UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number 811-4075
RIVERSOURCE INTERNATIONAL SERIES, INC.
(Exact name of registrant as specified in charter)
50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474
(Address of principal executive offices) (Zip code)
Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474
(Name and address of agent for service)
Registrant's telephone number, including area code: (612) 671-1947
Date of fiscal year end: 10/31
Date of reporting period: 4/30
Semiannual Report
(RIVERSOURCE INVESTMENTS LOGO)
RIVERSOURCE
DISCIPLINED INTERNATIONAL EQUITY FUND
SEMIANNUAL REPORT FOR
THE PERIOD ENDED
APRIL 30, 2009
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND
SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL
GROWTH.
(SINGLE STRATEGY FUNDS ICON)
TABLE OF CONTENTS --------------------------------------------------------------
<Table>
Your Fund at a Glance.............. 2
Fund Expenses Example.............. 9
Portfolio of Investments........... 12
Statement of Assets and
Liabilities...................... 21
Statement of Operations............ 23
Statements of Changes in Net
Assets........................... 25
Financial Highlights............... 27
Notes to Financial Statements...... 36
Approval of Investment Management
Services Agreement............... 52
Proxy Voting....................... 55
</Table>
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RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 1
YOUR FUND AT A GLANCE ----------------------------------------------------------
(UNAUDITED)
FUND SUMMARY
- --------------------------------------------------------------------------------
> RiverSource Disciplined International Equity Fund (the Fund) Class A shares
declined 5.84% (excluding sales charge) during the six month period ended
April 30, 2009.
> The Fund underperformed its benchmark, the Morgan Stanley Capital
International (MSCI) EAFE Index, which fell 2.35%.
> The Fund also underperformed the Lipper International Large-Cap Core Funds
Index, representing the Fund's peer group, which fell 4.55% during the same
period.
ANNUALIZED TOTAL RETURNS (for period ended April 30, 2009)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Since
inception
6 months* 1 year 5/18/06
- -------------------------------------------------------------------
RiverSource Disciplined
International Equity Fund Class A
(excluding sales charge) -5.84% -49.25% -14.29%
- -------------------------------------------------------------------
MSCI EAFE Index(1) (unmanaged) -2.35% -42.42% -11.29%
- -------------------------------------------------------------------
Lipper International Large-Cap Core
Funds Index(2) -4.55% -43.88% -11.94%
- -------------------------------------------------------------------
</Table>
* Not annualized.
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by contacting your financial intermediary
or visiting riversource.com/funds.
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the table above. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses. See the Average Annual Total Returns table for performance of other
share classes of the Fund.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes. It is not possible to invest directly in an index.
(1) The Morgan Stanley Capital International (MSCI) EAFE Index, an unmanaged
index, is compiled from a composite of securities markets of Europe,
Australasia and the Far East. The index is
- --------------------------------------------------------------------------------
2 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
widely recognized by investors in foreign markets as the measurement index
for portfolios of non-North American securities. The index reflects
reinvestment of all distributions and changes in market prices.
(2) The Lipper International Large-Cap Core Funds Index includes the 30 largest
large-cap core funds tracked by Lipper Inc. The index's returns include net
reinvested dividends. The Fund's performance is currently measured against
this index for purposes of determining the performance incentive adjustment.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 3
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT APRIL 30, 2009
SINCE
Without sales charge 6 MONTHS* 1 YEAR INCEPTION
Class A (inception 5/18/06) -5.84% -49.25% -14.29%
- --------------------------------------------------------------------
Class B (inception 5/18/06) -6.29% -49.84% -15.06%
- --------------------------------------------------------------------
Class C (inception 5/18/06) -6.24% -49.77% -15.03%
- --------------------------------------------------------------------
Class I (inception 5/18/06) -5.50% -48.83% -13.85%
- --------------------------------------------------------------------
Class R2 (inception 8/1/08) -5.83% N/A -40.89%*
- --------------------------------------------------------------------
Class R3 (inception 8/1/08) -5.71% N/A -40.81%*
- --------------------------------------------------------------------
Class R4 (inception 5/18/06) -5.57% -48.87% -13.92%
- --------------------------------------------------------------------
Class R5 (inception 8/1/08) -5.56% N/A -40.62%*
- --------------------------------------------------------------------
Class W (inception 12/1/06) -5.77% -49.13% -20.33%
- --------------------------------------------------------------------
With sales charge
Class A (inception 5/18/06) -11.29% -52.16% -15.99%
- --------------------------------------------------------------------
Class B (inception 5/18/06) -10.85% -52.27% -16.17%
- --------------------------------------------------------------------
Class C (inception 5/18/06) -7.14% -50.25% -15.03%
- --------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
4 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT MARCH 31, 2009
SINCE
Without sales charge 6 MONTHS* 1 YEAR INCEPTION
Class A (inception 5/18/06) -37.24% -52.96% -18.67%
- --------------------------------------------------------------------
Class B (inception 5/18/06) -37.63% -53.49% -19.41%
- --------------------------------------------------------------------
Class C (inception 5/18/06) -37.56% -53.43% -19.38%
- --------------------------------------------------------------------
Class I (inception 5/18/06) -36.86% -52.51% -18.22%
- --------------------------------------------------------------------
Class R2 (inception 8/1/08) -37.00% N/A -48.43%*
- --------------------------------------------------------------------
Class R3 (inception 8/1/08) -36.91% N/A -48.36%*
- --------------------------------------------------------------------
Class R4 (inception 5/18/06) -36.93% -52.56% -18.30%
- --------------------------------------------------------------------
Class R5 (inception 8/1/08) -36.91% N/A -48.29%*
- --------------------------------------------------------------------
Class W (inception 12/1/06) -37.12% -52.84% -25.51%
- --------------------------------------------------------------------
With sales charge
Class A (inception 5/18/06) -40.85% -55.66% -20.33%
- --------------------------------------------------------------------
Class B (inception 5/18/06) -40.66% -55.75% -20.49%
- --------------------------------------------------------------------
Class C (inception 5/18/06) -38.17% -53.88% -19.38%
- --------------------------------------------------------------------
</Table>
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 R2, Class R3, Class R4, Class R5 and Class W shares.
Class I, Class R2, Class R3, Class R4 and Class R5 are available to
institutional investors only. Class W shares are offered through qualifying
discretionary accounts.
* Not annualized.
** For Class B shares purchased on or after June 13, 2009 the CDSC percentage
for the third year will be 3%.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 5
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
STYLE MATRIX
- --------------------------------------------------------------------------------
<Table>
<Caption>
STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
</Table>
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)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Total fund
and acquired
Total fund fund fees and
expenses(a) expenses(a)
- ------------------------------------------
Class A 1.40% 1.43%
- ------------------------------------------
Class B 2.18% 2.21%
- ------------------------------------------
Class C 2.17% 2.20%
- ------------------------------------------
Class I 0.90% 0.93%
- ------------------------------------------
Class R2 1.69% 1.72%
- ------------------------------------------
Class R3 1.44% 1.47%
- ------------------------------------------
Class R4 1.20% 1.23%
- ------------------------------------------
Class R5 0.94% 0.97%
- ------------------------------------------
Class W 1.35% 1.38%
- ------------------------------------------
</Table>
(a) In addition to the Fund's total annual operating expenses that the Fund
bears directly, the Fund's shareholders indirectly bear the expenses of
acquired funds in which the Fund invests. The Fund's "acquired fund fees and
expenses," based on its investment in the acquired funds, is 0.03% for the
year ended Oct. 31, 2008.
* Fund expense ratios are calculated based on the fund's average net assets
during the fund's most recently completed fiscal year, and have not been
adjusted for current asset levels, including any decrease or increase in
assets, which, if adjusted, would result in expense ratios that are higher
or lower, respectively, than those that are expressed herein. Any fee
waivers/expense caps would limit the impact that any decrease in assets will
have on net expense ratios in the current fiscal year.
International investing involves increased risk and volatility due to potential
political and economic instability, currency fluctuations, and differences in
financial reporting and accounting standards and oversight. Risks are
particularly significant in emerging markets.
- --------------------------------------------------------------------------------
6 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
COUNTRY DIVERSIFICATION(1) (at April 30, 2009; % of portfolio assets)
- ---------------------------------------------------------------------
<Table>
<Caption>
Australia 7.3%
- ------------------------------------------------
Austria 0.3%
- ------------------------------------------------
Belgium 1.7%
- ------------------------------------------------
Bermuda --%
- ------------------------------------------------
Denmark 0.9%
- ------------------------------------------------
Finland 1.2%
- ------------------------------------------------
France 10.6%
- ------------------------------------------------
Germany 6.2%
- ------------------------------------------------
Greece 0.2%
- ------------------------------------------------
Hong Kong 5.8%
- ------------------------------------------------
Ireland 1.1%
- ------------------------------------------------
Italy 4.4%
- ------------------------------------------------
Japan 18.6%
- ------------------------------------------------
Luxembourg 0.6%
- ------------------------------------------------
Netherlands 8.1%
- ------------------------------------------------
New Zealand 0.2%
- ------------------------------------------------
Norway 1.0%
- ------------------------------------------------
Singapore 0.7%
- ------------------------------------------------
Spain 4.3%
- ------------------------------------------------
Sweden 2.0%
- ------------------------------------------------
Switzerland 3.2%
- ------------------------------------------------
United Kingdom 16.1%
- ------------------------------------------------
United States 0.3%
- ------------------------------------------------
Other(2) 5.2%
- ------------------------------------------------
</Table>
(1) Percentages indicated are based upon total investments (excluding
Investments of Cash Collateral for Securities on Loan) as of April 30, 2009.
The Fund's composition is subject to change.
(2) Cash & Cash Equivalents.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 7
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
TOP TEN HOLDINGS (at April 30, 2009; % of portfolio assets)
- ---------------------------------------------------------------------
<Table>
<Caption>
Toyota Motor (Japan) 2.7%
- ------------------------------------------------
Honda Motor (Japan) 2.5%
- ------------------------------------------------
Royal Dutch Shell Series A (Netherlands) 2.1%
- ------------------------------------------------
Novartis (Switzerland) 2.1%
- ------------------------------------------------
GlaxoSmithKline (United Kingdom) 2.0%
- ------------------------------------------------
Barclays (United Kingdom) 1.7%
- ------------------------------------------------
BNP Paribas (France) 1.7%
- ------------------------------------------------
Vodafone Group (United Kingdom) 1.7%
- ------------------------------------------------
AstraZeneca (United Kingdom) 1.6%
- ------------------------------------------------
Royal Dutch Shell Series B (Netherlands) 1.6%
- ------------------------------------------------
</Table>
For further detail about these holdings, please refer to the section entitled
"Portfolio of Investments."
Fund holding are as of the date given, are subject to change at any time, and
are not recommendations to buy or sell any security.
- --------------------------------------------------------------------------------
8 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
FUND EXPENSES EXAMPLE ----------------------------------------------------------
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, which may include management fees; distribution and service (12b-1) fees;
and other Fund fees and expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
In addition to the ongoing expenses which the Fund bears directly, the Fund's
shareholders indirectly bear the expenses of the funds in which it invests (also
referred to as "acquired funds"), including affiliated and non-affiliated pooled
investment vehicles (including mutual funds and exchange traded funds). The
Fund's indirect expense from investing in the acquired funds is based on the
Fund's pro rata portion of the cumulative expenses charged by the acquired funds
using the expense ratio of each of the acquired funds as of the acquired fund's
most recent shareholder report.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended April 30, 2009.
ACTUAL EXPENSES
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 9
FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
NOV. 1, 2008 APRIL 30, 2009 THE PERIOD(A) EXPENSE RATIO
- -------------------------------------------------------------------------------------------
Class A
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 941.60 $ 7.32 1.52%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,017.26 $ 7.60 1.52%
- -------------------------------------------------------------------------------------------
Class B
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 937.10 $11.05 2.30%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,013.39 $11.48 2.30%
- -------------------------------------------------------------------------------------------
Class C
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 937.60 $10.95 2.28%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,013.49 $11.38 2.28%
- -------------------------------------------------------------------------------------------
Class I
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 945.00 $ 3.62 .75%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,021.08 $ 3.76 .75%
- -------------------------------------------------------------------------------------------
Class R2
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 941.70 $ 7.37 1.53%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,017.21 $ 7.65 1.53%
- -------------------------------------------------------------------------------------------
Class R3
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 942.90 $ 6.21 1.29%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,018.40 $ 6.46 1.29%
- -------------------------------------------------------------------------------------------
Class R4
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 944.30 $ 5.01 1.04%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,019.64 $ 5.21 1.04%
- -------------------------------------------------------------------------------------------
Class R5
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 944.40 $ 3.71 .77%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,020.98 $ 3.86 .77%
- -------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
10 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
NOV. 1, 2008 APRIL 30, 2009 THE PERIOD(A) EXPENSE RATIO
- -------------------------------------------------------------------------------------------
Class W
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 942.30 $ 5.73 1.19%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,018.89 $ 5.96 1.19%
- -------------------------------------------------------------------------------------------
</Table>
(a) Expenses are equal to the annualized expense ratio for each class as
indicated above, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended April 30, 2009: -5.84%
for Class A, -6.29% for Class B, -6.24% for Class C, -5.50% for Class I,
-5.83% for Class R2, -5.71% for Class R3, -5.57% for Class R4, -5.56% for
Class R5 and -5.77% for Class W.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 11
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
APRIL 30, 2009 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
COMMON STOCKS (93.5%)(c)
ISSUER SHARES VALUE(a)
AUSTRALIA (7.2%)
AGL Energy 85,965 $944,311
BHP Billiton 188,977 4,567,759
BlueScope Steel 135,318(d) 230,045
CFS Retail Property Trust 220,027(d) 262,956
CSL 82,652 2,066,834
Dexus Property Group 410,691 217,811
Foster's Group 246,530 943,891
GPT Group 1,116,116 381,109
Macquarie Airports 156,426 205,697
Macquarie Infrastructure Group 405,296 397,510
Macquarie Office Trust 2,011,792 285,009
Natl Australia Bank 58,700 879,790
Newcrest Mining 38,979 847,860
OneSteel 183,820(d) 297,810
Origin Energy 123,159(d) 1,457,568
Qantas Airways 271,919 391,153
QBE Insurance Group 110,173 1,744,110
Santos 92,687 1,105,690
Stockland 393,011 896,552
Telstra 509,287 1,232,107
Woodside Petroleum 12,433 346,675
Woolworths 136,520 2,650,173
---------------
Total 22,352,420
- -------------------------------------------------------------------------------------
AUSTRIA (0.3%)
OMV 28,720 901,896
- -------------------------------------------------------------------------------------
BELGIUM (1.7%)
Belgacom 40,572(d) 1,185,763
Colruyt 2,254 513,807
Delhaize Group 11,755 796,465
Dexia 139,409(d) 687,397
Fortis 239,512 595,881
Groupe Bruxelles Lambert 10,330(d) 751,313
InBev 15,253 470,614
KBC Groep 8,063 180,486
---------------
Total 5,181,726
- -------------------------------------------------------------------------------------
BERMUDA (--%)
SeaDrill 13,350(d) 145,759
- -------------------------------------------------------------------------------------
DENMARK (0.9%)
A P Moller -- Maersk Series B 169(d) 994,060
Danske Bank 82,213(b) 916,753
Novozymes Series B 5,943(d) 405,013
Vestas Wind Systems 8,818(b) 582,140
---------------
Total 2,897,966
- -------------------------------------------------------------------------------------
FINLAND (1.2%)
Neste Oil 15,598 203,732
Nokia 47,607(d) 688,597
Outokumpu 32,029 482,771
Stora Enso Series R 214,011(b,d) 1,234,800
UPM-Kymmene 120,168 1,086,135
---------------
Total 3,696,035
- -------------------------------------------------------------------------------------
FRANCE (10.5%)
Air France-KLM 43,656 489,445
AXA 45,759(b,d) 771,775
BNP Paribas 114,106 6,077,829
Casino Guichard Perrachon 2,514 158,261
CNP Assurances 6,723(d) 532,834
Compagnie de Saint-Gobain 70,463 2,557,301
Credit Agricole 118,831 1,761,254
France Telecom 169,294(d) 3,779,469
GDF Suez 27,867(d) 1,006,762
Hermes Intl 4,892(d) 652,496
Lafarge 7,783(d) 445,150
Michelin Series B 9,853 508,454
Natixis 301,958 694,897
Peugeot 32,437 757,634
Renault 48,134 1,565,061
Sanofi-Aventis 92,693(d) 5,369,052
SCOR 37,531 793,175
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
12 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
FRANCE (CONT.)
Societe Generale 40,851 $2,117,264
Sodexho Alliance 12,925 624,135
Total 8,893 451,265
Vallourec 2,525 278,644
Vivendi 50,557(d) 1,369,536
---------------
Total 32,761,693
- -------------------------------------------------------------------------------------
GERMANY (6.1%)
BASF 24,934(d) 942,706
Bayer 33,413(b,d) 1,663,003
BMW 77,697(d) 2,423,862
Commerzbank 68,850(d) 470,141
Daimler 20,629(d) 741,041
Deutsche Bank 60,824(d) 3,271,972
Deutsche Lufthansa 46,554(d) 595,433
Deutsche Telekom 262,491(d) 3,174,934
Fresenius Medical Care & Co 27,749(d) 1,092,467
MAN 4,616(d) 287,042
Munich Re Group 5,479 758,633
Salzgitter 3,144 224,423
SAP 76,547 2,940,184
Volkswagen 5,544 352,159
---------------
Total 18,938,000
- -------------------------------------------------------------------------------------
GREECE (0.2%)
Hellenic Petroleum 14,534 141,751
OPAP 14,665 454,898
---------------
Total 596,649
- -------------------------------------------------------------------------------------
HONG KONG (5.7%)
Cheung Kong Holdings 361,000(d) 3,759,107
Cheung Kong Infrastructure Holdings 123,000(d) 476,929
CLP Holdings 342,500 2,315,771
Hang Seng Bank 183,500 2,050,491
Hong Kong & China Gas 682,000 1,276,016
Hong Kong Exchanges and Clearing 45,800 534,242
Hongkong Electric Holdings 379,000 2,239,797
Hutchison Whampoa 135,000 801,301
Link REIT 308,000 600,906
MTR 268,689 682,999
Orient Overseas Intl 119,500 346,169
Sun Hung Kai Properties 193,000(d) 2,010,961
Swire Pacific Series A 80,000 628,137
---------------
Total 17,722,826
- -------------------------------------------------------------------------------------
IRELAND (1.1%)
CRH 107,116 2,816,607
Experian 107,363 714,787
---------------
Total 3,531,394
- -------------------------------------------------------------------------------------
ITALY (4.4%)
Banca Monte dei Paschi di Siena 331,030 535,319
Banco Popolare 144,712 963,267
Enel 98,331 537,747
Eni 187,455 4,080,723
Telecom Italia 2,174,064(d) 2,235,404
Terna -- Rete Elettrica Nationale 71,768 231,499
UniCredit 1,653,669 4,090,083
Unione di Banche Italiane 69,309 963,059
---------------
Total 13,637,101
- -------------------------------------------------------------------------------------
JAPAN (18.3%)
Aisin Seiki 30,500 621,761
Alps Electric 63,000 335,450
Astellas Pharma 13,700 446,019
Bridgestone 45,900 679,662
Canon 68,300(d) 2,043,479
Dai Nippon Printing 141,000 1,488,666
DENSO 64,100 1,501,750
Eisai 8,900 239,653
FamilyMart 4,200 115,437
Fuji Heavy Inds 124,000(d) 495,502
FUJIFILM Holdings 54,600 1,384,395
Hitachi 434,000(d) 1,500,968
Honda Motor 303,700(d) 8,763,035
Japan Steel Works 16,000(d) 172,010
JFE Holdings 24,900 675,540
KDDI 126 564,833
Komatsu 42,800(d) 529,145
Kurita Water Inds 14,400 347,590
Kyocera 17,100 1,321,535
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 13
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
JAPAN (CONT.)
MEIJI Holdings 4,329(b) $132,154
Mitsubishi 39,700 607,988
Mitsubishi Chemical Holdings 142,000(d) 537,186
Mitsubishi Tanabe Pharma 31,000 294,597
Mitsui & Co 83,000 873,782
Mitsui Chemicals 166,000 494,975
Mitsui Mining & Smelting 80,000 157,405
Mitsui OSK Lines 88,000(d) 500,695
Murata Mfg 26,600(d) 1,071,025
Nikon 11,000 144,920
Nintendo 2,600 693,780
Nippon Express 189,900 676,020
Nippon Mining Holdings 173,500(d) 788,324
Nippon Oil 76,000 395,420
Nippon Paper Group 10,700(d) 303,857
Nippon Telegraph & Telephone 29,000 1,082,364
Nippon Yusen Kabushiki Kaisha 98,000 399,558
Nissan Motor 290,100 1,500,532
Nisshin Seifun Group 34,500 354,801
NTT DoCoMo 539 748,923
Oji Paper 38,000(d) 163,024
Ono Pharmaceutical 10,400 440,897
Osaka Gas 125,000 396,810
Resona Holdings 22,300 297,638
Ricoh 93,000(d) 1,134,687
Rohm 12,200(d) 746,113
Sankyo 2,800 141,421
Sega Sammy Holdings 13,700(d) 123,385
Seiko Epson 13,800 193,426
Seven & I Holdings 23,400 528,048
Shin-Etsu Chemical 37,200 1,795,880
SMC 6,700 652,339
Sojitz 230,400 355,184
Sony 13,400 343,837
SUMCO 24,500(d) 356,819
Sumitomo 128,400(d) 1,110,814
Takeda Pharmaceutical 19,900 706,396
TDK 14,800 667,958
Tokyo Gas 79,000 299,658
Toyo Seikan Kaisha 43,400 716,151
Toyota Inds 20,600 546,344
Toyota Motor 245,900 9,601,670
Yamaha Motor 74,700 785,646
---------------
Total 57,088,881
- -------------------------------------------------------------------------------------
LUXEMBOURG (0.6%)
ArcelorMittal 82,669 1,969,198
- -------------------------------------------------------------------------------------
NETHERLANDS (8.0%)
Aegon 261,742 1,350,866
Akzo Nobel 10,212(d) 431,098
ASML Holding 28,324 583,228
Corio 8,350 373,268
ING Groep 370,039 3,469,947
Koninklijke (Royal) KPN 48,722 587,313
Koninklijke Ahold 132,504(d) 1,461,007
Koninklijke DSM 26,924 841,398
Koninklijke Philips Electronics 57,376 1,044,774
Royal Dutch Shell Series A 314,708 7,323,955
Royal Dutch Shell Series B 244,115 5,623,313
Unilever 94,580 1,880,563
---------------
Total 24,970,730
- -------------------------------------------------------------------------------------
NEW ZEALAND (0.2%)
Fletcher Building 88,666 335,705
Telecom Corporation of New Zealand 122,646 195,446
---------------
Total 531,151
- -------------------------------------------------------------------------------------
NORWAY (1.0%)
DNB NOR 219,500 1,397,439
Norsk Hydro 187,450(d) 843,236
Orkla 90,700(d) 660,424
Yara Intl 5,380 146,851
---------------
Total 3,047,950
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
14 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
SINGAPORE (0.7%)
Neptune Orient Lines 305,000(d) $267,996
Singapore Airlines 107,000 773,842
SingTel 687,000(d) 1,188,726
---------------
Total 2,230,564
- -------------------------------------------------------------------------------------
SPAIN (4.3%)
ACS Actividades de Construccion y Servicios 12,115 608,428
Banco Santander 309,696 2,979,505
Gamesa Tecnologica 9,853 187,630
Inditex 23,465 1,005,786
Repsol YPF 196,254 3,758,038
Telefonica 249,484 4,757,523
---------------
Total 13,296,910
- -------------------------------------------------------------------------------------
SWEDEN (1.9%)
Electrolux Series B 16,994(b) 194,493
Investor Cl B 92,228 1,348,094
Nordea Bank 229,244(d) 1,728,185
SSAB Svenskt Stal Series B 28,900 264,244
Svenska Cellulosa Series B 92,096 899,353
Swedbank 77,264(d) 444,057
Telefonaktiebolaget LM Ericsson Series B 128,131(d) 1,131,702
---------------
Total 6,010,128
- -------------------------------------------------------------------------------------
SWITZERLAND (3.1%)
Compagnie Financiere Richemont Series A Unit 23,728 428,283
Lonza Group 3,122(d) 287,774
Novartis 192,547 7,321,987
STMicroelectronics 98,904 655,731
UBS 35,089(b) 490,382
Xstrata 73,094 656,957
---------------
Total 9,841,114
- -------------------------------------------------------------------------------------
UNITED KINGDOM (15.8%)
3i Group 121,478 576,915
AMEC 16,058 147,772
AstraZeneca 161,594 5,701,942
Barclays 1,468,085 6,114,187
BP 436,363 3,114,974
British American Tobacco 43,951 1,065,754
Cable & Wireless 260,219 577,483
Capita Group 66,884 677,337
Carnival 17,077 473,720
Compass Group 170,204 815,876
GlaxoSmithKline 465,068 7,217,739
Home Retail Group 248,123 924,157
J Sainsbury 110,127 538,486
Kingfisher 492,783 1,356,786
Ladbrokes 47,325 165,064
Liberty Intl 32,169 190,493
Lloyds Banking Group 2,253,061 3,733,362
Old Mutual 1,547,256 1,563,478
Pearson 51,988 543,406
Royal Bank of Scotland Group 5,413,857 3,348,053
SABMiller 59,395 1,003,518
Shire 44,436 559,137
Standard Life 301,428 848,656
Tomkins 79,151 204,051
Unilever 78,043 1,531,041
Vodafone Group 3,291,695 6,072,887
Wolseley 21,377 387,745
---------------
Total 49,454,019
- -------------------------------------------------------------------------------------
UNITED STATES (0.3%)
Synthes 8,781 892,492
- -------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $493,837,143) $291,696,602
- -------------------------------------------------------------------------------------
<Caption>
OTHER (--%)(c)
ISSUER SHARES VALUE(a)
BELGIUM
Fortis Rights 239,512(b,f) $--
- -------------------------------------------------------------------------------------
TOTAL OTHER
(Cost: $--) $--
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 15
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
MONEY MARKET FUND (5.1%)
SHARES VALUE(a)
RiverSource Short-Term Cash Fund, 0.28% 15,928,393(e) $15,928,393
- -------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $15,928,393) $15,928,393
- -------------------------------------------------------------------------------------
<Caption>
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (14.4%)
SHARES VALUE(a)
CASH COLLATERAL REINVESTMENT FUND
JPMorgan Prime Money Market Fund 44,982,057 $44,982,057
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN
(Cost: $44,982,057) $44,982,057
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $554,747,593)(g) $352,607,052
=====================================================================================
</Table>
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 April 30, 2009:
<Table>
<Caption>
PERCENTAGE OF
INDUSTRY NET ASSETS VALUE
- ------------------------------------------------------------------------
Airlines 0.7% $2,249,873
Auto Components 1.2 3,857,971
Automobiles 8.6 26,986,142
Beverages 0.8 2,418,023
Biotechnology 0.7 2,066,834
Building Products 0.8 2,557,301
Capital Markets 1.4 4,339,269
Chemicals 1.8 5,595,107
Commercial Banks 13.6 42,430,456
Commercial Services & Supplies 0.5 1,488,666
Communications Equipment 0.6 1,820,299
Computers & Peripherals 0.1 193,426
Construction & Engineering 0.2 608,428
Construction Materials 1.2 3,597,462
Containers & Packaging 0.2 716,151
Diversified Financial Services 2.1 6,699,477
Diversified Telecommunication Services 6.4 19,996,532
Electric Utilities 1.9 5,801,743
Electrical Equipment 0.2 769,770
Electronic Equipment, Instruments &
Components 2.0 6,281,331
Energy Equipment & Services 0.1 293,531
Food & Staples Retailing 2.2 6,761,684
Food Products 1.2 3,898,559
Gas Utilities 0.6 1,972,484
Health Care Equipment & Supplies 0.3 892,492
Health Care Providers & Services 0.4 1,092,467
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
16 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENTAGE OF
INDUSTRY NET ASSETS VALUE
- ------------------------------------------------------------------------
Hotels, Restaurants & Leisure 0.8% $2,533,693
Household Durables 0.2 538,330
Industrial Conglomerates 0.9 2,710,550
Insurance 2.7 8,363,527
Internet & Catalog Retail 0.3 924,157
Leisure Equipment & Products 0.1 409,726
Life Sciences Tools & Services 0.1 287,774
Machinery 0.7 2,266,770
Marine 0.8 2,508,478
Media 0.6 1,912,942
Metals & Mining 3.6 11,217,248
Multi-Utilities 0.6 1,951,073
Office Electronics 1.0 3,178,166
Oil, Gas & Consumable Fuels 9.5 29,693,324
Paper & Forest Products 1.2 3,687,169
Pharmaceuticals 9.6 29,960,422
Professional Services 0.4 1,392,124
Real Estate Investment Trusts (REITs) 1.0 3,208,104
Real Estate Management & Development 2.1 6,398,205
Road & Rail 0.4 1,359,019
Semiconductors & Semiconductor Equipment 0.8 2,341,891
Software 1.2 3,633,964
Specialty Retail 0.8 2,362,572
Textiles, Apparel & Luxury Goods 0.3 1,080,779
Tobacco 0.3 1,065,754
Trading Companies & Distributors 1.1 3,335,513
Transportation Infrastructure 0.2 603,207
Wireless Telecommunication Services 2.4 7,386,643
Other(1) 19.5 60,910,450
- ------------------------------------------------------------------------
Total $352,607,052
- ------------------------------------------------------------------------
</Table>
(1) Cash & Cash Equivalents.
