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: October 31
Date of reporting period: October 31, 2010
ITEM 1. REPORTS TO STOCKHOLDERS.
ANNUAL REPORT
Annual Report
and Prospectus
(COLUMBIA MANAGEMENT LOGO)
COLUMBIA ASIA PACIFIC EX-JAPAN FUND
(FORMERLY KNOWN AS THREADNEEDLE ASIA PACIFIC FUND)
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ANNUAL REPORT FOR THE PERIOD ENDED
OCTOBER 31, 2010
(Prospectus also enclosed)
COLUMBIA ASIA PACIFIC EX-JAPAN FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM
CAPITAL GROWTH.
This annual report includes a prospectus that describes in detail the Fund's
objective, investment strategy, risks, sales charges, fees and other matters of
interest. Please read the prospectus carefully before you invest or send money.
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
TABLE OF CONTENTS --------------------------------------------------------------
<Table>
Your Fund at a Glance.................................. 3
Manager Commentary..................................... 6
The Fund's Long-term Performance....................... 12
Fund Expenses Example.................................. 14
Portfolio of Investments............................... 17
Statement of Assets and Liabilities.................... 27
Statement of Operations................................ 28
Statements of Changes in Net Assets.................... 29
Financial Highlights................................... 30
Notes to Financial Statements.......................... 36
Report of Independent Registered Public Accounting
Firm................................................. 51
Federal Income Tax Information......................... 53
Board Members and Officers............................. 54
Proxy Voting........................................... 59
</Table>
SEE THE FUND'S PROSPECTUS FOR RISKS ASSOCIATED WITH INVESTING IN THE FUND.
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2 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
YOUR FUND AT A GLANCE ----------------------------------------------------------
FUND SUMMARY
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> Columbia Asia Pacific ex-Japan Fund (the Fund) Class R5 shares gained 21.06%
for 12 months ended Oct. 31, 2010.
> The Fund outperformed its benchmark, the Morgan Stanley Capital International
All Country (MSCI AC) Asia Pacific Ex-Japan Index, which advanced 20.45% for
the 12-month period.
> The Fund underperformed its peer group, the Lipper Pacific Region Ex-Japan
Funds Index, which increased 28.62% for the same time period.
ANNUALIZED TOTAL RETURNS (for period ended Oct. 31, 2010)
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<Table>
<Caption>
SINCE
INCEPTION
1 YEAR 7/15/09
- ---------------------------------------------------------------
Columbia Asia Pacific ex-Japan Fund
Class R5 +21.06% +28.39%
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MSCI AC Asia Pacific Ex-Japan Index
(unmanaged) +20.45% +34.25%
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Lipper Pacific Region Ex-Japan Funds Index
(unmanaged) +28.62% +35.07%
- ---------------------------------------------------------------
</Table>
(See "The Fund's Long-term Performance" for Index descriptions)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by contacting your financial intermediary,
visiting columbiamanagement.com or calling 800.345.6611.
The performance of Class R5 may vary from that shown because of differences in
fees and expenses. The Fund's returns reflect the effect of fee waivers/expense
reimbursements, if any. Without such waivers/reimbursements, the Fund's returns
would be lower. See the Average Annual Total Returns table for performance of
Class R5 shares of the Fund.
The indices do not reflect the effects of expenses (excluding Lipper) and taxes.
It is not possible to invest directly in an index.
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COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 3
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
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<Table>
<Caption>
AT OCT. 31, 2010
SINCE
Without sales charge 1 YEAR INCEPTION
Class A (inception 9/27/10) N/A +3.53%*
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Class C (inception 9/27/10) N/A +3.45%*
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Class I (inception 9/27/10) N/A +3.53%*
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Class R (inception 9/27/10) N/A +3.53%*
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Class R5 (inception 7/15/09) +21.06% +28.39%
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Class Z (inception 9/27/10) N/A +3.53%*
- ---------------------------------------------------------------
With sales charge
Class A (inception 9/27/10) N/A -2.43%*
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Class C (inception 9/27/10) N/A +2.45%*
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</Table>
Class A share performance reflects the maximum initial sales charge of 5.75%.
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 R and Class R5
shares. Class I, Class R and Class R5 shares are available to qualifying
institutional investors only. Class Z shares are offered to certain eligible
investors.
* Not annualized.
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4 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
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MORNINGSTAR STYLE BOX(TM)
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<Table>
<Caption>
Equity Style
Value Blend Growth
X Large
Medium Size
Small
</Table>
The Morningstar Style Box(TM) is based on the fund's portfolio holdings as of
period end. The vertical axis shows the market capitalization of the stocks
owned, and the horizontal axis shows investment style (value, blend, or growth).
Information shown is based on the most recent data provided by Morningstar.
(C)2010 Morningstar, Inc. All rights reserved. The information contained herein
is proprietary to Morningstar and/or its content providers, may not be copied or
distributed and is not warranted to be accurate, complete, or timely. Neither
Morningstar nor its content providers are responsible for any damages or losses
arising from any use of this information. Past performance is no guarantee of
future results.
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COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 5
MANAGER COMMENTARY -------------------------------------------------------------
Effective Sept. 27, 2010, Threadneedle Asia Pacific Fund was renamed Columbia
Asia Pacific ex-Japan Fund.
Columbia Asia Pacific ex-Japan Fund portfolio managers Vanessa Donegan and
Rafael Polatinsky of Threadneedle International Limited (Threadneedle) discuss
the Fund's results and positioning for the fiscal year ended Oct. 31, 2010.
Threadneedle, an indirect wholly-owned subsidiary of Ameriprise Financial, Inc.,
is the subadviser to the Fund.
Dear Shareholders,
The Fund's Class R5 shares advanced 21.06% for the one-year period ended Oct.
31, 2010. The Fund outperformed its benchmark, the Morgan Stanley Capital
International All Country (MSCI AC) Asia Pacific Ex-Japan Index (MSCI AC Index),
which advanced 20.45% for the period. The Fund underperformed its peer group, as
represented by the Lipper Pacific Region Ex-Japan Funds Index, which advanced
28.62% for the same time period.
COUNTRY BREAKDOWN(1) (at Oct. 31, 2010)
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<Table>
<Caption>
Australia 13.9%
- ------------------------------------------------
China 20.6%
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Hong Kong 14.5%
- ------------------------------------------------
India 9.1%
- ------------------------------------------------
Indonesia 5.0%
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Luxembourg 0.5%
- ------------------------------------------------
Malaysia 2.6%
- ------------------------------------------------
Mongolia 0.4%
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Philippine Islands 0.6%
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Singapore 3.7%
- ------------------------------------------------
South Korea 14.1%
- ------------------------------------------------
Taiwan 7.5%
- ------------------------------------------------
Thailand 2.9%
- ------------------------------------------------
United Kingdom 1.1%
- ------------------------------------------------
United States 1.8%
- ------------------------------------------------
Other(2) 1.7%
- ------------------------------------------------
</Table>
(1) Percentages indicated are based upon total investments (excluding
Investments of Cash Collateral Received for Securities on Loan). The Fund's
composition is subject to change.
(2) Cash & Cash Equivalents.
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6 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
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SIGNIFICANT PERFORMANCE FACTORS
The equity markets in Asia (excluding Japan) were collectively very strong
performers for the past year, particularly in U.S. dollar terms. Within the
region, standout markets included Thailand, Indonesia and Malaysia, where strong
currencies further enhanced robust equity market returns. Interest rates in
these countries rose from abnormally low levels, boosting their currencies and
consequently adding to gains as measured in U.S. dollars. India's equity market
was also strong as its accelerating growth attracted foreign capital.
Conversely, China experienced a noticeable lag, underperforming the MSCI AC
Index amid concern that government's efforts to manage the pace of economic
growth would stifle the economy. Australia, a very large component of the MSCI
AC Index, also underperformed, as did countries such as Taiwan and Singapore
that are more dependant on the global economy than on domestic or regional
demand.
The Fund had a smaller weighting in lagging Australia than the MSCI AC Index,
which was beneficial to relative investment results. Having larger weightings in
better performing Thailand and Indonesia was also advantageous. An emphasis on
consumer discretionary stocks, which
TOP TEN HOLDINGS(1) (at Oct. 31, 2010)
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<Table>
<Caption>
BHP Billiton Ltd. (Australia) 3.4%
- ------------------------------------------------
Samsung Electronics Co., Ltd. (South
Korea) 2.5%
- ------------------------------------------------
Australia & New Zealand Banking Group Ltd.
(Australia) 2.2%
- ------------------------------------------------
Rio Tinto Ltd. (Australia) 2.0%
- ------------------------------------------------
CNOOC Ltd. (China) 1.9%
- ------------------------------------------------
China Mobile Ltd. (Hong Kong) 1.7%
- ------------------------------------------------
China Construction Bank Corp., Series H
(China) 1.7%
- ------------------------------------------------
Hyundai Mobis (South Korea) 1.6%
- ------------------------------------------------
Newcrest Mining Ltd. (Australia) 1.6%
- ------------------------------------------------
Ping An Insurance Group Co. of China Ltd.,
Series H (China) 1.5%
- ------------------------------------------------
</Table>
(1) Percentages indicated are based upon total investments (excluding
Investments of Cash Collateral Received for Securities on Loan and Cash &
Cash Equivalents).
For further detail about these holdings, please refer to the section entitled
"Portfolio of Investments."
Fund holdings are as of the date given, are subject to change at any time, and
are not recommendations to buy or sell any security.
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 7
MANAGER COMMENTARY (continued) -------------------------------------------------
benefited from strong domestic demand in the region, also had a positive effect
on results for the fiscal year.
Effective stock selection in China added to relative return, though having a
larger weighting in China than the MSCI AC Index partially offset the positive
effect. A number of mid-size companies among the Fund's China holdings performed
particularly well, including advertising firm FOCUS MEDIA, sound system
solutions company AAC ACOUSTIC TECHNOLOGIES and industrial company DONGFANG
ELECTRIC CORP., which continues to benefit from China's industrialization.
Stock selection among technology companies was a primary detractor during the
period. Technology stocks have generally not performed well amid investor
concerns about the potential effect of slower global growth on technology demand
and earnings. We believe the Fund holds solid companies in this sector, but
some, such as HON HAI PRECISION INDUSTRY in Taiwan, came under pressure during
the year.
Results in the financials sector were mixed. Financial holdings in Korea and
Taiwan performed poorly. Though we believe there is reasonable value in these
stocks, the Korean and Taiwanese markets didn't perform well and earnings
momentum in Korean banks has not been good. Conversely, banks in Thailand and
India had a favorable effect on Fund performance for the year. Contributors
included BANGKOK BANK in Thailand, BANK MANDIRI in Indonesia and STATE BANK OF
INDIA.
CHANGES TO THE FUND'S PORTFOLIO
The Fund received significant inflows of money throughout the year. We allocated
incoming money to the consumer discretionary, materials and industrials sectors,
as well as added a bit to the Fund's holdings in telecommunications stocks.
Purchases in the consumer discretionary sector were spread across multiple Asian
markets as we sought to capitalize on strong domestic demand in the region.
In the industrials sector, purchases were mainly in China and Korea. China is
evolving from a source of cheap labor toward a goal of being a world class
manufacturing economy. This requires greater emphasis on areas such as
automation and alternative energy. We have focused on companies that we believe
may benefit from this evolution.
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8 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
The Fund's weightings in technology and financials were decreased over the year
as we allocated new money to other areas. Technology and financial stocks tend
to be more impacted by what's happening in the global economy. At this stage of
the economic cycle, we see greater opportunity in companies that can benefit
from the strength of domestic demand, which we expect to continue to grow
relatively strong irrespective of the muted pace of global growth.
The Fund's country weightings are mainly the result of our stock selection and
sector decisions, though we also consider the effect of economic conditions on
individual countries. Over the course of the year, the Fund's weightings in
Australia, Korea and Taiwan decreased due to stock selection activity. The
Australian market is heavily weighted in banking stocks, whose scope to grow
assets looks relatively unexciting at this point. We prefer to focus on the bulk
commodity producers as beneficiaries of the China industrialization theme.
Domestic demand in Taiwan is not as strong as in other countries, and technology
stocks -- where we are invested very selectively -- are a large component of
Taiwan's equity market.
Weightings in India, China, Hong Kong, Thailand and Indonesia were increased
during the year. These are countries where we see the strongest growth dynamic
and that we believe have the potential to benefit from both domestic demand and
regional trade. In India, for example, we see growth momentum, significant
domestic demand, infrastructure spending and a good capital expenditure cycle,
all of which support individual stock opportunities there.
At this stage of the economic cycle, we see greater opportunity in companies
that can benefit from the strength of domestic demand, which we expect to
continue to grow relatively strong irrespective of the muted pace of global
growth.
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COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 9
MANAGER COMMENTARY (continued) -------------------------------------------------
OUR FUTURE STRATEGY
Because growth is scarce globally, we want to position the Fund's portfolio in
areas where we believe growth to be strongest. We have focused on stocks in the
consumer discretionary, industrials, capital goods and transportation groups. We
are seeing strong regional tourism as consumers are moving around the Asian
region and spending.
The Fund's financials weighting is a bit smaller than that of the MSCI AC Index,
mainly due to an underweight in the Australian banking sector. The under-
penetration of financial services leads the Fund to be overweight the banks in
the emerging markets of India, Indonesia and Thailand, and the opportunity for
closer banking ties with China drives the Fund's exposure to banks in Hong Kong.
Still, we see a number of powerful performance drivers in the region. Asian
economic growth is strong compared to rest of the world, but stocks are
generally not overvalued, in our view. This means investors can tap into the
growth at a reasonable price. Furthermore, a number of Asian markets offer
exposure to robust domestic demand. We believe companies and governments across
the region are generally in sound fiscal condition, without too much debt. We
believe sharp interest rate increases appear unlikely, so, at present, liquidity
remains favorable and dividend yields appear attractive to both local and
foreign investors, particularly when compared with domestic deposit rates.
Meanwhile, China has managed to slow its economy without a recession, a positive
for the entire region because so many countries have trade surpluses with China.
As long as China is growing, we believe intra-regional trade should remain
strong.
Finally, we anticipate upward pressure on Asian currencies, which would boost
investment returns in U.S. dollar terms.
