EX-99.17(G) 15 c50116e.txt Annual Report (THREADNEEDLE LOGO) THREADNEEDLE EMERGING MARKETS FUND ANNUAL REPORT FOR THE PERIOD ENDED OCTOBER 31, 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.............. 3 Manager Commentary................. 6 The Fund's Long-term Performance... 12 Fund Expenses Example.............. 14 Portfolio of Investments........... 16 Statement of Assets and Liabilities...................... 20 Statement of Operations............ 21 Statements of Changes in Net Assets........................... 22 Financial Highlights............... 23 Notes to Financial Statements...... 29 Report of Independent Registered Public Accounting Firm........... 44 Federal Income Tax Information..... 46 Board Members and Officers......... 47 Proxy Voting....................... 52
RIVERSOURCE FAMILY OF FUNDS Threadneedle Funds are a part of the RiverSource family of funds that includes funds branded "RiverSource," "RiverSource Partners," and "Threadneedle." These funds share the same Board of Directors/Trustees and officers. Please see the pages that follow this report for a list of mutual funds that are included in the RiverSource family 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. -------------------------------------------------------------------------------- 2 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY -------------------------------------------------------------------------------- > The Threadneedle Emerging Markets Fund (the Fund) Class A shares declined 57.79% (excluding sales charge) for the 12 months ended Oct. 31, 2008. > The Fund underperformed its benchmark, the Morgan Stanley Capital International (MSCI) Emerging Markets Index, which fell 56.22%. > The Fund's peer group, the Lipper Emerging Markets Funds Index, declined 56.42% for the period. ANNUALIZED TOTAL RETURNS (for period ended Oct. 31, 2008) --------------------------------------------------------------------------------
1 year 3 years 5 years 10 years --------------------------------------------------------------------- Threadneedle Emerging Markets Fund Class A (excluding sales charge) -57.79% -0.71% +8.42% +9.06% --------------------------------------------------------------------- MSCI Emerging Markets Index (unmanaged) -56.22% -0.07% +9.87% +10.05% --------------------------------------------------------------------- Lipper Emerging Markets Funds Index -56.42% -2.03% +8.74% +9.39% ---------------------------------------------------------------------
(See "The Fund's Long-term Performance" for Index descriptions) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial 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. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix 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 Net expenses expenses -------------------------------------- Class A 1.87% 1.87% -------------------------------------- Class B 2.62% 2.62% -------------------------------------- Class C 2.63% 2.63% -------------------------------------- Class I 1.42% 1.42% -------------------------------------- Class R4 1.73% 1.72%(a) -------------------------------------- Class R5 1.47% 1.47% --------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Oct. 31, 2009, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment (that increased the management fee by 0.08% for the year ended Oct. 31, 2008), will not exceed 1.64% for Class R4. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. -------------------------------------------------------------------------------- 4 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------
AT OCT. 31, 2008 SINCE Without sales charge 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION* Class A (inception 11/13/96) -57.79% -0.71% +8.42% +9.06% N/A --------------------------------------------------------------------------- Class B (inception 11/13/96) -58.08% -1.43% +7.57% +8.22% N/A --------------------------------------------------------------------------- Class C (inception 6/26/00) -58.15% -1.42% +7.61% N/A +3.48% --------------------------------------------------------------------------- Class I (inception 3/4/04) -57.63% -0.28% N/A N/A +5.37% --------------------------------------------------------------------------- Class R4 (inception 11/13/96) -57.58% -0.44% +8.68% +9.32% N/A --------------------------------------------------------------------------- Class R5 (inception 08/1/08) N/A N/A N/A N/A -44.96%** --------------------------------------------------------------------------- With sales charge Class A (inception 11/13/96) -60.20% -2.64% +7.15% +8.50% N/A --------------------------------------------------------------------------- Class B (inception 11/13/96) -59.70% -2.22% +7.32% +8.22% N/A --------------------------------------------------------------------------- Class C (inception 6/26/00) -58.41% -1.42% +7.61% N/A +3.48% ---------------------------------------------------------------------------
AT SEPT. 30, 2008 SINCE Without sales charge 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION* Class A (inception 11/13/96) -33.20% +8.23% +17.68% +13.60% N/A ------------------------------------------------------------------------- Class B (inception 11/13/96) -33.74% +7.40% +16.77% +12.73% N/A ------------------------------------------------------------------------- Class C (inception 6/26/00) -33.75% +7.40% +16.74% N/A +7.67% ------------------------------------------------------------------------- Class I (inception 3/4/04) -32.91% +8.72% N/A N/A +13.25% ------------------------------------------------------------------------- Class R4 (inception 11/13/96) -32.86% +8.52% +17.94% +13.87% N/A ------------------------------------------------------------------------- Class R5 (inception 08/1/08) N/A N/A N/A N/A -23.61%** ------------------------------------------------------------------------- With sales charge Class A (inception 11/13/96) -37.04% +6.11% +16.28% +13.01% N/A ------------------------------------------------------------------------- Class B (inception 11/13/96) -36.29% +6.54% +16.56% +12.73% N/A ------------------------------------------------------------------------- Class C (inception 6/26/00) -34.26% +7.40% +16.74% N/A +7.67% -------------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R4 and Class R5 shares. Class I, Class R4 and Class R5 shares are available to institutional investors only. *For classes with less than 10 years performance. **Not annualized. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 5 MANAGER COMMENTARY ------------------------------------------------------------- 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 fiscal year ended Oct. 31, 2008. Threadneedle, an indirect wholly-owned subsidiary of Ameriprise Financial, Inc., acts as the subadvisor to the Fund. Dear Shareholders, The Threadneedle Emerging Markets Fund (the Fund) Class A shares declined 57.79% (excluding sales charge) for the 12 months ended Oct. 31, 2008. The Fund underperformed its benchmark, the Morgan Stanley Capital International (MSCI) Emerging Markets Index, which fell 56.22%. The Fund's peer group, the Lipper Emerging Markets Funds Index, declined 56.42% for the period. COUNTRY DIVERSIFICATION (at Oct. 31, 2008; % of portfolio assets) --------------------------------------------------------------------- Bermuda 1.0% ------------------------------------------------ Brazil 12.2% ------------------------------------------------ Canada 0.8% ------------------------------------------------ China 14.4% ------------------------------------------------ Czech Republic 1.1% ------------------------------------------------ Hong Kong 7.5% ------------------------------------------------ India 7.3% ------------------------------------------------ Indonesia 1.4% ------------------------------------------------ Israel 6.7% ------------------------------------------------ Malaysia 1.3% ------------------------------------------------ Mexico 6.7% ------------------------------------------------ Norway 0.1% ------------------------------------------------ Russia 7.6% ------------------------------------------------ South Africa 8.3% ------------------------------------------------ South Korea 9.1% ------------------------------------------------ Taiwan 7.4% ------------------------------------------------ Thailand 1.1% ------------------------------------------------ Turkey 1.2% ------------------------------------------------ Other(1) 4.8% ------------------------------------------------