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 17
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
INVESTMENTS IN DERIVATIVES
At April 30, 2009, $1,648,464 was held in a margin deposit account as collateral
to cover initial margin deposits on open stock index futures contracts.
FUTURES CONTRACTS OUTSTANDING AT APRIL 30, 2009
<Table>
<Caption>
NUMBER OF UNREALIZED
CONTRACTS NOTIONAL EXPIRATION APPRECIATION/
CONTRACT DESCRIPTION LONG/(SHORT) MARKET VALUE DATE (DEPRECIATION)
- -------------------------------------------------------------------------------------
Dow Jones Euro STOXX 50 285 $8,780,151 June 2009 $799,773
Financial Times Stock 61 3,796,746 June 2009 255,953
Exchange 100 Index
Nikkei 225 100 4,447,500 June 2009 87,911
- -------------------------------------------------------------------------------------
Total $1,143,637
- -------------------------------------------------------------------------------------
</Table>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Securities are valued by using policies described in Note 1 to the
financial statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) At April 30, 2009, security was partially or fully on loan. See Note 5 to
the financial statements.
(e) Affiliated Money Market Fund -- See Note 6 to the financial statements. The
rate shown is the seven-day current annualized yield at April 30, 2009.
(f) Negligible market value.
(g) At April 30, 2009, the cost of securities for federal income tax purposes
was approximately $554,748,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
<Table>
Unrealized appreciation $9,202,000
Unrealized depreciation (211,343,000)
------------------------------------------------------------
Net unrealized depreciation $(202,141,000)
------------------------------------------------------------
</Table>
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.
- --------------------------------------------------------------------------------
18 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
FAIR VALUE MEASUREMENTS
Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to
implement more uniform reporting relating to the fair valuation of securities
for financial statement purposes. Mutual funds are required to implement the
requirements of this standard for fiscal years beginning after Nov. 15, 2007.
While uniformity of presentation is the objective of the standard, it is likely
that there may be a range of practices utilized and it may be some period of
time before industry practices become more uniform. For this reason care should
be exercised in interpreting this information and/or using it for comparison
with other mutual funds.
Various inputs are used in determining the value of the Fund's investments.
These inputs are summarized in the three broad levels listed below:
- Level 1 -- quoted prices in active markets for identical securities
- Level 2 -- other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speeds, credit risks,
etc.)
- Level 3 -- significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
Observable inputs are those based on market data obtained from sources
independent of the Fund, and unobservable inputs reflect the Fund's own
assumptions based on the best information available. The input levels are not
necessarily an indication of the risk or liquidity associated with investments
at that level. Non-U.S. equity securities actively traded in foreign markets may
be reflected in Level 2 despite the availability of closing prices, because the
Fund evaluates and determines whether those closing prices reflect fair value at
the close of the NYSE or require adjustment, as described in Note 1 to the
financial statements -- Valuation of securities.
The following table is a summary of the inputs used to value the Fund's
investments as of April 30, 2009:
<Table>
<Caption>
FAIR VALUE AT APRIL 30, 2009
---------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL
- -----------------------------------------------------------------------------------
Investments in
securities $352,607,052 $-- $-- $352,607,052
Other financial
instruments* 1,143,637 -- -- 1,143,637
- -----------------------------------------------------------------------------------
Total $353,750,689 $-- $-- $353,750,689
- -----------------------------------------------------------------------------------
</Table>
* Other financial instruments are derivative instruments, such as futures, which
are valued at the unrealized appreciation (depreciation) on the instrument.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 19
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q,
can be obtained without charge, upon request, by calling the RiverSource
Family of Funds at 1(800) 221-2450.
- --------------------------------------------------------------------------------
20 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
STATEMENT OF ASSETS AND LIABILITIES --------------------------------------------
APRIL 30, 2009 (UNAUDITED)
<Table>
<Caption>
ASSETS
Investments in securities, at value
Unaffiliated issuers* (identified cost $493,837,143) $ 291,696,602
Affiliated money market fund (identified cost $15,928,393) 15,928,393
Investments of cash collateral received for securities on loan
(identified cost $44,982,057) 44,982,057
- ---------------------------------------------------------------------------------------
Total investments in securities (identified cost $554,747,593) 352,607,052
Capital shares receivable 1,682,549
Dividends and accrued interest receivable 1,604,838
Receivable for investment securities sold 1,934
Variation margin receivable on futures contracts 264,383
Margin deposits on futures contracts 1,648,464
- ---------------------------------------------------------------------------------------
Total assets 357,809,220
- ---------------------------------------------------------------------------------------
LIABILITIES
Disbursements in excess of cash 1,657
Capital shares payable 655,787
Payable upon return of securities loaned 44,982,057
Accrued investment management services fees 6,713
Accrued distribution fees 1,761
Accrued transfer agency fees 1,665
Accrued administrative services fees 675
Other accrued expenses 114,776
- ---------------------------------------------------------------------------------------
Total liabilities 44,765,091
- ---------------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $ 312,044,129
- ---------------------------------------------------------------------------------------
REPRESENTED BY
Capital stock -- $.01 par value $ 573,384
Additional paid-in capital 747,781,737
Undistributed net investment income 2,803,723
Accumulated net realized gain (loss) (238,113,935)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (201,000,780)
- ---------------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding capital stock $ 312,044,129
- ---------------------------------------------------------------------------------------
*Including securities on loan, at value $ 43,779,612
- ---------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 21
STATEMENT OF ASSETS AND LIABILITIES (continued) --------------------------------
APRIL 30, 2009 (UNAUDITED)
<Table>
<Caption>
NET ASSET VALUE PER SHARE
NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE
Class A $ 42,459,127 7,807,248 $5.44(1)
Class B $ 7,377,511 1,370,715 $5.38
Class C $ 929,465 172,840 $5.38
Class I $ 76,504,259 14,013,017 $5.46
Class R2 $ 2,752 509 $5.41
Class R3 $ 2,752 509 $5.41
Class R4 $ 57,500 10,559 $5.45
Class R5 $ 2,757 509 $5.42
Class W $184,708,006 33,962,490 $5.44
- -----------------------------------------------------------------------------------------
</Table>
(1) The maximum offering price per share for Class A is $5.77. The offering
price is calculated by dividing the net asset value by 1.0 minus the maximum
sales charge of 5.75%.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
22 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
STATEMENT OF OPERATIONS --------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2009 (UNAUDITED)
<Table>
<Caption>
INVESTMENT INCOME
Income:
Dividends $ 5,905,410
Income distributions from affiliated money market fund 26,431
Fee income from securities lending 167,336
Less foreign taxes withheld (570,105)
- ---------------------------------------------------------------------------
Total income 5,529,072
- ---------------------------------------------------------------------------
Expenses:
Investment management services fees 975,422
Distribution fees
Class A 55,465
Class B 38,743
Class C 4,626
Class R2 7
Class R3 3
Class W 255,604
Transfer agency fees
Class A 116,983
Class B 21,624
Class C 2,512
Class R4 13
Class W 204,484
Administrative services fees 136,671
Plan administration services fees
Class R2 3
Class R3 3
Class R4 66
Compensation of board members 5,848
Custodian fees 74,170
Printing and postage 32,440
Registration fees 20,370
Professional fees 21,745
Other 6,207
- ---------------------------------------------------------------------------
Total expenses 1,973,009
Expenses waived/reimbursed by the Investment Manager and
its affiliates (41)
- ---------------------------------------------------------------------------
Total net expenses 1,972,968
- ---------------------------------------------------------------------------
Investment income (loss) -- net 3,556,104
- ---------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 23
STATEMENT OF OPERATIONS (continued) --------------------------------------------
SIX MONTHS ENDED APRIL 30, 2009 (UNAUDITED)
<Table>
<Caption>
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions $(205,494,071)
Foreign currency transactions (610,348)
Futures contracts (7,453,633)
- ---------------------------------------------------------------------------
Net realized gain (loss) on investments (213,558,052)
Net change in unrealized appreciation (depreciation) on
investments
and on translation of assets and liabilities in foreign
currencies 177,492,329
- ---------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies (36,065,723)
- ---------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $ (32,509,619)
- ---------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
24 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2009 OCT. 31, 2008
(UNAUDITED)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 3,556,104 $ 17,382,215
Net realized gain (loss) on investments (213,558,052) (23,793,115)
Net change in unrealized appreciation (depreciation) on
investments and on translation of assets and liabilities
in
foreign currencies 177,492,329 (443,449,500)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (32,509,619) (449,860,400)
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (2,036,880) (219,304)
Class B (251,061) (20,185)
Class C (31,630) (2,341)
Class I (4,505,003) (1,888,673)
Class R2 (132) --
Class R3 (136) --
Class R4 (2,822) (455)
Class R5 (140) --
Class W (9,771,565) (3,602,017)
Net realized gain
Class A -- (376,594)
Class B -- (53,303)
Class C -- (6,874)
Class I -- (2,534,781)
Class R4 -- (682)
Class W -- (5,906,335)
- ---------------------------------------------------------------------------------------------
Total distributions (16,599,369) (14,611,544)
- ---------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 25
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2009 OCT. 31, 2008
(UNAUDITED)
CAPITAL SHARE TRANSACTIONS
Proceeds from sales
Class A shares $ 3,572,878 $ 22,873,991
Class B shares 222,049 3,465,525
Class C shares 68,559 433,769
Class I shares 10,963,041 51,510,120
Class R2 shares -- 5,000
Class R3 shares -- 5,000
Class R4 shares 520 --
Class R5 shares -- 5,000
Class W shares 23,779,999 320,633,250
Fund merger (Note 8)
Class A shares N/A 87,278,661
Class B shares N/A 18,592,350
Class C shares N/A 1,583,146
Class I shares N/A 68,640,981
Class R4 shares N/A 115,274
Reinvestment of distributions at net asset value
Class A shares 1,996,055 587,287
Class B shares 246,989 72,134
Class C shares 30,209 8,218
Class I shares 4,504,765 4,423,174
Class R4 shares 2,589 870
Class W shares 9,771,449 9,508,225
Payments for redemptions
Class A shares (13,377,497) (29,756,699)
Class B shares (1,821,007) (7,000,624)
Class C shares (180,566) (378,009)
Class I shares (29,011,857) (102,217,635)
Class R4 shares -- (69,561)
Class W shares (69,194,793) (215,203,076)
- ---------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share
transactions (58,426,618) 235,116,371
- ---------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (107,535,606) (229,355,573)
Net assets at beginning of period 419,579,735 648,935,308
- ---------------------------------------------------------------------------------------------
Net assets at end of period $ 312,044,129 $ 419,579,735
- ---------------------------------------------------------------------------------------------
Undistributed net investment income $ 2,803,723 $ 15,846,988
- ---------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
26 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
FINANCIAL HIGHLIGHTS -----------------------------------------------------------
CLASS A
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(k) 2008 2007 2006(b)
Net asset value, beginning of period $6.02 $13.06 $9.82 $9.21
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .04(c) .27(c) .15(c) .01
Net gains (losses) (both realized and
unrealized) (.39) (7.06) 3.17 .60
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.35) (6.79) 3.32 .61
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.23) (.09) (.07) --
Distributions from realized gains -- (.16) (.01) --
- --------------------------------------------------------------------------------------------------------------
Total distributions (.23) (.25) (.08) --
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.44 $6.02 $13.06 $9.82
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $42 $56 $25 $11
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 1.52%(f) 1.40% 1.43% 1.92%(f)
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) 1.52%(f) 1.40% 1.43% 1.42%(f)
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 1.71%(f) 2.75% 1.37% 1.48%(f)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 43% 61% 47% 10%
- --------------------------------------------------------------------------------------------------------------
Total return(i) (5.84%)(j) (52.87%) 34.06% 6.62%(j)
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from May 18, 2006 (when shares became publicly available) to
Oct. 31, 2006.
(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 in the periods in which they
occurred were less than 0.01% of average net assets.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
(k) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 27
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS B
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(k) 2008 2007 2006(b)
Net asset value, beginning of period $5.91 $12.92 $9.79 $9.21
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .02(c) .20(c) .08(c) --
Net gains (losses) (both realized and
unrealized) (.39) (6.99) 3.13 .58
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.37) (6.79) 3.21 .58
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.16) (.06) (.07) --
Distributions from realized gains -- (.16) (.01) --
- --------------------------------------------------------------------------------------------------------------
Total distributions (.16) (.22) (.08) --
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.38 $5.91 $12.92 $9.79
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $7 $10 $3 $--
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 2.30%(f) 2.18% 2.20% 2.71%(f)
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) 2.30%(f) 2.18% 2.20% 2.21%(f)
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) .93%(f) 2.11% .73% (.03%)(f)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 43% 61% 47% 10%
- --------------------------------------------------------------------------------------------------------------
Total return(i) (6.29%)(j) (53.35%) 32.94% 6.30%(j)
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from May 18, 2006 (when shares became publicly available) to
Oct. 31, 2006.
(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 in the periods in which they
occurred were less than 0.01% of average net assets.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
(k) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
28 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS C
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(k) 2008 2007 2006(b)
Net asset value, beginning of period $5.92 $12.92 $9.79 $9.21
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .03(c) .19(c) .08(c) --
Net gains (losses) (both realized and
unrealized) (.40) (6.98) 3.12 .58
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.37) (6.79) 3.20 .58
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.17) (.05) (.06) --
Distributions from realized gains -- (.16) (.01) --
- --------------------------------------------------------------------------------------------------------------
Total distributions (.17) (.21) (.07) --
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.38 $5.92 $12.92 $9.79
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $1 $1 $-- $--
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 2.28%(f) 2.17% 2.19% 2.71%(f)
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) 2.28%(f) 2.17% 2.19% 2.21%(f)
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) .99%(f) 1.98% .71% .74%(f)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 43% 61% 47% 10%
- --------------------------------------------------------------------------------------------------------------
Total return(i) (6.24%)(j) (53.30%) 32.85% 6.30%(j)
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from May 18, 2006 (when shares became publicly available) to
Oct. 31, 2006.
(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 in the periods in which they
occurred were less than 0.01% of average net assets.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
(k) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 29
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS I
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(j) 2008 2007 2006(b)
Net asset value, beginning of period $6.07 $13.11 $9.83 $9.21
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .06(c) .29(c) .24(c) .02
Net gains (losses) (both realized and
unrealized) (.39) (7.05) 3.14 .60
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.33) (6.76) 3.38 .62
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.28) (.12) (.09) --
Distributions from realized gains -- (.16) (.01) --
- --------------------------------------------------------------------------------------------------------------
Total distributions (.28) (.28) (.10) --
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.46 $6.07 $13.11 $9.83
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $77 $103 $195 $63
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) .75%(f) .90% 1.05% 1.65%(f)
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) .75%(f) .90% 1.05% 1.15%(f)
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.52%(f) 2.84% 2.06% 1.17%(f)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 43% 61% 47% 10%
- --------------------------------------------------------------------------------------------------------------
Total return (5.50%)(i) (52.55%) 34.61% 6.73%(i)
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from May 18, 2006 (when shares became publicly available) to
Oct. 31, 2006.
(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 in the periods in which they
occurred were less than 0.01% of average net assets.
(i) Not annualized.
(j) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
30 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS R2
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(j) 2008(b)
Net asset value, beginning of period $6.02 $9.59
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) .05 .03
Net gains (losses) (both realized and
unrealized) (.40) (3.60)
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.35) (3.57)
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.26) --
Distributions from realized gains -- --
- --------------------------------------------------------------------------------------------------------------
Total distributions (.26) --
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.41 $6.02
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $--
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 1.53%(f) 1.64%(f)
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) 1.38%(f) 1.44%(f)
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 1.92%(f) 1.61%(f)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 43% 61%
- --------------------------------------------------------------------------------------------------------------
Total return (5.83%)(i) (37.23%)(i)
- --------------------------------------------------------------------------------------------------------------
</Table>
(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 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 in the periods in which they
occurred were less than 0.01% of average net assets.
(i) Not annualized.
(j) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 31
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS R3
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(j) 2008(b)
Net asset value, beginning of period $6.02 $9.59
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) .05 .04
Net gains (losses) (both realized and
unrealized) (.39) (3.61)
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.34) (3.57)
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.27) --
Distributions from realized gains -- --
- --------------------------------------------------------------------------------------------------------------
Total distributions (.27) --
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.41 $6.02
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $--
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 1.29%(f) 1.39%(f)
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) 1.15%(f) 1.19%(f)
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.16%(f) 1.86%(f)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 43% 61%
- --------------------------------------------------------------------------------------------------------------
Total return (5.71%)(i) (37.23%)(i)
- --------------------------------------------------------------------------------------------------------------
</Table>
(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 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 in the periods in which they
occurred were less than 0.01% of average net assets.
(i) Not annualized.
(j) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
32 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS R4
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(j) 2008 2007 2006(b)
Net asset value, beginning of period $6.07 $13.07 $9.83 $9.21
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .06(c) .33(c) .20(c) .02
Net gains (losses) (both realized and
unrealized) (.40) (7.06) 3.13 .60
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.34) (6.73) 3.33 .62
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.28) (.11) (.08) --
Distributions from realized gains -- (.16) (.01) --
- --------------------------------------------------------------------------------------------------------------
Total distributions (.28) (.27) (.09) --
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.45 $6.07 $13.07 $9.83
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $-- $-- $--
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 1.04%(f) 1.20% 1.35% 1.77%(f)
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) .90%(f) .95% 1.35% 1.27%(f)
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.43%(f) 3.27% 1.79% 1.72%(f)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 43% 61% 47% 10%
- --------------------------------------------------------------------------------------------------------------
Total return (5.57%)(i) (52.46%) 34.13% 6.73%(i)
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from May 18, 2006 (when shares became publicly available) to
Oct. 31, 2006.
(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 in the periods in which they
occurred were less than 0.01% of average net assets.
(i) Not annualized.
(j) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 33
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS R5
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(h) 2008(b)
Net asset value, beginning of period $6.03 $9.59
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) .06 .04
Net gains (losses) (both realized and
unrealized) (.39) (3.60)
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.33) (3.56)
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.28) --
Distributions from realized gains -- --
- --------------------------------------------------------------------------------------------------------------
Total distributions (.28) --
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.42 $6.03
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $--
- --------------------------------------------------------------------------------------------------------------
Total expenses(d),(e) .77%(f) .90%(f)
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.54%(f) 2.14%(f)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 43% 61%
- --------------------------------------------------------------------------------------------------------------
Total return (5.56%)(g) (37.12%)(g)
- --------------------------------------------------------------------------------------------------------------
</Table>
(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 amounts have been calculated using the average shares outstanding
method.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits in the periods in which they
occurred were less than 0.01% of average net assets.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(f) Adjusted to an annual basis.
(g) Not annualized.
(h) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
34 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS W
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(h) 2008 2007(b)
Net asset value, beginning of period $6.02 $13.05 $10.13
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) .05 .23 .13
Net gains (losses) (both realized and
unrealized) (.40) (7.00) 2.89
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.35) (6.77) 3.02
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.23) (.10) (.09)
Distributions from realized gains -- (.16) (.01)
- --------------------------------------------------------------------------------------------------------------
Total distributions (.23) (.26) (.10)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.44 $6.02 $13.05
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $185 $249 $426
- --------------------------------------------------------------------------------------------------------------
Total expenses(d),(e) 1.19%(f) 1.35% 1.48%(f)
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.03%(f) 2.32% 1.17%(f)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 43% 61% 47%
- --------------------------------------------------------------------------------------------------------------
Total return (5.77%)(g) (52.81%) 30.03%(g)
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Dec. 1, 2006 (when shares became publicly available) to
Oct. 31, 2007.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits in the periods in which they
occurred were less than 0.01% of average net assets.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(f) Adjusted to an annual basis.
(g) Not annualized.
(h) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 35
NOTES TO FINANCIAL STATEMENTS --------------------------------------------------
(UNAUDITED AS TO APRIL 30, 2009)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RiverSource Disciplined International Equity Fund (the Fund) is a series of
RiverSource International Series, Inc. and is registered under the Investment
Company Act of 1940 (as amended) as a diversified, open-end management
investment company. RiverSource International 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 foreign issuers or in instruments that provide
exposure to foreign equity markets. The Fund may invest in securities of or
instruments that provide exposure to both developed and emerging markets
issuers.
The Fund offers Class A, Class B, Class C, Class I, Class R2, Class R3, Class
R4, Class R5 and Class W shares.
- - Class A shares are 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 R2, Class R3, Class R4 and Class R5 shares are sold without a
front-end sales charge or CDSC and are offered to qualifying institutional
investors.
- - Class W shares are sold without a front-end sales charge or CDSC and are
offered through qualifying discretionary accounts.