<Table>
Vanessa Donegan Rafael Polatinsky, CFA(R)
Portfolio Manager Deputy Portfolio Manager
</Table>
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10 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
Any specific securities mentioned are for illustrative purposes only and are not
a complete list of securities that have increased or decreased in value. The
views expressed in this statement reflect those of the portfolio manager(s) only
through the end of the period of the report as stated on the cover and do not
necessarily represent the views of Columbia Management Investment Advisers, LLC*
(the Investment Manager) or any subadviser to the Fund or any other person in
the Investment Manager or subadviser organizations. Any such views are subject
to change at any time based upon market or other conditions and the Investment
Manager disclaims any responsibility to update such views. These views may not
be relied on as investment advice and, because investment decisions for the Fund
are based on numerous factors, may not be relied on as an indication of trading
intent on behalf of the Fund.
* Effective May 1, 2010, RiverSource Investments, LLC became known as Columbia
Management Investment Advisers, LLC.
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 11
THE FUND'S LONG-TERM PERFORMANCE -----------------------------------------------
The chart on the facing page illustrates the total value of an assumed $10,000
investment in Columbia Asia Pacific ex-Japan Fund Class R5 shares (from 7/15/09
to 10/31/10) as compared to the performance of the Morgan Stanley Capital
International All Country (MSCI AC) Asia Pacific Ex-Japan Index and the Lipper
Pacific Region Ex-Japan Funds Index. Returns for the Fund include the
reinvestment of any distributions paid during each period.
The performance information shown represents past performance and is not a
guarantee of future results. The table below and the chart on the facing page do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. The investment return and
principal value of your investment will fluctuate so that your shares, when
redeemed, may be worth more or less than their original cost. Current
performance may be lower or higher than the performance information shown. You
may obtain performance information current to the most recent month-end by
contacting your financial intermediary or visiting columbiamanagement.com. Also
see "Past Performance" in the Fund's current prospectus.
COMPARATIVE RESULTS
- --------------------------------------------------------------------------------
<Table>
<Caption>
Results at Oct. 31, 2010
SINCE
INCEPTION
1 YEAR 7/15/09
COLUMBIA ASIA PACIFIC EX-JAPAN FUND
Class R5 Cumulative value of $10,000 $12,106 $13,825
- -----------------------------------------------------------------------
Average annual total return +21.06% +28.39%
- -----------------------------------------------------------------------
MSCI AC ASIA PACIFIC EX-JAPAN INDEX(1)
Cumulative value of $10,000 $12,045 $14,635
- -----------------------------------------------------------------------
Average annual total return +20.45% +34.25%
- -----------------------------------------------------------------------
LIPPER PACIFIC REGION EX-JAPAN FUNDS INDEX(2)
Cumulative value of $10,000 $12,862 $14,752
- -----------------------------------------------------------------------
Average annual total return +28.62% +35.07%
- -----------------------------------------------------------------------
</Table>
Results for other share classes can be found on page 4.
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12 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
(VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE COLUMBIA ASIA PACIFIC
EX-JAPAN FUND LINE GRAPH)
<Table>
<Caption>
COLUMBIA ASIA MSCI AC LIPPER PACIFIC
PACIFIC EX-JAPAN ASIA PACIFIC REGION EX-JAPAN
FUND CLASS R5 EX-JAPAN INDEX(1) FUNDS INDEX(2)
---------------- ----------------- ---------------
7/15/09 $10,000 $10,000 $10,000
7/09 11,000 11,146 10,905
10/09 11,420 12,150 11,469
1/10 11,409 12,123 11,790
4/10 12,441 13,387 12,950
7/10 12,251 12,939 12,933
10/10 13,825 14,635 14,752
</Table>
(1) The Morgan Stanley Capital International All Country (MSCI AC) Asia Pacific
Ex-Japan Index, an unmanaged index, is a free float-adjusted market
capitalization weighted index that is designed to measure the equity market
performance of the following countries: Australia, China, Hong Kong, India,
Indonesia, Korea, Malaysia, Singapore, Taiwan and Thailand. The Fund's
performance is currently measured against this index for purposes of
determining the performance incentive adjustment.
(2) Lipper Pacific Region Ex-Japan Funds Index includes the 10 largest Pacific
Region Ex-Japan funds tracked by Lipper Inc. The index's returns include net
reinvested dividends.
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 13
FUND EXPENSES EXAMPLE ----------------------------------------------------------
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (i) transaction
costs, including sales charges (loads) on purchase payments; and (ii) ongoing
costs, which may include management fees; distribution and service (Rule 12b-1)
fees; and other Fund fees and expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
In addition to the ongoing expenses which the Fund bears directly, the Fund's
shareholders indirectly bear the ongoing expenses of any funds in which the Fund
invests (also referred to as "acquired funds"), including affiliated and non-
affiliated pooled investment vehicles (including mutual funds and exchange
traded funds). The Fund's indirect expense from investing in the acquired funds
is based on the Fund's pro rata portion of the ongoing expenses charged by
acquired funds using the expense ratio of each of the acquired funds as of the
acquired fund's most recent shareholder report.
The example is based on an investment of $1,000 invested at the beginning of the
period indicated and held until Oct. 31, 2010.
ACTUAL EXPENSES
The first line of the table provides information about actual account values and
actual expenses for each class. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading titled "Direct expenses paid during
the period" to estimate the expenses you paid on your account during this
period. You can also estimate the direct and indirect expenses you paid over the
period by using the number in the first line under the heading "Direct and
indirect expenses paid during the period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the actual expense ratio for each
class and an assumed rate of return of 5% per year before expenses, which is not
the actual return for the class. The hypothetical account values and expenses
may not be used to estimate the actual ending account balance or expenses you
paid for the period. You may use this information to compare the ongoing costs
of investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
- --------------------------------------------------------------------------------
14 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
<Table>
<Caption>
DIRECT AND
DIRECT INDIRECT
BEGINNING ENDING EXPENSES EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING PAID DURING
MAY 1, 2010(a) OCT. 31, 2010 THE PERIOD(b) THE PERIOD
- -----------------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------
Actual(c) $1,000 $1,035.30 $ 1.34 $ 1.35
- -----------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,017.45 $ 7.54 $ 7.60
- -----------------------------------------------------------------------------------------
Class C
- -----------------------------------------------------------------------------------------
Actual(c) $1,000 $1,034.50 $ 1.98 $ 1.99
- -----------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,013.86 $11.15 $11.20
- -----------------------------------------------------------------------------------------
Class I
- -----------------------------------------------------------------------------------------
Actual(c) $1,000 $1,035.30 $ 0.96 $ 0.97
- -----------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,019.55 $ 5.44 $ 5.49
- -----------------------------------------------------------------------------------------
Class R
- -----------------------------------------------------------------------------------------
Actual(c) $1,000 $1,035.30 $ 1.54 $ 1.55
- -----------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,016.31 $ 8.70 $ 8.75
- -----------------------------------------------------------------------------------------
Class R5
- -----------------------------------------------------------------------------------------
Actual(d) $1,000 $1,111.20 $ 5.68 $ 5.74
- -----------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,019.55 $ 5.44 $ 5.49
- -----------------------------------------------------------------------------------------
Class Z
- -----------------------------------------------------------------------------------------
Actual(c) $1,000 $1,035.30 $ 1.10 $ 1.11
- -----------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,018.80 $ 6.19 $ 6.24
- -----------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 15
FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
ANNUALIZED EXPENSE RATIOS
<Table>
<Caption>
FUND'S ACQUIRED FUND TOTAL FUND AND
ANNUALIZED FEES AND ACQUIRED FUND FEES
EXPENSE RATIO EXPENSES AND EXPENSES
- ---------------------------------------------------------------------------------
Class A 1.50% .01% 1.51%
- ---------------------------------------------------------------------------------
Class C 2.22% .01% 2.23%
- ---------------------------------------------------------------------------------
Class I 1.08% .01% 1.09%
- ---------------------------------------------------------------------------------
Class R 1.73% .01% 1.74%
- ---------------------------------------------------------------------------------
Class R5 1.08% .01% 1.09%
- ---------------------------------------------------------------------------------
Class Z 1.23% .01% 1.24%
- ---------------------------------------------------------------------------------
</Table>
(a) The beginning account values for Class A, Class C, Class I, Class R and
Class Z are as of Sept. 27, 2010 (when shares became available) for actual
expense calculations.
(b) Expenses are equal to the annualized expense ratio for each class as
indicated above, multiplied by the average account value over the period,
multiplied by 182/365 (to reflect the one-half year period). Actual expenses
for Class A, Class C, Class I, Class R and Class Z are equal to the
annualized expense ratio for the class as indicated above, multiplied by the
average account value over the period, multiplied by 32/365 (to reflect the
number of days in the period).
(c) Based on the actual return for the period from Sept. 27, 2010 (when shares
became available) to Oct. 31, 2010: +3.53% for Class A, +3.45% for Class C,
+3.53% for Class I , +3.53% for Class R and +3.53% for Class Z.
(d) Based on the actual return for the six months ended Oct. 31, 2010 of +11.12%
for Class R5.
- --------------------------------------------------------------------------------
16 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
PORTFOLIO OF INVESTMENTS ------------------------------------------------------
OCT. 31, 2010
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
COMMON STOCKS (95.6%)(c)
ISSUER SHARES VALUE(a)
AUSTRALIA (13.9%)
Asciano Group 1,845,919(b) $2,829,642
Australia & New Zealand Banking Group Ltd. 448,025 10,887,633
BHP Billiton Ltd. 410,763 16,866,192
CSL Ltd. 73,787 2,372,768
Macquarie Group Ltd. 127,408 4,517,620
Myer Holdings Ltd. 861,500(f) 3,240,343
Newcrest Mining Ltd. 204,445(f) 8,002,145
QBE Insurance Group Ltd. 90,349(f) 1,520,376
Rio Tinto Ltd. 125,448 10,160,643
Telstra Corp., Ltd. 912,640 2,386,796
Wesfarmers Ltd. 75,603 2,454,121
Westpac Banking Corp. 146,546 3,258,399
Woodside Petroleum Ltd. 64,496 2,748,062
---------------
Total 71,244,740
- -------------------------------------------------------------------------------------
CHINA (20.5%)
AsiaInfo-Linkage, Inc. 103,081(b) 2,290,460
Bank of China Ltd., Series H 8,157,000(f) 4,883,045
China Construction Bank Corp., Series H 9,034,000 8,613,244
China Life Insurance Co., Ltd., Series H 725,000(f) 3,175,558
China National Building Material Co., Ltd.,
Series H 1,444,000 3,521,042
China Shenhua Energy Co., Ltd., Series H 558,000 2,483,680
China Yurun Food Group Ltd. 1,200,000 4,667,785
CNOOC Ltd. 4,690,000 9,717,635
Ctrip.com International Ltd., ADR 93,048(b) 4,845,009
Dongfang Electric Corp., Ltd., Series H 786,000(f) 3,823,016
Dongfeng Motor Group Co., Ltd., Series H 2,562,000(f) 5,553,038
ENN Energy Holdings Ltd. 1,478,000 4,442,962
Focus Media Holding Ltd., ADR 182,812(b) 4,524,597
Harbin Power Equipment Co., Ltd., Series H 1,276,000 1,718,674
Hengan International Group Co., Ltd. 347,000 3,268,094
Industrial & Commercial Bank of China, Series
H 6,938,000 5,585,488
International Mining Machinery Holdings Ltd. 1,596,500(b) 1,390,321
New Oriental Education & Technology Group,
ADR 32,003(b) 3,436,162
PetroChina Co., Ltd., Series H 1,794,000 2,189,555
Ping An Insurance Group Co. of China Ltd.,
Series H 703,000 7,568,746
Sany Heavy Equipment International Holdings
Co., Ltd. 2,256,000 3,230,758
Sihuan Pharmaceutical Holdings Group Ltd. 854,000(b) 620,310
Tencent Holdings Ltd. 243,700(f) 5,580,796
Want Want China Holdings Ltd. 2,450,000 2,260,031
Yanzhou Coal Mining Co., Ltd., Series H 754,000 2,169,294
Zhuzhou CSR Times Electric Co., Ltd., Series
H 1,167,000 3,560,773
---------------
Total 105,120,073
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 17
PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
HONG KONG (14.5%)
AAC Acoustic Technologies Holdings, Inc. 2,432,000 $5,861,148
Agile Property Holdings Ltd. 3,572,000 4,700,606
AIA Group Ltd. 676,000(b) 2,010,295
Beijing Enterprises Holdings Ltd. 341,500 2,337,321
BOC Hong Kong Holdings Ltd. 1,723,000 5,401,742
Cathay Pacific Airways Ltd. 1,732,000 4,659,038
Cheung Kong Holdings Ltd. 325,000 4,947,749
China High Speed Transmission Equipment Group
Co., Ltd. 1,016,000 2,076,305
China Mobile Ltd. 825,500 8,408,364
China Overseas Land & Investment Ltd. 1,110,000 2,334,279
Comba Telecom Systems Holdings Ltd. 1,505,900(f) 1,709,705
Esprit Holdings Ltd. 325,974 1,755,827
Hong Kong & China Gas Co., Ltd. 756,000 1,821,969
Hong Kong Exchanges and Clearing Ltd. 186,900 4,113,681
Li & Fung Ltd. 1,286,000 6,794,181
Ports Design Ltd. 1,003,500 2,428,804
Sun Hung Kai Properties Ltd. 397,974 6,818,598
Swire Pacific Ltd., Series A 180,000 2,554,509
Wharf Holdings Ltd. 537,000 3,526,422
---------------
Total 74,260,543
- -------------------------------------------------------------------------------------
INDIA (9.1%)
Bharat Heavy Electricals Ltd. 80,515 4,432,267
HDFC Bank Ltd. 74,419 3,819,198
ICICI Bank Ltd., ADR 119,498 6,283,205
Infosys Technologies Ltd. 10,069 673,541
Infosys Technologies Ltd., ADR 37,404 2,522,526
ITC Ltd. 1,252,082 4,825,131
Jaiprakash Associates Ltd. 435,308 1,178,296
Larsen & Toubro Ltd. 85,922 3,921,950
Maruti Suzuki India Ltd. 142,864 4,989,708
Reliance Industries Ltd. 132,916 3,279,891
Reliance Industries Ltd., GDR 8,444(d) 420,427