(1) Cash & Cash Equivalents. -------------------------------------------------------------------------------- 6 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT -------------------------------------------------------------------------------- SIGNIFICANT PERFORMANCE FACTORS This has been a very difficult period for emerging market equities. The bull market cycle for the emerging market universe peaked last October, just before the start of the Fund's fiscal period. Since then the U.S. credit crisis has caused increased risk aversion and a shortage of liquidity in the global banking system. Investors have sold securities perceived to be riskier and reinvested the assets in dollar-denominated securities, pushing the value of the dollar higher relative to most emerging market currencies. Rising risk aversion has reduced the amount of money people are willing to invest in emerging markets and falling demand for these securities has driven down equity prices. Emerging market economies are quite sensitive to global economic trends because they are typically large exporters of either commodities or manufactured goods. Domestic consumption tends to be a smaller percentage of the gross national product in emerging market countries. The economic slowdown in developed nations has reduced demand for commodities and other emerging market exports. As a result, economic growth rates in emerging market countries have also declined. For the fiscal year, there was little difference in the performance of various sectors or the results from different regions in the emerging market universe. Asia underperformed, while Latin America and Eastern TOP TEN HOLDINGS (at Oct. 31, 2008; % of portfolio assets) --------------------------------------------------------------------- China Mobile (Hong Kong) 6.5% ------------------------------------------------- Gazprom ADR (Russia) 4.4% ------------------------------------------------- Samsung Electronics (South Korea) 4.0% ------------------------------------------------- Redecard (Brazil) 3.7% ------------------------------------------------- Taiwan Semiconductor Mfg ADR (Taiwan) 3.3% ------------------------------------------------- Petroleo Brasileiro ADR (Brazil) 3.1% ------------------------------------------------- Industrial & Commercial Bank of China 3.0% Series H (China) ------------------------------------------------- Teva Pharmaceutical Inds ADR (Israel) 2.9% ------------------------------------------------- Ping An Insurance Group of China Series H 2.7% (China) ------------------------------------------------- America Movil ADR Series L (Mexico) 2.3% -------------------------------------------------
For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- Europe/the Mid East/Africa slightly outperformed the MSCI Emerging Markets Index. The Fund's results suffered from a larger weighting in Russia than the MSCI Emerging Markets Index, while being overweight in Brazil was advantageous. Cyclical sectors such as industrials, materials, financials and energy were the weaker performers within the MSCI Emerging Markets Index. Health care was the only sector to hold up much better than the overall MSCI Emerging Markets Index. The Fund entered the period with a larger materials weighting than the MSCI Emerging Markets Index and, on average, maintained a larger energy weighting throughout the period. Though these positions were helpful to performance early in the fiscal year, they were detrimental in the latter months as it became clear that the world economy, including China, was slowing. The portfolio benefited from having a larger health care weighting and smaller industrials and financials positions than the MSCI Emerging Markets Index. Stock selection was mainly responsible for the Fund's underperformance of the MSCI Emerging Markets Index. Three Russian holdings were key detractors. Coal and steel company MECHEL came under political pressure and declined on concerns that the Russian government might appropriate some of its assets. MMC NORILSK NICKEL, a mining company that is the world's largest nickel producer, also suffered from fear that it might ultimately pass into state ownership. Energy company ROSNEFT OIL declined on concerns about its high level of short-term debt. The Russian government is the company's majority shareholder so the credit issues should not have been a problem. However, the whole Russian market weakened during the period. We gradually sold the portfolio's holdings of Mechel and Rosneft. REDECARD in Brazil had a positive effect on relative performance. One of the portfolio's larger holdings at the beginning of the fiscal year, Redecard has the MasterCard franchise in Brazil and has produced very good results this year. We added to the portfolio's holdings throughout the period. The company is a transaction processor that does not take on credit risk, but benefits from increased volume as people use credit cards more often in place of cash. We think the outlook for the company remains favorable. It has a good dividend yield and the Brazilian economy seems to be somewhat insulated from the global slowdown. -------------------------------------------------------------------------------- 8 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT -------------------------------------------------------------------------------- Exports are a lesser percentage of Brazil's GDP than in other emerging market countries, and Brazilian consumers have less debt so they have not been reducing spending as much as in other nations. CHANGES TO THE FUND'S PORTFOLIO We decreased the portfolio's Russian exposure very significantly. We also moved Brazil from an overweight to a weighting about equal to the MSCI Emerging Markets Index. Though we think Brazil is well positioned for the global slowdown, the market has a large number of commodity companies and we reduced our exposure in that sector, resulting in a reduction in the portfolio's Brazil weighting. We maintained exposure to Brazil's domestic economy. We increased the portfolio's holdings in China, which became the largest country allocation in the Fund. Our strategy is to focus the portfolio on countries whose economies are in the strongest position to withstand the global economic slowdown. The Chinese government has a healthy fiscal surplus, has relatively low external debt and has announced a massive infrastructure program to counter the loss of export demand. The Chinese banking system is well funded, with a low ratio of loans to deposits, so we believe it is in a position to increase lending. In our view, China appears well positioned to prevail through the global slowdown. We kept the portfolio very underweight in South Korea and Taiwan due to their dependence on the consumer electronics industry and their indirect exposure to consumer and business spending in developed markets. The domestic banking systems We have focused on companies that we believe have solid franchises, stable revenue generators and healthy balance sheets. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 9 MANAGER COMMENTARY (continued) ------------------------------------------------- in both countries are not well funded and consumers have high debt so domestic spending may suffer as well. Regarding the portfolio's sector weightings, we reduced exposure to the materials sector, particularly steel and iron ore stocks. We also reduced the energy weighting. We increased holdings of health care stocks and software companies within the technology sector. We moved from an underweight in the financials sector to an overweight. Though financials stocks in emerging markets have suffered in sympathy with the financials sell-off in developed markets, we believe most emerging market financial stocks have better funding structures and higher asset quality than their counterparts in the U.S. and Europe. We have added to what we consider the most attractive banks from a quality and funding perspective. We have found these mainly in China, Brazil and South Africa. We sold the portfolio's holdings of SBERBANK in Russia because of concerns about the security of Russia's banking sector. OUR FUTURE STRATEGY In summary, we have positioned the portfolio quite defensively for what is clearly a downturn in the global economy. We have focused on companies that we believe have solid franchises, stable revenue generators and healthy balance sheets. We reduced the number of portfolio holdings, consolidating assets into what we think are the companies best able to weather the downturn. The portfolio's key regional overweights are China and Mexico. We consider the quality of companies in Mexico to be very high. The portfolio has slightly more cash than normal to enable us to take advantage of market volatility. -------------------------------------------------------------------------------- 10 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT -------------------------------------------------------------------------------- In general, we expect earnings to fall in 2009, but we think price/earnings multiples for emerging markets will be attractive, both on an historical basis and relative to developed markets. Though the environment is likely to remain volatile, we do think emerging markets will be able to survive the downturn without any major financial crisis. (PHOTO - JULIAN THOMPSON) (PHOTO - JULES MORT) Julian Thompson, PhD 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. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 11 THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in Threadneedle Emerging Markets Fund Class A shares (from 11/1/98 to 10/31/08) as compared to the performance of two widely cited performance indices, the Morgan Stanley Capital International (MSCI) Emerging Markets Index and the Lipper Emerging Markets Funds Index. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5.75%, while such charges are not reflected in the performance of the indices. Returns for the Fund include the reinvestment of any distribution paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The table below and the chart on the facing page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution or visiting riversource.com/funds. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS --------------------------------------------------------------------------------