At April 30, 2009, 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 R2, Class R3 and
Class R5 shares.
All classes of shares have identical voting, dividend and liquidation rights.
Class specific expenses (e.g., distribution and service fees, transfer agency
fees, plan administration services fees) differ among classes. Income, expenses
(other than 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,
- --------------------------------------------------------------------------------
36 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
liabilities and contingent assets and liabilities) that could differ from actual
results.
VALUATION OF SECURITIES
Effective Nov. 1, 2008, the Fund adopted Statement of Financial Accounting
Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an
authoritative definition of fair value, sets out a hierarchy for measuring fair
value, and requires additional disclosures about the inputs used to develop the
measurements of fair value and the effect of certain measurements reported in
the Statement of Operations for a fiscal period. There was no impact to the
Fund's net assets or results of operations upon adoption. The fair valuation
measurements disclosure can be found following the Notes to Portfolio of
Investments.
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
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 (NYSE) and therefore the closing prices for
securities in such markets or on such exchanges may not fully reflect events
that occur after such close but before the close of the NYSE, including
significant movements in the U.S. market after foreign exchanges have closed.
Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise
Financial), parent company of the Investment Manager, as administrator to the
Fund, will fair value foreign securities pursuant to procedures adopted by the
Board, including utilizing a third party pricing service to determine these fair
values. These
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 37
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
procedures take into account multiple factors, including movements in the U.S.
securities markets, to determine a good faith estimate that reasonably reflects
the current market conditions as of the close of the NYSE.
Short-term securities maturing in more than 60 days from the valuation date are
valued at the market price or approximate market value based on current interest
rates; those maturing in 60 days or less are valued at amortized cost, which
approximates fair value.
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 NYSE. The Fund will realize a gain or loss when the option
transaction expires or is exercised. When an option is exercised, the proceeds
on sales for a written call option, the purchase cost for a written put option
or the cost of a security for a purchased put or call option is adjusted by the
amount of premium received or paid. At April 30, 2009, and for the six months
then ended, the Fund had no outstanding option contracts.
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes, the Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund also may buy and write put and call options on these futures contracts.
Risks of entering into futures contracts and related options include the
possibility of an
- --------------------------------------------------------------------------------
38 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
illiquid market and that a change in the value of the contract or option may not
correlate with changes in the value of the underlying securities.
Futures and options on futures are valued daily based upon the last sale price
at the close of the market on the principal exchange on which they are traded.
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the contract is closed
or expires.
FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the Statement of Operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes.
The Fund may enter into forward foreign currency 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 April 30, 2009, 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.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 39
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue Code
that applies to regulated investment companies and to distribute substantially
all of its taxable income to shareholders. No provision for income or excise
taxes is thus required.
Management of the Fund has concluded that there are no significant uncertain tax
positions that would require recognition in the financial statements. Generally,
the tax authorities can examine all the tax returns filed for the last three
years.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of futures contracts,
foreign currency transactions, 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.
RECENT ACCOUNTING PRONOUNCEMENTS
The Fund has adopted FASB Staff Position No. 133-1 and FIN No. 45-4 (FSP FAS
133-1 and FIN 45-4), "Disclosures about Credit Derivatives and Certain
Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No.
45." The amendments to FSP FAS 133-1 and FIN 45-4 require enhanced disclosures
about a fund's derivatives and guarantees. 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, (c) how derivative instruments and
related hedged items affect a fund's financial position, financial performance,
and cash flows and (d) the current status of the payment/performance risk of the
credit derivative. The amendments to FSP FAS 133-1 and FIN 45-4 also require
additional disclosures about the current status of the payment/performance risk
of a guarantee. At April 30, 2009, the Fund did not own nor was it a party to
any credit derivative contracts within the scope of these amendments.
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. SFAS 161 is
effective for financial statements issued for fiscal years and interim periods
- --------------------------------------------------------------------------------
40 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
beginning after Nov. 15, 2008. As of April 30, 2009, 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 April 9, 2009, the FASB issued Staff Position No. 157-4, "Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly" (FSP
157-4). FSP 157-4 provides additional guidance for estimating fair value in
accordance with SFAS 157 when the volume and level of activity for the asset or
liability have significantly decreased. FSP 157-4 also requires additional
disaggregation of the current SFAS 157 required disclosures. FSP 157-4 is
effective for interim and annual reporting periods ending after June 15, 2009,
and shall be applied prospectively. Management is currently evaluating the
impact that the adoption of FSP 157-4 will have on the amounts and disclosures
within the Fund's financial statements.
DIVIDENDS TO SHAREHOLDERS
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
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 0.80%
to 0.57% annually as the Fund's assets increase. The fee may be adjusted upward
or downward by a performance incentive adjustment determined monthly by
measuring the percentage difference over a rolling 12-month period between the
annualized performance of one Class A share of the Fund and the annualized
performance of the Lipper International Large-Cap Core 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%,
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 41
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
the adjustment will be zero. The adjustment decreased the management fee by
$379,541 for the six months ended April 30, 2009. The management fee for the six
months ended April 30, 2009 was 0.57% of the Fund's average daily net assets,
including the adjustment under the terms of the performance incentive
arrangement.
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 from 0.08% to 0.05% annually as the
Fund's assets increase. The fee for the six months ended April 30, 2009 was
0.08% of the Fund's average daily net assets.
OTHER FEES
Other expenses are for, among other things, certain expenses of the Fund or the
Board including: Fund boardroom and office expense, employee compensation,
employee health and retirement benefits, and certain other expenses. Payment of
these Fund and Board expenses is facilitated by a company providing limited
administrative services to the Fund and the Board. For the six months ended
April 30, 2009, other expenses paid to this company were $1,838.
COMPENSATION OF BOARD MEMBERS
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 daily net assets attributable to Class R2, Class R3, Class R4 and Class
R5 shares and an annual asset-based fee at a rate of 0.20% of the Fund's average
daily net assets attributable to Class W shares.
The Transfer Agent charges an annual fee of $5 per inactive account, charged on
a pro rata basis for 12 months from the date the account becomes inactive. These
fees are included in the transfer agency fees in the Statement of Operations.
- --------------------------------------------------------------------------------
42 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
PLAN ADMINISTRATION SERVICES FEES
Under a Plan Administration Services Agreement with the Transfer Agent, the Fund
pays an annual fee at a rate of 0.25% of the Fund's average daily net assets
attributable to Class R2, Class R3 and Class R4 shares for the provision of
various administrative, recordkeeping, communication and educational services.
DISTRIBUTION FEES
The Fund has agreements with RiverSource Distributors, Inc. and RiverSource Fund
Distributors, Inc. (collectively, the Distributor) for distribution and
shareholder services. Under a Plan and Agreement of Distribution pursuant to
Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's
average daily net assets attributable to Class A, Class R3 and Class W shares, a
fee at an annual rate of up to 0.50% of the Fund's average daily net assets
attributable to Class R2 shares and a fee at an annual rate of up to 1.00% of
the Fund's average daily net assets attributable to Class B and Class C shares.
For Class B and Class C shares, 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 $388,000 and $12,000 for
Class B and Class C shares, respectively. These amounts are based on the most
recent information available as of April 30, 2009, and may be recovered from
future payments under the distribution plan or CDSC. To the extent the
unreimbursed expense has been fully recovered, the distribution fee is reduced.
SALES CHARGES
Sales charges received by the Distributor for distributing Fund shares were
$32,986 for Class A, $3,115 for Class B and $22 for Class C for the six months
ended April 30, 2009.
EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES
For the six months ended April 30, 2009, the Investment Manager and its
affiliates waived/reimbursed certain fees and expenses such that net expenses
(excluding fees and expenses of acquired funds*), including the adjustment under
the terms of a performance incentive arrangement, were as follows:
<Table>
Class R2............................................ 1.38%
Class R3............................................ 1.15
Class R4............................................ 0.90
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 43
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
The waived/reimbursed fees and expenses for the plan administration services
fees at the class level were as follows:
<Table>
Class R2............................................. $2
Class R3............................................. 2
Class R4............................................. 37
</Table>
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 class average daily net assets:
<Table>
Class R4............................................ 1.37%
</Table>
* In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the funds in
which it invests (also referred to as "acquired funds"), including
affiliated and non-affiliated pooled investment vehicles (including mutual
funds and exchange traded funds). Because the acquired funds have varied
expense and fee levels and the Fund may own different proportions of
acquired funds at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
CUSTODIAN FEES
Effective Dec. 15, 2008, the Fund pays custodian fees to JPMorgan Chase Bank,
N.A. For the period from Nov. 1, 2008 to Dec. 15, 2008, the Fund paid custodian
fees amounting to $5,223 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 $144,217,675 and $210,940,905, respectively, for the six
months ended April 30, 2009. Realized gains and losses are determined on an
identified cost basis.
- --------------------------------------------------------------------------------
44 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
<Table>
<Caption>
SIX MONTHS ENDED APRIL 30, 2009
ISSUED FOR
REINVESTED NET
SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- --------------------------------------------------------------------------------------
Class A 673,195 364,910 (2,605,105) (1,567,000)
Class B 42,907 45,486 (371,533) (283,140)
Class C 13,286 5,563 (36,239) (17,390)
Class I 2,099,399 822,037 (5,872,117) (2,950,681)
Class R4 101 473 -- 574
Class W 4,566,130 1,786,371 (13,781,656) (7,429,155)
- --------------------------------------------------------------------------------------
<Caption>
YEAR ENDED OCT. 31, 2008*
ISSUED FOR
FUND REINVESTED NET
SOLD MERGER DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- --------------------------------------------------------------------------------------
Class A 2,149,576 8,485,254 52,111 (3,214,704) 7,472,237
Class B 320,154 1,827,044 6,458 (744,124) 1,409,532
Class C 41,521 155,443 735 (40,730) 156,969
Class I 4,794,438 6,653,955 391,778 (9,744,855) 2,095,316
Class R2 509 -- -- -- 509
Class R3 509 -- -- -- 509
Class R4 -- 11,178 77 (6,457) 4,798
Class R5 509 -- -- -- 509
Class W 30,213,146 -- 844,425 (22,281,511) 8,776,060
- --------------------------------------------------------------------------------------
</Table>
* Class R2, Class R3 and Class R5 are for the period from Aug. 1, 2008 (when
shares became publicly available) to Oct. 31, 2008.
5. LENDING OF PORTFOLIO SECURITIES
Effective Dec. 1, 2008, the Fund has entered into a Master Securities Lending
Agreement ("the Agreement") with JPMorgan Chase Bank, National Association
("JPMorgan"). The Agreement authorizes JPMorgan as lending agent to lend
securities to authorized borrowers in order to generate additional income on
behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured
by cash or U.S. government securities equal to at least 100% of the market value
of the loaned securities. Any additional collateral required to maintain those
levels due to market fluctuations of the loaned securities is delivered the
following business day. Cash collateral received is invested by the lending
agent on behalf of the Fund into authorized investments pursuant to the
Agreement. The investments made with the cash collateral are listed in the
Portfolio of
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 45
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
Investments. The value of such investments, and any uninvested cash collateral
balance, are disclosed in the Statement of Assets and Liabilities along with the
related obligation to return the collateral upon the return of the securities
loaned. At April 30, 2009, securities valued at $43,779,612 were on loan,
secured by cash collateral of $44,982,057 invested in short-term securities or
in cash equivalents.
Pursuant to the Agreement, the Fund receives income for lending its securities
either in the form of fees or by earning interest on invested cash collateral,
net of negotiated rebates paid to borrowers and fees paid to the lending agent
for services provided and any other securities lending expenses. Income of
$167,336 earned from securities lending from Dec. 1, 2008 through April 30, 2009
is included in the Statement of Operations. The Fund also continues to earn
interest and dividends on the securities loaned.
Risks of delay in recovery of securities or even loss of rights in the
securities may occur should the borrower of the securities fail financially.
Risks may also arise to the extent that the value of the securities loaned
increases above the value of the collateral received. JPMorgan will indemnify
the Fund from losses resulting from a borrower's failure to return a loaned
security when due. Such indemnification does not extend to losses associated
with declines in the value of cash collateral investments. Loans are subject to
termination by the Funds or the borrower at any time, and are, therefore, not
considered to be illiquid investments.
Prior to Dec. 1, 2008, the Investment Manager served as securities lending agent
for the Fund under the Securities Lending Agency Agreement. For the period from
Nov. 1, 2008 through Nov. 30, 2008, the Fund had no securities on loan.
6. AFFILIATED MONEY MARKET FUND
The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund,
a money market fund established for the exclusive use of the RiverSource funds
and other institutional clients of RiverSource Investments. The cost of the
Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term
Cash Fund aggregated $60,807,094 and $78,752,545, respectively, for the six
months ended April 30, 2009. The income distributions received with respect to
the Fund's investment in RiverSource Short-Term Cash Fund can be found in the
Statement of Operations and the Fund's invested balance in RiverSource Short-
Term Cash Fund at April 30, 2009, can be found in the Portfolio of Investments.
- --------------------------------------------------------------------------------
46 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
7. BANK BORROWINGS
The Fund has entered into a revolving credit facility with a syndicate of banks
led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund
may borrow for the temporary funding of shareholder redemptions or for other
temporary or emergency purposes. The credit facility agreement, which is a
collective agreement between the Fund and certain other RiverSource 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 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 six months ended April 30, 2009.
8. FUND MERGER
At the close of business on March 14, 2008, RiverSource Disciplined
International Equity Fund acquired the assets and assumed the identified
liabilities of RiverSource International Equity Fund. The reorganization was
completed after shareholders approved the plan on Jan. 29, 2008.
The aggregate net assets of RiverSource Disciplined International Equity Fund
immediately before the acquisition were $608,113,836 and the combined net assets
immediately after the acquisition were $784,324,248.
The merger was accomplished by a tax-free exchange of 31,950,545 shares of
RiverSource International Equity Fund valued at $176,210,412.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 47
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
In exchange for the RiverSource International Equity Fund shares and net assets,
RiverSource Disciplined International Equity Fund issued the following number of
shares:
<Table>
<Caption>
SHARES
- ------------------------------------------------------------
Class A.......................................... 8,485,254
Class B.......................................... 1,827,044
Class C.......................................... 155,443
Class I.......................................... 6,653,955
Class R4......................................... 11,178
</Table>
RiverSource International Equity Fund's net assets after adjustments for any
permanent book-to-tax differences at the merger date were as follows:
<Table>
<Caption>
EXCESS OF
ACCUMULATED DISTRIBUTIONS OVER
TOTAL CAPITAL UNREALIZED NET NET INVESTMENT
NET ASSETS STOCK DEPRECIATION REALIZED LOSS INCOME
- ----------------------------------------------------------------------------------------------
RiverSource
International
Equity Fund.... $176,210,412 $195,593,605 $(19,207,049) $(174,218) $(1,926)
</Table>
9. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$23,521,188 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.
10. 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.
11. 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
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48 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
they are investors in several American Express Company mutual funds and they
purport to bring the action derivatively on behalf of those funds under the
Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid
to the defendants by the funds for investment advisory and administrative
services are excessive. The plaintiffs seek remedies including restitution and
rescission of investment advisory and distribution agreements. The plaintiffs
voluntarily agreed to transfer this case to the United States District Court for
the District of Minnesota (the District Court). In response to defendants'
motion to dismiss the complaint, the District Court dismissed one of plaintiffs'
four claims and granted plaintiffs limited discovery. Defendants moved for
summary judgment in April 2007. Summary judgment was granted in the defendants'
favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth
Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8,
2009, the Eighth Circuit reversed summary judgment and remanded to the District
Court for further proceedings.
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
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 49
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
January 2004, Seligman, on a voluntary basis, publicly disclosed these four
arrangements to its clients and to shareholders of the Seligman Funds. Seligman
also provided information concerning mutual fund trading practices to the SEC
and the Office of the Attorney General of the State of New York (NYAG).
In September 2006, the NYAG commenced a civil action in New York State Supreme
Court against Seligman, Seligman Advisors, Inc. (which is now known as
RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino
(collectively, the Seligman Parties), alleging, in substance, that the Seligman
Parties permitted various persons to engage in frequent trading and, as a
result, the prospectus disclosure used by the registered investment companies
then managed by Seligman 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. On March 13, 2009, without admitting or denying
any violations of law or wrongdoing, the Seligman Parties entered into a
stipulation of settlement with the NYAG and settled the claims made by the NYAG.
Under the terms of the settlement, Seligman will pay $11.3 million to four
Seligman Funds. This settlement resolved all outstanding matters between the
Seligman Parties and the NYAG. In addition to the foregoing matter, the New York
staff of the SEC indicated in September 2005 that it was considering
recommending to the Commissioners of the SEC the instituting of a formal action
against Seligman and Seligman Advisors, Inc. relating to frequent trading in the
Seligman Funds. Seligman responded to the staff in October 2005 that it believed
that any action would be both inappropriate and unnecessary, especially in light
of the fact that Seligman had previously resolved the underlying issue with the
Independent Directors of the Seligman Funds and made recompense to the affected
Seligman Funds. There have been no further developments with the SEC on this
matter.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, arbitration and regulatory proceedings, including
routine litigation, class actions, and governmental actions, concerning matters
arising in connection with the conduct of their business activities. Ameriprise
Financial believes that the Funds are not currently the subject of, and that
neither Ameriprise Financial nor any of its affiliates are the subject of, any
pending legal, arbitration or regulatory proceedings that are likely to have a
material adverse effect on the Funds or the ability of Ameriprise Financial or
its affiliates to perform under their contracts with the Funds. Ameriprise
Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the
Securities and Exchange Commission on legal and regulatory matters that relate
to Ameriprise Financial and its affiliates. Copies of these filings may be
obtained by accessing the SEC website at www.sec.gov.
- --------------------------------------------------------------------------------
50 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
There can be no assurance that these matters, or the adverse publicity
associated with them, will not result in increased fund redemptions, reduced
sale of fund shares or other adverse consequences to the Funds. Further,
although we believe proceedings are not likely to have a material adverse effect
on the Funds or the ability of Ameriprise Financial or its affiliates to perform
under their contracts with the Funds, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range
of loss that may result. An adverse outcome in one or more of these proceedings
could result in adverse judgments, settlements, fines, penalties or other relief
that could have a material adverse effect on the consolidated financial
condition or results of operations of Ameriprise Financial.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 51
APPROVAL OF INVESTMENT MANAGEMENT SERVICES
AGREEMENT ----------------------------------------------------------------------
RiverSource Investments, LLC ("RiverSource Investments" or the "investment
manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise
Financial"), serves as the investment manager to the Fund. Under an investment
management services agreement (the "IMS Agreement"), RiverSource Investments
provides investment advice and other services to the Fund and all funds in the
RiverSource Family of Funds (collectively, the "Funds").
On an annual basis, the Fund's Board of Directors (the "Board"), including the
independent Board members (the "Independent Directors"), considers renewal of
the IMS Agreement. RiverSource Investments prepared detailed reports for the
Board and its Contracts Committee in March and April 2009, including reports
based on data provided by independent organizations to assist the Board in
making this determination. In addition, throughout the year, the Board (or its
committees) reviews information prepared by RiverSource Investments addressing
the services RiverSource Investments provides and Fund performance. The Board
accords particular weight to the work, deliberations and conclusions of the
Contracts, Investment Review and Compliance Committees in determining whether to
continue the IMS Agreement. At the April 7-8, 2009 in-person Board meeting,
independent legal counsel to the Independent Directors reviewed with the
Independent Directors various factors relevant to the Board's consideration of
advisory agreements and the Board's legal responsibilities related to such
consideration. Following an analysis and discussion of the factors identified
below, the Board, including all of the Independent Directors, approved renewal
of the IMS Agreement.
Nature, Extent and Quality of Services Provided by RiverSource Investments: The
Board analyzed various reports and presentations it had received detailing the
services performed by RiverSource Investments, as well as its expertise,
resources and capabilities. The Board specifically considered many developments
during the past year concerning the services provided by RiverSource
Investments, including, in particular, the continued investment in, and
resources dedicated to, the Fund's operations, most notably, the large
investment made in the acquisition of J. & W. Seligman & Co. Incorporated,
including its portfolio management operations, personnel and infrastructure
(including the addition of two new offices in New York City and Palo Alto).
Further, in connection with the Board's evaluation of the overall package of
services provided by RiverSource Investments, the Board considered the quality
of the administrative and transfer agency services provided by RiverSource
Investments' affiliates to the Fund. The Board also reviewed the financial
condition of RiverSource Investments (and its affiliates) and each entity's
ability to carry out its responsibilities under the IMS Agreement. Further, the
Board considered RiverSource Investments' ability to
- --------------------------------------------------------------------------------
52 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
retain key personnel and its expectations in this regard. The Board also
discussed the acceptability of the terms of the IMS Agreement (including the
relatively broad scope of services required to be performed by RiverSource
Investments). The Board concluded that the services being performed under the
IMS Agreement were of a reasonably high quality, particularly in light of recent
market conditions.
Based on the foregoing, and based on other information received (both oral and
written, including the information on investment performance referenced below)
and other considerations, the Board concluded that RiverSource Investments and
its affiliates were in a position to continue to provide a high quality and
level of services to the Fund.
Investment Performance: For purposes of evaluating the nature, extent and
quality of services provided under the IMS Agreement, the Board carefully
reviewed the investment performance of the Fund. In this regard, the Board
considered: (i) detailed reports containing data prepared by an independent
organization showing, for various periods, the performance of the Fund, the
performance of a benchmark index, the percentage ranking of the Fund among its
comparison group and the net assets of the Fund; and (ii) a report detailing the
Fund's performance over various periods, recent Fund inflows (and outflows) and
a comparison of the Fund's net assets from December 2007 to December 2008. The
Board observed that the Fund's investment performance reflected the
interrelationship of exceptionally challenging market conditions with the
investment strategies employed by the portfolio management team. Further, the
Board noted that appropriate measures have been taken to adjust the quantitative
investment processes in response to recent market conditions.
Comparative Fees, Costs of Services Provided and the Profits Realized By
RiverSource Investments and its Affiliates from their Relationships with the
Fund: The Board reviewed comparative fees and the costs of services to be
provided under the IMS Agreement. The Board members considered detailed
comparative information set forth in an annual report on fees and expenses,
including, among other things, data (prepared by an independent organization)
showing a comparison of the Fund's expenses with median expenses paid by funds
in its peer group, as well as data showing the Fund's contribution to
RiverSource Investments' profitability. They also reviewed information in the
report comparing the fees charged to the Fund by RiverSource Investments to fees
charged to other client accounts (with similar investment strategies to those of
the Fund).
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 53
APPROVAL OF INVESTMENT MANAGEMENT SERVICES
AGREEMENT (continued) ----------------------------------------------------------
The Board accorded particular weight to the notion that the level of fees should
reflect a rational pricing model applied consistently across the various product
lines in the Funds' family, while assuring that the overall fees for each fund
are generally in line with the "pricing philosophy" (i.e., that the total
expense ratio of each fund (excluding the effect of a performance incentive
adjustment, if applicable), with few exceptions, is at or below the median
expense ratio of funds in the same comparison group). The Board took into
account that the Fund's total expense ratio (after considering proposed expense
caps/waivers) was slightly below the peer group's median expense ratio shown in
the reports. The Board also considered the Fund's performance incentive
adjustment and noted its continued appropriateness.
The Board also considered the expected profitability of RiverSource Investments
and its affiliates in connection with RiverSource Investments providing
investment management services to the Fund. In this regard, the Board referred
to a detailed profitability report, discussing the profitability to RiverSource
Investments and Ameriprise Financial from managing and operating the Fund,
including data showing comparative profitability over the past two years. The
Board also considered the services acquired by the investment manager through
the use of commission dollars paid by the Funds on portfolio transactions. The
Board noted that the fees paid by the Fund should permit the investment manager
to offer competitive compensation to its personnel, make necessary investments
in its business and earn an appropriate profit. The Board concluded that
profitability levels were reasonable.
Economies of Scale to be Realized: The Board also considered the economies of
scale that might be realized by RiverSource Investments as the Fund grows and
took note of the extent to which Fund shareholders might also benefit from such
growth. The Board considered that the IMS Agreement provides for lower fees as
assets increase at pre-established breakpoints and concluded that the IMS
Agreement satisfactorily provided for sharing these economies of scale.
Based on the foregoing, the Board, including all of the Independent Directors,
concluded that the investment management service fees were fair and reasonable
in light of the extent and quality of services provided. In reaching this
conclusion, no single factor was determinative. On April 8, 2009, the Board,
including all of the Independent Directors, approved the renewal of the IMS
Agreement for an additional annual period.
- --------------------------------------------------------------------------------
54 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT
PROXY VOTING -------------------------------------------------------------------
The policy of the Board is to vote the proxies of the companies in which the
Fund holds investments consistent with the procedures as stated in the Statement
of Additional Information (SAI). You may obtain a copy of the SAI without charge
by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your
financial intermediary; visiting riversource.com/funds; or searching the website
of the Securities and Exchange Commission (SEC) at http://www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio
securities is filed with the SEC by August 31 for the most recent 12-month
period ending June 30 of that year, and is available without charge by visiting
riversource.com/funds; or searching the website of the SEC at www.sec.gov.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2009 SEMIANNUAL REPORT 55
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND
734 Ameriprise Financial Center
Minneapolis, MN 55474
RIVERSOURCE.COM/FUNDS
<Table>
This report must be accompanied or preceded by the Fund's
current prospectus. RiverSource(R) mutual funds are
distributed by RiverSource Distributors, Inc., and
RiverSource Fund Distributors, Inc., Members FINRA, and
managed by RiverSource Investments, LLC. RiverSource is part
of Ameriprise Financial, Inc.