State Bank of India 27,089 1,921,139
State Bank of India, GDR 34,267 4,728,846
Tata Consultancy Services Ltd. 146,147 3,463,774
---------------
Total 46,459,899
- -------------------------------------------------------------------------------------
INDONESIA (5.0%)
Astra International Tbk PT 532,500 3,397,034
Bank Mandiri Tbk PT 5,972,500 4,679,071
Bank Negara Indonesia Persero Tbk PT 384,500 167,829
Bank Rakyat Indonesia Persero Tbk PT 2,976,500 3,797,661
Bumi Resources Tbk PT 9,984,000 2,486,223
Indofood CBP Sukses Makmur Tbk PT 4,162,500(b) 2,655,428
PT Perusahaan Gas Negara Tbk 3,324,000 1,506,682
Semen Gresik Persero Tbk PT 3,572,000 3,917,807
Telekomunikasi Indonesia Tbk PT 2,881,000 2,934,202
---------------
Total 25,541,937
- -------------------------------------------------------------------------------------
MALAYSIA (2.5%)
Axiata Group Bhd 1,840,100(b) 2,656,607
CIMB Group Holdings Bhd 1,802,400 4,804,468
Genting Bhd 1,665,300 5,590,269
---------------
Total 13,051,344
- -------------------------------------------------------------------------------------
MONGOLIA (0.4%)
Mongolian Mining Corp. 2,021,500(b) 2,188,154
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
18 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
PHILIPPINE ISLANDS (0.6%)
Ayala Corp. 304,310 $2,840,980
- -------------------------------------------------------------------------------------
SINGAPORE (3.6%)
City Developments Ltd. 215,000 2,113,610
Genting Singapore PLC 772,000(b) 1,294,721
Oversea-Chinese Banking Corp., Ltd. 606,000 4,219,847
Singapore Airlines Ltd. 450,000 5,501,970
United Overseas Bank Ltd. 215,108 3,098,859
Wilmar International Ltd. 496,000 2,453,358
---------------
Total 18,682,365
- -------------------------------------------------------------------------------------
SOUTH KOREA (14.1%)
Amorepacific Corp. 4,198 3,880,542
Hana Tour Service, Inc. 46,794 1,919,457
Hynix Semiconductor, Inc. 91,450(b) 1,881,704
Hyundai Department Store Co., Ltd. 26,546 2,937,548
Hyundai Heavy Industries Co., Ltd. 11,760 3,830,874
Hyundai Mobis 32,155 8,002,453
Hyundai Motor Co. 46,862 7,080,866
KB Financial Group, Inc. 58,659 2,606,881
KT Corp., ADR 96,278 1,991,992
LG Chem Ltd. 17,919 5,526,623
LG Display Co., Ltd. 67,350 2,304,703
LG Household & Health Care Ltd. 6,784 2,261,173
POSCO 11,610 4,767,501
Samsung Electronics Co., Ltd. 18,838 12,474,055
Samsung Engineering Co., Ltd. 40,494 6,460,583
Shinhan Financial Group Co., Ltd. 102,660 3,973,800
---------------
Total 71,900,755
- -------------------------------------------------------------------------------------
TAIWAN (7.5%)
Acer, Inc. 732,727 2,127,558
Cathay Financial Holding Co., Ltd. 1,314,450 2,011,366
Chinatrust Financial Holding Co., Ltd. 3,265,174 2,036,934
Compal Electronics, Inc. 1,202,001 1,531,111
Delta Electronics, Inc. 503,000 2,078,241
Formosa Plastics Corp. 2,078,000 5,959,055
Fubon Financial Holding Co., Ltd. 3,369,491 4,126,986
Hon Hai Precision Industry Co., Ltd. 1,412,080 5,350,010
MediaTek, Inc. 123,249 1,549,821
Synnex Technology International Corp. 343,861 841,206
Taiwan Semiconductor Manufacturing Co., Ltd. 1,928,000 3,954,613
Taiwan Semiconductor Manufacturing Co., Ltd.,
ADR 279,627 3,050,731
Tripod Technology Corp. 577,000 2,214,374
Yuanta Financial Holding Co., Ltd. 2,751,000 1,729,652
---------------
Total 38,561,658
- -------------------------------------------------------------------------------------
THAILAND (2.9%)
Bangkok Bank PCL 929,000 4,632,564
Banpu PCL 194,500 5,064,598
Siam Commercial Bank PCL 1,570,700 5,388,110
---------------
Total 15,085,272
- -------------------------------------------------------------------------------------
UNITED KINGDOM (1.0%)
Standard Chartered PLC 184,830 5,346,709
- -------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $424,929,935) $490,284,429
- -------------------------------------------------------------------------------------
<Caption>
EXCHANGE-TRADED FUNDS (1.3%)(c)
SHARES VALUE(a)
LUXEMBOURG (0.5%)
db x-trackers 2,253,000(b) $2,470,713
- -------------------------------------------------------------------------------------
UNITED STATES (0.8%)
iShares MSCI Taiwan Index Fund 309,132 4,300,027
- -------------------------------------------------------------------------------------
TOTAL EXCHANGE-TRADED FUNDS
(Cost: $6,132,354) $6,770,740
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 19
PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
<Table>
<Caption>
EXCHANGE-TRADED NOTES (0.9%)
SHARES VALUE(a)
UNITED STATES
iPath MSCI India Index 61,160(b) $4,719,106
- -------------------------------------------------------------------------------------
TOTAL EXCHANGE-TRADED NOTES
(Cost: $3,837,436) $4,719,106
- -------------------------------------------------------------------------------------
<Caption>
RIGHTS (--%)(c)
ISSUER SHARES VALUE(a)
UNITED KINGDOM
Standard Chartered PLC 23,103(b) $194,517
- -------------------------------------------------------------------------------------
TOTAL RIGHTS
(Cost: $--) $194,517
- -------------------------------------------------------------------------------------
<Caption>
MONEY MARKET FUND (1.7%)
SHARES VALUE(a)
Columbia Short-Term Cash Fund, 0.241% 8,942,891(g) $8,942,891
- -------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $8,942,891) $8,942,891
- -------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (1.9%)
EFFECTIVE PRINCIPAL
ISSUER YIELD AMOUNT VALUE(a)
REPURCHASE AGREEMENTS(E)
Cantor Fitzgerald & Co.
dated 10-29-10, matures 11-01-10,
repurchase price
$5,000,100 0.240% $5,000,000 $5,000,000
Societe Generale
dated 10-29-10, matures 11-01-10,
repurchase price
$4,628,593 0.230 4,628,505 4,628,505
---------------
Total 9,628,505
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN
(Cost: $9,628,505) $9,628,505
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $453,471,121)(h) $520,540,188
=====================================================================================
</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 net assets at Oct. 31, 2010:
<Table>
<Caption>
PERCENTAGE OF
INDUSTRY NET ASSETS VALUE(a)
- -----------------------------------------------------------------------
Airlines 2.0% $10,161,008
Auto Components 1.6 8,002,453
Automobiles 4.1 21,020,646
Biotechnology 0.5 2,372,768
Capital Markets 1.2 6,247,272
Chemicals 2.2 11,485,678
Commercial Banks 19.4 100,329,189
Communications Equipment 1.5 7,570,853
Computers & Peripherals 0.7 3,658,669
Construction & Engineering 2.0 10,382,533
Construction Materials 1.5 7,438,849
Distributors 1.3 6,794,181
Diversified Consumer Services 0.7 3,436,162
Diversified Financial Services 2.2 11,081,647
Diversified Telecommunication Services 1.4 7,312,990
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
20 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
SUMMARY OF INVESTMENTS IN SECURITIES
BY INDUSTRY (CONTINUED)
<Table>
<Caption>
PERCENTAGE OF
INDUSTRY NET ASSETS VALUE(a)
- -----------------------------------------------------------------------
Electrical Equipment 3.0% $15,611,035
Electronic Equipment, Instruments &
Components 2.5 12,788,534
Food & Staples Retailing 0.5 2,454,121
Food Products 2.3 12,036,602
Gas Utilities 1.5 7,771,613
Hotels, Restaurants & Leisure 2.7 13,649,456
Household Products 0.4 2,261,173
Industrial Conglomerates 0.7 3,515,617
Insurance 3.2 16,286,341
Internet Software & Services 1.1 5,580,796
IT Services 1.3 6,659,841
Machinery 2.1 10,640,107
Media 0.9 4,524,597
Metals & Mining 7.8 39,796,481
Multiline Retail 1.2 6,177,891
Oil, Gas & Consumable Fuels 6.0 30,559,365
Personal Products 1.4 7,148,636
Pharmaceuticals 0.1 620,310
Real Estate Management & Development 5.3 26,995,773
Road & Rail 0.6 2,829,642
Semiconductors & Semiconductor
Equipment 4.5 22,910,924
Software 0.4 2,290,460
Specialty Retail 0.3 1,755,827
Textiles, Apparel & Luxury Goods 0.5 2,428,804
Tobacco 0.9 4,825,131
Wireless Telecommunication Services 2.2 11,064,971
Exchange-Traded Funds 1.3 6,770,740
Exchange-Traded Notes 0.9 4,719,106
Other(1) 3.6 18,571,396
- -----------------------------------------------------------------------
Total $520,540,188
- -----------------------------------------------------------------------
</Table>
(1) Cash & Cash Equivalents.
The industries identified above are based on the Global Industry Classification
Standard (GICS), which was developed by, and is the exclusive property of,
Morgan Stanley Capital International Inc. and Standard & Poor's, a division of
The McGraw-Hill Companies, Inc.
NOTES TO PORTFOLIO OF INVESTMENTS
<Table>
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
</Table>
(A) Securities are valued by using policies described in Note 2 to the
financial statements.
(B) Non-income producing.
(C) Foreign security values are stated in U.S. dollars.
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 21
PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(D) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
may be determined to be liquid under guidelines established by the Fund's
Board of Directors. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At Oct. 31, 2010,
the value of these securities amounted to $420,427 or 0.08% of net assets.
(E) The table below represents securities received as collateral for repurchase
agreements. This collateral, which is generally high quality short-term
obligations, is deposited with the Fund's custodian and, pursuant to the
terms of the repurchase agreement, must have an aggregate market value
greater than or equal to the repurchase price plus accrued interest at all
times. The value of securities and/or cash held as collateral for
repurchase agreements is monitored on a daily basis to ensure the existence
of the proper level of collateral.
<Table>
<Caption>
CANTOR FITZGERALD & CO. (0.240%)
SECURITY DESCRIPTION VALUE(a)
- -----------------------------------------------------------
Fannie Mae Grantor Trust $257
Fannie Mae Interest Strip 80,068
Fannie Mae Pool 622,893
Fannie Mae Principal Strip 14,504
Fannie Mae REMICS 749,932
Fannie Mae Whole Loan 12,350
Federal National Mortgage Association 30,240
FHLMC Multifamily Structured Pass Through
Certificates 197
FHLMC Structured Pass Through Securities 5,785
Freddie Mac Coupon Strips 545
Freddie Mac Non Gold Pool 301,102
Freddie Mac Reference REMIC 4,195
Freddie Mac REMICS 326,995
Freddie Mac Strips 173,135
Ginnie Mae I Pool 674,256
Ginnie Mae II Pool 1,266,511
Government National Mortgage Association 439,728
United States Treasury Inflation Indexed Bonds 50,639
United States Treasury Strip Coupon 261,625
United States Treasury Strip Principal 85,043
- -----------------------------------------------------------
Total market value of collateral securities $5,100,000
- -----------------------------------------------------------
<Caption>
SOCIETE GENERALE (0.230%)
SECURITY DESCRIPTION VALUE(a)
- -----------------------------------------------------------
Government National Mortgage Association $4,721,075
- -----------------------------------------------------------
Total market value of collateral securities $4,721,075
- -----------------------------------------------------------
</Table>
(F) At Oct. 31, 2010, security was partially or fully on loan. See Note 7 to
the financial statements.
- --------------------------------------------------------------------------------
22 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(G) Affiliated Money Market Fund -- See Note 8 to the financial statements. The
rate shown is the seven-day current annualized yield at Oct. 31, 2010.
(H) At Oct. 31, 2010, the cost of securities for federal income tax purposes
was $453,471,123 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
<Table>
Unrealized appreciation $69,928,422
Unrealized depreciation (2,859,357)
-----------------------------------------------------------
Net unrealized appreciation $67,069,065
-----------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 23
PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
FAIR VALUE MEASUREMENTS
Generally accepted accounting principles (GAAP) require disclosure regarding the
inputs and valuation techniques used to measure fair value and any changes in
valuation inputs or techniques. In addition, investments shall be disclosed by
major category.
The Fund categorizes its fair value measurements according to a three-level
hierarchy that maximizes the use of observable inputs and minimizes the use of
unobservable inputs by prioritizing that the most observable input be used when
available. Observable inputs are those that market participants would use in
pricing an investment based on market data obtained from sources independent of
the reporting entity. Unobservable inputs are those that reflect the Fund's
assumptions about the information market participants would use in pricing an
investment. An investment's level within the fair value hierarchy is based on
the lowest level of any input that is deemed significant to the asset or
liability's fair value measurement. The input levels are not necessarily an
indication of the risk or liquidity associated with investments at that level.
For example, certain U.S. government securities are generally high quality and
liquid, however, they are reflected as Level 2 because the inputs used to
determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in the three broad levels listed below:
- Level 1 -- Valuations based on quoted prices for investments in active
markets that the Fund has the ability to access at the measurement date
(to include NAV for open-end mutual funds). Valuation adjustments are not
applied to Level 1 investments.
- Level 2 -- Valuations based on other significant observable inputs
(including quoted prices for similar securities, interest rates,
prepayment speeds, credit risks, etc.).
- Level 3 -- Valuations based on significant unobservable inputs (including
the Fund's own assumptions and judgment in determining the fair value of
investments).
Inputs that are used in determining fair value of an investment may include
price information, credit data, volatility statistics, and other factors. These
inputs can be either observable or unobservable. The availability of observable
inputs can vary between investments, and is affected by various factors such as
the type of investment, and the volume and level of activity for that investment
or similar investments in the marketplace. The inputs will be considered by the
Fund Administrator, along with any other relevant factors in the calculation of
an investment's fair value. The Fund uses prices and inputs that are current as
of the measurement date, which may include periods of market dislocations.
During these periods, the availability of prices and inputs may be reduced for
many investments. This condition could cause an investment to be reclassified
between the various levels within the hierarchy.
Non-U.S. equity securities actively traded in foreign markets may be reflected
in Level 2 despite the availability of closing prices, because the Fund
evaluates and determines whether those closing prices reflect fair value at the
close of the New York Stock Exchange (NYSE) or require adjustment, as described
in Note 2 to the financial statements -- Valuation of securities.