Results at Oct. 31, 2008 1 YEAR 3 YEARS 5 YEARS 10 YEARS THREADNEEDLE EMERGING MARKETS FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $3,980 $9,229 $14,124 $22,431 ------------------------------------------------------------------------------------------ Average annual total return -60.20% -2.64% +7.15% +8.50% ------------------------------------------------------------------------------------------ MSCI EMERGING MARKETS INDEX(1) Cumulative value of $10,000 $4,378 $9,979 $16,010 $26,064 ------------------------------------------------------------------------------------------ Average annual total return -56.22% -0.07% +9.87% +10.05% ------------------------------------------------------------------------------------------ LIPPER EMERGING MARKETS FUNDS INDEX(2) Cumulative value of $10,000 $4,358 $9,403 $15,204 $24,545 ------------------------------------------------------------------------------------------ Average annual total return -56.42% -2.03% +8.74% +9.39% ------------------------------------------------------------------------------------------
Results for other share classes can be found on page 5. -------------------------------------------------------------------------------- 12 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN THREADNEEDLE EMERGING MARKETS FUND LINE GRAPH)
THREADNEEDLE EMERGING MARKETS FUND CLASS A LIPPER EMERGING (INCLUDES SALES MSCI EMERGING MARKETS FUNDS CHARGE) MARKETS INDEX(1) INDEX(2) --------------------- ---------------- --------------- 10/98 $ 9,425 $ 10,000 $ 10,000 10/99 13,684 14,463 13,641 10/00 13,192 13,189 13,057 10/01 10,121 10,095 10,157 10/02 10,971 10,947 10,881 10/03 14,975 16,282 16,145 10/04 17,384 19,441 19,629 10/05 22,918 26,117 26,100 10/06 31,592 35,367 35,134 10/07 53,141 59,534 56,323 10/08 22,431 26,064 24,545
(1) The MSCI Emerging Markets Index, an unmanaged market capitalization-weighted index, is designed to measure equity market performance in the global emerging markets. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Emerging Markets Funds Index includes the 30 largest emerging markets funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period indicated and held until Oct. 31, 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. -------------------------------------------------------------------------------- 14 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED MAY 1, 2008(A) OCT. 31, 2008 THE PERIOD(B) EXPENSE RATIO ------------------------------------------------------------------------------------------- Class A ------------------------------------------------------------------------------------------- Actual(c) $1,000 $ 479.20 $ 7.12 1.91% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,015.58 $ 9.70 1.91% ------------------------------------------------------------------------------------------- Class B ------------------------------------------------------------------------------------------- Actual(c) $1,000 $ 476.80 $ 9.94 2.67% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,011.75 $13.54 2.67% ------------------------------------------------------------------------------------------- Class C ------------------------------------------------------------------------------------------- Actual(c) $1,000 $ 476.90 $ 9.94 2.67% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,011.75 $13.54 2.67% ------------------------------------------------------------------------------------------- Class I ------------------------------------------------------------------------------------------- Actual(c) $1,000 $ 480.30 $ 5.34 1.43% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.00 $ 7.27 1.43% ------------------------------------------------------------------------------------------- Class R4 ------------------------------------------------------------------------------------------- Actual(c) $1,000 $ 480.40 $ 6.49 1.74% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.43 $ 8.84 1.74% ------------------------------------------------------------------------------------------- Class R5 ------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 550.40 $ 2.84 1.47% ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.80 $ 7.48 1.47% -------------------------------------------------------------------------------------------
(a) The beginning account value for Class R5 is as of Aug. 1, 2008 (when shares of the class became publicly available) for actual expense calculations, and as of May 1, 2008 for hypothetical expense calculations. (b) Expenses for Classes A, B, C, I and R4 are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Actual expenses for Class R5 are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 91/365 (to reflect the period from Aug. 1, 2008 to Oct. 31, 2008). Hypothetical expenses for Class R5 are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (c) Based on the actual return for the six months ended Oct. 31, 2008: -52.08% for Class A, -52.32% for Class B, -52.31% for Class C, -51.97% for Class I and -51.96% for Class R4. (d) Based on the actual return for the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008: -44.96% for Class R5. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS ------------------------------------------------------ OCT. 31, 2008 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (95.8%)(c) ISSUER SHARES VALUE(a) BERMUDA (1.0%) Credicorp $- 72,761 2,857,324 ------------------------------------------------------------------------------------- BRAZIL (12.2%) AmBev ADR 54,439 2,313,658 Banco Bradesco 255,100 2,937,551 Companhia Vale do Rio Doce ADR 211,011 2,768,464 MRV Engenharia e Participacoes 160,400 833,218 Multiplan Empreendimentos Imobiliarios 399,849(b) 2,017,774 PDG Realty 269,800 1,381,506 Petroleo Brasileiro ADR 327,760 8,813,466 Redecard 955,100 10,405,191 UNIBANCO -- Uniao de Bancos Brasileiros GDR 52,661 3,321,857 ------------ Total 34,792,685 ------------------------------------------------------------------------------------- CANADA (0.8%) Yamana Gold 460,420 2,131,745 ------------------------------------------------------------------------------------- CHINA (14.4%) China Construction Bank Series H 9,620,000 4,772,560 China Life Insurance Series H 2,005,000 5,358,462 China Medical Technologies ADR 77,736 1,894,426 China Merchants Bank Series H 2,439,000 3,736,882 CNOOC ADR 71,752 5,861,421 Industrial & Commercial Bank of China Series H 18,359,000 8,638,789 Li Ning 1,691,500 2,093,436 Minth Group 2,484,000 868,102 Ping An Insurance Group of China Series H 1,825,000 7,805,478 ------------ Total 41,029,556 ------------------------------------------------------------------------------------- CZECH REPUBLIC (1.1%) CEZ 70,000 3,033,756 ------------------------------------------------------------------------------------- HONG KONG (7.5%) China Mobile 2,084,000 18,347,176 China Overseas Land & Investment 2,566,000 2,897,869 ------------ Total 21,245,045 ------------------------------------------------------------------------------------- INDIA (7.4%) Bharat Heavy Electricals 91,662 2,435,150 Bharti Airtel 412,765(b) 5,573,659 Housing Development Finance 87,154 3,163,627 Infosys Technologies 191,779 5,574,974 Reliance Inds 145,110 4,113,500 ------------ Total 20,860,910 ------------------------------------------------------------------------------------- INDONESIA (1.4%) Bank Rakyat Indonesia 8,962,000 2,729,545 Bumi Resources 7,288,500(g) 1,136,986 ------------ Total 3,866,531 ------------------------------------------------------------------------------------- ISRAEL (6.8%) Check Point Software Technologies 297,210(b) 6,009,586 Israel Chemicals 491,565 4,979,313 Teva Pharmaceutical Inds ADR 190,786 8,180,903 ------------ Total 19,169,802 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 16 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) MALAYSIA (1.3%) IOI $- 2,647,300 2,101,445 KNM Group 9,350,150 1,587,707 ------------ Total 3,689,152 ------------------------------------------------------------------------------------- MEXICO (6.8%) America Movil ADR Series L 207,252 6,412,377 Grupo Financiero Banorte Series O 1,930,900 3,543,198 Grupo Televisa ADR 252,920 4,466,567 Wal-Mart de Mexico Series V 1,747,500 4,707,272 ------------ Total 19,129,414 ------------------------------------------------------------------------------------- NORWAY (0.1%) Copeinca 110,800(b) 181,059 ------------------------------------------------------------------------------------- RUSSIA (7.7%) Eurasia Drilling GDR 243,662(b,d,e)1,339,747 Gazprom ADR 617,321 12,577,916 MMC Norilsk Nickel ADR 201,865 2,025,853 Pharmstandard 72,811(b) 1,830,430 Sibirskiy Cement 24,589 1,475,340 Vimpel-Communications ADR 163,588 2,372,026 ------------ Total 21,621,312 ------------------------------------------------------------------------------------- SOUTH AFRICA (8.4%) ABSA Group 335,510 3,517,898 Aveng 720,771 3,571,281 Gold Fields 485,399 3,386,473 Gold Fields ADR 218,148 1,450,684 Impala Platinum Holdings 258,879 2,707,989 MTN Group 350,937 3,949,297 Murray & Roberts Holdings 272,391 1,848,111 Sasol 109,036 3,225,527 ------------ Total 23,657,260 ------------------------------------------------------------------------------------- SOUTH KOREA (9.2%) Hyundai Motor 68,408 3,163,629 Infopia 65,450 488,514 KT 34,150 870,018 LG Electronics 45,653 3,411,257 NHN 33,539(b) 3,572,276 Samsung Electronics 27,090 11,430,540 Yuhan 20,363 2,964,512 ------------ Total 25,900,746 ------------------------------------------------------------------------------------- TAIWAN (7.4%) Asustek Computer 2,037,062 2,919,344 Chunghwa Telecom 1,286,460 2,129,621 First Financial Holding 4,196,764 1,980,311 Hon Hai Precision Industry 1,098,250 2,652,248 Taiwan Semiconductor Mfg ADR 1,119,988 9,251,101 Tripod Technology 1,008,155 1,232,753 U-Ming Marine Transport 635,000 741,724 ------------ Total 20,907,102 ------------------------------------------------------------------------------------- THAILAND (1.1%) Kasikornbank 2,094,800 3,066,297 ------------------------------------------------------------------------------------- TURKEY (1.2%) Turkiye Garanti Bankasi 2,008,865(b) 3,374,384 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $424,358,342) $270,514,080 ------------------------------------------------------------------------------------- MONEY MARKET FUND (4.8%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 1.60% $- 13,521,361(f) 13,521,361 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $13,521,361) $13,521,361 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $437,879,703)(h) $284,035,441 =====================================================================================
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------ SUMMARY OF INVESTMENTS IN SECURITIES BY INDUSTRY The following table represents the portfolio investments of the Fund by industry classifications as a percentage of total net assets at Oct. 31, 2008:
PERCENTAGE OF INDUSTRY NET ASSETS VALUE ----------------------------------------------------------------------- Auto Components 0.3% $868,102 Automobiles 1.1 3,163,629 Beverages 0.8 2,313,658 Chemicals 1.8 4,979,313 Commercial Banks 15.8 44,476,596 Computers & Peripherals 1.0 2,919,344 Construction & Engineering 1.3 3,571,281 Diversified Telecommunication Services 1.9 5,371,665 Electric Utilities 1.1 3,033,756 Electrical Equipment 0.9 2,435,150 Electronic Equipment, Instruments & Components 1.4 3,885,001 Energy Equipment & Services 1.0 2,927,454 Food & Staples Retailing 1.7 4,707,272 Food Products 0.8 2,282,504 Health Care Equipment & Supplies 0.8 2,382,940 Household Durables 2.0 5,625,981 Industrial Conglomerate 0.6 1,848,111 Insurance 4.7 13,163,940 Internet Software & Services 1.3 3,572,276 IT Services 5.7 15,980,165 Leisure Equipment & Products 0.7 2,093,436 Marine 0.3 741,724 Media 1.6 4,466,567 Metals & Mining 5.1 14,471,208 Multi-Utilities 0.5 1,475,340 Oil, Gas & Consumable Fuels 12.7 35,728,816 Pharmaceuticals 4.6 12,975,845 Real Estate Management & Development 1.7 4,915,643 Semiconductors & Semiconductor Equipment 7.3 20,681,641 Software 2.1 6,009,586 Thrifts & Mortgage Finance 1.1 3,163,627 Wireless Telecommunication Services 12.1 34,282,509 Other(1) 4.8 13,521,361 ----------------------------------------------------------------------- Total $284,035,441 -----------------------------------------------------------------------
(1) Cash & Cash Equivalents. See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 18 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT -------------------------------------------------------------------------------- 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) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security may be determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Oct. 31, 2008, the value of these securities amounted to $1,339,747 or 0.5% 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 Oct. 31, 2008, is as follows:
ACQUISITION SECURITY DATES COST ---------------------------------------------------------------------- Eurasia Drilling GDR* 11-02-07 thru 04-15-08 $5,741,380
* 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 Oct. 31, 2008. (g) Security valued by management at fair value according to procedures approved, in good faith, by the Board. (h) At Oct. 31, 2008, the cost of securities for federal income tax purposes was $449,749,120 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $2,377,852 Unrealized depreciation (168,091,531) ------------------------------------------------------------ Net unrealized depreciation $(165,713,679) ------------------------------------------------------------
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. 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. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 19 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- OCT. 31, 2008
ASSETS Investments in securities, at value Unaffiliated issuers (identified cost $424,358,342) $ 270,514,080 Affiliated money market fund (identified cost $13,521,361) 13,521,361 -------------------------------------------------------------------------------- Total investments in securities (identified cost $437,879,703) 284,035,441 Cash 667,406 Foreign currency holdings (identified cost $1,911,096) 1,906,201 Capital shares receivable 202,353 Dividends and accrued interest receivable 435,788 Receivable for investment securities sold 12,802,608 -------------------------------------------------------------------------------- Total assets 300,049,797 -------------------------------------------------------------------------------- LIABILITIES Capital shares payable 278,847 Payable for investment securities purchased 17,212,931 Accrued investment management services fees 8,332 Accrued distribution fees 2,524 Accrued transfer agency fees 2,573 Accrued administrative services fees 607 Accrued plan administration services fees 5 Other accrued expenses 320,472 -------------------------------------------------------------------------------- Total liabilities 17,826,291 -------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 282,223,506 -------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 576,740 Additional paid-in capital 456,206,763 Excess of distributions over net investment income (5,170) Accumulated net realized gain (loss) (20,707,820) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (153,847,007) -------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 282,223,506 --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $250,088,197 50,453,378 $4.96(1) Class B $ 28,179,486 6,354,512 $4.43 Class C $ 3,162,935 711,847 $4.44 Class I $ 7,972 1,558 $5.12 Class R4 $ 782,170 152,215 $5.14 Class R5 $ 2,746 535 $5.13 -----------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $5.26. 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 EMERGING MARKETS FUND -- 2008 ANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- YEAR ENDED OCT. 31, 2008
INVESTMENT INCOME Income: Dividends $ 17,185,342 Interest 64,517 Income distributions from affiliated money market fund 412,142 Less foreign taxes withheld (1,058,784) -------------------------------------------------------------------------------- Total income 16,603,217 -------------------------------------------------------------------------------- Expenses: Investment management services fees 7,352,591 Distribution fees Class A 1,283,814 Class B 701,567 Class C 62,513 Transfer agency fees Class A 972,852 Class B 139,042 Class C 12,334 Class R4 868 Class R5 1 Administrative services fees 498,019 Plan administration services fees -- Class R4 4,342 Compensation of board members 13,359 Custodian fees 693,125 Printing and postage 117,050 Registration fees 86,716 Professional fees 79,151 Other 168,800 -------------------------------------------------------------------------------- Total expenses 12,186,144 Expenses waived/reimbursed by the Investment Manager and its affiliates (4,460) Earnings and bank fee credits on cash balances (14,844) -------------------------------------------------------------------------------- Total net expenses 12,166,840 -------------------------------------------------------------------------------- Investment income (loss) -- net 4,436,377 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (18,203,439) Foreign currency transactions (1,454,385) -------------------------------------------------------------------------------- Net realized gain (loss) on investments (19,657,824) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (421,981,869) -------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (441,639,693) -------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(437,203,316) --------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 21 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