(RIVERSOURCE INVESTMENTS LOGO) (C)2009 RiverSource Investments, LLC. S-6518 D (6/09)
</Table>
Semiannual Report
(THREADNEEDLE LOGO)
THREADNEEDLE
EUROPEAN EQUITY FUND
SEMIANNUAL REPORT FOR
THE PERIOD ENDED
APRIL 30, 2009
THREADNEEDLE EUROPEAN EQUITY FUND SEEKS TO PROVIDE
SHAREHOLDERS WITH CAPITAL APPRECIATION.
(SINGLE STRATEGY FUNDS ICON)
TABLE OF CONTENTS --------------------------------------------------------------
<Table>
Your Fund at a Glance.............. 2
Fund Expenses Example.............. 7
Portfolio of Investments........... 9
Statement of Assets and
Liabilities...................... 15
Statement of Operations............ 16
Statements of Changes in Net
Assets........................... 17
Financial Highlights............... 18
Notes to Financial Statements...... 23
Approval of Investment Management
Services Agreement............... 37
Proxy Voting....................... 40
</Table>
RIVERSOURCE FAMILY OF FUNDS
Threadneedle Funds are a part of the RiverSource
family of funds that includes funds branded
"RiverSource," "RiverSource Partners," "Seligman" and
"Threadneedle." These funds share the same Board of
Directors/Trustees and officers.
- --------------------------------------------------------------------------------
THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT 1
YOUR FUND AT A GLANCE ----------------------------------------------------------
(UNAUDITED)
FUND SUMMARY
- --------------------------------------------------------------------------------
> Threadneedle European Equity Fund (the Fund) Class A shares declined 1.92%
(excluding sales charge) for the six months ended April 30, 2009.
> The Fund outperformed its benchmark, the Morgan Stanley Capital International
(MSCI) Europe Index, which fell 4.18% for the same period.
> The Fund underperformed the Lipper European Funds Index, representing the
Fund's peer group, which rose 0.08% for the same time frame.
ANNUALIZED TOTAL RETURNS (for period ended April 30, 2009)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Since
inception
6 months* 1 year 3 years 5 years 6/26/00
- ---------------------------------------------------------------------------
Threadneedle European
Equity Fund Class A
(excluding sales charge) -1.92% -38.32% -9.03% +2.77% -2.15%
- ---------------------------------------------------------------------------
MSCI Europe Index(1)
(unmanaged) -4.18% -44.99% -11.46% +1.51% -0.71%
- ---------------------------------------------------------------------------
Lipper European Funds
Index(2) +0.08% -43.46% -11.06% +3.01% -0.40%
- ---------------------------------------------------------------------------
</Table>
* Not annualized.
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by contacting your financial intermediary
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.
- --------------------------------------------------------------------------------
2 THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes. It is not possible to invest directly in an index.
(1) The Morgan Stanley Capital International (MSCI) Europe Index, compiled by
MSCI in Geneva, is an unmanaged market-capitalization-weighted index of
equity securities from various European countries. Income is included. The
index reflects reinvestment of all distributions and changes in market
prices.
(2) The Lipper European Funds Index includes the 30 largest European 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 EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT 3
YOUR FUND AT A GLANCE (continued) ---------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT APRIL 30, 2009
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS INCEPTION
Class A (inception
6/26/00) -1.92% -38.32% -9.03% +2.77% -2.15%
- --------------------------------------------------------------------------
Class B (inception
6/26/00) -2.09% -38.79% -9.75% +1.98% -2.89%
- --------------------------------------------------------------------------
Class C (inception
6/26/00) -2.25% -38.85% -9.74% +1.98% -2.90%
- --------------------------------------------------------------------------
Class I (inception
7/15/04) -1.67% -38.00% -8.60% N/A +3.31%
- --------------------------------------------------------------------------
Class R4 (inception
6/26/00) -1.83% -38.15% -8.75% +3.08% -1.93%
- --------------------------------------------------------------------------
With sales charge
Class A (inception
6/26/00) -7.63% -41.90% -10.78% +1.57% -2.80%
- --------------------------------------------------------------------------
Class B (inception
6/26/00) -6.99% -41.85% -10.97% +1.61% -2.89%
- --------------------------------------------------------------------------
Class C (inception
6/26/00) -3.23% -39.46% -9.74% +1.98% -2.90%
- --------------------------------------------------------------------------
</Table>
<Table>
<Caption>
AT MARCH 31, 2009
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS INCEPTION
Class A (inception
6/26/00) -27.91% -41.84% -10.15% +0.32% -3.23%
- --------------------------------------------------------------------------
Class B (inception
6/26/00) -28.12% -42.37% -10.86% -0.46% -3.97%
- --------------------------------------------------------------------------
Class C (inception
6/26/00) -28.10% -42.28% -10.77% -0.42% -3.95%
- --------------------------------------------------------------------------
Class I (inception
7/15/04) -27.55% -41.56% -9.67% N/A +1.30%
- --------------------------------------------------------------------------
Class R4 (inception
6/26/00) -27.79% -41.60% -9.89% +0.62% -3.01%
- --------------------------------------------------------------------------
With sales charge
Class A (inception
6/26/00) -32.01% -45.16% -11.92% -0.87% -3.87%
- --------------------------------------------------------------------------
Class B (inception
6/26/00) -31.71% -45.25% -12.06% -0.86% -3.97%
- --------------------------------------------------------------------------
Class C (inception
6/26/00) -28.81% -42.86% -10.77% -0.42% -3.95%
- --------------------------------------------------------------------------
</Table>
Class A share performance reflects the maximum sales charge of 5.75%. Class B
share performance reflects a contingent deferred sales charge (CDSC) applied as
follows: first year 5%; second and third** years 4%; fourth year 3%; fifth year
2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to
a 1% CDSC if shares are sold within one year after purchase. Sales charges do
not apply to Class I and Class R4 shares. Class I and Class R4 shares are
available to institutional investors only.
* Not annualized.
** For Class B shares purchased on or after June 13, 2009 the CDSC percentage
for the third year will be 3%.
- --------------------------------------------------------------------------------
4 THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
STYLE MATRIX
- --------------------------------------------------------------------------------
<Table>
<Caption>
STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
</Table>
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)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Total fund Net fund
expenses expenses(a)
- -----------------------------------------
Class A 1.58% 1.48%
- -----------------------------------------
Class B 2.32% 2.25%
- -----------------------------------------
Class C 2.33% 2.24%
- -----------------------------------------
Class I 1.08% 1.03%
- -----------------------------------------
Class R4 1.36% 1.33%
- -----------------------------------------
</Table>
(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 0.02%
for the year ended Oct. 31, 2008), will not exceed 1.46% for Class A, 2.23%
for Class B, 2.22% for Class C, 1.01% for Class I and 1.31% for Class R4.
* Fund expense ratios are calculated based on the fund's average net assets
during the fund's most recently completed fiscal year, and have not been
adjusted for current asset levels, including any decrease or increase in
assets, which, if adjusted, would result in expense ratios that are higher
or lower, respectively, than those that are expressed herein. Any fee
waivers/expense caps would limit the impact that any decrease in assets will
have on net expense ratios in the current fiscal year.
International investing involves increased risk and volatility due to potential
political and economic instability, currency fluctuations, and differences in
financial reporting and accounting standards and oversight. Risks are
particularly significant in emerging markets.
- --------------------------------------------------------------------------------
THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT 5
YOUR FUND AT A GLANCE (continued) ---------------------------------------------
COUNTRY DIVERSIFICATION(1) (at April 30, 2009; % of portfolio assets)
- ---------------------------------------------------------------------
<Table>
<Caption>
Belgium 2.0%
- ------------------------------------------------
France 16.2%
- ------------------------------------------------
Germany 12.4%
- ------------------------------------------------
Ireland 1.0%
- ------------------------------------------------
Netherlands 10.0%
- ------------------------------------------------
Spain 4.1%
- ------------------------------------------------
Switzerland 15.7%
- ------------------------------------------------
United Kingdom 36.9%
- ------------------------------------------------
United States 0.9%
- ------------------------------------------------
Other(2) 0.8%
- ------------------------------------------------
</Table>
(1) Percentages indicated are based upon total investments (excluding
Investments of Cash Collateral for Securities on Loan) as of April 30, 2009.
The Fund's composition is subject to change.
(2) Cash & Cash Equivalents.
TOP TEN HOLDINGS (at April 30, 2009; % of portfolio assets)
- ---------------------------------------------------------------------
<Table>
<Caption>
Nestle (Switzerland) 3.6%
- ------------------------------------------------
BG Group (United Kingdom) 3.5%
- ------------------------------------------------
Roche Holding (Switzerland) 3.2%
- ------------------------------------------------
British American Tobacco (United Kingdom) 2.7%
- ------------------------------------------------
Total (France) 2.7%
- ------------------------------------------------
Vodafone Group (United Kingdom) 2.7%
- ------------------------------------------------
HSBC Holdings (United Kingdom) 2.6%
- ------------------------------------------------
Reckitt Benckiser Group (United Kingdom) 2.3%
- ------------------------------------------------
Koninklijke Ahold (Netherlands) 2.0%
- ------------------------------------------------
Fresenius Medical Care & Co (Germany) 2.0%
- ------------------------------------------------
</Table>
For further detail about these holdings, please refer to the section entitled
"Portfolio of Investments."
Fund holdings are as of the date given, are subject to change at any time, and
are not recommendations to buy or sell any security.
- --------------------------------------------------------------------------------
6 THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT
FUND EXPENSES EXAMPLE ----------------------------------------------------------
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, which may include management fees; distribution and service (12b-1) fees;
and other Fund fees and expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
In addition to the ongoing expenses which the Fund bears directly, the Fund's
shareholders indirectly bear the expenses of the funds in which it invests (also
referred to as "acquired funds"), including affiliated and non-affiliated pooled
investment vehicles (including mutual funds and exchange traded funds). The
Fund's indirect expense from investing in the acquired funds is based on the
Fund's pro rata portion of the cumulative expenses charged by the acquired funds
using the expense ratio of each of the acquired funds as of the acquired fund's
most recent shareholder report.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended April 30, 2009.
ACTUAL EXPENSES
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT 7
FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
NOV. 1, 2008 APRIL 30, 2009 THE PERIOD(A) EXPENSE RATIO
- -------------------------------------------------------------------------------------------
Class A
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 980.80 $ 8.20 1.67%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,016.51 $ 8.35 1.67%
- -------------------------------------------------------------------------------------------
Class B
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 979.10 $11.97 2.44%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,012.69 $12.18 2.44%
- -------------------------------------------------------------------------------------------
Class C
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 977.50 $11.91 2.43%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,012.74 $12.13 2.43%
- -------------------------------------------------------------------------------------------
Class I
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 983.30 $ 6.00 1.22%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,018.74 $ 6.11 1.22%
- -------------------------------------------------------------------------------------------
Class R4
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 981.70 $ 7.47 1.52%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,017.26 $ 7.60 1.52%
- -------------------------------------------------------------------------------------------
</Table>
(a) Expenses are equal to the annualized expense ratio for each class as
indicated above, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one half year period).
(b) Based on the actual return for the six months ended April 30, 2009: -1.92%
for Class A, -2.09% for Class B, -2.25% for Class C, -1.67% for Class I and
-1.83% for Class R4.
- --------------------------------------------------------------------------------
8 THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
APRIL 30, 2009 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
COMMON STOCKS (97.6%)(c)
ISSUER SHARES VALUE(a)
BELGIUM (2.0%)
Colruyt 5,023(d) $1,145,010
- -------------------------------------------------------------------------------------
FRANCE (15.9%)
Air Liquide 11,278 923,169
ALSTOM 13,664 864,963
AXA 52,219(b) 880,729
BNP Paribas 15,858 844,673
Essilor Intl 19,255 834,250
LVMH Moet Hennessy Louis Vuitton 8,640 656,182
Sanofi-Aventis 20,741(d) 1,201,380
Societe Generale 11,398 590,746
Total 35,593 1,806,124
Vivendi 21,781(d) 590,024
---------------
Total 9,192,240
- -------------------------------------------------------------------------------------
GERMANY (12.2%)
Allianz 12,220(d) 1,127,788
BMW 13,504(d) 469,100
Daimler 22,515 808,791
E.ON 27,630(d) 937,504
Fresenius Medical Care & Co 33,696 1,326,598
Linde 7,315(d) 584,012
Munich Re Group 5,169(d) 715,710
SAP 21,302(d) 818,214
Volkswagen 4,168 264,754
---------------
Total 7,052,471
- -------------------------------------------------------------------------------------
IRELAND (1.0%)
CRH 21,171 556,690
- -------------------------------------------------------------------------------------
NETHERLANDS (9.8%)
Akzo Nobel 13,840(d) 584,253
Heineken 6,122 182,933
Heineken Holding 14,483(d) 344,414
ING Groep 83,452 782,550
Koninklijke (Royal) KPN 93,063 1,121,816
Koninklijke Ahold 122,474(d) 1,350,415
Koninklijke Vopak 11,176(d) 496,492
Unilever 41,738 829,889
---------------
Total 5,692,762
- -------------------------------------------------------------------------------------
SPAIN (4.0%)
Banco Santander 136,180 1,310,153
Telefonica 53,545 1,021,074
---------------
Total 2,331,227
- -------------------------------------------------------------------------------------
SWITZERLAND (15.5%)
Credit Suisse Group 32,819 1,282,516
Nestle 74,139 2,426,924
Roche Holding 16,950 2,146,051
Sika 672 612,358
Syngenta 5,139 1,103,181
UBS 60,881(b) 850,834
Xstrata 57,278 514,806
---------------
Total 8,936,670
- -------------------------------------------------------------------------------------
UNITED KINGDOM (36.3%)
Admiral Group 27,343 368,531
Aggreko 43,026 367,932
Amlin 75,036 400,484
BAE Systems 112,903 598,413
BG Group 144,770 2,341,035
British American Tobacco 74,708 1,811,571
Burberry Group 139,439 837,567
Diageo 82,334 990,327
Greene King 72,129(d) 665,892
HSBC Holdings 247,931 1,762,516
Intertek Group 37,450 565,701
J Sainsbury 96,033 469,571
Kingfisher 204,301 562,505
Marks & Spencer Group 42,111 211,049
Prudential 164,690 958,177
Reckitt Benckiser Group 38,112 1,503,813
Rio Tinto 23,642 970,286
RSA Insurance Group 457,006 887,084
Standard Chartered 46,841 733,198
Tesco 256,295 1,278,606
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT 9
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
UNITED KINGDOM (CONT.)
Tullow Oil 73,966 $882,563
Vodafone Group 978,003 1,804,329
---------------
Total 20,971,150
- -------------------------------------------------------------------------------------
UNITED STATES (0.9%)
Synthes 5,053 513,582
- -------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $61,236,073) $56,391,802
- -------------------------------------------------------------------------------------
<Caption>
MONEY MARKET FUND (0.8%)
SHARES VALUE(a)
RiverSource Short-Term Cash Fund, 0.28% 486,239(e) $486,239
- -------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $486,239) $486,239
- -------------------------------------------------------------------------------------
<Caption>
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (16.9%)
SHARES VALUE(a)
CASH COLLATERAL REINVESTMENT FUND
JPMorgan Prime Money Market Fund 9,769,292 $9,769,292
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN
(Cost: $9,769,292) $9,769,292
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $71,491,604)(f) $66,647,333
=====================================================================================
</Table>
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 April 30, 2009:
<Table>
<Caption>
PERCENTAGE OF
INDUSTRY NET ASSETS VALUE
- ------------------------------------------------------------------------
Aerospace & Defense 1.0% $598,413
Automobiles 2.7 1,542,645
Beverages 2.6 1,517,674
Capital Markets 3.7 2,133,350
Chemicals 6.6 3,806,973
Commercial Banks 9.1 5,241,286
Commercial Services & Supplies 0.6 367,932
Construction Materials 1.0 556,690
Diversified Financial Services 1.3 782,550
Diversified Telecommunication Services 3.7 2,142,890
Electric Utilities 1.6 937,504
Electrical Equipment 1.5 864,963
Food & Staples Retailing 7.3 4,243,602
Food Products 5.6 3,256,813
Health Care Equipment & Supplies 2.3 1,347,832
Health Care Providers & Services 2.3 1,326,598
Hotels, Restaurants & Leisure 1.2 665,892
Household Products 2.6 1,503,813
Insurance 9.2 5,338,503
Media 1.0 590,024
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
10 THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENTAGE OF
INDUSTRY NET ASSETS VALUE
- ------------------------------------------------------------------------
Metals & Mining 2.6% $1,485,092
Multiline Retail 0.4 211,049
Oil, Gas & Consumable Fuels 8.7 5,029,722
Pharmaceuticals 5.8 3,347,431
Professional Services 1.0 565,701
Software 1.4 818,214
Specialty Retail 1.0 562,505
Textiles, Apparel & Luxury Goods 2.6 1,493,749
Tobacco 3.1 1,811,571
Transportation Infrastructure 0.9 496,492
Wireless Telecommunication Services 3.1 1,804,329
Other(1) 17.8 10,255,531
- ------------------------------------------------------------------------
Total $66,647,333
- ------------------------------------------------------------------------
</Table>
(1) Cash & Cash Equivalents.
INVESTMENTS IN DERIVATIVES
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT APRIL 30, 2009
<Table>
<Caption>
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED
EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION
- --------------------------------------------------------------------------------------
May 5, 2009 29,806 20,000 $-- $(216)
U.S. Dollar British Pound
</Table>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Securities are valued by using policies described in Note 1 to the
financial statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) At April 30, 2009, security was partially or fully on loan. See Note 5 to
the financial statements.
(e) Affiliated Money Market Fund -- See Note 6 to the financial statements. The
rate shown is the seven-day current annualized yield at April 30, 2009.
- --------------------------------------------------------------------------------
THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT 11
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(f) At April 30, 2009, the cost of securities for federal income tax purposes
was approximately $71,492,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
<Table>
Unrealized appreciation $3,748,000
Unrealized depreciation (8,593,000)
-----------------------------------------------------------
Net unrealized depreciation $(4,845,000)
-----------------------------------------------------------
</Table>
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.
- --------------------------------------------------------------------------------
12 THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
FAIR VALUE MEASUREMENTS
Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to
implement more uniform reporting relating to the fair valuation of securities
for financial statement purposes. Mutual funds are required to implement the
requirements of this standard for fiscal years beginning after Nov. 15, 2007.
While uniformity of presentation is the objective of the standard, it is likely
that there may be a range of practices utilized and it may be some period of
time before industry practices become more uniform. For this reason care should
be exercised in interpreting this information and/or using it for comparison
with other mutual funds.
Various inputs are used in determining the value of the Fund's investments.
These inputs are summarized in the three broad levels listed below:
- Level 1 -- quoted prices in active markets for identical securities
- Level 2 -- other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speeds, credit risks,
etc.)
- Level 3 -- significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
Observable inputs are those based on market data obtained from sources
independent of the Fund, and unobservable inputs reflect the Fund's own
assumptions based on the best information available. The input levels are not
necessarily an indication of the risk or liquidity associated with investments
at that level. Non-U.S. equity securities actively traded in foreign markets may
be reflected in Level 2 despite the availability of closing prices, because the
Fund evaluates and determines whether those closing prices reflect fair value at
the close of the NYSE or require adjustment, as described in Note 1 to the
financial statements -- Valuation of securities.
The following table is a summary of the inputs used to value the Fund's
investments as of April 30, 2009:
<Table>
<Caption>
FAIR VALUE AT APRIL 30, 2009
--------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL
- -----------------------------------------------------------------------------------
Investments in securities $66,647,333 $-- $-- $66,647,333
Other financial
instruments* -- (216) -- (216)
- -----------------------------------------------------------------------------------
Total $66,647,333 $(216) $-- $66,647,117
- -----------------------------------------------------------------------------------
</Table>
* Other financial instruments are derivative instruments, such as forwards,
which are valued at the unrealized appreciation (depreciation) on the
instrument.
- --------------------------------------------------------------------------------
THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT 13
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q,
can be obtained without charge, upon request, by calling the RiverSource
Family of Funds at 1(800) 221-2450.
- --------------------------------------------------------------------------------
14 THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT
STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------
APRIL 30, 2009 (UNAUDITED)
<Table>
<Caption>
ASSETS
Investments in securities, at value
Unaffiliated issuers* (identified cost $61,236,073) $ 56,391,802
Affiliated money market fund (identified cost $486,239) 486,239
Investments of cash collateral received for securities on loan
(identified cost $9,769,292) 9,769,292
- -------------------------------------------------------------------------------
Total investments in securities (identified cost $71,491,604) 66,647,333
Foreign currency holdings (identified cost $243,572) 245,822
Capital shares receivable 75,945
Dividends and accrued interest receivable 562,598
Receivable for investment securities sold 2,028,993
- -------------------------------------------------------------------------------
Total assets 69,560,691
- -------------------------------------------------------------------------------
LIABILITIES
Capital shares payable 124,464
Payable for investment securities purchased 1,821,963
Payable upon return of securities loaned 9,769,292
Unrealized depreciation on forward foreign currency contracts 216
Accrued investment management services fees 1,252
Accrued distribution fees 581
Accrued transfer agency fees 659
Accrued administrative services fees 125
Other accrued expenses 74,322
- -------------------------------------------------------------------------------
Total liabilities 11,792,874
- -------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $ 57,767,817
- -------------------------------------------------------------------------------
REPRESENTED BY
Capital stock -- $.01 par value $ 154,095
Additional paid-in capital 129,560,740
Undistributed net investment income 658,066
Accumulated net realized gain (loss) (67,762,696)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign
currencies (4,842,388)
- -------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding
capital stock $ 57,767,817
- -------------------------------------------------------------------------------
*Including securities on loan, at value $ 9,293,835
- -------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE
NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE
Class A $48,387,321 12,899,264 $3.75(1)
Class B $ 8,459,634 2,262,823 $3.74
Class C $ 903,048 242,651 $3.72
Class I $ 4,993 1,336 $3.74
Class R4 $ 12,821 3,426 $3.74
- ----------------------------------------------------------------------------------------
</Table>
(1) The maximum offering price per share for Class A is $3.98. The offering
price is calculated by dividing the net asset value by 1.0 minus the maximum
sales charge of 5.75%.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT 15
STATEMENT OF OPERATIONS --------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2009 (UNAUDITED)
<Table>
<Caption>
INVESTMENT INCOME
Income:
Dividends $ 1,368,146
Income distributions from affiliated money market fund 1,468
Fee income from securities lending 26,442
Less foreign taxes withheld (175,062)
- -------------------------------------------------------------------------------
Total income 1,220,994
- -------------------------------------------------------------------------------
Expenses:
Investment management services fees 295,929
Distribution fees
Class A 61,258
Class B 42,783
Class C 4,253
Transfer agency fees
Class A 103,907
Class B 19,230
Class C 1,859
Class R4 3
Administrative services fees 23,372
Plan administration services fees -- Class R4 15
Compensation of board members 1,017
Custodian fees 31,620
Printing and postage 17,555
Registration fees 23,850
Professional fees 13,035
Other 8,987
- -------------------------------------------------------------------------------
Total expenses 648,673
Expenses waived/reimbursed by the Investment Manager and its
affiliates (123,140)
- -------------------------------------------------------------------------------
Total net expenses 525,533
- -------------------------------------------------------------------------------
Investment income (loss) -- net 695,461
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions (18,802,947)
Foreign currency transactions (79,671)
- -------------------------------------------------------------------------------
Net realized gain (loss) on investments (18,882,618)
Net change in unrealized appreciation (depreciation) on
investments
and on translation of assets and liabilities in foreign
currencies 16,049,937
- -------------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies (2,832,681)
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (2,137,220)
- -------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
16 THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2009 OCT. 31, 2008
(UNAUDITED)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 695,461 $ 975,963
Net realized gain (loss) on investments (18,882,618) (7,726,626)
Net change in unrealized appreciation (depreciation) on
investments
and on translation of assets and liabilities in foreign
currencies 16,049,937 (50,756,976)
- --------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (2,137,220) (57,507,639)
- --------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (788,538) (915,145)
Class C (1,022) (4,087)
Class I (113) (237)
Class R4 (297) (509)
- --------------------------------------------------------------------------------------------------
Total distributions (789,970) (919,978)
- --------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales
Class A shares 3,960,820 18,116,022
Class B shares 404,850 2,409,729
Class C shares 100,685 362,379
Class R4 shares -- 5,001
Reinvestment of distributions at net asset value
Class A shares 771,028 898,593
Class C shares 954 4,000
Class R4 shares 244 463
Payments for redemptions
Class A shares (11,711,328) (28,162,762)
Class B shares (1,673,749) (12,450,296)
Class C shares (126,867) (700,739)
Class I shares -- (8,000)
Class R4 shares -- (23,890)
- --------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions (8,273,363) (19,549,500)
- --------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (11,200,553) (77,977,117)
Net assets at beginning of period 68,968,370 146,945,487
- --------------------------------------------------------------------------------------------------
Net assets at end of period $ 57,767,817 $ 68,968,370
- --------------------------------------------------------------------------------------------------
Undistributed net investment income $ 658,066 $ 752,575
- --------------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT 17
FINANCIAL HIGHLIGHTS -----------------------------------------------------------
CLASS A
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(j) 2008 2007 2006 2005
Net asset value, beginning of period $3.88 $6.83 $5.39 $4.19 $3.71
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .04(b) .06(b) .04(b) .05 .05
Net gains (losses) (both realized and
unrealized) (.11) (2.96) 1.47 1.22 .46
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.07) (2.90) 1.51 1.27 .51
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.06) (.05) (.07) (.07) (.03)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $3.75 $3.88 $6.83 $5.39 $4.19
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $48 $58 $115 $85 $78
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(c),(d) 2.09%(e) 1.58% 1.43% 1.52% 1.48%
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(f),(g) 1.67%(e) 1.58% 1.43% 1.52% 1.48%
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.50%(e) .95% .70% 1.00% 1.13%
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 79% 180% 114% 64% 56%
- --------------------------------------------------------------------------------------------------------------
Total return(h) (1.92%)(i) (42.70%) 28.24% 30.63% 13.92%
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(d) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(e) Adjusted to an annual basis.