Investments falling into the Level 3 category are primarily supported by quoted
prices from brokers and dealers participating in the market for those
investments. However, these may be classified as
- --------------------------------------------------------------------------------
24 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
FAIR VALUE MEASUREMENTS (CONTINUED)
Level 3 investments due to lack of market transparency and corroboration to
support these quoted prices. Additionally, valuation models may be used as the
pricing source for any remaining investments classified as Level 3. These models
rely on one or more significant unobservable inputs and/or significant
assumptions by the Fund Administrator. Inputs used in valuations may include,
but are not limited to, financial statement analysis, capital account balances,
discount rates and estimated cash flows, and comparable company data.
The following table is a summary of the inputs used to value the Fund's
investments as of Oct. 31, 2010:
<Table>
<Caption>
FAIR VALUE AT OCT. 31, 2010
------------------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION(A) IDENTICAL ASSETS(B) INPUTS INPUTS TOTAL
- -----------------------------------------------------------------------------------------------
Equity Securities
Common Stocks $490,284,429 $-- $-- $490,284,429
Rights 194,517 -- -- 194,517
- -----------------------------------------------------------------------------------------------
Total Equity Securities 490,478,946 -- -- 490,478,946
- -----------------------------------------------------------------------------------------------
Other
Exchange-Traded Funds 6,770,740 -- -- 6,770,740
Exchange-Traded Notes 4,719,106 -- -- 4,719,106
Affiliated Money Market
Fund(c) 8,942,891 -- -- 8,942,891
Investments of Cash
Collateral Received
for Securities on
Loan -- 9,628,505 -- 9,628,505
- -----------------------------------------------------------------------------------------------
Total Other 20,432,737 9,628,505 -- 30,061,242
- -----------------------------------------------------------------------------------------------
Total $510,911,683 $9,628,505 $-- $520,540,188
- -----------------------------------------------------------------------------------------------
</Table>
(a) See the Portfolio of Investments for all investment classifications not
indicated in the table.
(b) Includes certain securities trading outside the U.S. whose values were
adjusted at Oct. 31, 2009 as a result of significant market movements
following the close of local trading, and were classified as Level 2. These
values were not adjusted as of Oct. 31, 2010. Therefore, these investment
securities were classified as Level 1 instead of Level 2 at Oct. 31, 2010.
The amount of securities transferred out of Level 2 into Level 1 during the
period was $37,401,600. Transfers between Levels 1 and 2 are determined
based on the fair value at the beginning of the period for security
positions held throughout the period.
(c) Money market fund that is a sweep investment for cash balances in the Fund
at Oct. 31, 2010.
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 25
PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 800.SEC.0330); and
(iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q,
can be obtained without charge, upon request, by calling 800.345.6611.
- --------------------------------------------------------------------------------
26 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------
OCT. 31, 2010
<Table>
<Caption>
ASSETS
Investments in securities, at value
Unaffiliated issuers* (identified cost $434,899,725) $501,968,792
Affiliated money market fund (identified cost $8,942,891) 8,942,891
Investments of cash collateral received for securities on loan
(identified cost $9,628,505) 9,628,505
- --------------------------------------------------------------------------------------
Total investments in securities (identified cost $453,471,121) 520,540,188
Foreign currency holdings (identified cost $2,427,279) 2,480,361
Capital shares receivable 1,552,475
Dividends and accrued interest receivable 264,387
Receivable for investment securities sold 1,540,778
- --------------------------------------------------------------------------------------
Total assets 526,378,189
- --------------------------------------------------------------------------------------
LIABILITIES
Capital shares payable 72,454
Payable for investment securities purchased 3,668,412
Payable upon return of securities loaned 9,628,505
Accrued investment management services fees 11,006
Accrued distribution fees 1
Accrued transfer agency fees 15,084
Accrued administrative services fees 1,118
Other accrued expenses 172,026
- --------------------------------------------------------------------------------------
Total liabilities 13,568,606
- --------------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $512,809,583
- --------------------------------------------------------------------------------------
REPRESENTED BY
Capital stock -- $.01 par value $ 371,885
Additional paid-in capital 442,277,170
Undistributed net investment income 2,404,235
Accumulated net realized gain (loss) 633,213
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 67,123,080
- --------------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding capital stock $512,809,583
- --------------------------------------------------------------------------------------
*Value of securities on loan $ 9,048,107
- --------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE
NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE
Class A $ 77,994 5,656 $13.79(1)
Class C $ 2,590 188 $13.78
Class I $ 2,592 188 $13.79
Class R $ 2,592 188 $13.79
Class R5 $512,721,223 37,182,125 $13.79
Class Z $ 2,592 188 $13.79
- ------------------------------------------------------------------------------
</Table>
(1) The maximum offering price per share for Class A is $14.63. 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.
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 27
STATEMENT OF OPERATIONS -------------------------------------------------------
YEAR ENDED OCT. 31, 2010
<Table>
<Caption>
INVESTMENT INCOME
Income:
Dividends $ 5,409,654
Interest 202
Income distributions from affiliated money market fund 23,083
Income from securities lending -- net 14,214
Foreign taxes withheld (745,385)
- -------------------------------------------------------------------------
Total income 4,701,768
- -------------------------------------------------------------------------
Expenses:
Investment management services fees 1,639,719
Distribution fees
Class A 7
Class C 2
Class R 1
Transfer agency fees
Class A 5
Class C 1
Class R 1
Class R5 107,877
Class Z 1
Administrative services fees 172,133
Compensation of board members 5,328
Custodian fees 210,160
Printing and postage 28,200
Registration fees 125,383
Professional fees 44,324
Other 19,257
- -------------------------------------------------------------------------
Total expenses 2,352,399
- -------------------------------------------------------------------------
Investment income (loss) -- net 2,349,369
- -------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions 633,233
Foreign currency transactions 117,442
- -------------------------------------------------------------------------
Net realized gain (loss) on investments 750,675
Net change in unrealized appreciation (depreciation) on
investments
and on translation of assets and liabilities in foreign
currencies 65,365,417
- -------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies 66,116,092
- -------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $68,465,461
- -------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
28 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
STATEMENTS OF CHANGES IN NET
ASSETS ----------------------------------------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31, 2010 2009*
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 2,349,369 $ 45,374
Net realized gain (loss) on investments 750,675 74,217
Net change in unrealized appreciation (depreciation) on
investments and on translation of assets and liabilities
in foreign currencies 65,365,417 1,757,330
- ---------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 68,465,461 1,876,921
- ---------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class R5 (118,921) --
Net realized gain
Class R5 (63,175) --
- ---------------------------------------------------------------------------------------
Total distributions (182,096) --
- ---------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales
Class A shares 77,422 N/A
Class C shares 2,500 N/A
Class I shares 2,500 N/A
Class R shares 2,500 N/A
Class R5 shares 414,644,441 53,371,666
Class Z shares 2,500 N/A
Reinvestment of distributions at net asset value
Class R5 shares 35,163 --
Payments for redemptions
Class R5 shares (23,883,979) (6,605,658)
- ---------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share
transactions 390,883,047 46,766,008
- ---------------------------------------------------------------------------------------
Total increase (decrease) in net assets 459,166,412 48,642,929
Net assets at beginning of year 53,643,171 5,000,242**
- ---------------------------------------------------------------------------------------
Net assets at end of year $512,809,583 $53,643,171
- ---------------------------------------------------------------------------------------
Undistributed net investment income $ 2,404,235 $ 56,345
- ---------------------------------------------------------------------------------------
</Table>
* For the period from July 15, 2009 (when shares became available) to Oct. 31,
2009.
** Initial capital of $5,000,000 was contributed on July 13, 2009. The Fund had
an increase in net assets resulting from operations of $242 during the
period from July 13, 2009 to July 15, 2009 (when shares became available).
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 29
FINANCIAL HIGHLIGHTS ----------------------------------------------------------
The following tables are intended to help you understand the Fund's financial
performance. Certain information reflects financial results for a single share
of a class held for the periods shown. Per share net investment income (loss)
amounts are calculated based on average shares outstanding during the period.
Total returns assume reinvestment of all dividends and distributions. Total
returns do not reflect payment of sales charges, if any, and are not annualized
for periods of less than one year.
<Table>
<Caption>
YEAR ENDED
CLASS A OCT. 31,
PER SHARE DATA 2010(a)
Net asset value, beginning of period $13.32
- -------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.01)
Net gains (losses) (both realized and
unrealized) .48
- -------------------------------------------------------------
Total from investment operations .47
- -------------------------------------------------------------
Net asset value, end of period $13.79
- -------------------------------------------------------------
TOTAL RETURN 3.53%
- -------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(B)
Total expenses 1.50%(c)
- -------------------------------------------------------------
Net investment income (loss) (.95%)(c)
- -------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $--
- -------------------------------------------------------------
Portfolio turnover rate 21%
- -------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
30 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
YEAR ENDED
CLASS C OCT. 31,
PER SHARE DATA 2010(a)
Net asset value, beginning of period $13.32
- -------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.02)
Net gains (losses) (both realized and
unrealized) .48
- -------------------------------------------------------------
Total from investment operations .46
- -------------------------------------------------------------
Net asset value, end of period $13.78
- -------------------------------------------------------------
TOTAL RETURN 3.45%
- -------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(B)
Total expenses 2.22%(c)
- -------------------------------------------------------------
Net investment income (loss) (1.93%)(c)
- -------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $--
- -------------------------------------------------------------
Portfolio turnover rate 21%
- -------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 31
FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------
<Table>
<Caption>
YEAR ENDED
CLASS I OCT. 31,
PER SHARE DATA 2010(a)
Net asset value, beginning of period $13.32
- -------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.01)
Net gains (losses) (both realized and
unrealized) .48
- -------------------------------------------------------------
Total from investment operations .47
- -------------------------------------------------------------
Net asset value, end of period $13.79
- -------------------------------------------------------------
TOTAL RETURN 3.53%
- -------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(B)
Total expenses 1.08%(c)
- -------------------------------------------------------------
Net investment income (loss) (.78%)(c)
- -------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $--
- -------------------------------------------------------------
Portfolio turnover rate 21%
- -------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
32 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
YEAR ENDED
CLASS R OCT. 31,
PER SHARE DATA 2010(a)
Net asset value, beginning of period $13.32
- -------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.02)
Net gains (losses) (both realized and
unrealized) .49
- -------------------------------------------------------------
Total from investment operations .47
- -------------------------------------------------------------
Net asset value, end of period $13.79
- -------------------------------------------------------------
TOTAL RETURN 3.53%
- -------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(B)
Total expenses 1.73%(c)
- -------------------------------------------------------------
Net investment income (loss) (1.43%)(c)
- -------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $--
- -------------------------------------------------------------
Portfolio turnover rate 21%
- -------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 33
FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------
<Table>
<Caption>
Year ended Oct. 31,
CLASS R5 -------------------
PER SHARE DATA 2010 2009(d)
Net asset value, beginning of period $11.42 $10.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .13 .02
Net gains (losses) (both realized and
unrealized) 2.27 1.40
- ----------------------------------------------------------------------
Total from investment operations 2.40 1.42
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.02) --
Distributions from realized gains (.01) --
- ----------------------------------------------------------------------
Total distributions (.03) --
- ----------------------------------------------------------------------
Net asset value, end of period $13.79 $11.42
- ----------------------------------------------------------------------
TOTAL RETURN 21.06% 14.20%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(B)
Gross expenses prior to expense
waiver/reimbursement 1.09% 1.67%(c)
- ----------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e) 1.09% 1.15%(c)
- ----------------------------------------------------------------------
Net investment income (loss) 1.09% .47%(c)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $513 $54
- ----------------------------------------------------------------------
Portfolio turnover rate 21% 4%
- ----------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
34 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
YEAR ENDED
CLASS Z OCT. 31,
PER SHARE DATA 2010(a)
Net asset value, beginning of period $13.32
- -------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.01)
Net gains (losses) (both realized and
unrealized) .48
- -------------------------------------------------------------
Total from investment operations .47
- -------------------------------------------------------------
Net asset value, end of period $13.79
- -------------------------------------------------------------
TOTAL RETURN 3.53%
- -------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(B)
Total expenses 1.23%(c)
- -------------------------------------------------------------
Net investment income (loss) (.93%)(c)
- -------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $--
- -------------------------------------------------------------
Portfolio turnover rate 21%
- -------------------------------------------------------------
</Table>
NOTES TO FINANCIAL HIGHLIGHTS
(a) For the period from Sept. 27, 2010 (when shares became available) to Oct.
31, 2010.
(b) Expense ratios include the impact of a performance incentive adjustment, if
any. In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the reported expense ratios.
(c) Annualized.
(d) For the period from July 15, 2009 (when shares became available) to Oct. 31,
2009.
(e) The Investment Manager and its affiliates agreed to waive/reimburse certain
fees and expenses (excluding fees and expenses of acquired funds), before
giving effect to any performance incentive adjustment.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 35
NOTES TO FINANCIAL STATEMENTS --------------------------------------------------
1. ORGANIZATION
Columbia Asia Pacific ex-Japan Fund (formerly known as Threadneedle Asia Pacific
Fund) (the Fund) is a series of RiverSource International Series, Inc. (the
Corporation) and is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as a diversified, open-end management investment
company. The Corporation has 10 billion authorized shares of capital stock that
can be allocated among the separate series as designated by the Corporation's
Board of Directors (the Board). On July 13, 2009, Columbia Management Investment
Advisers, LLC (formerly known as RiverSource Investments, LLC) (the Investment
Manager), a subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial),
invested $5,000,000 in the Fund, which represented the initial capital at $10
per share. Shares of the Fund were first offered to the public on July 15, 2009.
The Fund offers Class A, Class C, Class I, Class R, Class R5 and Class Z shares.
- - Class A shares are offered with a front-end sales charge, which may be waived
under certain circumstances.
- - Class C shares may be subject to a contingent deferred sales charge (CDSC) on
shares redeemed within one year of purchase.
- - Class I shares are not subject to sales charges and are available only to the
Columbia Family of Funds.
- - Class R shares are offered without a front-end sales charge or CDSC to
qualifying institutional investors.
- - Class R5 shares are not subject to sales charges, however, this class is
closed to new investors effective Dec. 31, 2010.
- - Class Z shares are offered without a front-end sales charge or CDSC to
certain eligible investors.