YEAR ENDED OCT. 31, 2008 2007 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 4,436,377 $ 1,517,079 Net realized gain (loss) on investments (19,657,824) 156,013,553 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (421,981,869) 189,936,461 ----------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (437,203,316) 347,467,093 ----------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (7,733,781) -- Class B (584,169) -- Class C (60,487) -- Class I (828,121) -- Class R4 (23,143) -- Net realized gain Class A (117,775,823) (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 (157,252,294) (129,310,261) ----------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares 109,825,373 91,841,700 Class B shares 12,474,577 12,086,529 Class C shares 2,616,649 1,969,066 Class I shares 30,164,283 5,204,952 Class R4 shares 642,913 3,407,128 Class R5 shares 5,000 N/A Reinvestment of distributions at net asset value Class A shares 124,102,560 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 (148,388,977) (127,473,312) Class B shares (31,272,815) (38,310,114) Class C shares (2,462,810) (2,015,974) Class I shares (72,065,208) (16,607,477) Class R4 shares (921,454) (9,169,513) ----------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 56,102,399 48,907,819 ----------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (538,353,211) 267,064,651 Net assets at beginning of year 820,576,717 553,512,066 ----------------------------------------------------------------------------------------------- Net assets at end of year $ 282,223,506 $ 820,576,717 ----------------------------------------------------------------------------------------------- Undistributed (excess of distributions over) net investment income $ (5,170) $ 22,906 -----------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 22 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2008 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) .08(b) .04(b) .01 .04 .03 Net gains (losses) (both realized and unrealized) (7.24) 6.27 3.10 1.95 .84 -------------------------------------------------------------------------------------------------------------- Total from investment operations (7.16) 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 $4.96 $14.99 $11.32 $8.23 $6.27 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $250 $661 $425 $295 $191 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.87% 1.83% 1.81% 1.79% 1.83% -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) 1.87% 1.83% 1.81% 1.79% 1.83% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .78% .31% .19% .54% .41% -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 133% 125% 145% 124% 128% -------------------------------------------------------------------------------------------------------------- Total return(g) (57.79%) 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) 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. (f) 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 year ended Oct. 31, 2008 were less than 0.01% of average net assets. (g) Total return does not reflect payment of a sales charge. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 23 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2008 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) .00(b),(c) (.05)(b) (.05) (.01) (.02) Net gains (losses) (both realized and unrealized) (6.53) 5.79 2.91 1.83 .81 -------------------------------------------------------------------------------------------------------------- Total from investment operations (6.53) 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 $4.43 $13.73 $10.63 $7.77 $5.95 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $28 $94 $77 $74 $73 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 2.62% 2.58% 2.57% 2.55% 2.59% -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(f),(g) 2.62% 2.58% 2.57% 2.55% 2.59% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .02% (.48%) (.55%) (.24%) (.32%) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 133% 125% 145% 124% 128% -------------------------------------------------------------------------------------------------------------- Total return(h) (58.08%) 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) 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) 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 year ended Oct. 31, 2008 were less than 0.01% of average net assets. (h) Total return does not reflect payment of a sales charge. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 24 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT -------------------------------------------------------------------------------- CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2008 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) .00(b),(c) (.05)(b) (.06) -- (.01) Net gains (losses) (both realized and unrealized) (6.54) 5.81 2.93 1.82 .81 -------------------------------------------------------------------------------------------------------------- Total from investment operations (6.54) 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 $4.44 $13.78 $10.66 $7.79 $5.97 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $3 $8 $5 $3 $1 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 2.63% 2.59% 2.58% 2.56% 2.60% -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(f),(g) 2.63% 2.59% 2.58% 2.56% 2.60% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .03% (.48%) (.57%) (.19%) (.34%) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 133% 125% 145% 124% 128% -------------------------------------------------------------------------------------------------------------- Total return(h) (58.15%) 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) 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) 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 year ended Oct. 31, 2008 were less than 0.01% of average net assets. (h) Total return does not reflect payment of a sales charge. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 25 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2008 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) .11(c) .09(c) .03 .06 .01 Net gains (losses) (both realized and unrealized) (7.45) 6.43 3.16 1.98 (.19) -------------------------------------------------------------------------------------------------------------- Total from investment operations (7.34) 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 $5.12 $15.38 $11.50 $8.35 $6.36 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $56 $41 $19 $13 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.42% 1.39% 1.35% 1.30% 1.35%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.42% 1.39% 1.35% 1.30% 1.35%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .97% .75% .63% .97% .79%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 133% 125% 145% 124% 128% -------------------------------------------------------------------------------------------------------------- Total return (57.63%) 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 year ended Oct. 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 26 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT -------------------------------------------------------------------------------- CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2008 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) .11(b) .05(b) .03 .05 .04 Net gains (losses) (both realized and unrealized) (7.45) 6.41 3.14 1.97 .86 -------------------------------------------------------------------------------------------------------------- Total from investment operations (7.34) 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 $5.14 $15.32 $11.50 $8.33 $6.35 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $2 $6 $2 $18 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.73% 1.65% 1.63% 1.59% 1.65% -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) 1.47% 1.65% 1.63% 1.59% 1.65% -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.12% .45% .41% .81% .61% -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 133% 125% 145% 124% 128% -------------------------------------------------------------------------------------------------------------- Total return (57.58%) 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) 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. (f) 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 year ended Oct. 31, 2008 were less than 0.01% of average net assets. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 27 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended Oct. 31, 2008(b) Net asset value, beginning of period $9.32 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .03 Net gains (losses) (both realized and unrealized) (4.22) -------------------------------------------------------------------------------------------------------------- Total from investment operations (4.19) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.13 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- -------------------------------------------------------------------------------------------------------------- Total expenses(d),(e),(f) 1.47%(g) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.57%(g) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 133% -------------------------------------------------------------------------------------------------------------- Total return (44.96%)(h) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. (c) Per share amount has been calculated using the average shares outstanding method. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) 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. (f) 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 year ended Oct. 31, 2008 were less than 0.01% of average net assets. (g) Adjusted to an annual basis. (h) Not annualized. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 28 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 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, Class R4 and Class R5 shares. - Class A shares are sold with a front-end sales charge. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - Class C shares may be subject to a CDSC. - Class I, Class R4 and Class R5 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. Class R5 shares became available effective Aug. 1, 2008. At Oct. 31, 2008, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) and the RiverSource affiliated funds-of-funds owned 100% of Class I shares and the Investment Manager owned 100% of Class R5 shares. 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- -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange 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, which approximates fair value. ILLIQUID SECURITIES At Oct. 31, 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 Oct. 31, 2008 was $1,339,747 representing 0.47% of net assets. 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 -------------------------------------------------------------------------------- 30 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT -------------------------------------------------------------------------------- disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. OPTION TRANSACTIONS To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Fund may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. Cash collateral may be collected by the Fund to secure certain over-the-counter options (OTC options) trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. The Fund also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. Option contracts, including OTC option contracts, with no readily available market value are valued using quotations obtained from independent brokers as of the close of the New York Stock Exchange. 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 Oct. 31, 2008, and for the year then ended, the Fund had no outstanding option contracts. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Futures and options on futures are valued daily based upon the last sale price at the close of 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 -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 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 Oct. 31, 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 Oct. 31, 2008, foreign currency holdings consisted of multiple denominations, primarily Indonesian rupiah. The Fund may enter into forward foreign currency contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the counterparty will not complete its contract obligations. At Oct. 31, 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 -------------------------------------------------------------------------------- 32 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT -------------------------------------------------------------------------------- of its taxable income to shareholders. No provision for income or excise taxes is thus required. Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes," which clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of foreign currency transactions, passive foreign investment company (PFIC) holdings, and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. On the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been increased by $4,765,248 accumulated net realized loss has been increased by $9,262,053 resulting in a net reclassification adjustment to increase paid-in capital by 4,496,805. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED OCT. 31, 2008* 2007 ----------------------------------------------------------------- CLASS A Distributions paid from: Ordinary income.................. $76,776,161 $43,124,323 Long-term capital gain........... 48,733,443 55,114,907 CLASS B Distributions paid from: Ordinary income.................. 11,435,113 8,236,390 Long-term capital gain........... 7,659,131 10,526,381 CLASS C Distributions paid from: Ordinary income.................. 951,551 523,272 Long-term capital gain........... 628,950 672,797
-------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
YEAR ENDED OCT. 31, 2008* 2007 ----------------------------------------------------------------- CLASS I Distributions paid from: Ordinary income.................. $6,573,170 $4,243,012 Long-term capital gain........... 4,055,198 5,421,506 CLASS R4 Distributions paid from: Ordinary income.................. 267,263 635,576 Long-term capital gain........... 172,314 812,097 CLASS R5 Distributions paid from: Ordinary income.................. -- N/A Long-term capital gain........... -- N/A
* Class R5 is for the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. At Oct. 31, 2008, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income................. $ -- Undistributed accumulated long-term gain...... $ -- Accumulated realized loss..................... $ (8,838,403) Unrealized appreciation (depreciation)........ $(165,721,594)
RECENT ACCOUNTING PRONOUNCEMENTS In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, 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 periods beginning after Nov. 15, 2008. As of Oct. 31, 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. 30, 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 -------------------------------------------------------------------------------- 34 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT -------------------------------------------------------------------------------- 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 INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 1.10% to 0.90% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment determined monthly by measuring the percentage difference over a rolling 12-month period between the annualized performance of one Class A share of the Fund and the annualized performance of the Lipper Emerging Markets Funds Index. In certain circumstances, the Board may approve a change in the index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment increased the management fee by $507,378 for the year ended Oct. 31, 2008. The management fee for the year ended Oct. 31, 2008 was 1.16% of the Fund's average daily net assets, including the adjustment under the terms of the performance incentive arrangement. SUBADVISORY AGREEMENT The Investment Manager has a Subadvisory Agreement with Threadneedle International Limited (Threadneedle), an affiliate of the Investment Manager and an indirect wholly-owned subsidiary of Ameriprise Financial, to subadvise the -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 35 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- assets of the Fund. The Investment Manager contracts with and compensates Threadneedle to manage the investment of the Fund's assets. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial 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 year ended Oct. 31, 2008 was 0.08% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the year ended Oct. 31, 2008, other expenses paid to this company were $3,707. COMPENSATION OF BOARD MEMBERS 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. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50 for Class B and $20.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average net assets attributable to Class R4 and Class R5 shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the Statement of Operations. -------------------------------------------------------------------------------- 36 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT -------------------------------------------------------------------------------- PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Fund's average daily net assets attributable to Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. DISTRIBUTION FEES The Fund has an agreement with RiverSource 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. For Class B and Class C shares, up to 0.75% of the fee is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed expense") was approximately $1,077,000 and $38,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of Oct. 31, 2008, and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGES Sales charges received by the Distributor for distributing Fund shares were $739,218 for Class A, $40,279 for Class B and $1,375 for Class C for the year ended Oct. 31, 2008. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended Oct. 31, 2008, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), including the adjustment under the terms of a performance incentive arrangement, were as follows: Class R4............................................ 1.47%