(f) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(g) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits in the periods in which they
occurred were less than 0.01% of average net assets.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
(j) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
18 THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS B
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(k) 2008 2007 2006 2005
Net asset value, beginning of period $3.82 $6.73 $5.31 $4.12 $3.65
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .03(b) .02(b) .00(b),(c) .02 .02
Net gains (losses) (both realized and
unrealized) (.11) (2.93) 1.44 1.20 .45
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.08) (2.91) 1.44 1.22 .47
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- (.02) (.03) --
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $3.74 $3.82 $6.73 $5.31 $4.12
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $8 $10 $30 $29 $31
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 2.87%(f) 2.32% 2.19% 2.29% 2.25%
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) 2.44%(f) 2.32% 2.19% 2.29% 2.25%
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 1.72%(f) .28% (.03%) .28% .39%
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 79% 180% 114% 64% 56%
- --------------------------------------------------------------------------------------------------------------
Total return(i) (2.09%)(j) (43.24%) 27.28% 29.74% 12.97%
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Rounds to zero.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(h) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits in the periods in which they
occurred were less than 0.01% of average net assets.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
(k) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT 19
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS C
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(k) 2008 2007 2006 2005
Net asset value, beginning of period $3.81 $6.71 $5.30 $4.12 $3.65
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .03(b) .01(b) .00(b),(c) .02 .02
Net gains (losses) (both realized and
unrealized) (.12) (2.90) 1.44 1.19 .45
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.09) (2.89) 1.44 1.21 .47
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.00)(c) (.01) (.03) (.03) --
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $3.72 $3.81 $6.71 $5.30 $4.12
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $1 $1 $2 $1 $1
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 2.85%(f) 2.33% 2.19% 2.29% 2.25%
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) 2.43%(f) 2.33% 2.19% 2.29% 2.25%
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 1.86%(f) .25% (.05%) .24% .36%
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 79% 180% 114% 64% 56%
- --------------------------------------------------------------------------------------------------------------
Total return(i) (2.25%)(j) (43.10%) 27.21% 29.65% 12.97%
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Rounds to zero.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(h) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits in the periods in which they
occurred were less than 0.01% of average net assets.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
(k) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
20 THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS I
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(i) 2008 2007 2006 2005
Net asset value, beginning of period $3.89 $6.84 $5.40 $4.20 $3.72
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .05(b) .09(b) .07(b) .06 .07
Net gains (losses) (both realized and
unrealized) (.12) (2.96) 1.46 1.23 .46
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.07) (2.87) 1.53 1.29 .53
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.08) (.09) (.09) (.05)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $3.74 $3.89 $6.84 $5.40 $4.20
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $-- $-- $-- $-- $--
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(c),(d) 1.43%(e) 1.08% .95% .99% .93%
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(f),(g) 1.22%(e) 1.08% .95% .99% .93%
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.09%(e) 1.50% 1.17% 1.55% 1.67%
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 79% 180% 114% 64% 56%
- --------------------------------------------------------------------------------------------------------------
Total return (1.67%)(h) (42.38%) 28.78% 31.34% 14.46%
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(d) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(e) Adjusted to an annual basis.
(f) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(g) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits in the periods in which they
occurred were less than 0.01% of average net assets.
(h) Not annualized.
(i) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT 21
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS R4
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(j) 2008 2007 2006 2005
Net asset value, beginning of period $3.90 $6.84 $5.41 $4.20 $3.71
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .05(b) .08(b) .00(b),(c) .05 .06
Net gains (losses) (both realized and
unrealized) (.12) (2.94) 1.51 1.24 .47
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.07) (2.86) 1.51 1.29 .53
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.08) (.08) (.08) (.04)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $3.74 $3.90 $6.84 $5.41 $4.20
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $-- $-- $-- $-- $--
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 1.72%(f) 1.36% 1.26% 1.31% 1.29%
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) 1.39%(f) 1.11% 1.26% 1.31% 1.29%
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.93%(f) 1.35% .04% 1.05% 1.36%
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 79% 180% 114% 64% 56%
- --------------------------------------------------------------------------------------------------------------
Total return (1.83%)(i) (42.29%) 28.16% 31.10% 14.37%
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Rounds to zero.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(h) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits in the periods in which they
occurred were less than 0.01% of average net assets.
(i) Not annualized.
(j) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
22 THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS --------------------------------------------------
(UNAUDITED AS TO APRIL 30, 2009)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Threadneedle European Equity Fund (the Fund) is a series of RiverSource
International Series, Inc. and is registered under the Investment Company Act of
1940 (as amended) as a diversified, open-end management investment company.
RiverSource International 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 European companies that are believed to offer growth potential.
The Fund offers Class A, Class B, Class C, Class I and Class R4 shares.
- - Class A shares are sold with a front-end sales charge.
- - Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth year of
ownership.
- - Class C shares may be subject to a CDSC.
- - Class I and R4 shares are sold without a front-end sales charge or CDSC and
are offered to qualifying institutional investors.
At April 30, 2009, RiverSource Investments, LLC (RiverSource Investments or the
Investment Manager) owned 100% of Class I shares.
All classes of shares have identical voting, dividend and liquidation rights.
Class specific expenses (e.g., distribution and service fees, transfer agency
fees, plan administration services fees) differ among classes. Income, expenses
(other than class specific expenses) and realized and unrealized gains or losses
on investments are allocated to each class of shares based upon its relative net
assets.
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
VALUATION OF SECURITIES
Effective Nov. 1, 2008, the Fund adopted 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
- --------------------------------------------------------------------------------
THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT 23
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
reported in the Statement of Operations for a fiscal period. There was no impact
to the Fund's net assets or results of operations upon adoption. The fair
valuation measurements disclosure can be found following the Notes to Portfolio
of Investments.
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
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 (NYSE) and therefore the closing prices for
securities in such markets or on such exchanges may not fully reflect events
that occur after such close but before the close of the NYSE, including
significant movements in the U.S. market after foreign exchanges have closed.
Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise
Financial), parent company of the Investment Manager, as administrator to the
Fund, will fair value foreign securities pursuant to procedures adopted by the
Board, including utilizing a third party pricing service to determine these fair
values. These procedures take into account multiple factors, including movements
in the U.S. securities markets, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the NYSE.
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.
- --------------------------------------------------------------------------------
24 THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
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 NYSE. The Fund will realize a gain or loss when the option
transaction expires or is exercised. When an option is exercised, the proceeds
on sales for a written call option, the purchase cost for a written put option
or the cost of a security for a purchased put or call option is adjusted by the
amount of premium received or paid. At April 30, 2009, and for the six months
then ended, the Fund had no outstanding option contracts.
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes, the Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund also may buy and write put and call options on these futures contracts.
Risks of entering into futures contracts and related options include the
possibility of an illiquid market and that a change in the value of the contract
or option may not correlate with changes in the value of the underlying
securities.
Futures and options on futures are valued daily based upon the last sale price
at the close of the market on the principal exchange on which they are traded.
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by
- --------------------------------------------------------------------------------
THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT 25
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
the Fund each day. The variation margin payments are equal to the daily changes
in the contract value and are recorded as unrealized gains and losses. The Fund
recognizes a realized gain or loss when the contract is closed or expires. At
April 30, 2009, the Fund had no outstanding futures contracts.
FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the Statement of Operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes. At April 30, 2009, foreign currency holdings consisted of
multiple denominations.
The Fund may enter into forward foreign currency contracts for operational
purposes and to protect against adverse exchange rate fluctuation. The net U.S.
dollar value of foreign currency underlying all contractual commitments held by
the Fund and the resulting unrealized appreciation or depreciation are
determined using foreign currency exchange rates from an independent pricing
service. The Fund is subject to the credit risk that the counterparty will not
complete its contract obligations.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue Code
that applies to regulated investment companies and to distribute substantially
all of its taxable income to shareholders. No provision for income or excise
taxes is thus required.
- --------------------------------------------------------------------------------
26 THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
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 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.
RECENT ACCOUNTING PRONOUNCEMENTS
The Fund has adopted FASB Staff Position No. 133-1 and FIN No. 45-4 (FSP FAS
133-1 and FIN 45-4), "Disclosures about Credit Derivatives and Certain
Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No.
45." The amendments to FSP FAS 133-1 and FIN 45-4 require enhanced disclosures
about a fund's derivatives and guarantees. 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, (c) how derivative instruments and
related hedged items affect a fund's financial position, financial performance,
and cash flows and (d) the current status of the payment/performance risk of the
credit derivative. The amendments to FSP FAS 133-1 and FIN 45-4 also require
additional disclosures about the current status of the payment/performance risk
of a guarantee. At April 30, 2009, the Fund did not own nor was it a party to
any credit derivative contracts within the scope of these amendments.
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. SFAS 161 is
effective for financial statements issued for fiscal years and interim periods
beginning after Nov. 15, 2008. As of April 30, 2009, 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 April 9, 2009, the FASB issued Staff Position No. 157-4, "Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly"
- --------------------------------------------------------------------------------
THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT 27
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
(FSP 157-4). FSP 157-4 provides additional guidance for estimating fair value in
accordance with SFAS 157 when the volume and level of activity for the asset or
liability have significantly decreased. FSP 157-4 also requires additional
disaggregation of the current SFAS 157 required disclosures. FSP 157-4 is
effective for interim and annual reporting periods ending after June 15, 2009,
and shall be applied prospectively. Management is currently evaluating the
impact that the adoption of FSP 157-4 will have on the amounts and disclosures
within the Fund's financial statements.
DIVIDENDS TO SHAREHOLDERS
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
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 0.80%
to 0.57% annually as the Fund's assets increase. The fee may be adjusted upward
or downward by a performance incentive adjustment determined monthly by
measuring the percentage difference over a rolling 12-month period between the
annualized performance of one Class A share of the Fund and the annualized
performance of the Lipper European 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 $62,209 for the six months
ended April 30, 2009. The management fee for the six months ended April 30, 2009
was 1.01% 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
- --------------------------------------------------------------------------------
28 THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
an indirect wholly-owned subsidiary of Ameriprise Financial, to subadvise the
assets of the Fund. The Investment Manager contracts with and compensates
Threadneedle to manage the investment of the Fund's assets.
ADMINISTRATIVE SERVICES FEES
Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a
fee for administration and accounting services at a percentage of the Fund's
average daily net assets that declines from 0.08% to 0.05% annually as the
Fund's assets increase. The fee for the six months ended April 30, 2009 was
0.08% of the Fund's average daily net assets.
OTHER FEES
Other expenses are for, among other things, certain expenses of the Fund or the
Board including: Fund boardroom and office expense, employee compensation,
employee health and retirement benefits, and certain other expenses. Payment of
these Fund and Board expenses is facilitated by a company providing limited
administrative services to the Fund and the Board. For the six months ended
April 30, 2009, other expenses paid to this company were $270.
COMPENSATION OF BOARD MEMBERS
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 daily net assets attributable to Class R4 shares.
The Transfer Agent charges an annual fee of $5 per inactive account, charged on
a pro rata basis for 12 months from the date the account becomes inactive. These
fees are included in the transfer agency fees in the Statement of Operations.
PLAN ADMINISTRATION SERVICES FEES
Under a Plan Administration Services Agreement with the Transfer Agent, the Fund
pays an annual fee at a rate of 0.25% of the Fund's average daily net assets
attributable to Class R4 shares for the provision of various administrative,
recordkeeping, communication and educational services.
- --------------------------------------------------------------------------------
THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT 29
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
DISTRIBUTION FEES
The Fund has agreements with RiverSource Distributors, Inc. and RiverSource Fund
Distributors, Inc. (collectively, 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 $193,000 and $12,000 for
Class B and Class C shares, respectively. These amounts are based on the most
recent information available as of April 30, 2009, and may be recovered from
future payments under the distribution plan or CDSC. To the extent the
unreimbursed expense has been fully recovered, the distribution fee is reduced.
SALES CHARGES
Sales charges received by the Distributor for distributing Fund shares were
$31,237 for Class A, $2,511 for Class B and $8 for Class C for the six months
ended April 30, 2009.
EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES
For the six months ended April 30, 2009, the Investment Manager and its
affiliates waived/reimbursed certain fees and expenses such that net expenses
(excluding fees and expenses of acquired funds*), including the adjustment under
the terms of a performance incentive arrangement, were as follows:
<Table>
Class A............................................. 1.67%
Class B............................................. 2.44
Class C............................................. 2.43
Class I............................................. 1.22
Class R4............................................ 1.39
</Table>
The waived/reimbursed fees and expenses for the transfer agency fees at the
class level were as follows:
<Table>
Class A........................................... $54,792
Class B........................................... 9,766
Class C........................................... 961
</Table>
The waived/reimbursed fees and expenses for plan administration services fee at
the class level were as follows:
<Table>
Class R4............................................. $8
</Table>
- --------------------------------------------------------------------------------
30 THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
The management fees waived/reimbursed at the Fund level were $57,613.
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 class average daily net assets:
<Table>
Class A............................................. 1.46%
Class B............................................. 2.23
Class C............................................. 2.22
Class I............................................. 1.01
Class R4............................................ 1.31
</Table>
* In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the funds in
which it invests (also referred to as "acquired funds"), including
affiliated and non-affiliated pooled investment vehicles (including mutual
funds and exchange traded funds). Because the acquired funds have varied
expense and fee levels and the Fund may own different proportions of
acquired funds at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
CUSTODIAN FEES
Effective Dec. 15, 2008, the Fund pays custodian fees to JPMorgan Chase Bank,
N.A. For the period from Nov. 1, 2008 to Dec. 15, 2008, the Fund paid custodian
fees amounting to $1,000 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 $46,575,771 and $54,964,634, respectively, for the six
months ended April 30, 2009. 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:
<Table>
<Caption>
SIX MONTHS ENDED APRIL 30, 2009
ISSUED FOR
REINVESTED NET
SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ----------------------------------------------------------------------------------
Class A 1,111,492 206,157 (3,352,879) (2,035,230)
Class B 114,427 -- (488,245) (373,818)
Class C 28,668 256 (36,729) (7,805)
Class R4 -- 66 -- 66
- ----------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT 31
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31, 2008
ISSUED FOR
REINVESTED NET
SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ----------------------------------------------------------------------------------
Class A 3,114,503 141,958 (5,105,782) (1,849,321)
Class B 405,232 -- (2,250,573) (1,845,341)
Class C 60,882 639 (129,399) (67,878)
Class I -- -- (1,529) (1,529)
Class R4 813 73 (4,137) (3,251)
- ----------------------------------------------------------------------------------
</Table>
5. LENDING OF PORTFOLIO SECURITIES
Effective Dec. 1, 2008, the Fund has entered into a Master Securities Lending
Agreement ("the Agreement") with JPMorgan Chase Bank, National Association
("JPMorgan"). The Agreement authorizes JPMorgan as lending agent to lend
securities to authorized borrowers in order to generate additional income on
behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured
by cash or U.S. government securities equal to at least 100% of the market value
of the loaned securities. Any additional collateral required to maintain those
levels due to market fluctuations of the loaned securities is delivered the
following business day. Cash collateral received is invested by the lending
agent on behalf of the Fund into authorized investments pursuant to the
Agreement. The investments made with the cash collateral are listed in the
Portfolio of Investments. The values of such investments, and any uninvested
cash collateral balance, are disclosed in the Statement of Assets and
Liabilities along with the related obligation to return the collateral upon the
return of the securities loaned. At April 30, 2009, securities valued at
$9,293,835 were on loan, secured by cash collateral of $9,769,292 invested in
short-term securities or in cash equivalents.
Pursuant to the Agreement, the Fund receives income for lending its securities
either in the form of fees or by earning interest on invested cash collateral,
net of negotiated rebates paid to borrowers and fees paid to the lending agent
for services provided and any other securities lending expenses. Income of
$26,442 earned from securities lending from Dec. 1, 2008 through April 30, 2009
is included in the Statement of Operations. The Fund also continues to earn
interest and dividends on the securities loaned.
Risks of delay in recovery of securities or even loss of rights in the
securities may occur should the borrower of the securities fail financially.
Risks may also arise to the extent that the value of the securities loaned
increases above the value of the collateral received. JPMorgan will indemnify
the Fund from losses resulting from a borrower's failure to return a loaned
security when due. Such
- --------------------------------------------------------------------------------
32 THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
indemnification does not extend to losses associated with declines in the value
of cash collateral investments. Loans are subject to termination by the Fund or
the borrower at any time, and are, therefore, not considered to be illiquid
investments.
Prior to Dec. 1, 2008, the Investment Manager served as securities lending agent
for the Fund under the Securities Lending Agency Agreement. For the period from
Nov. 1, 2008 through Nov. 30, 2008, the Fund had no securities on loan.
6. AFFILIATED MONEY MARKET FUND
The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund,
a money market fund established for the exclusive use of the RiverSource funds
and other institutional clients of RiverSource Investments. The cost of the
Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term
Cash Fund aggregated $14,273,033 and $14,775,688, respectively, for the six
months ended April 30, 2009. The income distributions received with respect to
the Fund's investment in RiverSource Short-Term Cash Fund can be found in the
Statement of Operations and the Fund's invested balance in RiverSource Short-
Term Cash Fund at April 30, 2009, can be found in the Portfolio of Investments.
7. BANK BORROWINGS
The Fund has entered into a revolving credit facility with a syndicate of banks
led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund
may borrow for the temporary funding of shareholder redemptions or for other
temporary or emergency purposes. The credit facility agreement, which is a
collective agreement between the Fund and certain other RiverSource 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 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 six months ended April 30, 2009.
- --------------------------------------------------------------------------------
THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT 33
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
8. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$45,298,067 at Oct. 31, 2008, that if not offset by capital gains will expire as
follows:
<Table>
<Caption>
2009 2010 2011 2016
$19,489,378 $16,514,518 $5,021,215 $4,272,956
</Table>
It is unlikely the Board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires.
9. RISKS RELATING TO CERTAIN INVESTMENTS
FOREIGN/EMERGING MARKETS RISK
Investing in foreign securities may include certain risks and considerations not
typically associated with investing in U.S. securities, such as fluctuating
currency values and changing local and regional economic, political and social
conditions, which may result in greater market volatility. In addition, certain
foreign securities may not be as liquid as U.S. securities. Investing in
emerging markets may accentuate these risks.
10. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In June 2004, an action captioned John E. Gallus et al. v. American Express
Financial Corp. and American Express Financial Advisors Inc., was filed in the
United States District Court for the District of Arizona. The plaintiffs allege
that they are investors in several American Express Company mutual funds and
they purport to bring the action derivatively on behalf of those funds under the
Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid
to the defendants by the funds for investment advisory and administrative
services are excessive. The plaintiffs seek remedies including restitution and
rescission of investment advisory and distribution agreements. The plaintiffs
voluntarily agreed to transfer this case to the United States District Court for
the District of Minnesota (the District Court). In response to defendants'
motion to dismiss the complaint, the District Court dismissed one of plaintiffs'
four claims and granted plaintiffs limited discovery. Defendants moved for
summary judgment in April 2007. Summary judgment was granted in the defendants'
favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth
Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8,
2009, the Eighth Circuit reversed summary judgment and remanded to the District
Court for further proceedings.
- --------------------------------------------------------------------------------
34 THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
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 2006, the NYAG commenced a civil action in New York State Supreme
Court against Seligman, Seligman Advisors, Inc. (which is now known as
RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino
(collectively, the Seligman Parties), alleging, in substance, that the Seligman
Parties permitted various persons to engage in frequent trading and, as a
result, the prospectus disclosure used by the registered investment companies
then managed by Seligman 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. On March 13, 2009, without admitting or denying
any violations of law or wrongdoing, the Seligman Parties entered into a
stipulation of settlement with the NYAG and settled the claims made by the
- --------------------------------------------------------------------------------
THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT 35
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
NYAG. Under the terms of the settlement, Seligman will pay $11.3 million to four
Seligman Funds. This settlement resolved all outstanding matters between the
Seligman Parties and the NYAG. In addition to the foregoing matter, the New York
staff of the SEC indicated in September 2005 that it was considering
recommending to the Commissioners of the SEC the instituting of a formal action
against Seligman and Seligman Advisors, Inc. relating to frequent trading in the
Seligman Funds. Seligman responded to the staff in October 2005 that it believed
that any action would be both inappropriate and unnecessary, especially in light
of the fact that Seligman had previously resolved the underlying issue with the
Independent Directors of the Seligman Funds and made recompense to the affected
Seligman Funds. There have been no further developments with the SEC on this
matter.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, arbitration and regulatory proceedings, including
routine litigation, class actions, and governmental actions, concerning matters
arising in connection with the conduct of their business activities. Ameriprise
Financial believes that the Funds are not currently the subject of, and that
neither Ameriprise Financial nor any of its affiliates are the subject of, any
pending legal, arbitration or regulatory proceedings that are likely to have a
material adverse effect on the Funds or the ability of Ameriprise Financial or
its affiliates to perform under their contracts with the Funds. Ameriprise
Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the
Securities and Exchange Commission on legal and regulatory matters that relate
to Ameriprise Financial and its affiliates. Copies of these filings may be
obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse publicity
associated with them, will not result in increased fund redemptions, reduced
sale of fund shares or other adverse consequences to the Funds. Further,
although we believe proceedings are not likely to have a material adverse effect
on the Funds or the ability of Ameriprise Financial or its affiliates to perform
under their contracts with the Funds, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range
of loss that may result. An adverse outcome in one or more of these proceedings
could result in adverse judgments, settlements, fines, penalties or other relief
that could have a material adverse effect on the consolidated financial
condition or results of operations of Ameriprise Financial.
- --------------------------------------------------------------------------------
36 THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT
APPROVAL OF INVESTMENT MANAGEMENT SERVICES
AGREEMENT ----------------------------------------------------------------------
RiverSource Investments, LLC ("RiverSource Investments" or the "investment
manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise
Financial"), serves as the investment manager to the Fund. Under an investment
management services agreement (the "IMS Agreement"), RiverSource Investments
provides investment advice and other services to the Fund and all funds in the
RiverSource Family of Funds (collectively, the "Funds"). In addition, under the
subadvisory agreement (the "Subadvisory Agreement") between RiverSource
Investments and Threadneedle International Limited (the "Subadviser"), the
Subadviser performs portfolio management and related services for the Fund.
On an annual basis, the Fund's Board of Directors (the "Board"), including the
independent Board members (the "Independent Directors"), considers renewal of
each of the IMS Agreement and the Subadvisory Agreement (together, the "Advisory
Agreements"). RiverSource Investments prepared detailed reports for the Board
and its Contracts Committee in March and April 2009, including reports based on
data provided by independent organizations to assist the Board in making these
determinations. In addition, throughout the year, the Board (or its committees)
reviews information prepared by RiverSource Investments addressing the services
RiverSource Investments provides and Fund performance. The Board accords
particular weight to the work, deliberations and conclusions of the Contracts,
Investment Review and Compliance Committees in determining whether to continue
the Advisory Agreements. At the April 7-8, 2009 in-person Board meeting,
independent legal counsel to the Independent Directors reviewed with the
Independent Directors various factors relevant to the Board's consideration of
advisory and subadvisory agreements and the Board's legal responsibilities
related to such consideration. Following an analysis and discussion of the
factors identified below, the Board, including all of the Independent Directors,
approved renewal of each of the Advisory Agreements.
Nature, Extent and Quality of Services Provided by RiverSource Investments and
the Subadviser: The Board analyzed various reports and presentations it had
received detailing the services performed by RiverSource Investments and the
Subadviser, as well as their expertise, resources and capabilities. The Board
specifically considered many developments during the past year concerning the
services provided by RiverSource Investments, including, in particular, the
continued investment in, and resources dedicated to, the Fund's operations, most
notably, the large investment made in the acquisition of J. & W. Seligman & Co.