Class A, Class C, Class I, Class R and Class Z shares became effective Sept. 27,
2010.
At Oct. 31, 2010, the Investment Manager owned 100% of Class C, Class I, Class R
and Class Z 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.
- --------------------------------------------------------------------------------
36 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
VALUATION OF SECURITIES
All securities are valued at the close of business of the New York Stock
Exchange (NYSE). Securities traded on national securities exchanges or included
in national market systems are valued at the last quoted sales price from the
primary exchange. Debt securities are generally traded in the over-the-counter
market and are valued by an independent pricing service using an evaluated bid.
When market quotes are not readily available, the pricing service, in
determining fair values of debt securities, takes into consideration such
factors as current quotations by broker/dealers, coupon, maturity, quality, type
of issue, trading characteristics, and other yield and risk factors it deems
relevant in determining valuations. Foreign securities are valued based on
quotations from the principal market in which such securities are normally
traded. The procedures adopted by the Board generally contemplate the use of
fair valuation in the event that price quotations or valuations are not readily
available, price quotations or valuations from other sources are not reflective
of market value and thus deemed unreliable, or a significant event has occurred
in relation to a security or class of securities (such as foreign securities)
that is not reflected in price quotations or valuations from other sources. A
fair value price is a good faith estimate of the value of a security at a given
point in time.
Many securities markets and exchanges outside the U.S. close prior to the close
of the NYSE and therefore the closing prices for securities in such markets or
on such exchanges may not fully reflect events that occur after such close but
before the close of the NYSE, including significant movements in the U.S. market
after foreign exchanges have closed. Accordingly, in those situations,
Ameriprise Financial, as administrator to the Fund, will fair value foreign
securities pursuant to procedures adopted by the Board, including utilizing a
third party pricing service to determine these fair values. These procedures
take into account multiple factors, including movements in the U.S. securities
markets, to determine a good faith estimate that reasonably reflects the current
market conditions as of the close of the NYSE. The fair value of a security is
likely to be different from the quoted or published price, if available.
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
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 37
NOTES TO FINANCIAL STATEMENTS
(continued) ------------------------------------------------------------
rates. Typically, those maturing in 60 days or less that originally had
maturities of more than 60 days at acquisition date are valued at amortized cost
using the market value on the 61st day before maturity. Short-term securities
maturing in 60 days or less at acquisition date are valued at amortized cost.
Amortized cost is an approximation of market value. Investments in money market
funds are valued at net asset value.
FOREIGN CURRENCY TRANSLATIONS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the Statement of Operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes. At Oct. 31, 2010, foreign currency holdings consisted of
multiple denominations, primarily Taiwan dollars.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements. Generally, securities received as
collateral subject to repurchase agreements are deposited with the Fund's
custodian and, pursuant to the terms of the repurchase agreement, must have an
aggregate market value greater than or equal to the repurchase price plus
accrued interest at all times. The market value of securities held as collateral
for repurchase agreements is monitored on a daily basis to ensure the existence
of the proper level of collateral.
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
- --------------------------------------------------------------------------------
38 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
of its taxable income (which includes net short-term capital gains) to
shareholders. No provision for income or excise taxes is thus required.
Management of the Fund has concluded that there are no significant uncertain tax
positions that would require recognition in the financial statements. Generally,
the tax authorities can examine all tax returns filed for the last three years.
FOREIGN CAPITAL GAINS TAXES
Realized gains in certain countries may be subject to foreign taxes at the Fund
level, at rates ranging from approximately 10% to 15%. The Fund pays such
foreign taxes on net realized gains at the appropriate rate for each
jurisdiction.
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
normally distributed along with the income dividend.
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
3. DERIVATIVE INSTRUMENTS
The Fund invests in certain derivative instruments as detailed below to meet its
investment objectives. Derivatives are instruments whose values depend on, or
are derived from, in whole or in part, the value of one or more other assets,
such as securities, currencies, commodities or indices. Derivative instruments
may be used to maintain cash reserves while maintaining exposure to certain
other assets, to offset anticipated declines in values of investments, to
facilitate trading, to reduce transaction costs and to pursue higher investment
returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate
risk and credit risk. Derivatives may involve various risks, including the
potential inability of the counterparty to fulfill its obligation under the
terms of the contract, the potential for an illiquid secondary market and the
potential for market movements which may expose the Fund to gains or losses in
excess of the amount shown in the Statement of Assets and Liabilities.
The Fund and any counterparty are required to maintain an agreement that
requires the Fund and that counterparty to monitor (on a daily basis) the net
fair
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 39
NOTES TO FINANCIAL STATEMENTS
(continued) ------------------------------------------------------------
value of all derivatives entered into pursuant to the contract between the Fund
and such counterparty. If the net fair value of such derivatives between the
Fund and that counterparty exceeds a certain threshold (as defined in the
agreement), the Fund or the counterparty (as the case may be) is required to
post cash and/or securities as collateral. Fair values of derivatives presented
in the financial statements are not netted with the fair value of other
derivatives or with any collateral amounts posted by the Fund or any
counterparty.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Forward foreign currency exchange contracts are agreements between two parties
to buy and sell a currency at a set price on a future date. These contracts are
intended to be used to minimize the exposure to foreign exchange rate
fluctuations during the period between the trade and settlement dates of the
contract. The Fund utilized forward foreign currency exchange contracts to hedge
the currency exposure associated with some or all of the Fund's securities, and
to obtain market exposure to the underlying instruments which are themselves not
readily available to purchase, either because of local market licence issues or
liquidity aspects.
The market values of forward foreign currency exchange contracts fluctuate with
changes in foreign currency exchange rates. The Fund will record a realized gain
or loss when the forward foreign currency exchange contract is closed.
The use of forward foreign currency exchange contracts does not eliminate
fluctuations in the prices of the Fund's portfolio securities. The risks of
forward foreign currency contracts include movement in the values of the foreign
currencies relative to the U.S. dollar (or other foreign currencies) and the
possibility that counterparties will not complete their contractual obligations,
which may be in excess of the amount reflected, if any, in the Statement of
Assets and Liabilities.
EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS
The following tables are intended to provide additional information about the
effect of derivatives on the financial statements of the Fund including: the
fair value of derivatives by risk category and the location of those fair values
in the Statement of Assets and Liabilities; the impact of derivative
transactions on the Fund's operations over the period including realized gains
or losses and unrealized gains or losses. The derivative schedules following the
Portfolio of Investments present additional information regarding derivative
instruments outstanding at the end of the period, if any.
FAIR VALUES OF DERIVATIVE INSTRUMENTS AT OCT. 31, 2010
At Oct. 31, 2010, the Fund had no outstanding derivatives.
- --------------------------------------------------------------------------------
40 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCT. 31, 2010
<Table>
<Caption>
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME
- --------------------------------------------------------------------------
FORWARD FOREIGN
RISK EXPOSURE CATEGORY CURRENCY EXCHANGE CONTRACTS
- --------------------------------------------------------------------------
Foreign exchange contracts $227,627
- --------------------------------------------------------------------------
</Table>
<Table>
<Caption>
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED
IN INCOME
- --------------------------------------------------------------------------
FORWARD FOREIGN
RISK EXPOSURE CATEGORY CURRENCY EXCHANGE CONTRACTS
- --------------------------------------------------------------------------
Foreign exchange contracts $--
- --------------------------------------------------------------------------
</Table>
VOLUME OF DERIVATIVE ACTIVITY
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
At Oct. 31, 2010, the Fund had no outstanding forward foreign currency exchange
contracts. The monthly average gross notional amount for these contracts was
$0.7 million for the year ended Oct. 31, 2010.
4. EXPENSES AND SALES CHARGES
INVESTMENT MANAGEMENT SERVICES FEES
Under an Investment Management Services Agreement (IMSA), the Investment Manager
is responsible for the management of the Fund. Day-to-day portfolio management
of the Fund is provided by the Fund's subadviser. See Subadvisory agreement
below. The management fee is an annual fee that is equal to a percentage of the
Fund's average daily net assets that declines from 0.80% to 0.57% as the Fund's
net assets increase. The fee may be adjusted upward or downward by a performance
incentive adjustment (PIA) determined monthly by measuring the percentage
difference over a rolling 12-month period between the annualized performance of
the Fund and the annualized performance of the MSCI All Country Asia Pacific Ex-
Japan 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 first adjustment was made
on Feb. 1, 2010 and covered the six- month period beginning Aug. 1, 2009. The
adjustment decreased the management fee by $69,322 for the year ended Oct. 31,
2010. The management fee for the year ended Oct. 31, 2010 was 0.76% of the
Fund's average daily net assets, including the adjustment under the terms of the
performance incentive arrangement.
In September 2010, the Fund's Board approved, subject to approval by
shareholders, an amended IMSA that would eliminate the Fund's PIA.
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 41
NOTES TO FINANCIAL STATEMENTS
(continued) ------------------------------------------------------------
Furthermore, effective Oct. 1, 2010, the Investment Manager has agreed that for
a transitional period of 6 months (which is equal to half of the Fund's rolling
performance fee calculation period), the Fund will compensate the Investment
Manager at the lower of: (i) the management fee calculated and capped at the
rate calculated under the current IMSA prior to any PIA, or (ii) the fee
calculated under the current IMSA including any applicable downward adjustment
under the terms of the PIA, regardless of whether the proposal to amend the IMSA
to eliminate the PIA (the IMSA Proposal) is ultimately approved by Fund
shareholders. The IMSA Proposal is subject to approval by Fund shareholders at a
meeting expected to be held in the first half of 2011. If approved by Fund
shareholders, the IMSA Proposal is expected to be effective in the second
quarter of 2011. If not approved, the current IMSA will stay in effect including
any adjustment under the terms of the PIA.
SUBADVISORY AGREEMENT
The Investment Manager has a Subadvisory Agreement with Threadneedle
International Limited (Threadneedle), an affiliate of the Investment Manager and
an indirect wholly-owned subsidiary of Ameriprise Financial, to subadvise the
assets of the Fund. The Investment Manager contracts with and compensates
Threadneedle to manage the investment of the Fund's assets.
ADMINISTRATIVE SERVICES FEES
Under an Administrative Services Agreement, the Fund pays Ameriprise Financial
an annual fee for administration and accounting services equal to a percentage
of the Fund's average daily net assets that declines from 0.08% to 0.05% as the
Fund's net assets increase. The fee for the year ended Oct. 31, 2010 was 0.08%
of the Fund's average daily net assets.
OTHER FEES
Other expenses are for, among other things, certain expenses of the Fund or the
Board including: Fund boardroom and office expense, employee compensation,
employee health and retirement benefits, and certain other expenses. Payment of
these Fund and Board expenses is facilitated by a company providing limited
administrative services to the Fund and the Board. For the year ended Oct. 31,
2010, other expenses paid to this company were $131.
COMPENSATION OF BOARD MEMBERS
Under a Deferred Compensation Plan (the Plan), the board members who are not
"interested persons" of the Fund as defined under the 1940 Act may defer receipt
of their compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the Fund or certain other funds managed
by the Investment Manager. The Fund's liability for these amounts is adjusted
for
- --------------------------------------------------------------------------------
42 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
market value changes and remains in the Fund until distributed in accordance
with the Plan.
TRANSFER AGENCY FEES
Under a Transfer Agency Agreement, Columbia Management Investment Services Corp.
(formerly known as RiverSource Service Corporation) (the Transfer Agent) is
responsible for providing transfer agency services to the Fund.
Prior to Sept. 7, 2010, the Transfer Agent received annual asset-based service
fees based on the Fund's average daily net assets attributable to Class R5
shares. In addition, the Transfer Agent charged an annual fee per inactive
account and received reimbursement from the Fund for certain out-of-pocket
expenses.
Under a new Transfer Agency Agreement effective Sept. 7, 2010, the Transfer
Agent has contracted with Boston Financial Data Services ("BFDS") to serve as
sub-transfer agent. The Transfer Agent receives monthly account-based service
fees based on the number of open accounts and is reimbursed by the Fund for the
fees and expenses the Transfer Agent pays to financial intermediaries that
maintain omnibus accounts with the Fund subject to an annual limitation (that
varies by class) that is a percentage of the average aggregate value of the
Fund's shares maintained in each such omnibus account (other than omnibus
accounts for which American Enterprise Investment Services, Inc. is the broker
of record or accounts where the beneficial shareholder is a customer of
Ameriprise Financial Services, Inc., which are paid a per account fee). The
Transfer Agent pays the fees of BFDS for services as sub-transfer agent and is
not entitled to reimbursement for such fees from the Fund.
The Transfer Agent also receives reimbursement for certain out-of-pocket
expenses and may also retain, as additional compensation for its services, fees
for wire, telephone and redemption orders, Individual Retirement Account ("IRA")
trustee agent fees and account transcript fees due to the Transfer Agent from
shareholders of the Fund and credits (net of bank charges) earned with respect
to balances in accounts the Transfer Agent maintains in connection with its
services to the Fund.
For the year ended Oct. 31, 2010, the Fund's effective transfer agent fee rates
as a percentage of average daily net assets of each class were as follows:
<Table>
Class A.............................................. 0.16%*
Class C.............................................. 0.26*
Class R.............................................. 0.26*
Class R5............................................. 0.05
Class Z.............................................. 0.26*
</Table>
* Annualized
Class I shares do not pay transfer agent fees.
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 43
NOTES TO FINANCIAL STATEMENTS
(continued) ------------------------------------------------------------
DISTRIBUTION FEES
The Fund has an agreement with Columbia Management Investment Distributors, Inc.
(formerly known as RiverSource Fund Distributors, Inc.) (the Distributor) for
distribution and shareholder services. Under a Plan and Agreement of
Distribution pursuant to Rule 12b-1, the Fund paid a fee at an annual rate of up
to 0.25% of the Fund's average daily net assets attributable to Class A shares,
a fee at an annual rate of up to 0.50% of the Fund's average daily net assets
attributable to Class R shares (of which up to 0.25% may be used for services)
and a fee at an annual rate of up to 1.00% of the Fund's average daily net
assets attributable to Class C shares. For Class C shares, of the 1.00% fee, up
to 0.75% is reimbursed for distribution expenses.
EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES
The Investment Manager and its affiliates have contractually agreed to waive
certain fees and reimburse certain expenses until Dec. 31, 2011, unless sooner
terminated at the sole discretion of the Board, such that net expenses
(excluding fees and expenses of acquired funds*), before giving effect to any
performance incentive adjustment, will not exceed the following percentage of
the class' average daily net assets:
<Table>
Class A.............................................. 1.50%
Class C.............................................. 2.25
Class I.............................................. 1.10
Class R.............................................. 1.75
Class R5............................................. 1.15
Class Z.............................................. 1.25
</Table>
For the year ended Oct. 31, 2010, the waiver was not invoked since the Fund's
expenses were below the cap amount.
* In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the funds in
which it invests (also referred to as "acquired funds"), including
affiliated and non-affiliated pooled investment vehicles (including mutual
funds and exchange traded funds). Because the acquired funds have varied
expense and fee levels and the Fund may own different proportions of
acquired funds at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
5. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $430,087,161 and $43,811,677, respectively, for the year
ended Oct. 31, 2010. Realized gains and losses are determined on an identified
cost basis.
- --------------------------------------------------------------------------------
44 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
6. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated were as
follows:
<Table>
<Caption>
YEAR ENDED OCT. 31, 2010 2009*
- -----------------------------------------------------------------
CLASS A**
Sold 5,656 N/A
- -----------------------------------------------------------------
Net increase (decrease) 5,656 N/A
- -----------------------------------------------------------------
CLASS C**
Sold 188 N/A
- -----------------------------------------------------------------
Net increase (decrease) 188 N/A
- -----------------------------------------------------------------
CLASS I**
Sold 188 N/A
- -----------------------------------------------------------------
Net increase (decrease) 188 N/A
- -----------------------------------------------------------------
CLASS R**
Sold 188 N/A
- -----------------------------------------------------------------
Net increase (decrease) 188 N/A
- -----------------------------------------------------------------
CLASS R5
Sold 34,419,023 4,759,574
Reinvested distributions 2,965 --
Redeemed (1,938,342) (561,095)
- -----------------------------------------------------------------
Net increase (decrease) 32,483,646 4,198,479
- -----------------------------------------------------------------
CLASS Z**
Sold 188 N/A
- -----------------------------------------------------------------
Net increase (decrease) 188 N/A
- -----------------------------------------------------------------
</Table>
* For the period from July 15, 2009 (when shares became available) to Oct. 31,
2009.
** For the period from Sept 27, 2010 (when shares became available) to Oct. 31,
2010.
7. LENDING OF PORTFOLIO SECURITIES
The Fund has entered into a Master Securities Lending Agreement (the Agreement)
with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement
authorizes JPMorgan as lending agent to lend securities to authorized borrowers
in order to generate additional income on behalf of the Fund. Pursuant 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
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 45
NOTES TO FINANCIAL STATEMENTS
(continued) ------------------------------------------------------------
investments and any uninvested cash collateral are disclosed in the Statement of
Assets and Liabilities along with the related obligation to return the
collateral upon the return of the securities loaned. At Oct. 31, 2010,
securities valued at $9,048,107 were on loan, secured by cash collateral of
$9,628,505 invested in short-term securities or in cash equivalents.
Risks of delay in recovery of securities or even loss of rights in the
securities may occur should the borrower of the securities fail financially.
Risks may also arise to the extent that the value of the securities loaned
increases above the value of the collateral received. JPMorgan will indemnify
the Fund from losses resulting from a borrower's failure to return a loaned
security when due. Such indemnification does not extend to losses associated
with declines in the value of cash collateral investments. Loans are subject to
termination by the Fund or the borrower at any time, and are, therefore, not
considered to be illiquid investments.
Pursuant to the Agreement, the Fund receives income for lending its securities
either in the form of fees or by earning interest on invested cash collateral,
net of negotiated rebates paid to borrowers and fees paid to the lending agent
for services provided and any other securities lending expenses. Net income of
$14,214 earned from securities lending for the year ended Oct. 31, 2010 is
included in the Statement of Operations. The Fund also continues to earn
interest and dividends on the securities loaned.
8. AFFILIATED MONEY MARKET FUND
The Fund may invest its daily cash balance in Columbia Short-Term Cash Fund
(formerly known as RiverSource Short-Term Cash Fund), a money market fund
established for the exclusive use of certain funds managed by the Investment
Manager and other institutional clients of the Investment Manager. The cost of
the Fund's purchases and proceeds from sales of shares of Columbia Short-Term
Cash Fund aggregated $261,421,658 and $255,363,714, respectively, for the year
ended Oct. 31, 2010. The income distributions received with respect to the
Fund's investment in Columbia Short-Term Cash Fund can be found in the Statement
of Operations and the Fund's invested balance in Columbia Short-Term Cash Fund
at Oct. 31, 2010, can be found in the Portfolio of Investments.
9. BANK BORROWINGS
The Fund has entered into a revolving credit facility with a syndicate of banks
led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund
may borrow for the temporary funding of shareholder redemptions or for other
temporary or emergency purposes. The credit facility became effective on
- --------------------------------------------------------------------------------
46 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
Oct. 14, 2010, replacing a prior credit facility. The credit facility agreement,
which is a collective agreement between the Fund and certain other funds managed
by the Investment Manager, severally and not jointly, permits collective
borrowings up to $300 million. The borrowers shall have the right, upon written
notice to the Administrative Agent, to request an increase of up to $200 million
in the aggregate amount of the credit facility from new or existing lenders,
provided that the aggregate amount of the credit facility shall at no time
exceed $500 million. Participation in such increase by any existing lender shall
be at such lender's sole discretion. Interest is charged to each fund based on
its borrowings at a rate equal to the sum of the federal funds rate plus (i)
1.25% per annum plus (ii) if one-month LIBOR exceeds the federal funds rate, the
amount of such excess. Each borrowing under the credit facility matures no later
than 60 days after the date of borrowing. The Fund also pays a commitment fee
equal to its pro rata share of the amount of the credit facility at a rate of
0.10% per annum.
Prior to Oct. 14, 2010, the credit facility agreement, which was a collective
agreement between the Fund and certain other funds managed by the Investment
Manager, severally and not jointly, permitted collective borrowings up to $300
million. The Fund also paid a commitment fee equal to its pro rata share of the
amount of the credit facility at a rate of 0.10% per annum, in addition to an
upfront fee equal to its pro rata share of 0.04% of the amount of the credit
facility. The Fund had no borrowings during the year ended Oct. 31, 2010.
10. FEDERAL TAX INFORMATION
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of foreign currency
transactions, passive foreign investment company (PFIC) holdings, foreign tax
credits and losses deferred due to wash sales. The character of distributions
made during the year from net investment income or net realized gains may differ
from their ultimate characterization for federal income tax purposes. Also, due
to the timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gains were
recorded by the Fund.
In the Statement of Assets and Liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been increased by $117,442
and accumulated net realized gain has been decreased by $117,442.
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 47
NOTES TO FINANCIAL STATEMENTS
(continued) ------------------------------------------------------------
The tax character of distributions paid for the years indicated was as follows:
<Table>
<Caption>
YEAR ENDED OCT. 31, 2010 2009
- --------------------------------------------------------------
Ordinary income............................... $182,096 $--
Long-term capital gain........................ -- --
</Table>
At Oct. 31, 2010, the components of distributable earnings on a tax basis were
as follows:
<Table>
Undistributed ordinary income.................... $ 2,665,799
Undistributed accumulated long-term gain......... $ 374,174
Unrealized appreciation (depreciation)........... $67,120,555
</Table>
11. RISKS RELATING TO CERTAIN INVESTMENTS
FOREIGN/EMERGING MARKETS RISK
Investing in foreign securities may include certain risks and considerations not
typically associated with investing in U.S. securities, such as fluctuating
currency values and changing local and regional economic, political and social
conditions, which may result in greater market volatility. In addition, certain
foreign securities may not be as liquid as U.S. securities. Investing in
emerging markets may accentuate these risks.
ASIAN PACIFIC REGION RISK
Many of the countries in the Asian Pacific Region are developing both
politically and economically, and may have relatively unstable governments and
economies based on a limited number of commodities or industries. Securities
markets in the Asian Pacific Region are smaller and have a lower trading volume
than those in the United States, which may result in the securities of some
companies in the Asian Pacific Region being less liquid than similar U.S. or
other foreign securities. Some currencies in the Asian Pacific Region are more
volatile than the U.S. dollar and some countries in the Asian Pacific Region
have restricted the flow of money in and out of the country.
GEOGRAPHIC CONCENTRATION RISK
Because the Fund concentrates its investments in the Asian Pacific Region, the
Fund may be particularly susceptible to economic, political or regulatory events
affecting companies and countries within the Asian Pacific Region. Currency
devaluations could occur in countries that have not yet experienced currency
devaluation to date, or could continue to occur in countries that have already
experienced such devaluations. As a result, the Fund may be more volatile than a
more geographically diversified fund. If securities of companies in the Asian
Pacific Region fall out of favor, it may cause the Fund to underperform funds
that do not concentrate in a single region of the world.
- --------------------------------------------------------------------------------
48 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
12. SUBSEQUENT EVENTS
Management has evaluated Fund related events and transactions that occurred
during the period from the date of the Statement of Assets and Liabilities
through the date of issuance of the Fund's financial statements. There were no
events or transactions that occurred during the period that materially impacted
the amounts or disclosures in the Fund's financial statements.
13. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In June 2004, an action captioned John E. Gallus et al. v. American Express
Financial Corp. and American Express Financial Advisors Inc. was filed in the
United States District Court for the District of Arizona. The plaintiffs allege
that they are investors in several American Express Company (now known as legacy
RiverSource) mutual funds and they purport to bring the action derivatively on
behalf of those funds under the Investment Company Act of 1940. The plaintiffs
allege that fees allegedly paid to the defendants by the funds for investment
advisory and administrative services are excessive. The plaintiffs seek remedies
including restitution and rescission of investment advisory and distribution
agreements. The plaintiffs voluntarily agreed to transfer this case to the
United States District Court for the District of Minnesota (the District Court).
In response to defendants' motion to dismiss the complaint, the District Court
dismissed one of plaintiffs' four claims and granted plaintiffs limited
discovery. Defendants moved for summary judgment in April 2007. Summary judgment
was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a
notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit)
on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary
judgment and remanded to the District Court for further proceedings. On August
6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court (the
Supreme Court), asking the Supreme Court to stay the District Court proceedings
while the Supreme Court considers and rules in a case captioned Jones v. Harris
Associates, which involves issues of law similar to those presented in the
Gallus case. On March 30, 2010, the Supreme Court issued its ruling in Jones v.
Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth
Circuit's decision in the Gallus case and remanded the case to the Eighth
Circuit for further consideration in light of the Supreme Court's decision in
Jones v. Harris Associates. On June 4, 2010, the Eighth Circuit remanded the
Gallus case to the District Court for further consideration in light of the
Supreme Court's decision in Jones v. Harris Associates. On December 9, 2010, the
District Court reinstated its July 9, 2007 summary judgment order in favor of
the defendants.
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 49
NOTES TO FINANCIAL STATEMENTS
(continued) ------------------------------------------------------------
In December 2005, without admitting or denying the allegations, American Express
Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc.
(Ameriprise Financial)), entered into settlement agreements with the Securities
and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC)
related to market timing activities. As a result, AEFC was censured and ordered
to cease and desist from committing or causing any violations of certain
provisions of the Investment Advisers Act of 1940, the Investment Company Act of
1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million
and civil money penalties of $7 million. AEFC also agreed to retain an
independent distribution consultant to assist in developing a plan for
distribution of all disgorgement and civil penalties ordered by the SEC in
accordance with various undertakings detailed at
http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its
affiliates have cooperated with the SEC and the MDOC in these legal proceedings,
and have made regular reports to the funds' Boards of Directors/Trustees.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, arbitration and regulatory proceedings, including
routine litigation, class actions, and governmental actions, concerning matters
arising in connection with the conduct of their business activities. Ameriprise
Financial believes that the Funds are not currently the subject of, and that
neither Ameriprise Financial nor any of its affiliates are the subject of, any
pending legal, arbitration or regulatory proceedings that are likely to have a
material adverse effect on the Funds or the ability of Ameriprise Financial or
its affiliates to perform under their contracts with the Funds. Ameriprise
Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the
Securities and Exchange Commission on legal and regulatory matters that relate
to Ameriprise Financial and its affiliates. Copies of these filings may be
obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse publicity
associated with them, will not result in increased fund redemptions, reduced
sale of fund shares or other adverse consequences to the Funds. Further,
although we believe proceedings are not likely to have a material adverse effect
on the Funds or the ability of Ameriprise Financial or its affiliates to perform
under their contracts with the Funds, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range
of loss that may result. An adverse outcome in one or more of these proceedings
could result in adverse judgments, settlements, fines, penalties or other relief
that could have a material adverse effect on the consolidated financial
condition or results of operations of Ameriprise Financial.
- --------------------------------------------------------------------------------
50 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
COLUMBIA ASIA PACIFIC EX-JAPAN FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Columbia Asia Pacific ex-Japan Fund (formerly
known as Threadneedle Asia Pacific Fund) (the Fund) (one of the portfolios
constituting the RiverSource International Series, Inc.) as of October 31, 2010,
and the related statement of operations for the year then ended, the statements
of changes in net assets and the financial highlights for the year then ended,
and for the period from July 15, 2009 (when shares became available) to October
31, 2009. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of October 31, 2010, by correspondence with the custodian
and brokers, or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 51
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued) ------------
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Columbia Asia Pacific ex-Japan Fund of the RiverSource International Series,
Inc. at October 31, 2010, the results of its operations for the year then ended,
the changes in its net assets and the financial highlights for the year then
ended, and for the period from July 15, 2009 (when shares became available) to
October 31, 2009, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
December 20, 2010
- --------------------------------------------------------------------------------
52 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
FEDERAL INCOME TAX INFORMATION -------------------------------------------------
(UNAUDITED)
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
Fiscal year ended Oct. 31, 2010
<Table>
<Caption>
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for
distributions:
Qualified Dividend Income for individuals.................... 75.55%
Dividends Received Deduction for corporations................ 0.07%
U.S. Government Obligations.................................. 0.00%
Foreign Taxes Paid........................................... $734,256
Foreign Source Income........................................ $4,376,595
</Table>
The Fund designates as distributions of long-term gains, to the extent necessary
to fully distribute such capital gains, earnings and profits distributed to
shareholders on the redemption of shares.