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class R4........................................... $118
The waived/reimbursed fees and expenses for the plan administration services fees at the class level were as follows: Class R4.......................................... $4,342
-------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Oct. 31, 2009, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any performance incentive adjustment, will not exceed the following percentage of the Fund's average daily net assets: Class R4............................................ 1.64%
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. EARNINGS AND BANK FEE CREDITS During the year ended Oct. 31, 2008, the Fund's custodian and transfer agency fees were reduced by $14,844 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 $819,754,752 and $913,722,799, respectively, for the year ended Oct. 31, 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:
YEAR ENDED OCT. 31, 2008** ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) --------------------------------------------------------------------------------- Class A 11,082,775 11,944,431 (16,677,659) 6,349,547 Class B 1,336,871 2,007,193 (3,818,705) (474,641) Class C 296,342 163,281 (305,438) 154,185 Class I 2,894,086 993,810 (7,495,922) (3,608,026) Class R4 56,860 40,967 (95,990) 1,837 Class R5 535 -- -- 535 ---------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 38 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT --------------------------------------------------------------------------------
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) ---------------------------------------------------------------------------------
** Class R5 is for the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. 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 Cash Fund aggregated $449,546,557 and $443,696,285, respectively, for the year ended Oct. 31, 2008. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found on the Statement of Operations and the Fund's invested balance in RiverSource Short- Term Cash Fund at Oct. 31, 2008, can be found in the Portfolio of Investments. 6. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (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. 16, 2008, 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 $475 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $175 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $650 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum, in addition to an -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- upfront fee equal to its pro rata share of 0.02% of the amount of the credit facility. The Fund had no borrowings during the year ended Oct. 31, 2008. Under the prior credit facility which was effective until Oct. 15, 2008, the Fund had entered into a revolving credit facility with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund was permitted to borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility agreement, which was a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permitted collective borrowings up to $500 million. Interest was 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 matured no later than 60 days after the date of borrowing. The Fund also paid a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. 7. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund had a capital loss carry-over of $8,838,403 at Oct. 31, 2008, that if not offset by capital gains will expire in 2016. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. 8. 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. 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 -------------------------------------------------------------------------------- 40 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT -------------------------------------------------------------------------------- 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. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co., Inc. (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2005, the New York staff of the SEC indicated that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and the distributor of the Seligman Funds, Seligman -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- Advisors, Inc., relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc., Seligman Data Corp. (transfer agent for the Seligman Funds) and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that, in addition to the four arrangements noted above, the Seligman Parties permitted other persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies managed by Seligman is and has been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. The NYAG is seeking damages of at least $80 million and restitution, disgorgement, penalties and costs and injunctive relief. The Seligman Parties answered the complaint in December 2006 and believe that the claims are without merit. Any resolution of these matters may include the relief noted above or other sanctions or changes in procedures. Any damages would be paid by Seligman and not by the Seligman Funds. If the NYAG obtains injunctive relief, Seligman and its affiliates could, in the absence of the SEC in its discretion granting exemptive relief, be enjoined from providing advisory and underwriting services to the Seligman Funds and other registered investment companies. Seligman does not believe that the foregoing legal action or other possible actions will have a material adverse impact on Seligman or its clients, including the Seligman Funds and other investment companies managed by it; however, there can be no assurance of this or that these matters and any related publicity will not affect demand for shares of the Seligman Funds and such other investment companies or have other adverse consequences. 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 -------------------------------------------------------------------------------- 42 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT -------------------------------------------------------------------------------- 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. 10. SUBSEQUENT EVENTS Effective Dec. 15, 2008, the Fund will pay custodian fees to JPMorgan Chase Bank, N.A. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 43 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THREADNEEDLE EMERGING MARKETS FUND: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Threadneedle Emerging Markets Fund (the Fund), formerly RiverSource Emerging Markets Fund, (one of the portfolios constituting the RiverSource Global Series, Inc.) as of October 31, 2008, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the two years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of the Fund for the periods presented through October 31, 2006, were audited by other auditors whose report dated December 20, 2006 expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2008, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. -------------------------------------------------------------------------------- 44 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT -------------------------------------------------------------------------------- In our opinion, the financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of Threadneedle Emerging Markets Fund of the RiverSource Global Series, Inc. at October 31, 2008, the results of its operations for the year then ended, and changes in its net assets and the financial highlights for each of the two years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota December 19, 2008 -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 45 FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Fiscal year ended Oct. 31, 2008
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Qualified Dividend Income for individuals.................... 0.00% Dividends Received Deduction for corporations................ 0.00% U.S. Government Obligations.................................. 0.00% CAPITAL GAIN DISTRIBUTION - the Fund designates $61,249,036 to be taxed as long-term capital gain.
