of period $8.93 $7.02 $5.85 $4.85 $4.38 - -------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01)(b) (.04)(b) (.01) (.02) (.02) Net gains (losses) (both realized and unrealized) (1.08) 1.98 1.18 1.03 .49 - -------------------------------------------------------------------------------------------------- Total from investment operations (1.09) 1.94 1.17 1.01 .47 - -------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.03) -- (.01) -- - -------------------------------------------------------------------------------------------------- Net asset value, end of period $7.84 $8.93 $7.02 $5.85 $4.85 - -------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $8 $8 $6 $2 $1 - -------------------------------------------------------------------------------------------------- Total expenses(c),(d) 2.25%(e) 2.15% 2.27% 2.33% 2.19% - -------------------------------------------------------------------------------------------------- Net investment income (loss) (.22%)(e) (.48%) (.50%) (.53%) (.69%) - -------------------------------------------------------------------------------------------------- Portfolio turnover rate 46% 100% 112% 93% 104% - -------------------------------------------------------------------------------------------------- Total return(f) (12.21%)(g) 27.76% 20.03% 20.89% 10.73% - --------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of a sales charge. (g) Not annualized. (h) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 37 CLASS R2
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(K) 2007(B) Net asset value, beginning of period $9.62 $7.89 - ------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .02 (.01) Net gains (losses) (both realized and unrealized) (1.16) 1.84 - ------------------------------------------------------------------------------------------------------ Total from investment operations (1.14) 1.83 - ------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.02) (.10) - ------------------------------------------------------------------------------------------------------ Net asset value, end of period $8.46 $9.62 - ------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - ------------------------------------------------------------------------------------------------------ Gross expenses prior to expense waiver/reimbursement(d),(e) 1.84%(f) 1.74%(f) - ------------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement (e),(g),(h) 1.59%(f) 1.74%(f) - ------------------------------------------------------------------------------------------------------ Net investment income (loss) .42%(f) (.13%)(f) - ------------------------------------------------------------------------------------------------------ Portfolio turnover rate 46% 100% - ------------------------------------------------------------------------------------------------------ Total return(i) (11.81%)(j) 23.41%(j) - ------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11,2006 (inception date) to Oct. 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have waived/reimbursed certain fees and expenses. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- 38 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT CLASS R3
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(K) 2007(B) Net asset value, beginning of period $9.65 $7.89 - ------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .03 .01 Net gains (losses) (both realized and unrealized) (1.17) 1.85 - ------------------------------------------------------------------------------------------------------ Total from investment operations (1.14) 1.86 - ------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.10) - ------------------------------------------------------------------------------------------------------ Net asset value, end of period $8.47 $9.65 - ------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - ------------------------------------------------------------------------------------------------------ Gross expenses prior to expense waiver/reimbursement(d),(e) 1.60%(f) 1.49%(f) - ------------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement (e),(g),(h) 1.34%(f) 1.49%(f) - ------------------------------------------------------------------------------------------------------ Net investment income (loss) .66%(f) .12%(f) - ------------------------------------------------------------------------------------------------------ Portfolio turnover rate 46% 100% - ------------------------------------------------------------------------------------------------------ Total return(i) (11.79%)(j) 23.80%(j) - ------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to Oct. 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have waived/reimbursed certain fees and expenses. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 39 CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(J) 2007 2006 2005 2004 Net asset value, beginning of period $9.70 $7.60 $6.29 $5.20 $4.65 - ---------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(b) .04(b) .02 .04 .01 Net gains (losses) (both realized and unrealized) (1.18) 2.13 1.31 1.09 .54 - ---------------------------------------------------------------------------------------------------- Total from investment operations (1.15) 2.17 1.33 1.13 .55 - ---------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.07) (.02) (.04) -- - ---------------------------------------------------------------------------------------------------- Net asset value, end of period $8.50 $9.70 $7.60 $6.29 $5.20 - ---------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $9 $10 $9 $6 $4 - ---------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement (c),(d) 1.34%(e) 1.23% 1.32% 1.38% 1.23% - ---------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement (d),(f),(g) 1.32%(e) 1.23% 1.32% 1.38% 1.23% - ---------------------------------------------------------------------------------------------------- Net investment income (loss) .69%(e) .45% .44% .49% .25% - ---------------------------------------------------------------------------------------------------- Portfolio turnover rate 46% 100% 112% 93% 104% - ---------------------------------------------------------------------------------------------------- Total return(h) (11.88%)(i) 28.85% 21.26% 21.90% 11.88% - ----------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratio. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- 40 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(I) 2007(B) Net asset value, beginning of period $9.69 $7.89 - -------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .04 .05 Net gains (losses) (both realized and unrealized) (1.18) 1.85 - -------------------------------------------------------------------------------------------------------- Total from investment operations (1.14) 1.90 - -------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.10) - -------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.48 $9.69 - -------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - -------------------------------------------------------------------------------------------------------- Total expenses (d),(e) 1.09%(f) .99%(f) - -------------------------------------------------------------------------------------------------------- Net investment income (loss) .92%(f) .62%(f) - -------------------------------------------------------------------------------------------------------- Portfolio turnover rate 46% 100% - -------------------------------------------------------------------------------------------------------- Total return(g) (11.81%)(h) 24.33%(h) - --------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to Oct. 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Total return does not reflect payment of a sales charge. (h) Not annualized. (i) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 41 CLASS W