Incorporated, including its portfolio management operations, personnel and
infrastructure (including the addition of two new offices in New York City and
- --------------------------------------------------------------------------------
THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT 37
APPROVAL OF INVESTMENT MANAGEMENT SERVICES
AGREEMENT (continued) ----------------------------------------------------------
Palo Alto). Further, in connection with the Board's evaluation of the overall
package of services provided by RiverSource Investments, the Board considered
the quality of the administrative and transfer agency services provided by
RiverSource Investments' affiliates to the Fund. The Board also reviewed the
financial condition of RiverSource Investments (and its affiliates including the
Subadviser), and each entity's ability to carry out its responsibilities under
the Advisory Agreements. Further, the Board considered RiverSource Investments'
ability to retain key personnel and its expectations in this regard. The Board
also discussed the acceptability of the terms of the Advisory Agreements
(including the relatively broad scope of services required to be performed by
RiverSource Investments). The Board concluded that the services being performed
under the Advisory Agreements were of a reasonably high quality, particularly in
light of recent market conditions.
Based on the foregoing, and based on other information received (both oral and
written, including the information on investment performance referenced below)
and other considerations, the Board concluded that RiverSource Investments and
its affiliates, including the Subadviser, were in a position to continue to
provide a high quality and level of services to the Fund.
Investment Performance: For purposes of evaluating the nature, extent and
quality of services provided under the Advisory Agreements, the Board carefully
reviewed the investment performance of the Fund. In this regard, the Board
considered: (i) detailed reports containing data prepared by an independent
organization showing, for various periods, the performance of the Fund, the
performance of a benchmark index, the percentage ranking of the Fund among its
comparison group and the net assets of the Fund; and (ii) a report detailing the
Fund's performance over various periods, recent Fund inflows (and outflows) and
a comparison of the Fund's net assets from December 2007 to December 2008. The
Board observed that the Fund's investment performance met expectations.
Additionally, the Board reviewed the performance of the Subadviser and
RiverSource Investments' processes for monitoring the Subadviser. The Board
considered, in particular, management's rationale for recommending the continued
retention of the Subadviser.
Comparative Fees, Costs of Services Provided and the Profits Realized By
RiverSource Investments and its Affiliates from their Relationships with the
Fund: The Board reviewed comparative fees and the costs of services to be
provided under the Advisory Agreements. The Board members considered detailed
comparative information set forth in an annual report on fees and expenses,
including, among other things, data (prepared by an independent organization)
- --------------------------------------------------------------------------------
38 THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
showing a comparison of the Fund's expenses with median expenses paid by funds
in its peer group, as well as data showing the Fund's contribution to
RiverSource Investments' profitability.
The Board accorded particular weight to the notion that the level of fees should
reflect a rational pricing model applied consistently across the various product
lines in the Funds' family, while assuring that the overall fees for each fund
are generally in line with the "pricing philosophy" (i.e., that the total
expense ratio of each fund (excluding the effect of a performance incentive
adjustment, if applicable), with few exceptions, is at or below the median
expense ratio of funds in the same comparison group). The Board took into
account that the Fund's total expense ratio (after considering proposed expense
caps/waivers) approximated the peer group's median expense ratio. The Board also
considered the Fund's performance incentive adjustment and noted its continued
appropriateness.
The Board also considered the expected profitability of RiverSource Investments
and its affiliates in connection with RiverSource Investments providing
investment management services to the Fund. In this regard, the Board referred
to a detailed profitability report, discussing the profitability to RiverSource
Investments and Ameriprise Financial from managing and operating the Fund,
including data showing comparative profitability over the past two years. The
Board also considered the services acquired by the investment manager through
the use of commission dollars paid by the Funds on portfolio transactions. The
Board noted that the fees paid by the Fund should permit the investment manager
to offer competitive compensation to its personnel, make necessary investments
in its business and earn an appropriate profit. The Board concluded that
profitability levels were reasonable.
Economies of Scale to be Realized: The Board also considered the economies of
scale that might be realized by RiverSource Investments as the Fund grows and
took note of the extent to which Fund shareholders might also benefit from such
growth. The Board considered that the IMS Agreement provides for lower fees as
assets increase at pre-established breakpoints and concluded that the IMS
Agreement satisfactorily provided for sharing these economies of scale.
- --------------------------------------------------------------------------------
THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT 39
APPROVAL OF INVESTMENT MANAGEMENT SERVICES
AGREEMENT (continued) ----------------------------------------------------------
Based on the foregoing, the Board, including all of the Independent Directors,
concluded that the investment management service fees and subadvisory fees were
fair and reasonable in light of the extent and quality of services provided. In
reaching this conclusion, no single factor was determinative. On April 8, 2009,
the Board, including all of the Independent Directors, approved the renewal of
each of the Advisory Agreements for an additional annual period.
PROXY VOTING ------------------------------------------------------------------
The policy of the Board is to vote the proxies of the companies in which the
Fund holds investments consistent with the procedures as stated in the Statement
of Additional Information (SAI). You may obtain a copy of the SAI without charge
by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your
financial intermediary; visiting riversource.com/funds; or searching the website
of the Securities and Exchange Commission (SEC) at http://www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio
securities is filed with the SEC by August 31 for the most recent 12-month
period ending June 30 of that year, and is available without charge by visiting
riversource.com/funds; or searching the website of the SEC at www.sec.gov.
- --------------------------------------------------------------------------------
40 THREADNEEDLE EUROPEAN EQUITY FUND -- 2009 SEMIANNUAL REPORT
THREADNEEDLE EUROPEAN EQUITY FUND
734 Ameriprise Financial Center
Minneapolis, MN 55474
RIVERSOURCE.COM/FUNDS
<Table>
This report must be accompanied or preceded by the Fund's
current prospectus. RiverSource Investments employs
Threadneedle as a subadviser. Threadneedle(R) mutual funds
are distributed by RiverSource Distributors, Inc., and
RiverSource Fund Distributors, Inc., Members FINRA, and
managed by RiverSource Investments, LLC. RiverSource and
Threadneedle are part of Ameriprise Financial, Inc.
(THREADNEEDLE LOGO) (C)2009 RiverSource Investments, LLC. S-6016 K (6/09)
</Table>
Semiannual Report
(THREADNEEDLE LOGO)
THREADNEEDLE
INTERNATIONAL OPPORTUNITY FUND
SEMIANNUAL REPORT FOR
THE PERIOD ENDED
APRIL 30, 2009
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND SEEKS TO
PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH.
(SINGLE STRATEGY FUNDS ICON)
TABLE OF CONTENTS --------------------------------------------------------------
<Table>
Your Fund at a Glance.............. 2
Fund Expenses Example.............. 8
Portfolio of Investments........... 10
Statement of Assets and
Liabilities...................... 18
Statement of Operations............ 20
Statements of Changes in Net
Assets........................... 22
Financial Highlights............... 24
Notes to Financial Statements...... 32
Approval of Investment Management
Services Agreement............... 47
Proxy Voting....................... 50
</Table>
RIVERSOURCE FAMILY OF FUNDS
Threadneedle Funds are a part of the RiverSource
family of funds that includes funds branded
"RiverSource," "RiverSource Partners," "Seligman" and
"Threadneedle." These funds share the same Board of
Directors/Trustees and officers.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 1
YOUR FUND AT A GLANCE ----------------------------------------------------------
(UNAUDITED)
FUND SUMMARY
- --------------------------------------------------------------------------------
> Threadneedle International Opportunity Fund (the Fund) Class A shares declined
3.74% (excluding sales charge) for the six month period ended April 30, 2009.
> The Fund underperformed its benchmark index, the Morgan Stanley Capital
International (MSCI) EAFE Index, which fell 2.35% for the same period.
> The Fund outperformed the Lipper International Large-Cap Core Funds Index,
representing the Fund's peer group, which declined 4.55% for the same time
frame.
ANNUALIZED TOTAL RETURNS (for period ended April 30, 2009)
- --------------------------------------------------------------------------------
<Table>
<Caption>
6 months* 1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------
Threadneedle
International
Opportunity Fund Class
A (excluding sales
charge) -3.74% -41.36% -11.97% +0.70% -2.68%
- ------------------------------------------------------------------------
MSCI EAFE Index(1)
(unmanaged) -2.35% -42.42% -11.91% +1.12% +0.35%
- ------------------------------------------------------------------------
Lipper International
Large-Cap Core Funds
Index(2) -4.55% -43.88% -12.91% +0.03% +0.60%
- ------------------------------------------------------------------------
</Table>
* Not annualized.
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by contacting your financial intermediary
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.
- --------------------------------------------------------------------------------
2 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes. It is not possible to invest directly in an index.
(1) The Morgan Stanley Capital International (MSCI) EAFE Index, an unmanaged
index, is compiled from a composite of securities markets of Europe,
Australasia and the Far East. The index is widely recognized by investors in
foreign markets as the measurement index for portfolios of non-North
American securities. The index reflects reinvestment of all distributions
and changes in market prices.
(2) The Lipper International Large-Cap Core Funds Index includes the 30 largest
international large-cap core 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 INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 3
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT APRIL 30, 2009
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION**
Class A (inception
11/15/84) -3.74% -41.36% -11.97% +0.70% -2.68% N/A
- --------------------------------------------------------------------------------------
Class B (inception
3/20/95) -4.09% -41.87% -12.68% -0.07% -3.43% N/A
- --------------------------------------------------------------------------------------
Class C (inception
6/26/00) -4.06% -41.88% -12.67% -0.06% N/A -5.66%
- --------------------------------------------------------------------------------------
Class I (inception
3/4/04) -3.39% -41.07% -11.53% +1.28% N/A +0.39%
- --------------------------------------------------------------------------------------
Class R2 (inception
12/11/06) -3.61% -41.41% N/A N/A N/A -16.67%
- --------------------------------------------------------------------------------------
Class R3 (inception
12/11/06) -3.56% -41.25% N/A N/A N/A -16.46%
- --------------------------------------------------------------------------------------
Class R4 (inception
3/20/95) -3.56% -41.12% -11.66% +0.96% -2.44% N/A
- --------------------------------------------------------------------------------------
Class R5 (inception
12/11/06) -3.45% -41.15% N/A N/A N/A -16.26%
- --------------------------------------------------------------------------------------
With sales charge
Class A (inception
11/15/84) -9.17% -44.72% -13.68% -0.48% -3.17% N/A
- --------------------------------------------------------------------------------------
Class B (inception
3/20/95) -8.82% -44.73% -13.84% -0.46% -3.43% N/A
- --------------------------------------------------------------------------------------
Class C (inception
6/26/00) -5.00% -42.45% -12.67% -0.06% N/A -5.66%
- --------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
4 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT MARCH 31, 2009
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION**
Class A (inception
11/15/84) -28.67% -42.60% -13.16% -1.71% -3.00% N/A
- --------------------------------------------------------------------------------------
Class B (inception
3/20/95) -28.93% -43.06% -13.79% -2.46% -3.74% N/A
- --------------------------------------------------------------------------------------
Class C (inception
6/26/00) -29.07% -43.11% -13.85% -2.48% N/A -6.58%
- --------------------------------------------------------------------------------------
Class I (inception
3/4/04) -28.52% -42.36% -12.73% -1.19% N/A -1.23%
- --------------------------------------------------------------------------------------
Class R2 (inception
12/11/06) -28.77% -42.61% N/A N/A N/A -20.12%
- --------------------------------------------------------------------------------------
Class R3 (inception
12/11/06) -28.60% -42.46% N/A N/A N/A -19.91%
- --------------------------------------------------------------------------------------
Class R4 (inception
3/20/95) -28.59% -42.33% -12.85% -1.45% -2.77% N/A
- --------------------------------------------------------------------------------------
Class R5 (inception
12/11/06) -28.46% -42.26% N/A N/A N/A -19.65%
- --------------------------------------------------------------------------------------
With sales charge
Class A (inception
11/15/84) -32.81% -45.92% -14.85% -2.87% -3.49% N/A
- --------------------------------------------------------------------------------------
Class B (inception
3/20/95) -32.43% -45.86% -14.94% -2.85% -3.74% N/A
- --------------------------------------------------------------------------------------
Class C (inception
6/26/00) -29.77% -43.67% -13.85% -2.48% N/A -6.58%
- --------------------------------------------------------------------------------------
</Table>
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 R2, Class R3, Class R4 and Class R5 shares. Class I,
Class R2, Class R3, Class R4 and Class R5 are available to institutional
investors only.
*Not annualized.
**For classes with less than 10 years performance.
***For Class B shares purchased on or after June 13, 2009 the CDSC percentage
for the third year will be 3%.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 5
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
STYLE MATRIX
- --------------------------------------------------------------------------------
<Table>
<Caption>
STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
</Table>
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)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Total fund expenses
- ----------------------------------------
Class A 1.45%
- ----------------------------------------
Class B 2.21%
- ----------------------------------------
Class C 2.21%
- ----------------------------------------
Class I 0.97%
- ----------------------------------------
Class R2 1.77%
- ----------------------------------------
Class R3 1.52%
- ----------------------------------------
Class R4 1.26%
- ----------------------------------------
Class R5 1.02%
- ----------------------------------------
</Table>
* Fund expense ratios are calculated based on the fund's average net assets
during the fund's most recently completed fiscal year, and have not been
adjusted for current asset levels, including any decrease or increase in
assets, which, if adjusted, would result in expense ratios that are higher
or lower, respectively, than those that are expressed herein. Any fee
waivers/expense caps would limit the impact that any decrease in assets will
have on net expense ratios in the current fiscal year.
International investing involves increased risk and volatility due to potential
political and economic instability, currency fluctuations, and differences in
financial reporting and accounting standards and oversight. Risks are
particularly significant in emerging markets.
- --------------------------------------------------------------------------------
6 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
COUNTRY DIVERSIFICATION(1) (at April 30, 2009; % of portfolio assets)
- ---------------------------------------------------------------------
<Table>
<Caption>
Australia 4.4%
- ------------------------------------------------
Belgium 1.6%
- ------------------------------------------------
Brazil 0.3%
- ------------------------------------------------
Canada 1.6%
- ------------------------------------------------
China 1.4%
- ------------------------------------------------
France 10.3%
- ------------------------------------------------
Germany 8.4%
- ------------------------------------------------
Hong Kong 4.1%
- ------------------------------------------------
Ireland 0.9%
- ------------------------------------------------
Israel 0.5%
- ------------------------------------------------
Japan 17.8%
- ------------------------------------------------
Netherlands 4.1%
- ------------------------------------------------
Portugal 0.6%
- ------------------------------------------------
Singapore 1.0%
- ------------------------------------------------
Korea 1.1%
- ------------------------------------------------
Spain 2.6%
- ------------------------------------------------
Switzerland 10.9%
- ------------------------------------------------
Taiwan 0.7%
- ------------------------------------------------
United Kingdom 25.7%
- ------------------------------------------------
Other(2) 2.0%
- ------------------------------------------------
</Table>
(1) Percentages indicated are based upon total investments (excluding
Investments of Cash Collateral for Securities on Loan) as of April 30, 2009.
The Fund's composition is subject to change.
(2) Cash & Cash Equivalents.
TOP TEN HOLDINGS (at April 30, 2009; % of portfolio assets)
- ---------------------------------------------------------------------
<Table>
<Caption>
Nestle (Switzerland) 2.8%
- ------------------------------------------------
Roche Holding (Switzerland) 2.7%
- ------------------------------------------------
BG Group (United Kingdom) 2.7%
- ------------------------------------------------
Total (France) 2.4%
- ------------------------------------------------
Vodafone Group (United Kingdom) 2.4%
- ------------------------------------------------
Allianz (Germany) 1.7%
- ------------------------------------------------
British American Tobacco (United Kingdom) 1.6%
- ------------------------------------------------
Credit Suisse Group (Switzerland) 1.5%
- ------------------------------------------------
Reckitt Benckiser Group (United Kingdom) 1.4%
- ------------------------------------------------
Toyota Motor (Japan) 1.4%
- ------------------------------------------------
</Table>
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 INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 7
FUND EXPENSES EXAMPLE ----------------------------------------------------------
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, which may include management fees; distribution and service (12b-1) fees;
and other Fund fees and expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
In addition to the ongoing expenses which the Fund bears directly, the Fund's
shareholders indirectly bear the expenses of the funds in which it invests (also
referred to as "acquired funds"), including affiliated and non-affiliated pooled
investment vehicles (including mutual funds and exchange traded funds). The
Fund's indirect expense from investing in the acquired funds is based on the
Fund's pro rata portion of the cumulative expenses charged by the acquired funds
using the expense ratio of each of the acquired funds as of the acquired fund's
most recent shareholder report.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended April 30, 2009.
ACTUAL EXPENSES
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
8 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
NOV. 1, 2008 APRIL 30, 2009 THE PERIOD(A) EXPENSE RATIO
- -------------------------------------------------------------------------------------------
Class A
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 962.60 $ 8.61 1.77%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,016.02 $ 8.85 1.77%
- -------------------------------------------------------------------------------------------
Class B
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 959.10 $12.34 2.54%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,012.20 $12.67 2.54%
- -------------------------------------------------------------------------------------------
Class C
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 959.40 $12.29 2.53%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,012.25 $12.62 2.53%
- -------------------------------------------------------------------------------------------
Class I
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 966.10 $ 5.41 1.11%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,019.29 $ 5.56 1.11%
- -------------------------------------------------------------------------------------------
Class R2
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 963.90 $ 9.11 1.87%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,015.52 $ 9.35 1.87%
- -------------------------------------------------------------------------------------------
Class R3
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 964.40 $ 7.74 1.59%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,016.91 $ 7.95 1.59%
- -------------------------------------------------------------------------------------------
Class R4
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 964.40 $ 6.87 1.41%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,017.80 $ 7.05 1.41%
- -------------------------------------------------------------------------------------------
Class R5
- -------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 965.50 $ 5.36 1.10%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,019.34 $ 5.51 1.10%
- -------------------------------------------------------------------------------------------
</Table>
(a) Expenses are equal to the annualized expense ratio for each class as
indicated above, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended April 30, 2009: -3.74%
for Class A, -4.09% for Class B, -4.06% for Class C, -3.39% for Class I,
-3.61% for Class R2, -3.56% for Class R3, -3.56% for Class R4 and -3.45% for
Class R5.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 9
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
APRIL 30, 2009 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
COMMON STOCKS (97.1%)(c)
ISSUER SHARES VALUE(a)
AUSTRALIA (4.4%)
Australia & New Zealand Banking Group 167,834 $1,938,735
BHP Billiton 98,051 2,369,989
CSL 103,192 2,580,467
Macquarie Group 53,304(d) 1,296,542
Newcrest Mining 125,212(d) 2,723,574
QBE Insurance Group 163,377 2,586,364
Rio Tinto 23,490 1,099,544
---------------
Total 14,595,215
- -------------------------------------------------------------------------------------
BELGIUM (1.6%)
Colruyt 23,360 5,324,990
- -------------------------------------------------------------------------------------
BRAZIL (0.3%)
Cia Vale do Rio Doce ADR 65,720 902,336
- -------------------------------------------------------------------------------------
CANADA (1.6%)
Canadian Pacific Railway 52,000 1,861,816
First Uranium 200,000 1,076,640
Suncor Energy 100,000 2,518,030
---------------
Total 5,456,486
- -------------------------------------------------------------------------------------
CHINA (1.4%)
China Life Insurance Series H 463,000 1,633,963
Industrial & Commercial Bank of China Series
H 5,011,000 2,883,787
---------------
Total 4,517,750
- -------------------------------------------------------------------------------------
FRANCE (10.2%)
Air Liquide 36,147 2,958,838
ALSTOM 50,632 3,205,125
BNP Paribas 55,991 2,982,348
Essilor Intl 80,654 3,494,449
LVMH Moet Hennessy Louis Vuitton 38,824 2,948,564
Sanofi-Aventis 63,837(d) 3,697,627
Societe Generale 57,823(d) 2,996,904
Total 181,420 9,205,938
Vivendi 85,767(d) 2,323,337
---------------
Total 33,813,130
- -------------------------------------------------------------------------------------
GERMANY (8.3%)
Allianz 69,329(d) 6,398,395
BMW 53,450 1,856,740
Daimler 84,242(d) 3,026,166
E.ON 114,342(d) 3,879,699
Fresenius Medical Care & Co 129,537(d) 5,099,821
Linde 32,985 2,633,443
SAP 77,829 2,989,427
Wincor Nixdorf 31,848(d) 1,601,547
---------------
Total 27,485,238
- -------------------------------------------------------------------------------------
HONG KONG (4.0%)
China Mobile 200,500 1,741,139
China Overseas Land & Investment 2,239,120 3,952,459
Esprit Holdings 390,000 2,407,967
Hong Kong Exchanges and Clearing 190,700 2,224,452
Li & Fung 1,093,600 3,104,453
---------------
Total 13,430,470
- -------------------------------------------------------------------------------------
IRELAND (0.9%)
CRH 113,899 2,994,966
- -------------------------------------------------------------------------------------
ISRAEL (0.5%)
Teva Pharmaceutical Inds ADR 38,537 1,691,389
- -------------------------------------------------------------------------------------
JAPAN (17.6%)
AIR WATER 50,000 410,248
AMADA 79,000 484,741
Asahi Breweries 22,800 286,275
Bridgestone 50,100 741,853
Canon 78,900 2,360,622
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
10 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
JAPAN (CONT.)