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 53
BOARD MEMBERS AND OFFICERS -----------------------------------------------------
Shareholders elect a Board that oversees the Fund's operations. The Board
appoints officers who are responsible for day-to-day business decisions based on
policies set by the Board. The following is a list of the Fund's Board members.
Each Board member oversees 145 Columbia, RiverSource, Seligman and Threadneedle
funds. Under current Board policy, members generally serve until the next Board
meeting after he or she reaches the mandatory retirement age established by the
Board, or the fifteenth anniversary of the first Board meeting they attended as
members of the Board.
INDEPENDENT BOARD MEMBERS
<Table>
<Caption>
OTHER PRESENT OR
NAME, POSITION HELD PAST DIRECTORSHIPS
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION (WITHIN PAST 5
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS YEARS)
- ------------------------------------------------------------------------------------------------------------------------------
Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None
901 S. Marquette Ave. 1/11/06 Attorney
Minneapolis, MN 55402
Age 56
- ------------------------------------------------------------------------------------------------------------------------------
Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None
901 S. Marquette Ave. 7/11/07 Leadership (consulting company)
Minneapolis, MN 55402
Age 56
- ------------------------------------------------------------------------------------------------------------------------------
Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None
901 S. Marquette Ave. 11/1/04 University; former Dean, McCallum Graduate School of
Minneapolis, MN 55402 Business, Bentley University
Age 60
- ------------------------------------------------------------------------------------------------------------------------------
Anne P. Jones Board member since Attorney and Consultant None
901 S. Marquette Ave. 3/1/85
Minneapolis, MN 55402
Age 75
- ------------------------------------------------------------------------------------------------------------------------------
Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries,
901 S. Marquette Ave. since 1/1/07, College Inc. (manufactures
Minneapolis, MN 55402 Board member irrigation systems)
Age 71 since 1/1/02
- ------------------------------------------------------------------------------------------------------------------------------
John F. Maher Board member Retired President and Chief Executive Officer and None
901 S. Marquette Ave. since 12/10/08 former Director, Great Western Financial Corporation
Minneapolis, MN 55402 (financial services), 1986-1997
Age 67
- ------------------------------------------------------------------------------------------------------------------------------
Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None
901 S. Marquette Ave. 11/1/04 real estate and asset management company)
Minneapolis, MN 55402
Age 58
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
54 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
INDEPENDENT BOARD MEMBERS (CONTINUED)
<Table>
<Caption>
OTHER PRESENT OR
NAME, POSITION HELD PAST DIRECTORSHIPS
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION (WITHIN PAST 5
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS YEARS)
- ------------------------------------------------------------------------------------------------------------------------------
Leroy C. Richie Board member Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc.
901 S. Marquette Ave. since 11/11/08 President and General Counsel, Automotive Legal (digital imaging);
Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil
Age 69 and gas exploration
and production); OGE
Energy Corp. (energy
and energy services)
- ------------------------------------------------------------------------------------------------------------------------------
Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera
901 S. Marquette Ave. 11/13/02 since 2003 (biotechnology); former President, Aquila Pharmaceuticals,
Minneapolis, MN 55402 Biopharmaceuticals Inc.
Age 66 (biotechnology);
Healthways, Inc.
(health management
programs)
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 55
BOARD MEMBERS AND OFFICERS (continued) -----------------------------------------
BOARD MEMBER AFFILIATED WITH THE INVESTMENT MANAGER*
<Table>
<Caption>
OTHER PRESENT OR
NAME, POSITION HELD PAST DIRECTORSHIPS
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION (WITHIN PAST 5
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS YEARS)
- ------------------------------------------------------------------------------------------------------------------------------
William F. Truscott Board member Chairman of the Board, Columbia Management Investment None
53600 Ameriprise since 11/7/01, Advisers, LLC (formerly RiverSource Investments, LLC)
Financial Center Vice President since since May 2010 (previously President, Chairman of the
Minneapolis, MN 55474 2002 Board and Chief Investment Officer, 2001-April 2010);
Age 50 Senior Vice President, Atlantic Funds, Columbia Funds
and Nations Funds since May 2010; Chief Executive
Officer, U.S. Asset Management &
President -- Annuities, Ameriprise Financial, Inc.
since May 2010 (previously President -- U.S. Asset
Management and Chief Investment Officer, 2005-April
2010 and Senior Vice President -- Chief Investment
Officer, 2001-2005); Director, President and Chief
Executive Officer, Ameriprise Certificate Company since
2006; Director, Columbia Management Investment
Distributors, Inc. (formerly RiverSource Fund
Distributors, Inc.) since May 2010 (previously Chairman
of the Board and Chief Executive Officer, 2008-April
2010); Chairman of the Board and Chief Executive
Officer, RiverSource Distributors, Inc. since 2006
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
* Interested person (as defined under the 1940 Act) by reason of being an
officer, director, security holder and/or employee of the investment manager
or Ameriprise Financial.
The SAI has additional information about the Fund's Board members and is
available, without charge, upon request by calling 800.345.6611; contacting your
financial intermediary; or visiting columbiamanagement.com.
- --------------------------------------------------------------------------------
56 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
The Board has appointed officers who are responsible for day-to-day business
decisions based on policies it has established. The officers serve at the
pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the
Fund's other officers are:
FUND OFFICERS
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUNDS AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------
J. Kevin Connaughton President since Senior Vice President and General Manager -- Mutual
One Financial Center 5/1/10 Fund Products, Columbia Management Investment Advisers,
Boston, MA 02111 LLC since May 2010; President, Columbia Funds since
Age 46 2009 (previously Senior Vice President and Chief
Financial Officer, June 2008 -- January 2009);
President, Atlantic Funds and Nations Funds since 2009;
Managing Director of Columbia Management Advisors, LLC,
December 2004 -- April 2010; Treasurer, Columbia Funds,
October 2003 -- May 2008; Treasurer, the Liberty Funds,
Stein Roe Funds and Liberty All-Star Funds, December
2000 -- December 2006
- --------------------------------------------------------------------------------------------------------
Amy K. Johnson Vice President since Senior Vice President and Chief Operating Officer,
5228 Ameriprise Financial 12/5/06 Columbia Management Investment Advisers, LLC (formerly
Center Minneapolis, MN RiverSource Investments, LLC) since May 2010
55474 (previously Chief Administrative Officer, 2009 -- April
Age 45 2010 and Vice President -- Asset Management and Trust
Company Services, 2006-2009 and Vice
President -- Operations and Compliance, 2004-2006);
Senior Vice President, Atlantic Funds, Columbia Funds
and Nations Funds since May 2010
- --------------------------------------------------------------------------------------------------------
Jeffrey P. Fox Treasurer since Chief Financial Officer, Columbia Management Investment
105 Ameriprise 7/10/02 Distributors, Inc. (formerly RiverSource Fund
Financial Center Distributors, Inc.) and of Seligman Data Corp. since
Minneapolis, MN 55474 2008; Vice President -- Investment Accounting,
Age 55 Ameriprise Financial, Inc. since 2002; Chief Financial
Officer, RiverSource Distributors, Inc. since 2006
- --------------------------------------------------------------------------------------------------------
Scott R. Plummer Vice President, Chief Legal Officer and Assistant Secretary, Columbia
5228 Ameriprise Financial General Counsel and Management Investment Advisers, LLC (formerly
Center Secretary since RiverSource Investments, LLC) since June 2005; Vice
Minneapolis, MN 55474 12/5/06 President and Lead Chief Counsel -- Asset Management,
Age 51 Ameriprise Financial, Inc. since May 2010 (previously
Vice President and Chief Counsel -- Asset Management,
2005-April 2010 and Vice President -- Asset Management
Compliance, 2004-2005); Senior Vice President,
Secretary and Chief Legal Officer, Atlantic Funds,
Columbia Funds and Nations Funds since May 2010; Vice
President, Chief Counsel and Assistant Secretary,
Columbia Management Investment Distributors, Inc.
(formerly RiverSource Fund Distributors, Inc.) since
2008; Vice President, General Counsel and Secretary,
Ameriprise Certificate Company since 2005; Chief
Counsel, RiverSource Distributors, Inc. since 2006
- --------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 57
BOARD MEMBERS AND OFFICERS (continued) -----------------------------------------
FUND OFFICERS (CONTINUED)
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUNDS AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------
Michael A. Jones Vice President since Director and President, Columbia Management Investment
100 Federal Street 5/1/10 Advisers, LLC since May 2010; President and Director,
Boston, MA 02110 Columbia Management Investment Distributors, Inc. since
Age 51 May 2010; Senior Vice President, Atlantic Funds,
Columbia Funds and Nations Funds since May 2010;
Manager, Chairman, Chief Executive Officer and
President, Columbia Management Advisors, LLC,
2007 -- April 2010; Chief Executive Officer, President
and Director, Columbia Management Distributors, Inc.,
2006 -- April 2010; former Co-President and Senior
Managing Director, Robeco Investment Management
- --------------------------------------------------------------------------------------------------------
Colin Moore Vice President since Chief Investment Officer, Columbia Management
One Financial Center 5/1/10 Investment Advisers, LLC since May 2010; Senior Vice
Boston, MA 02111 President, Atlantic Funds, Columbia Funds and Nations
Age 52 Funds since May 2010; Manager, Managing Director and
Chief Investment Officer, Columbia Management Advisors,
LLC, 2007- April 2010; Head of Equities, Columbia
Management Advisors, LLC, 2002-Sept. 2007
- --------------------------------------------------------------------------------------------------------
Linda Wondrack Chief Compliance Vice President and Chief Compliance Officer, Columbia
One Financial Center Officer since 5/1/10 Management Investment Advisers, LLC since May 2010;
Boston, MA 02111 Chief Compliance Officer, Columbia Funds since 2007;
Age 46 Senior Vice President and Chief Compliance Officer,
Atlantic Funds and Nations Funds since 2007; Director
(Columbia Management Group, LLC and Investment Product
Group Compliance), Bank of America, June 2005 -- April
2010
- --------------------------------------------------------------------------------------------------------
Neysa M. Alecu Money Laundering Vice President -- Compliance, Ameriprise Financial,
2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer and
Center since 11/9/05 and Identity Theft Prevention Officer, Columbia Management
Minneapolis, MN 55474 Identity Theft Investment Distributors, Inc. (formerly RiverSource
Age 46 Prevention Officer Fund Distributors, Inc.) since 2008; Anti-Money
since 2008 Laundering Officer, Ameriprise Financial, Inc. since
2005; Compliance Director, Ameriprise Financial, Inc.,
2004-2008
- --------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
58 COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT
PROXY VOTING ------------------------------------------------------------------
The policy of the Board is to vote the proxies of the companies in which the
Fund holds investments consistent with the procedures as stated in the Statement
of Additional Information (SAI). You may obtain a copy of the SAI without charge
by calling 800.345.6611; contacting your financial intermediary; visiting
columbiamanagement.com; 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 columbiamanagement.com; or searching the website of
the SEC at www.sec.gov.
- --------------------------------------------------------------------------------
COLUMBIA ASIA PACIFIC EX-JAPAN FUND -- 2010 ANNUAL REPORT 59
COLUMBIA ASIA PACIFIC EX-JAPAN FUND
(formerly known as Threadneedle Asia Pacific Fund)
P.O. Box 8081
Boston, MA 02266-8081
COLUMBIAMANAGEMENT.COM
<Table>
This report must be accompanied or preceded by the Fund's
current prospectus. The Fund is distributed by Columbia
Management Investment Distributors, Inc., member FINRA, and
managed by Columbia Management Investment Advisers, LLC.
(C)2010 Columbia Management Investment Advisers, LLC. All
(COLUMBIA MANAGEMENT LOGO) rights reserved. S-6532 D (12/10)
</Table>
Annual Report
and Prospectus
(COLUMBIA MANAGEMENT LOGO)
COLUMBIA EUROPEAN EQUITY FUND
(FORMERLY KNOWN AS THREADNEEDLE EUROPEAN EQUITY FUND)
- --------------------------------------------------------------------------------
ANNUAL REPORT FOR THE PERIOD ENDED
OCTOBER 31, 2010
(Prospectus also enclosed)
COLUMBIA EUROPEAN EQUITY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH CAPITAL
APPRECIATION.
This annual report includes a prospectus that describes in detail the Fund's
objective, investment strategy, risks, sales charges, fees and other matters of
interest. Please read the prospectus carefully before you invest or send money.
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
TABLE OF CONTENTS --------------------------------------------------------------
<Table>
Your Fund at a Glance.............. 3
Manager Commentary................. 6
The Fund's Long-term Performance... 12
Fund Expenses Example.............. 14
Portfolio of Investments........... 17
Statement of Assets and
Liabilities...................... 25
Statement of Operations............ 27
Statements of Changes in Net
Assets........................... 28
Financial Highlights............... 30
Notes to Financial Statements...... 36
Report of Independent Registered
Public Accounting Firm........... 53
Federal Income Tax Information..... 55
Board Members and Officers......... 56
Proxy Voting....................... 61
</Table>
SEE THE FUND'S PROSPECTUS FOR RISKS ASSOCIATED WITH INVESTING IN THE FUND.
- --------------------------------------------------------------------------------
2 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
YOUR FUND AT A GLANCE ----------------------------------------------------------
FUND SUMMARY
- --------------------------------------------------------------------------------
> Columbia European Equity Fund (the Fund) Class A shares gained 21.14%
(excluding sales charge) for the 12 months ended October 31, 2010.
> The Fund outperformed its benchmark, the Morgan Stanley Capital International
(MSCI) Europe Index (MSCI Europe Index), which advanced 8.97% for the 12-month
period.
> The Fund also outperformed its peer group, as represented by the Lipper
European Funds Index, which increased 14.63% for the same time period.
ANNUALIZED TOTAL RETURNS (for period ended October 31, 2010)
- --------------------------------------------------------------------------------
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------
Columbia European Equity Fund
Class A (excluding sales
charge) +21.14% -4.09% +8.13% +2.73%
- ---------------------------------------------------------------------
MSCI Europe Index (unmanaged) +8.97% -9.89% +4.48% +4.02%
- ---------------------------------------------------------------------
Lipper European Funds Index
(unmanaged) +14.63% -8.28% +6.33% +4.77%
- ---------------------------------------------------------------------
</Table>
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by contacting your financial intermediary,
visiting columbiamanagement.com or calling 800.345.6611.