The Fund also designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. -------------------------------------------------------------------------------- 46 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. The RiverSource complex of funds that each Board member oversees consists of 162 funds, which includes 104 RiverSource funds and 58 Seligman funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. Under the current Board policy, members may serve until the end of the meeting following their 75th birthday, or the fifteenth anniversary of the first Board meeting they attended as members of the Board, whichever occurs first. This policy does not apply to Ms. Jones who may retire after her 75th birthday. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 2006 Attorney Minneapolis, MN 55402 Age 54 ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Funds, 1999-2006; former Governor of None 901 S. Marquette Ave. 1999 Minnesota Minneapolis, MN 55402 Age 74 ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 2007 Leadership (consulting company) Minneapolis, MN 55402 Age 54 ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley College Age 58 ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 1985 Minneapolis, MN 55402 Age 73 ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 2005 Insurance Minneapolis, MN 55402 Age 73 ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. since 2007, College Inc. (manufactures Minneapolis, MN 55402 Board member since irrigation systems) Age 69 2002 ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 47 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ John F. Maher Board member since Retired President and Chief Executive Officer and None 901 S. Marquette Ave. 2008 former Director, Great Western Financial Corporation Minneapolis, MN 55402 (bank holding company) and its principal subsidiary, Age 64 Great Western Bank (federal savings bank) ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 2004 real estate and asset management company) Minneapolis, MN 55402 Age 56 ------------------------------------------------------------------------------------------------------------------------------ Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C.; Director, Vibration Lead Outside 901 S. Marquette Ave. 2008 Control Technologies, LLC (auto vibration technology); Director, Digital Minneapolis, MN 55402 Director and Chairman, Highland Park Michigan Economic Ally, Inc. (digital Age 66 Development Corp; and Chairman, Detroit Public Schools imaging); and Foundation. Formerly, Chairman and Chief Executive Infinity, Inc. (oil Officer, Q Standards Worldwide, Inc. (library of and gas exploration technical standards); Director, Kerr-McGee Corporation and production); (diversified energy and chemical company); Trustee, New Director, OGE Energy York University Law Center Foundation; Vice Chairman, Corp. (energy and Detroit Medical Center and Detroit Economic Growth energy services Corp. provider offering physical delivery and related services for both electricity and natural gas) ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Forester Pharmaceutical, Inc. Minneapolis, MN 55402 Biotech (biotechnology); Age 64 Healthways, Inc. (health management programs) ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 48 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT -------------------------------------------------------------------------------- BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. and President, Financial Center Vice President since Chairman of the Board and Chief Investment Officer, Minneapolis, MN 55474 2002 RiverSource Investments, LLC since 2005; Director, Age 48 President and Chief Executive Officer, Ameriprise Certificate Company and Chairman of the Board, Chief Executive Officer and President, RiverSource Distributors, Inc. since 2006; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc. and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001- 2005 ------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; or visiting riversource.com/funds. -------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 49 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management, 172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC Center since 2006; Director and Vice President -- Asset Minneapolis, MN 55474 Management, Products and Marketing, RiverSource Age 43 Distributors, Inc. since 2006; Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004-2006; President, Touchstone Investments, 2002-2004 -------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income, 172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 44 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Vice President -- Asset Management and Trust Company 5228 Ameriprise Financial 2006 Services, RiverSource Investments, LLC since 2006; Vice Center Minneapolis, MN President -- Operations and Compliance, RiverSource 55474 Investments, LLC, 2004-2006; Director of Product Age 43 Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 Minneapolis, MN 55474 Age 53 -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management, 5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel, Center Secretary since 2006 RiverSource Distributors, Inc. and Chief Legal Officer Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC Age 49 since 2006; Vice President, General Counsel and Secretary, Ameriprise Certificate Company since 2005; Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 -------------------------------------------------------------------------------------------------------- Jennifer D. Lammers Chief Compliance U.S. Asset Management Chief Compliance Officer, 172 Ameriprise Financial Officer since 2006 RiverSource Investments, LLC since 2006; Center Director -- Mutual Funds, Voyageur Asset Management, Minneapolis, MN 55474 2003-2006; Director of Finance, Voyageur Asset Age 48 Management, 2000-2003 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 50 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT -------------------------------------------------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Neysa M. Alecu Money Laundering Compliance Director and Anti-Money Laundering Officer, 2934 Ameriprise Financial Prevention Officer Ameriprise Financial, Inc. since 2004; Manager Anti- Center since 2004 Money Laundering, Ameriprise Financial, Inc., 2003- Minneapolis, MN 55474 2004; Compliance Director and Bank Secrecy Act Officer, Age 44 American Express Centurion Bank, 2000-2003 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 51 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. -------------------------------------------------------------------------------- 52 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 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-6354 V (12/08)