Central Japan Railway 51 $301,555
Daito Trust Construction 13,600 564,144
DENSO 18,000 421,708
eAccess 420 273,471
East Japan Railway 32,400 1,827,037
FamilyMart 58,100 1,596,882
FANUC 12,500(d) 896,307
FUJIFILM Holdings 26,500 671,914
Fujitsu 135,000 575,057
Honda Motor 63,100(d) 1,820,703
Hoya 32,300 555,919
INPEX 32 202,193
JFE Holdings 29,700 805,765
Kansai Electric Power 35,400 721,650
Kao 27,000 506,871
KDDI 169 757,594
Kissei Pharmaceutical 7,000 134,961
Kobe Steel 182,000 299,029
Komatsu 101,400(d) 1,253,629
Konica Minolta Holdings 41,500 337,559
Kubota 47,000 280,287
Kurita Water Inds 12,600 304,141
Kyocera 8,800 680,088
Makita 31,000(d) 708,983
Mitsubishi 44,200 676,903
Mitsubishi Electric 94,000 496,699
Mitsubishi Estate 86,000 1,119,057
Mitsubishi Heavy Inds 108,000 351,606
Mitsubishi UFJ Financial Group 547,100 2,968,575
Mitsui & Co 102,500 1,079,068
Mitsui Fudosan 33,000(d) 413,676
Mitsui OSK Lines 100,000(d) 568,971
Mizuho Financial Group 297,300(d) 621,140
Murata Mfg 28,800 1,159,606
NGK Spark Plug 21,000 201,909
Nidec 34,000 1,865,536
Nikon 46,000 606,030
Nintendo 4,500 1,200,772
Nippon Oil 53,000 275,753
Nippon Telegraph & Telephone 37,300 1,392,144
Nippon Yusen Kabushiki Kaisha 97,000 395,481
Nomura Holdings 84,300 503,582
NTT DoCoMo 783 1,087,952
Obayashi 59,000 289,618
Ono Pharmaceutical 28,400 1,203,988
Oracle Japan 6,800(d) 239,313
Osaka Gas 89,000 282,528
Pacific Golf Group Intl Holdings 668 276,755
Ricoh 53,000(d) 646,650
SECOM 16,800 620,209
Seven & I Holdings 67,400 1,520,959
Shin-Etsu Chemical 42,500 2,051,744
Shionogi & Co 103,000 1,770,657
Showa Denko 189,000 283,695
SMC 1,900 184,992
Sumitomo 135,600 1,173,103
Sumitomo Metal Mining 28,000(d) 312,376
Sumitomo Mitsui Financial Group 31,400 1,082,770
Takeda Pharmaceutical 14,500 514,711
Tokio Marine Holdings 42,000 1,105,386
Tokyo Gas 164,000 622,075
Toyota Motor 139,300 5,439,254
Trend Micro 20,500 620,620
UBE Inds 81,000 151,979
Yahoo! Japan 1,308(d) 326,473
---------------
Total 58,485,501
- -------------------------------------------------------------------------------------
NETHERLANDS (4.0%)
ING Groep 256,926 2,409,258
Koninklijke (Royal) KPN 437,299 5,271,368
Koninklijke Ahold 365,300 4,027,848
Unilever 85,209 1,694,237
---------------
Total 13,402,711
- -------------------------------------------------------------------------------------
PORTUGAL (0.6%)
Jeronimo Martins 328,029(d) 1,857,933
- -------------------------------------------------------------------------------------
SINGAPORE (1.0%)
DBS Group Holdings 292,500 1,878,168
Keppel 356,000(d) 1,438,919
---------------
Total 3,317,087
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 11
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
SOUTH KOREA (1.1%)
Samsung Electronics 4,434 $2,047,685
Shinhan Financial Group 64,591(b) 1,597,266
---------------
Total 3,644,951
- -------------------------------------------------------------------------------------
SPAIN (2.6%)
Banco Santander 429,338 4,130,550
Telefonica 235,774 4,496,080
---------------
Total 8,626,630
- -------------------------------------------------------------------------------------
SWITZERLAND (10.8%)
Credit Suisse Group 141,810 5,541,715
Nestle 319,507(d) 10,458,989
Roche Holding 80,484 10,190,133
SGS 1,776 2,002,737
Syngenta 24,476(d) 5,254,230
UBS 181,047(b) 2,530,198
---------------
Total 35,978,002
- -------------------------------------------------------------------------------------
TAIWAN (0.7%)
Hon Hai Precision Industry 779,400 2,253,733
- -------------------------------------------------------------------------------------
UNITED KINGDOM (25.5%)
Admiral Group 104,943 1,414,429
Aggreko 164,497 1,406,679
Amlin 399,791 2,133,775
BAE Systems 561,242 2,974,716
BG Group 629,761 10,183,690
BP 398,082 2,841,705
British American Tobacco 255,366 6,192,289
Burberry Group 383,789 2,305,302
Diageo 192,477 2,315,147
HSBC Holdings 753,092 5,353,658
Intertek Group 159,253 2,405,596
J Sainsbury 390,698 1,910,389
Kingfisher 681,007 1,875,025
Next 72,973 1,765,181
Prudential 508,074 2,956,003
Reckitt Benckiser Group 137,227 5,414,668
Rio Tinto 83,131 3,411,761
RSA Insurance Group 2,504,596 4,861,616
Shire 211,269 2,658,394
Standard Chartered 230,336 3,605,427
Tesco 865,638 4,318,502
Tullow Oil 261,419 3,119,254
Vodafone Group 4,883,741 9,010,071
---------------
Total 84,433,277
- -------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $376,196,830) $322,211,795
- -------------------------------------------------------------------------------------
<Caption>
MONEY MARKET FUND (2.0%)
SHARES VALUE(a)
RiverSource Short-Term Cash Fund, 0.28% 6,691,242(e) $6,691,242
- -------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $6,691,242) $6,691,242
- -------------------------------------------------------------------------------------
<Caption>
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (14.9%)
SHARES VALUE(a)
CASH COLLATERAL REINVESTMENT FUND
JPMorgan Prime Money Market Fund 49,397,320 $49,397,320
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN
(Cost: $49,397,320) $49,397,320
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $432,285,392)(f) $378,300,357
=====================================================================================
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
12 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
SUMMARY OF INVESTMENTS IN SECURITIES BY INDUSTRY
The following table represents the portfolio investments of the Fund by industry
classifications as a percentage of total net assets at April 30, 2009:
<Table>
<Caption>
PERCENTAGE OF
INDUSTRY NET ASSETS VALUE
- ------------------------------------------------------------------------
Aerospace & Defense 0.9% $2,974,716
Auto Components 0.4 1,365,470
Automobiles 3.7 12,142,863
Beverages 0.8 2,601,422
Biotechnology 0.8 2,580,467
Capital Markets 3.0 9,872,037
Chemicals 4.1 13,744,177
Commercial Banks 9.6 32,039,328
Commercial Services & Supplies 0.6 2,026,888
Computers & Peripherals 0.7 2,176,604
Construction & Engineering 0.1 289,618
Construction Materials 0.9 2,994,966
Distributors 0.9 3,104,453
Diversified Financial Services 1.4 4,633,710
Diversified Telecommunication
Services 3.4 11,159,592
Electric Utilities 1.4 4,601,349
Electrical Equipment 1.1 3,701,824
Electronic Equipment, Instruments &
Components 2.2 7,186,796
Food & Staples Retailing 6.2 20,557,503
Food Products 3.7 12,153,226
Gas Utilities 0.3 904,603
Health Care Equipment & Supplies 1.0 3,494,449
Health Care Providers & Services 1.5 5,099,821
Hotels, Restaurants & Leisure 0.1 276,755
Household Durables 0.2 708,983
Household Products 1.8 5,921,539
Industrial Conglomerates 0.4 1,438,919
Insurance 7.0 23,089,931
Internet Software & Services 0.2 599,944
Leisure Equipment & Products 0.2 606,030
Machinery 1.1 3,755,703
Marine 0.3 964,452
Media 0.7 2,323,337
Metals & Mining 3.9 13,001,014
Multiline Retail 0.5 1,765,181
Office Electronics 1.0 3,344,831
Oil, Gas & Consumable Fuels 8.5 28,346,563
Pharmaceuticals 6.6 21,861,860
Professional Services 1.3 4,408,333
Real Estate Management & Development 1.8 6,049,336
Road & Rail 1.2 3,990,408
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 13
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
PERCENTAGE OF
INDUSTRY NET ASSETS VALUE
- ------------------------------------------------------------------------
Semiconductors & Semiconductor
Equipment 0.6% $2,047,685
Software 1.5 5,050,132
Specialty Retail 1.3 4,282,992
Textiles, Apparel & Luxury Goods 1.6 5,253,866
Tobacco 1.9 6,192,289
Trading Companies & Distributors 0.9 2,929,074
Wireless Telecommunication Services 3.8 12,596,756
Other(1) 16.9 56,088,562
- ------------------------------------------------------------------------
Total $378,300,357
- ------------------------------------------------------------------------
</Table>
(1) Cash & Cash Equivalents.
INVESTMENTS IN DERIVATIVES
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT APRIL 30, 2009
<Table>
<Caption>
CURRENCY TO BE CURRENCY TO BE UNREALIZED UNREALIZED
EXCHANGE DATE DELIVERED RECEIVED APPRECIATION DEPRECIATION
- --------------------------------------------------------------------------------------------
May 5, 2009 90,000 60,959 $128 $--
Singapore Dollar U.S. Dollar
- --------------------------------------------------------------------------------------------
May 5, 2009 335,318 225,000 -- (2,434)
U.S. Dollar British Pound
- --------------------------------------------------------------------------------------------
May 5, 2009 1,000,800 750,000 -- (8,289)
U.S. Dollar European Monetary Unit
- --------------------------------------------------------------------------------------------
Total $128 $(10,723)
- --------------------------------------------------------------------------------------------
</Table>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Securities are valued by using policies described in Note 1 to the
financial statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) At April 30, 2009, security was partially or fully on loan. See Note 5 to
the financial statements.
(e) Affiliated Money Market Fund -- See Note 6 to the financial statements. The
rate shown is the seven-day current annualized yield at April 30, 2009.
- --------------------------------------------------------------------------------
14 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(f) At April 30, 2009, the cost of securities for federal income tax purposes
was approximately $432,285,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
<Table>
Unrealized appreciation $20,029,000
Unrealized depreciation (74,014,000)
-----------------------------------------------------------
Net unrealized depreciation $(53,985,000)
-----------------------------------------------------------
</Table>
The industries identified above are based on the Global Industry Classification
Standard (GICS), which was developed by and is the exclusive property of Morgan
Stanley Capital International Inc. and Standard & Poor's, a division of The
McGraw-Hill Companies, Inc.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 15
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
FAIR VALUE MEASUREMENTS
Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to
implement more uniform reporting relating to the fair valuation of securities
for financial statement purposes. Mutual funds are required to implement the
requirements of this standard for fiscal years beginning after Nov. 15, 2007.
While uniformity of presentation is the objective of the standard, it is likely
that there may be a range of practices utilized and it may be some period of
time before industry practices become more uniform. For this reason care should
be exercised in interpreting this information and/or using it for comparison
with other mutual funds.
Various inputs are used in determining the value of the Fund's investments.
These inputs are summarized in the three broad levels listed below:
- Level 1 -- quoted prices in active markets for identical securities
- Level 2 -- other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speeds, credit risks,
etc.)
- Level 3 -- significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
Observable inputs are those based on market data obtained from sources
independent of the Fund, and unobservable inputs reflect the Fund's own
assumptions based on the best information available. The input levels are not
necessarily an indication of the risk or liquidity associated with investments
at that level. Non-U.S. equity securities actively traded in foreign markets may
be reflected in Level 2 despite the availability of closing prices, because the
Fund evaluates and determines whether those closing prices reflect fair value at
the close of the NYSE or require adjustment, as described in Note 1 to the
financial statements -- Valuation of securities.
The following table is a summary of the inputs used to value the Fund's
investments as of April 30, 2009:
<Table>
<Caption>
FAIR VALUE AT APRIL 30, 2009
---------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL
- -----------------------------------------------------------------------------------
Investments in
securities $378,300,357 $-- $-- $378,300,357
Other financial
instruments* -- (10,595) -- (10,595)
- -----------------------------------------------------------------------------------
Total $378,300,357 $(10,595) $-- $378,289,762
- -----------------------------------------------------------------------------------
</Table>
* Other financial instruments are derivative instruments, such as forwards,
which are valued at the unrealized appreciation (depreciation) on the
instrument.
- --------------------------------------------------------------------------------
16 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q,
can be obtained without charge, upon request, by calling the RiverSource
Family of Funds at 1(800) 221-2450.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 17
STATEMENT OF ASSETS AND LIABILITIES --------------------------------------------
APRIL 30, 2009 (UNAUDITED)
<Table>
<Caption>
ASSETS
Investments in securities, at value
Unaffiliated issuers* (identified cost $376,196,830) $ 322,211,795
Affiliated money market fund (identified cost $6,691,242) 6,691,242
Investments of cash collateral received for securities on loan
(identified cost $49,397,320) 49,397,320
- --------------------------------------------------------------------------------
Total investments in securities (identified cost $432,285,392) 378,300,357
Foreign currency holdings (identified cost $1,034,822) 1,042,567
Capital shares receivable 301,625
Dividends and accrued interest receivable 2,960,294
Receivable for investment securities sold 8,203,083
Unrealized appreciation on forward foreign currency contracts 128
- --------------------------------------------------------------------------------
Total assets 390,808,054
- --------------------------------------------------------------------------------
LIABILITIES
Capital shares payable 332,170
Payable for investment securities purchased 9,208,369
Payable upon return of securities loaned 49,397,320
Unrealized depreciation on forward foreign currency contracts 10,723
Accrued investment management services fees 7,164
Accrued distribution fees 2,101
Accrued transfer agency fees 2,577
Accrued administrative services fees 722
Accrued plan administration services fees 1
Other accrued expenses 157,371
- --------------------------------------------------------------------------------
Total liabilities 59,118,518
- --------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $ 331,689,536
- --------------------------------------------------------------------------------
REPRESENTED BY
Capital stock -- $.01 par value $ 543,038
Additional paid-in capital 719,942,181
Undistributed net investment income 3,053,820
Accumulated net realized gain (loss) (337,955,672)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign
currencies (53,893,831)
- --------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding
capital stock $ 331,689,536
- --------------------------------------------------------------------------------
*Including securities on loan, at value $ 47,617,881
- --------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
18 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
NET ASSET VALUE PER SHARE
NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE
Class A $213,189,654 34,925,238 $6.10(1)
Class B $ 22,106,046 3,684,321 $6.00
Class C $ 1,815,777 307,755 $5.90
Class I $ 94,376,812 15,354,099 $6.15
Class R2 $ 5,195 838 $6.20
Class R3 $ 3,074 496 $6.20
Class R4 $ 189,901 30,541 $6.22
Class R5 $ 3,077 496 $6.20
- -----------------------------------------------------------------------------------------
</Table>
(1) The maximum offering price per share for Class A is $6.47. The offering
price is calculated by dividing the net asset value by 1.0 minus the maximum
sales charge of 5.75%.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 19
STATEMENT OF OPERATIONS --------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2009 (UNAUDITED)
<Table>
<Caption>
INVESTMENT INCOME
Income:
Dividends $ 6,281,042
Interest 36
Income distributions from affiliated money market fund 15,409
Fee income from securities lending 102,588
Less foreign taxes withheld (677,523)
- -------------------------------------------------------------------------------
Total income 5,721,552
- -------------------------------------------------------------------------------
Expenses:
Investment management services fees 1,467,366
Distribution fees
Class A 268,757
Class B 114,207
Class C 8,997
Class R2 9
Class R3 4
Transfer agency fees
Class A 434,168
Class B 48,903
Class C 3,754
Class R2 1
Class R4 41
Administrative services fees 128,013
Plan administration services fees
Class R2 5
Class R3 4
Class R4 205
Compensation of board members 5,638
Custodian fees 70,380
Printing and postage 54,605
Registration fees 29,365
Professional fees 21,182
Other 6,410
- -------------------------------------------------------------------------------
Total expenses 2,662,014
Expenses waived/reimbursed by the Investment Manager and its
affiliates (92)
- -------------------------------------------------------------------------------
Total net expenses 2,661,922
- -------------------------------------------------------------------------------
Investment income (loss) -- net 3,059,630
- -------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
20 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions $(89,281,820)
Foreign currency transactions (17,999)
- -------------------------------------------------------------------------------
Net realized gain (loss) on investments (89,299,819)
Net change in unrealized appreciation (depreciation) on
investments
and on translation of assets and liabilities in foreign
currencies 70,921,680
- -------------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies (18,378,139)
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(15,318,509)
- -------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 21
STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2009 OCT. 31, 2008
(UNAUDITED)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 3,059,630 $ 9,841,204
Net realized gain (loss) on investments (89,299,819) (12,816,064)
Net change in unrealized appreciation (depreciation) on
investments and on translation of assets and liabilities in
foreign currencies 70,921,680 (297,266,660)
- --------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (15,318,509) (300,241,520)
- --------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (6,677,493) (3,580,745)
Class B (342,205) --
Class C (37,640) (2,207)
Class I (2,569,064) (1,475,608)
Class R2 (92) (33)
Class R3 (103) (46)
Class R4 (5,693) (4,181)
Class R5 (112) (63)
- --------------------------------------------------------------------------------------------------
Total distributions (9,632,402) (5,062,883)
- --------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
22 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2009 OCT. 31, 2008
(UNAUDITED)
CAPITAL SHARE TRANSACTIONS
Proceeds from sales
Class A shares $ 19,933,179 $ 47,238,648
Class B shares 1,824,218 6,160,677
Class C shares 320,760 759,316
Class I shares 26,835,665 15,518,168
Class R2 shares 2,021 --
Class R4 shares 30,959 56,966
Reinvestment of distributions at net asset value
Class A shares 6,510,561 3,505,552
Class B shares 333,747 --
Class C shares 36,537 2,171
Class I shares 2,568,878 1,475,409
Class R4 shares 5,693 4,181
Payments for redemptions
Class A shares (43,765,998) (103,889,267)
Class B shares (4,890,523) (25,515,027)
Class C shares (351,548) (1,032,936)
Class I shares (2,614,521) (15,677,847)
Class R4 shares (2,690) (201,571)
- --------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions 6,776,938 (71,595,560)
- --------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (18,173,973) (376,899,963)
Net assets at beginning of period 349,863,509 726,763,472
- --------------------------------------------------------------------------------------------------
Net assets at end of period $331,689,536 $ 349,863,509
- --------------------------------------------------------------------------------------------------
Undistributed net investment income $ 3,053,820 $ 9,626,592
- --------------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 23
FINANCIAL HIGHLIGHTS -----------------------------------------------------------
CLASS A
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(j) 2008 2007 2006 2005
Net asset value, beginning of period $6.52 $11.83 $9.54 $7.66 $6.58
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .05(b) .17(b) .07(b) .06 .05
Net gains (losses) (both realized and
unrealized) (.29) (5.40) 2.34 1.91 1.06
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.24) (5.23) 2.41 1.97 1.11
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.18) (.08) (.12) (.09) (.03)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.10 $6.52 $11.83 $9.54 $7.66
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $213 $248 $520 $464 $408
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(c),(d) 1.77%(e) 1.45% 1.34% 1.48% 1.53%
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(f),(g) 1.77%(e) 1.45% 1.34% 1.48% 1.52%
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 1.76%(e) 1.68% .63% .76% .75%
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 48% 78% 84% 79% 93%
- --------------------------------------------------------------------------------------------------------------
Total return(h) (3.74%)(i) (44.46%) 25.52% 25.98% 16.90%
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(d) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(e) Adjusted to an annual basis.
(f) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(g) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits in the periods in which they
occurred were less than 0.01% of average net assets.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
(j) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
24 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS B
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(j) 2008 2007 2006 2005
Net asset value, beginning of period $6.34 $11.50 $9.27 $7.44 $6.42
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .03(b) .10(b) (.01)(b) -- --
Net gains (losses) (both realized and
unrealized) (.29) (5.26) 2.28 1.86 1.02
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.26) (5.16) 2.27 1.86 1.02
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) -- (.04) (.03) --
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.00 $6.34 $11.50 $9.27 $7.44
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $22 $27 $72 $77 $81
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(c),(d) 2.54%(e) 2.21% 2.11% 2.25% 2.30%
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(f),(g) 2.54%(e) 2.21% 2.11% 2.25% 2.29%
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) .96%(e) .98% (.10%) .01% .01%
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 48% 78% 84% 79% 93%
- --------------------------------------------------------------------------------------------------------------
Total return(h) (4.09%)(i) (44.87%) 24.56% 25.07% 15.89%
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(d) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(e) Adjusted to an annual basis.
(f) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(g) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits in the periods in which they
occurred were less than 0.01% of average net assets.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
(j) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 25
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS C
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(j) 2008 2007 2006 2005
Net asset value, beginning of period $6.27 $11.39 $9.19 $7.40 $6.38
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .03(b) .09(b) (.01)(b) -- --
Net gains (losses) (both realized and
unrealized) (.28) (5.20) 2.27 1.84 1.02
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.25) (5.11) 2.26 1.84 1.02
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.12) (.01) (.06) (.05) --
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.90 $6.27 $11.39 $9.19 $7.40
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $2 $2 $4 $3 $3
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(c),(d) 2.53%(e) 2.21% 2.10% 2.25% 2.30%
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(f),(g) 2.53%(e) 2.21% 2.10% 2.25% 2.28%
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 1.04%(e) .91% (.12%) (.01%) .02%
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 48% 78% 84% 79% 93%
- --------------------------------------------------------------------------------------------------------------
Total return(h) (4.06%)(i) (44.92%) 24.66% 24.93% 16.03%
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(d) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(e) Adjusted to an annual basis.
(f) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(g) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits in the periods in which they
occurred were less than 0.01% of average net assets.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
(j) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
26 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS I
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(g) 2008 2007 2006 2005
Net asset value, beginning of period $6.60 $11.97 $9.64 $7.75 $6.65
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .08(b) .21(b) .12(b) .11 .09
Net gains (losses) (both realized and
unrealized) (.30) (5.45) 2.38 1.92 1.07
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.22) (5.24) 2.50 2.03 1.16
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.23) (.13) (.17) (.14) (.06)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.15 $6.60 $11.97 $9.64 $7.75
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $94 $73 $131 $105 $50
- --------------------------------------------------------------------------------------------------------------
Total expenses(c),(d) 1.11%(e) .97% .88% .99% .91%
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.61%(e) 2.14% 1.13% 1.22% 1.36%
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 48% 78% 84% 79% 93%
- --------------------------------------------------------------------------------------------------------------
Total return (3.39%)(f) (44.18%) 26.22% 26.50% 17.58%
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits in the periods in which they
occurred were less than 0.01% of average net assets.
(d) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(e) Adjusted to an annual basis.
(f) Not annualized.
(g) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 27
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS R2
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(j) 2008 2007(b)
Net asset value, beginning of period $6.62 $11.98 $10.08
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) .07 .16 .03
Net gains (losses) (both realized and
unrealized) (.31) (5.45) 2.04
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.24) (5.29) 2.07
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.18) (.07) (.17)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.20 $6.62 $11.98
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $-- $--
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 1.87%(f) 1.77% 1.68%(f)
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) 1.77%(f) 1.52% 1.68%(f)
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.33%(f) 1.61% .36%(f)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 48% 78% 84%
- --------------------------------------------------------------------------------------------------------------
Total return (3.61%)(i) (44.40%) 20.81%(i)
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Dec. 11, 2006 (inception date) to Oct. 31, 2007.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have 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 in the periods in which they
occurred were less than 0.01% of average net assets.
(i) Not annualized.
(j) Six months ended April 30, 2009 (Unaudited)
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
28 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS R3
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(j) 2008 2007(b)
Net asset value, beginning of period $6.64 $12.01 $10.08
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) .06 .19 .06
Net gains (losses) (both realized and
unrealized) (.29) (5.47) 2.04
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.23) (5.28) 2.10
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.21) (.09) (.17)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.20 $6.64 $12.01
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $-- $--
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 1.59%(f) 1.52% 1.44%(f)
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) 1.46%(f) 1.27% 1.44%(f)
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.14%(f) 1.86% .61%(f)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 48% 78% 84%
- --------------------------------------------------------------------------------------------------------------
Total return (3.56%)(i) (44.24%) 21.11%(i)
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Dec. 11, 2006 (inception date) to Oct. 31, 2007.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have 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 in the periods in which they
occurred were less than 0.01% of average net assets.
(i) Not annualized.
(j) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 29
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS R4
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(i) 2008 2007 2006 2005
Net asset value, beginning of period $6.68 $12.06 $9.72 $7.70 $6.62
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .07(b) .18(b) .09(b) .09 .05
Net gains (losses) (both realized and
unrealized) (.30) (5.46) 2.39 1.93 1.07
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.23) (5.28) 2.48 2.02 1.12
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.23) (.10) (.14) -- (.04)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.22 $6.68 $12.06 $9.72 $7.70
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $-- $-- $1 $--
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(c),(d) 1.41%(e) 1.26% 1.18% 1.29% 1.33%
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(f),(g) 1.30%(e) 1.01% 1.18% 1.29% 1.33%
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.41%(e) 1.77% .85% 1.02% 1.04%
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 48% 78% 84% 79% 93%
- --------------------------------------------------------------------------------------------------------------
Total return (3.56%)(h) (44.08%) 25.85% 26.23% 16.92%
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(d) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(e) Adjusted to an annual basis.
(f) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(g) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits in the periods in which they
occurred were less than 0.01% of average net assets.
(h) Not annualized.
(i) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
30 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS R5
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2009(h) 2008 2007(b)
Net asset value, beginning of period $6.65 $12.06 $10.08
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) .07 .21 .11
Net gains (losses) (both realized and
unrealized) (.29) (5.49) 2.04
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.22) (5.28) 2.15
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.23) (.13) (.17)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.20 $6.65 $12.06
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $-- $--
- --------------------------------------------------------------------------------------------------------------
Total expenses(d),(e) 1.10%(f) 1.02% .93%(f)
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.51%(f) 2.11% 1.12%(f)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 48% 78% 84%
- --------------------------------------------------------------------------------------------------------------
Total return (3.45%)(g) (44.21%) 21.63%(g)
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Dec. 11, 2006 (inception date) to Oct. 31, 2007.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) 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 in the periods in which they
occurred were less than 0.01% of average net assets.
(f) Adjusted to an annual basis.
(g) Not annualized.
(h) Six months ended April 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 31
NOTES TO FINANCIAL STATEMENTS -------------------------------------------------
(UNAUDITED AS TO APRIL 30, 2009)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Threadneedle International Opportunity Fund (the Fund) is a series of
RiverSource International Series, Inc. and is registered under the Investment
Company Act of 1940 (as amended) as a diversified, open-end management
investment company. RiverSource International 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 foreign issuers that are believed to offer
strong growth potential.
The Fund offers Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4
and Class R5 shares.
- - Class A shares are 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 R2, Class R3, Class R4 and Class R5 shares are sold without a
front-end sales charge or CDSC and are offered to qualifying institutional
investors.
At April 30, 2009, 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 R3 and Class R5
shares. At April 30, 2009, the Investment Manager and the RiverSource affiliated
funds-of-funds owned approximately 28% of the total outstanding Fund shares.
All classes of shares have identical voting, dividend and liquidation rights.
Class specific expenses (e.g., distribution and service fees, transfer agency
fees, plan administration services fees) differ among classes. Income, expenses
(other than class specific expenses) and realized and unrealized gains or losses
on investments are allocated to each class of shares based upon its relative net
assets.
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
- --------------------------------------------------------------------------------
32 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
liabilities and contingent assets and liabilities) that could differ from actual
results.
VALUATION OF SECURITIES
Effective Nov. 1, 2008, the Fund adopted Statement of Financial Accounting
Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an
authoritative definition of fair value, sets out a hierarchy for measuring fair
value, and requires additional disclosures about the inputs used to develop the
measurements of fair value and the effect of certain measurements reported in
the Statement of Operations for a fiscal period. There was no impact to the
Fund's net assets or results of operations upon adoption. The fair valuation
measurements disclosure can be found following the Notes to Portfolio of
Investments.
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
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 (NYSE) and therefore the closing prices for
securities in such markets or on such exchanges may not fully reflect events
that occur after such close but before the close of the NYSE, including
significant movements in the U.S. market after foreign exchanges have closed.
Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise
Financial), parent company of the Investment Manager, as administrator to the
Fund, will fair value foreign securities pursuant to procedures adopted by the
Board, including utilizing a third party pricing service to determine these fair
values. These
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 33
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
procedures take into account multiple factors, including movements in the U.S.
securities markets, to determine a good faith estimate that reasonably reflects
the current market conditions as of the close of the NYSE.