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2008(I) 2007(B) Net asset value, beginning of period $9.66 $7.83 - -------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .02 .02 Net gains (losses) (both realized and unrealized) (1.17) 1.91 - -------------------------------------------------------------------------------------------------------- Total from investment operations (1.15) 1.93 - -------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.10) - -------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.47 $9.66 - -------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - -------------------------------------------------------------------------------------------------------- Total expenses (d),(e) 1.48%(f) 1.39%(f) - -------------------------------------------------------------------------------------------------------- Net investment income (loss) .92%(f) .20%(f) - -------------------------------------------------------------------------------------------------------- Portfolio turnover rate 46% 100% - -------------------------------------------------------------------------------------------------------- Total return(g) (11.94%)(h) 24.87%(h) - --------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 1, 2006 (inception date) to Oct. 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended April 30, 2008 were less than 0.01% of average net assets. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Total return does not reflect payment of a sales charge. (h) Not annualized. (i) Six months ended April 30, 2008 (Unaudited). - -------------------------------------------------------------------------------- 42 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- RiverSource Investments, LLC ("RiverSource Investments" or the "investment manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement") RiverSource Investments provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). In addition, under the subadvisory agreement (the "Subadvisory Agreement") between RiverSource Investments and the subadviser (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 the IMS Agreement and the Subadvisory Agreement (together, the "Advisory Agreements"). RiverSource Investments prepared detailed reports for the Board and its Contracts Committee in March and April 2008, including reports based on data provided by independent organizations to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource Investments addressing the services RiverSource Investments provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts, Investment Review and Compliance Committees in determining whether to continue the Advisory Agreements. At the April 9-10, 2008 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the Advisory Agreements. Nature, Extent and Quality of Services Provided by RiverSource Investments and the Subadviser: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource Investments and the Subadviser, as well as their expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource Investments, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, particularly in the areas of trading systems, new product initiatives, legal and compliance. Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource Investments, the Board considered the quality of the administrative and transfer agency services provided by RiverSource Investments' affiliates to the Fund. The Board also reviewed the - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 43 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- financial condition of RiverSource Investments (and its affiliates) and the Subadviser, and each entity's ability to carry out its responsibilities under the Advisory Agreements. The Board also discussed the acceptability of the terms of the Advisory Agreements (including the relatively broad scope of services required to be performed by RiverSource Investments and the Subadviser). The Board concluded that the services being performed under the Advisory Agreements were of a reasonably high quality, particularly in light of recent market conditions. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that RiverSource Investments, its affiliates and the Subadviser were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the Advisory Agreements, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods (including since inception), recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2006 to December 2007. The Board observed that the Fund's investment performance met expectations. Additionally, the Board reviewed the performance of the Subadviser and considered management's rationale for recommending the continued retention of the Subadviser. Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource Investments and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the Advisory Agreements. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to RiverSource Investments' profitability. The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund are - -------------------------------------------------------------------------------- 44 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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) 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. 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 the expected profitability of RiverSource Investments and its affiliates in connection with RiverSource Investments providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource Investments and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource Investments as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees and subadvisory fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 10, 2008, the Board, including all of the Independent Directors, approved the renewal of the Advisory Agreements. - -------------------------------------------------------------------------------- THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT 45 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 RiverSource Funds at (888) 791-3380; contacting your financial institution; 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. - -------------------------------------------------------------------------------- 46 THREADNEEDLE GLOBAL EQUITY FUND -- 2008 SEMIANNUAL REPORT THREADNEEDLE GLOBAL EQUITY FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. Threadneedle(R) mutual funds are distributed by RiverSource Distributors, Inc., Member FINRA, managed by RiverSource Investments, LLC, and subadvised by Threadneedle International Limited. These companies are part of Ameriprise Financial, Inc. (THREADNEEDLE LOGO) (C) 2008 RiverSource Distributors, Inc. S-6451 W (6/08)
Item 2. Code of Ethics. Not applicable for semi-annual reports. Item 3. Audit Committee Financial Expert. Not applicable for semi-annual reports. Item 4. Principal Accountant Fees and Services. Not applicable for semi-annual reports. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. The complete schedule of investments is included in Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of matters to a vote of security holders. Not applicable. Item 11. Controls and Procedures. (a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's Principal Financial Officer and Principal Executive Officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal controls over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) Not applicable for semi-annual reports. (a)(2) Separate certification for the Registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX.99.CERT. (a)(3) Not applicable. (b) A certification by the Registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached as EX.99.906 CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) RiverSource Global Series, Inc. By /s/ Patrick T. Bannigan ---------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date July 3, 2008 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By /s/ Patrick T. Bannigan ---------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date July 3, 2008 By /s/ Jeffrey P. Fox ---------------------------------- Jeffrey P. Fox Treasurer and Principal Financial Officer Date July 3, 2008 EX-99.CERT 2 c26984exv99wcert.txt CERTIFICATION Certification Pursuant to 270.30a-2 of the Investment Company Act of 1940 I, Patrick T. Bannigan, certify that: 1. I have reviewed this report on Form N-CSR of RiverSource Global Series, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 23, 2008 /s/ Patrick T. Bannigan - ------------------------------------- Name: Patrick T. Bannigan Title: President and Principal Executive Officer Certification Pursuant to 270.30a-2 of the Investment Company Act of 1940 I, Jeffrey P. Fox, certify that: 1. I have reviewed this report on Form N-CSR of RiverSource Global Series, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 23, 2008 /s/ Jeffrey P. Fox - ------------------------------------- Name: Jeffrey P. Fox Title: Treasurer and Principal Financial Officer EX-99.906CERT 3 c26984exv99w906cert.txt 906 CERTIFICATION 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 23, 2008 /s/ Patrick T. Bannigan ---------------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date: June 23, 2008 /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-----