Short-term securities maturing in more than 60 days from the valuation date are
valued at the market price or approximate market value based on current interest
rates; those maturing in 60 days or less are valued at amortized cost, which
approximates fair value.
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 NYSE. The Fund will realize a gain or loss when the option
transaction expires or is exercised. When an option is exercised, the proceeds
on sales for a written call option, the purchase cost for a written put option
or the cost of a security for a purchased put or call option is adjusted by the
amount of premium received or paid. At April 30, 2009, and for the six months
then ended, the Fund had no outstanding option contracts.
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes, the Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund also may buy and write put and call options on these futures contracts.
Risks of entering into futures contracts and related options include the
possibility of an
- --------------------------------------------------------------------------------
34 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
illiquid market and that a change in the value of the contract or option may not
correlate with changes in the value of the underlying securities.
Futures and options on futures are valued daily based upon the last sale price
at the close of the market on the principal exchange on which they are traded.
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the contract is closed
or expires. At April 30, 2009, the Fund had no outstanding futures contracts.
FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the Statement of Operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes. At April 30, 2009, foreign currency holdings consisted of
multiple denominations.
The Fund may enter into forward foreign currency contracts for operational
purposes and to protect against adverse exchange rate fluctuation. The net U.S.
dollar value of foreign currency underlying all contractual commitments held by
the Fund and the resulting unrealized appreciation or depreciation are
determined using foreign currency exchange rates from an independent pricing
service. The Fund is subject to the credit risk that the counterparty will not
complete its contract obligations.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 35
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue Code
that applies to regulated investment companies and to distribute substantially
all of its taxable income to shareholders. No provision for income or excise
taxes is thus required.
Management of the Fund has concluded that there are no significant uncertain tax
positions that would require recognition in the financial statements. Generally,
the tax authorities can examine all the tax returns filed for the last three
years.
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.
RECENT ACCOUNTING PRONOUNCEMENTS
The Fund has adopted FASB Staff Position No. 133-1 and FIN No. 45-4 (FSP FAS
133-1 and FIN 45-4), "Disclosures about Credit Derivatives and Certain
Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No.
45." The amendments to FSP FAS 133-1 and FIN 45-4 require enhanced disclosures
about a fund's derivatives and guarantees. 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, (c) how derivative instruments and
related hedged items affect a fund's financial position, financial performance,
and cash flows and (d) the current status of the payment/performance risk of the
credit derivative. The amendments to FSP FAS 133-1 and FIN 45-4 also require
additional disclosures about the current status of the payment/performance risk
of a guarantee.
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. SFAS 161 is
effective for financial statements issued for fiscal years and interim periods
beginning after Nov. 15, 2008. As of April 30, 2009, management does not believe
the adoption of SFAS 161 will impact the financial statement amounts;
- --------------------------------------------------------------------------------
36 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
however, additional footnote disclosures may be required about the use of
derivative instruments and hedging items.
On April 9, 2009, the FASB issued Staff Position No. 157-4, "Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly" (FSP
157-4). FSP 157-4 provides additional guidance for estimating fair value in
accordance with SFAS 157 when the volume and level of activity for the asset or
liability have significantly decreased. FSP 157-4 also requires additional
disaggregation of the current SFAS 157 required disclosures. FSP 157-4 is
effective for interim and annual reporting periods ending after June 15, 2009,
and shall be applied prospectively. Management is currently evaluating the
impact that the adoption of FSP 157-4 will have on the amounts and disclosures
within the Fund's financial statements.
DIVIDENDS TO SHAREHOLDERS
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
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 0.80%
to 0.57% annually as the Fund's assets increase. The fee may be adjusted upward
or downward by a performance incentive adjustment determined monthly by
measuring the percentage difference over a rolling 12-month period between the
annualized performance of one Class A share of the Fund and the annualized
performance of the Lipper International Large-Cap Core 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
$196,273 for the six months April 30, 2009. The management fee for the six
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 37
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
months April 30, 2009 was 0.91% 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
asset 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 from 0.08% to 0.05% annually as the
Fund's assets increase. The fee for the six months April 30, 2009 was 0.08% of
the Fund's average daily net assets.
OTHER FEES
Other expenses are for, among other things, certain expenses of the Fund or the
Board including: Fund boardroom and office expense, employee compensation,
employee health and retirement benefits, and certain other expenses. Payment of
these Fund and Board expenses is facilitated by a company providing limited
administrative services to the Fund and the Board. For the six months April 30,
2009, other expenses paid to this company were $1,361.
COMPENSATION OF BOARD MEMBERS
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 daily net assets attributable to Class R2, Class R3, Class R4 and Class
R5 shares.
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38 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
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 in the Statement of Operations.
PLAN ADMINISTRATION SERVICES FEES
Under a Plan Administration Services Agreement with the Transfer Agent, the Fund
pays an annual fee at a rate of 0.25% of the Fund's average daily net assets
attributable to Class R2, Class R3 and Class R4 shares for the provision of
various administrative, recordkeeping, communication and educational services.
DISTRIBUTION FEES
The Fund has agreements with RiverSource Distributors, Inc. and RiverSource Fund
Distributors, Inc. (collectively, the Distributor) for distribution and
shareholder services. Under a Plan and Agreement of Distribution pursuant to
Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's
average daily net assets attributable to Class A and Class R3 shares, a fee at
an annual rate of up to 0.50% of the Fund's average daily net assets
attributable to Class R2 shares and a fee at an annual rate of up to 1.00% of
the Fund's average daily net assets attributable to Class B and Class C shares.
For Class B and Class C shares, 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 $857,000 and $31,000 for
Class B and Class C shares, respectively. These amounts are based on the most
recent information available as of April 30, 2009, and may be recovered from
future payments under the distribution plan or CDSC. To the extent the
unreimbursed expense has been fully recovered, the distribution fee is reduced.
SALES CHARGES
Sales charges received by the Distributor for distributing Fund shares were
$79,392 for Class A, $10,531 for Class B and $152 for Class C for the six months
ended April 30, 2009.
EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES
For the six months April 30, 2009, the Investment Manager and its affiliates
waived/reimbursed certain fees and expenses such that net expenses (excluding
fees and expenses of acquired funds*), including the adjustment under the terms
of a performance incentive arrangement, were as follows:
<Table>
Class R2............................................ 1.77%
Class R3............................................ 1.46
Class R4............................................ 1.30
</Table>
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 39
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
The waived/reimbursed fees and expenses for plan administration services fee at
the class level were as follows:
<Table>
Class R2............................................ $ 2
Class R3............................................ 2
Class R4............................................ 88
</Table>
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 class average daily net assets:
<Table>
Class R4............................................ 1.30%
</Table>
* In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the funds in
which it invests (also referred to as "acquired funds"), including
affiliated and non-affiliated pooled investment vehicles (including mutual
funds and exchange traded funds). Because the acquired funds have varied
expense and fee levels and the Fund may own different proportions of
acquired funds at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
CUSTODIAN FEES
Effective Dec. 15, 2008, the Fund pays custodian fees to JPMorgan Chase Bank,
N.A. For the period from Nov. 1, 2008 to Dec. 15, 2008, the Fund paid custodian
fees amounting to $4,198 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 $155,512,219 and $159,337,140 respectively, for the six
months ended April 30, 2009. Realized gains and losses are determined on an
identified cost basis.
- --------------------------------------------------------------------------------
40 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
<Table>
<Caption>
SIX MONTHS ENDED APRIL 30, 2009
----------------------------------------------------------
ISSUED FOR
REINVESTED NET
SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ----------------------------------------------------------------------------------
Class A 3,308,273 1,043,359 (7,512,689) (3,161,057)
Class B 311,195 54,268 (864,957) (499,494)
Class C 55,851 6,049 (62,965) (1,065)
Class I 4,393,655 410,364 (470,673) 4,333,346
Class R2 342 -- -- 342
Class R4 4,963 898 (465) 5,396
- ----------------------------------------------------------------------------------
<Caption>
YEAR ENDED OCT. 31, 2008
----------------------------------------------------------
ISSUED FOR
REINVESTED NET
SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ----------------------------------------------------------------------------------
Class A 4,839,962 327,622 (10,996,114) (5,828,530)
Class B 630,719 -- (2,718,869) (2,088,150)
Class C 82,839 210 (112,214) (29,165)
Class I 1,520,622 136,865 (1,545,670) 111,817
Class R4 5,794 383 (20,555) (14,378)
- ----------------------------------------------------------------------------------
</Table>
5. LENDING OF PORTFOLIO SECURITIES
Effective Dec. 1, 2008, the Fund has entered into a Master Securities Lending
Agreement ("the Agreement") with JPMorgan Chase Bank, National Association
("JPMorgan"). The Agreement authorizes JPMorgan as lending agent to lend
securities to authorized borrowers in order to generate additional income on
behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured
by cash or U.S. government securities equal to at least 100% of the market value
of the loaned securities. Any additional collateral required to maintain those
levels due to market fluctuations of the loaned securities is delivered the
following business day. Cash collateral received is invested by the lending
agent on behalf of the Fund into authorized investments pursuant to the
Agreement. The investments made with the cash collateral are listed in the
Portfolio of Investments. The value of such investments, including any
uninvested cash collateral balances, are disclosed in the Statement of Assets
and Liabilities along with the related obligation to return the collateral upon
return of the securities loaned. At April 30, 2009, securities valued at
$47,617,881 were on loan, secured
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 41
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
by cash collateral of $49,578,792 invested in short-term securities or in cash
equivalents.
Pursuant to the Agreement, the Fund receives income for lending its securities
either in the form of fees or by earning interest on invested cash collateral,
net of negotiated rebates paid to borrowers and fees paid to the lending agent
for services provided and any other securities lending expenses. Income of
$102,588 earned from securities lending from Dec. 1, 2008 through April 30, 2009
is included in the Statement of Operations. The Fund also continues to earn
interest and dividends on the securities loaned.
Risks of delay in recovery of securities or even loss of rights in the
securities may occur should the borrower of the securities fail financially.
Risks may also arise to the extent that the value of the securities loaned
increases above the value of the collateral received. JPMorgan will indemnify
the Fund from losses resulting from a borrower's failure to return a loaned
security when due. Such indemnification does not extend to losses associated
with declines in the value of cash collateral investments. Loans are subject to
termination by the Funds or the borrower at any time, and are, therefore, not
considered to be illiquid investments.
Prior to Dec. 1, 2008, the Investment Manager served as securities lending agent
for the Fund under the Securities Lending Agency Agreement. For the period from
Nov. 1, 2008 through Nov. 30, 2008, the Fund had no securities on loan.
6. AFFILIATED MONEY MARKET FUND
The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund,
a money market fund established for the exclusive use of the RiverSource funds
and other institutional clients of RiverSource Investments. The cost of the
Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term
Cash Fund aggregated $69,240,410 and $66,314,596, respectively, for the six
months April 30, 2009. The income distributions received with respect to the
Fund's investment in RiverSource Short-Term Cash Fund can be found in the
Statement of Operations and the Fund's invested balance in RiverSource Short-
Term Cash Fund at April 30, 2009, can be found in the Portfolio of Investments.
7. BANK BORROWINGS
The Fund has entered into a revolving credit facility with a syndicate of banks
led by JPMorgan Chase Bank, N.A. (JPMCB) (the Administrative Agent), whereby the
Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. The credit facility agreement, which is a
collective agreement between the Fund and certain other
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42 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
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 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 six months ended April 30, 2009.
8. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$246,866,293 at Oct. 31, 2008, that if not offset by capital gains will expire
as follows:
<Table>
<Caption>
2009 2010 2011 2016
$137,301,860 $59,231,998 $38,262,972 $12,069,463
</Table>
It is unlikely the Board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires.
9. RISKS RELATING TO CERTAIN INVESTMENTS
FOREIGN/EMERGING MARKETS RISK
Investing in foreign securities may include certain risks and considerations not
typically associated with investing in U.S. securities, such as fluctuating
currency values and changing local and regional economic, political and social
conditions, which may result in greater market volatility. In addition, certain
foreign securities may not be as liquid as U.S. securities. Investing in
emerging markets may accentuate these risks.
10. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In June 2004, an action captioned John E. Gallus et al. v. American Express
Financial Corp. and American Express Financial Advisors Inc., was filed in the
United States District Court for the District of Arizona. The plaintiffs allege
that they are investors in several American Express Company mutual funds and
they
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 43
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
purport to bring the action derivatively on behalf of those funds under the
Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid
to the defendants by the funds for investment advisory and administrative
services are excessive. The plaintiffs seek remedies including restitution and
rescission of investment advisory and distribution agreements. The plaintiffs
voluntarily agreed to transfer this case to the United States District Court for
the District of Minnesota (the District Court). In response to defendants'
motion to dismiss the complaint, the District Court dismissed one of plaintiffs'
four claims and granted plaintiffs limited discovery. Defendants moved for
summary judgment in April 2007. Summary judgment was granted in the defendants'
favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth
Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8,
2009, the Eighth Circuit reversed summary judgment and remanded to the District
Court for further proceedings.
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
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44 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
arrangements to its clients and to shareholders of the Seligman Funds. Seligman
also provided information concerning mutual fund trading practices to the SEC
and the Office of the Attorney General of the State of New York (NYAG).
In September 2006, the NYAG commenced a civil action in New York State Supreme
Court against Seligman, Seligman Advisors, Inc. (which is now known as
RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino
(collectively, the Seligman Parties), alleging, in substance, that the Seligman
Parties permitted various persons to engage in frequent trading and, as a
result, the prospectus disclosure used by the registered investment companies
then managed by Seligman 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. On March 13, 2009, without admitting or denying
any violations of law or wrongdoing, the Seligman Parties entered into a
stipulation of settlement with the NYAG and settled the claims made by the NYAG.
Under the terms of the settlement, Seligman will pay $11.3 million to four
Seligman Funds. This settlement resolved all outstanding matters between the
Seligman Parties and the NYAG. In addition to the foregoing matter, the New York
staff of the SEC indicated in September 2005 that it was considering
recommending to the Commissioners of the SEC the instituting of a formal action
against Seligman and Seligman Advisors, Inc. relating to frequent trading in the
Seligman Funds. Seligman responded to the staff in October 2005 that it believed
that any action would be both inappropriate and unnecessary, especially in light
of the fact that Seligman had previously resolved the underlying issue with the
Independent Directors of the Seligman Funds and made recompense to the affected
Seligman Funds. There have been no further developments with the SEC on this
matter.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, arbitration and regulatory proceedings, including
routine litigation, class actions, and governmental actions, concerning matters
arising in connection with the conduct of their business activities. Ameriprise
Financial believes that the Funds are not currently the subject of, and that
neither Ameriprise Financial nor any of its affiliates are the subject of, any
pending legal, arbitration or regulatory proceedings that are likely to have a
material adverse effect on the Funds or the ability of Ameriprise Financial or
its affiliates to perform under their contracts with the Funds. Ameriprise
Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the
Securities and Exchange Commission on legal and regulatory matters that relate
to Ameriprise Financial and its affiliates. Copies of these filings may be
obtained by accessing the SEC website at www.sec.gov.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 45
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
There can be no assurance that these matters, or the adverse publicity
associated with them, will not result in increased fund redemptions, reduced
sale of fund shares or other adverse consequences to the Funds. Further,
although we believe proceedings are not likely to have a material adverse effect
on the Funds or the ability of Ameriprise Financial or its affiliates to perform
under their contracts with the Funds, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range
of loss that may result. An adverse outcome in one or more of these proceedings
could result in adverse judgments, settlements, fines, penalties or other relief
that could have a material adverse effect on the consolidated financial
condition or results of operations of Ameriprise Financial.
- --------------------------------------------------------------------------------
46 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
APPROVAL OF INVESTMENT MANAGEMENT SERVICES
AGREEMENT ----------------------------------------------------------------------
RiverSource Investments, LLC ("RiverSource Investments" or the "investment
manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise
Financial"), serves as the investment manager to the Fund. Under an investment
management services agreement (the "IMS Agreement"), RiverSource Investments
provides investment advice and other services to the Fund and all funds in the
RiverSource Family of Funds (collectively, the "Funds"). In addition, under the
subadvisory agreement (the "Subadvisory Agreement") between RiverSource
Investments and Threadneedle International Limited (the "Subadviser"), the
Subadviser performs portfolio management and related services for the Fund.
On an annual basis, the Fund's Board of Directors (the "Board"), including the
independent Board members (the "Independent Directors"), considers renewal of
each of the IMS Agreement and the Subadvisory Agreement (together, the "Advisory
Agreements"). RiverSource Investments prepared detailed reports for the Board
and its Contracts Committee in March and April 2009, including reports based on
data provided by independent organizations to assist the Board in making these
determinations. In addition, throughout the year, the Board (or its committees)
reviews information prepared by RiverSource Investments addressing the services
RiverSource Investments provides and Fund performance. The Board accords
particular weight to the work, deliberations and conclusions of the Contracts,
Investment Review and Compliance Committees in determining whether to continue
the Advisory Agreements. At the April 7-8, 2009 in-person Board meeting,
independent legal counsel to the Independent Directors reviewed with the
Independent Directors various factors relevant to the Board's consideration of
advisory and subadvisory agreements and the Board's legal responsibilities
related to such consideration. Following an analysis and discussion of the
factors identified below, the Board, including all of the Independent Directors,
approved renewal of the Advisory Agreements.
Nature, Extent and Quality of Services Provided by RiverSource Investments and
the Subadviser: The Board analyzed various reports and presentations it had
received detailing the services performed by RiverSource Investments and the
Subadviser, as well as their expertise, resources and capabilities. The Board
specifically considered many developments during the past year concerning the
services provided by RiverSource Investments, including, in particular, the
continued investment in, and resources dedicated to, the Fund's operations, most
notably, the large investment made in the acquisition of J. & W. Seligman & Co.
Incorporated, including its portfolio management operations, personnel and
infrastructure (including the addition of two new offices in New York City and
Palo Alto). Further, in connection with the Board's evaluation of the overall
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 47
APPROVAL OF INVESTMENT MANAGEMENT SERVICES
AGREEMENT (continued) ----------------------------------------------------------
package of services provided by RiverSource Investments, the Board considered
the quality of the administrative and transfer agency services provided by
RiverSource Investments' affiliates to the Fund. The Board also reviewed the
financial condition of RiverSource Investments (and its affiliates including the
Subadviser), and each entity's ability to carry out its responsibilities under
the Advisory Agreements. Further, the Board considered RiverSource Investments'
ability to retain key personnel and its expectations in this regard. The Board
also discussed the acceptability of the terms of the Advisory Agreements
(including the relatively broad scope of services required to be performed by
RiverSource Investments). The Board concluded that the services being performed
under the Advisory Agreements were of a reasonably high quality, particularly in
light of recent market conditions.
Based on the foregoing, and based on other information received (both oral and
written, including the information on investment performance referenced below)
and other considerations, the Board concluded that RiverSource Investments and
its affiliates, including the Subadviser, were in a position to continue to
provide a high quality and level of services to the Fund.
Investment Performance: For purposes of evaluating the nature, extent and
quality of services provided under the Advisory Agreements, the Board carefully
reviewed the investment performance of the Fund. In this regard, the Board
considered: (i) detailed reports containing data prepared by an independent
organization showing, for various periods, the performance of the Fund, the
performance of a benchmark index, the percentage ranking of the Fund among its
comparison group and the net assets of the Fund; and (ii) a report detailing the
Fund's performance over various periods, recent Fund inflows (and outflows) and
a comparison of the Fund's net assets from December 2007 to December 2008. The
Board observed that the Fund's investment performance met expectations.
Additionally, the Board reviewed the performance of the Subadviser and
RiverSource Investments' processes for monitoring the Subadviser. The Board
considered, in particular, management's rationale for recommending the continued
retention of the Subadviser.
Comparative Fees, Costs of Services Provided and the Profits Realized By
RiverSource Investments and its Affiliates from their Relationships with the
Fund: The Board reviewed comparative fees and the costs of services to be
provided under the Advisory Agreements. The Board members considered detailed
comparative information set forth in an annual report on fees and expenses,
including, among other things, data (prepared by an independent organization)
showing a comparison of the Fund's expenses with median expenses paid by
- --------------------------------------------------------------------------------
48 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
funds in its peer group, as well as data showing the Fund's contribution to
RiverSource Investments' profitability. They also reviewed information in the
report comparing the fee charged to the Fund to fees charged to other client
accounts of the investment manager (or Subadviser) (with similar investment
strategies to those of the Fund).
The Board accorded particular weight to the notion that the level of fees should
reflect a rational pricing model applied consistently across the various product
lines in the Funds' family, while assuring that the overall fees for each fund
are generally in line with the "pricing philosophy" (i.e., that the total
expense ratio of each fund (excluding the effect of a performance incentive
adjustment, if applicable), with few exceptions, is at or below the median
expense ratio of funds in the same comparison group). The Board took into
account that the Fund's total expense ratio (after considering proposed expense
caps/waivers) was slightly below the peer group's median expense ratio shown in
the reports. The Board also considered the Fund's performance incentive
adjustment and noted its continued appropriateness.
The Board also considered the expected profitability of RiverSource Investments
and its affiliates in connection with RiverSource Investments providing
investment management services to the Fund. In this regard, the Board referred
to a detailed profitability report, discussing the profitability to RiverSource
Investments and Ameriprise Financial from managing and operating the Fund,
including data showing comparative profitability over the past two years. The
Board also considered the services acquired by the investment manager through
the use of commission dollars paid by the Funds on portfolio transactions. The
Board noted that the fees paid by the Fund should permit the investment manager
to offer competitive compensation to its personnel, make necessary investments
in its business and earn an appropriate profit. The Board concluded that
profitability levels were reasonable.
Economies of Scale to be Realized: The Board also considered the economies of
scale that might be realized by RiverSource Investments as the Fund grows and
took note of the extent to which Fund shareholders might also benefit from such
growth. The Board considered that the IMS Agreement provides for lower fees as
assets increase at pre-established breakpoints and concluded that the IMS
Agreement satisfactorily provided for sharing these economies of scale.
Based on the foregoing, the Board, including all of the Independent Directors,
concluded that the investment management service fees and subadvisory fees were
fair and reasonable in light of the extent and quality of services provided.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT 49
APPROVAL OF INVESTMENT MANAGEMENT SERVICES
AGREEMENT (continued) ----------------------------------------------------------
In reaching this conclusion, no single factor was determinative. On April 8,
2009, the Board, including all of the Independent Directors, approved the
renewal of the Advisory Agreements for an additional annual period.
PROXY VOTING -------------------------------------------------------------------
The policy of the Board is to vote the proxies of the companies in which the
Fund holds investments consistent with the procedures as stated in the Statement
of Additional Information (SAI). You may obtain a copy of the SAI without charge
by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your
financial intermediary; visiting riversource.com/funds; or searching the website
of the Securities and Exchange Commission (SEC) at http://www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio
securities is filed with the SEC by August 31 for the most recent 12-month
period ending June 30 of that year, and is available without charge by visiting
riversource.com/funds; or searching the website of the SEC at www.sec.gov.
- --------------------------------------------------------------------------------
50 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2009 SEMIANNUAL REPORT
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND
734 Ameriprise Financial Center
Minneapolis, MN 55474
RIVERSOURCE.COM/FUNDS
<Table>
This report must be accompanied or preceded by the Fund's
current prospectus. RiverSource Investments employs
Threadneedle as a subadviser. Threadneedle(R) mutual funds
are distributed by RiverSource Distributors, Inc., and
RiverSource Fund Distributors, Inc., Members FINRA, and
managed by RiverSource Investments, LLC. RiverSource and
Threadneedle are part of Ameriprise Financial, Inc.
(THREADNEEDLE LOGO) (C)2009 RiverSource Investments, LLC. S-6340 AA (6/09)
</Table>
Item 2. Code of Ethics. Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert. Not applicable for semi-annual
reports.
Item 4. Principal Accountant Fees and Services. Not applicable for
semi-annual reports.
Item 5. Audit Committee of Listed Registrants. Not applicable.
Item 6. The complete schedule of investments is included in Item 1 of this
Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers. Not applicable.
Item 10. Submission of matters to a vote of security holders. Not applicable.
Item 11. Controls and Procedures.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form N-CSR,
the registrant's Principal Financial Officer and Principal Executive Officer
have concluded that those disclosure controls and procedures provide reasonable
assurance that the material information required to be disclosed by the
registrant on this report is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no changes in the registrant's internal controls over financial
reporting that occurred during the registrant's last fiscal half-year (the
registrant's second fiscal half-year in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable for semi-annual reports.
(a)(2) Separate certification for the Registrant's principal executive officer
and principal financial officer, as required by Section 302 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of
1940, are attached as EX.99.CERT.
(a)(3) Not applicable.
(b) A certification by the Registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached
as EX.99.906 CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) RiverSource International Series, Inc.
By /s/ Patrick T. Bannigan
----------------------------------
Patrick T. Bannigan
President and Principal Executive Officer
Date July 2, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By /s/ Patrick T. Bannigan
----------------------------------
Patrick T. Bannigan
President and Principal Executive Officer
Date July 2, 2009
By /s/ Jeffrey P. Fox
----------------------------------
Jeffrey P. Fox
Treasurer and Principal Financial Officer
Date July 2, 2009