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the table above. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
fees and expenses. The Fund's returns reflect the effect of fee waivers/expense
reimbursements, if any. Without such waivers/reimbursements, the Fund's returns
would be lower. See the Average Annual Total Returns table for performance of
other share classes of the Fund.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes. It is not possible to invest directly in an index.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 3
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT OCTOBER 31, 2010
SINCE
Without sales charge 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION*
Class A (inception
6/26/00) +21.14% -4.09% +8.13% +2.73% N/A
- --------------------------------------------------------------------------
Class B (inception
6/26/00) +20.10% -4.78% +7.32% +1.93% N/A
- --------------------------------------------------------------------------
Class C (inception
6/26/00) +19.96% -4.80% +7.31% +1.95% N/A
- --------------------------------------------------------------------------
Class I (inception
7/15/04) +21.61% -3.62% +8.65% N/A +10.24%
- --------------------------------------------------------------------------
Class R4 (inception
6/26/00) +21.08% -3.76% +8.42% +2.98% N/A
- --------------------------------------------------------------------------
Class Z (inception
9/27/10) N/A N/A N/A N/A +5.07%**
- --------------------------------------------------------------------------
With sales charge
Class A (inception
6/26/00) +14.19% -5.96% +6.85% +2.12% N/A
- --------------------------------------------------------------------------
Class B (inception
6/26/00) +15.10% -5.74% +7.01% +1.93% N/A
- --------------------------------------------------------------------------
Class C (inception
6/26/00) +18.96% -4.80% +7.31% +1.95% N/A
- --------------------------------------------------------------------------
</Table>
Class A share performance reflects the maximum initial sales charge of 5.75%.
Class B share performance reflects a contingent deferred sales charge (CDSC)
applied as follows: first year 5%; second year 4%; third and fourth years 3%;
fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be
subject to a 1% CDSC if shares are sold within one year after purchase. Sales
charges do not apply to Class I and Class R4 shares. Class I and Class R4 shares
are available to qualifying institutional investors only. Class Z shares are
offered to certain eligible investors.
*For classes with less than 10 years performance.
**Not annualized.
- --------------------------------------------------------------------------------
4 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
MORNINGSTAR STYLE BOX(TM)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Equity Style
Value Blend Growth
X Large
Medium Size
Small
</Table>
The Morningstar Style Box(TM) is based on the fund's portfolio holdings as of
period end. The vertical axis shows the market capitalization of the stocks
owned, and the horizontal axis shows investment style (value, blend, or growth).
Information shown is based on the most recent data provided by Morningstar.
(C)2010 Morningstar, Inc. All rights reserved. The information contained herein
is proprietary to Morningstar and/or its content providers, may not be copied or
distributed and is not warranted to be accurate, complete, or timely. Neither
Morningstar nor its content providers are responsible for any damages or losses
arising from any use of this information. Past performance is no guarantee of
future results.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 5
MANAGER COMMENTARY -------------------------------------------------------------
Effective September 27, 2010, Threadneedle European Equity Fund was renamed
Columbia European Equity Fund.
Columbia European Equity Fund portfolio manager Dan Ison of Threadneedle
International Limited (Threadneedle) discuss the Fund's results and positioning
for the fiscal year ended October 31, 2010. Threadneedle, an indirect wholly-
owned subsidiary of Ameriprise Financial, Inc., is the subadviser to the Fund.
Dear Shareholders,
Columbia European Equity Fund (the Fund) Class A shares gained 21.14% (excluding
sales charge) for the 12 months ended October 31, 2010. The Fund outperformed
its benchmark, the Morgan Stanley Capital International (MSCI) Europe Index
(MSCI Europe Index), which advanced 8.97% for the 12-month period. The Fund also
outperformed its peer group, as represented by the Lipper European Funds Index,
which increased 14.63% for the same time frame.
COUNTRY BREAKDOWN(1) (at October 31, 2010)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Belgium 3.4%
- ------------------------------------------------
Bermuda 1.0%
- ------------------------------------------------
Denmark 1.8%
- ------------------------------------------------
Finland 0.9%
- ------------------------------------------------
France 10.7%
- ------------------------------------------------
Germany 13.3%
- ------------------------------------------------
Italy 1.1%
- ------------------------------------------------
Netherlands 5.3%
- ------------------------------------------------
Norway 1.0%
- ------------------------------------------------
Spain 2.4%
- ------------------------------------------------
Sweden 6.0%
- ------------------------------------------------
Switzerland 8.2%
- ------------------------------------------------
Turkey 2.3%
- ------------------------------------------------
United Kingdom 40.3%
- ------------------------------------------------
Other(2) 2.3%
- ------------------------------------------------
</Table>
(1) Percentages indicated are based upon total investments (excluding
Investments of Cash Collateral Received for Securities on Loan). The Fund's
composition is subject to change.
(2) Cash & Cash Equivalents.
- --------------------------------------------------------------------------------
6 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
SIGNIFICANT PERFORMANCE FACTORS
The fiscal year was one of very strong outperformance for the Fund, compared to
both the MSCI Europe Index and the Fund's peer group. During this time, equity
markets in Europe became much more discerning. In contrast to the prior year
when most stocks benefited from rising markets, this year we saw more
differentiation as stocks with strong growth characteristics performed well and
those without lagged.
In this environment, we preferred the stocks of companies that we believed could
deliver earnings growth and shied away from stocks that, while attractively
priced, we believed had no earnings potential or other catalyst to drive stock
prices higher. The Fund's performance illustrates that we were successful in
finding those opportunities during the fiscal year.
Contributors to the Fund's outperformance represent a broad mix of countries,
sectors and individual securities. One particularly effective theme was an
emphasis on companies that derive their earnings substantially from overseas
rather than local sources. In many cases, these companies had significant
exports to emerging markets, including China.
TOP TEN HOLDINGS(1) (at October 31, 2010)
- ---------------------------------------------------------------------
<Table>
<Caption>
Rio Tinto PLC (United Kingdom) 3.5%
- ------------------------------------------------
Vodafone Group PLC (United Kingdom) 3.1%
- ------------------------------------------------
Nestle SA (Switzerland) 2.9%
- ------------------------------------------------
Fresenius Medical Care AG & Co. KGaA
(Germany) 2.8%
- ------------------------------------------------
BG Group PLC (United Kingdom) 2.5%
- ------------------------------------------------
Admiral Group PLC (United Kingdom) 2.4%
- ------------------------------------------------
BP PLC (United Kingdom) 2.3%
- ------------------------------------------------
Anheuser-Busch InBev NV (Belgium) 2.3%
- ------------------------------------------------
Standard Chartered PLC (United Kingdom) 2.2%
- ------------------------------------------------
ING Groep NV-CVA (Netherlands) 2.2%
- ------------------------------------------------
</Table>
(1) Percentages indicated are based upon total investments (excluding
Investments of Cash Collateral Received for Securities on Loan and Cash &
Cash Equivalents).
For further detail about these holdings, please refer to the section entitled
"Portfolio of Investments."
Fund holdings are as of the date given, are subject to change at any time, and
are not recommendations to buy or sell any security.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 7
MANAGER COMMENTARY (continued) -------------------------------------------------
A second successful theme was our preference for companies within the core
European countries, such as Switzerland, Germany, Sweden and France. We de-
emphasized peripheral countries like Spain, Portugal, Italy and Greece, where
companies suffered from concerns about sovereign fiscal issues.
The Fund benefited from a significantly larger weighting in industrials stocks
than the MSCI Europe Index. Stocks in this sector typically have large overseas
earnings, especially from emerging markets and China. They also benefit from a
weaker euro, which we saw in the first half of the year. Because industrial
companies did so much restructuring in 2008 and 2009, their profit margins were
startlingly good as inventory restocking occurred. Consequently, the industrials
sector has delivered the greatest upside earnings surprises. The Fund's
industrials overweight and good stock selection within the sector added to the
Fund's performance relative to the MSCI Europe Index.
Exposure to luxury goods companies, where the Fund's weighting was larger than
that of the MSCI Europe Index, also had a positive effect on fiscal year
results. These companies have been notable beneficiaries of rising consumer
demand in emerging markets.
Having a smaller position in pharmaceuticals as compared to the MSCI Europe
Index and having no exposure to the utilities sector also had a favorable impact
on the Fund's investment results. Within the pharmaceutical area, the Fund's
holdings were very small, but what we owned performed quite well, so both an
underweight allocation and strong stock selection benefited the Fund's results.
Judicious positioning and stock selection in the financials sector added to
strong relative performance as well.
Overall, the telecommunication services sector detracted slightly from relative
return. Not having enough exposure in the second half of the year when
telecommunications stocks performed well was disadvantageous. Having a larger
weighting in information technology than the MSCI Europe Index also detracted,
though effective stock selection more than outweighed the small negative effect.
- --------------------------------------------------------------------------------
8 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
CHANGES TO THE FUND'S PORTFOLIO
From the beginning of the fiscal year through April and May 2010, the Fund was
underweight in financials compared to the MSCI Europe Index. We increased the
Fund's weighting to a neutral position relative to the MSCI Europe Index through
the middle part of the year. Then in the latter months of the period, we again
reduced the position because as financial stocks rallied, their valuations
became less attractive to us. Overall, this strategic reallocation was
beneficial to the Fund's investment results.
In the first half of the year, the Fund had a zero weighting in
telecommunication services because we thought these companies were likely to
have trouble producing growth. In the second half of the year, we revised our
view and increased the Fund's weighting until it was about equal to that of the
benchmark.
The portfolio turnover rate for the fiscal year was 115%.
OUR FUTURE STRATEGY
We seek to focus the Fund on companies with strong balance sheets because we
believe that in 2011 these companies are more likely to return cash to
shareholders either through share buybacks or special dividends. We think the
ability to return cash could be an important factor in a company's stock
performance going forward.
Currently the Fund is positioned with a preference for growth stocks and an
emphasis on core European countries. The largest underweight relative to the
MSCI Europe Index is utilities, followed by telecommunication services. We also
currently maintain an underweight in financials
One particularly effective theme was an emphasis on companies that derive
their earnings substantially from overseas rather than local sources.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 9
MANAGER COMMENTARY (continued) -------------------------------------------------
where we believe there is a lack of attractive individual financial companies.
The Fund is slightly underweight in the energy sector. Within energy, the Fund
does not currently own large oil companies, but instead has focused on oil
service businesses and exploration companies.
As of the end of October, the Fund had significant holdings in the U.K. because
the U.K. stock market is largely comprised of global companies with significant
overseas earnings and also includes a number of mining firms with foreign
operations. The Fund is not currently exposed to the U.K. domestic economy.
In the short to medium term, we see several key factors affecting European
equity markets. We believe growth in the developed markets is likely to be slow.
The euro may weaken due to fiscal situations in peripheral European countries,
which means interest rates are likely to remain low. Meanwhile, we believe
emerging market countries may continue to benefit from extremely low interest
rates in the rest of the world, a positive for both consumer demand and
infrastructure spending in emerging regions.
We believe the European equity markets are still attractive from a valuation
standpoint. The implied equity risk premium is well above the long-term average
and we believe valuations are still attractive relative to other asset classes.
European equity markets may continue to advance, but it is our view that returns
will depend on highly selective individual stock picking, with a particular
focus on companies that have the ability to grow earnings. Though there has been
much attention on weakness in countries like Spain and Greece, there are many
European companies that are selling goods internationally -- goods that are
highly desirable for emerging market consumers. We believe these types of
companies may continue to provide very strong investment opportunities.
Dan Ison
Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not
a complete list of securities that have increased or decreased in value. The
views expressed in this statement reflect those of the portfolio manager(s) only
through the end of the period of the report as stated on the cover and do not
necessarily represent the views of Columbia Management Investment Advisers,
- --------------------------------------------------------------------------------
10 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
LLC* (the Investment Manager) or any subadviser to the Fund or any other person
in the Investment Manager or subadviser organizations. Any such views are
subject to change at any time based upon market or other conditions and the
Investment Manager disclaims any responsibility to update such views. These
views may not be relied on as investment advice and, because investment
decisions for the Fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of the Fund.
* Effective May 1, 2010, RiverSource Investments, LLC became known as Columbia
Management Investment Advisers, LLC.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 11
THE FUND'S LONG-TERM PERFORMANCE -----------------------------------------------
The chart on the facing page illustrates the total value of an assumed $10,000
investment in Columbia European Equity Fund Class A shares (from 10/31/00 to
10/31/10) as compared to the performance of two widely cited performance
indices, the Morgan Stanley Capital International (MSCI) Europe Index and the
Lipper European Funds Index. In comparing the Fund's Class A shares to these
indices, you should take into account the fact that the Fund's performance
reflects the maximum initial sales charge of 5.75%, while such charges are not
reflected in the performance of the indices. Returns for the Fund include the
reinvestment of any distribution paid during each period.
The performance information shown represents past performance and is not a
guarantee of future results. The table below and the chart on the facing page do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. The investment return and
principal value of your investment will fluctuate so that your shares, when
redeemed, may be worth more or less than their original cost. Current
performance may be lower or higher than the performance information shown. You
may obtain performance information current to the most recent month-end by
contacting your financial institution or visiting riversource.com/funds. Also
see "Past Performance" in the Fund's current prospectus.
COMPARATIVE RESULTS
- --------------------------------------------------------------------------------
<Table>
<Caption>
Results at October 31, 2010
1 YEAR 3 YEARS 5 YEARS 10 YEARS
COLUMBIA EUROPEAN EQUITY FUND
(INCLUDES SALES CHARGE)
Class A Cumulative value of $10,000 $11,419 $8,315 $13,929 $12,336
- ------------------------------------------------------------------------------------------
Average annual total return +14.19% -5.96% +6.85% +2.12%
- ------------------------------------------------------------------------------------------
MSCI EUROPE INDEX(1)
Cumulative value of $10,000 $10,897 $7,317 $12,448 $14,832
- ------------------------------------------------------------------------------------------
Average annual total return +8.97% -9.89% +4.48% +4.02%
- ------------------------------------------------------------------------------------------
LIPPER EUROPEAN FUNDS INDEX(2)
Cumulative value of $10,000 $11,463 $7,717 $13,590 $15,932
- ------------------------------------------------------------------------------------------
Average annual total return +14.63% -8.28% +6.33% +4.77%
- ------------------------------------------------------------------------------------------
</Table>
Results for other share classes can be found on page 4.
- --------------------------------------------------------------------------------
12 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
(VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN COLUMBIA EUROPEAN EQUITY FUND
LINE GRAPH)
<Table>
<Caption>
COLUMBIA EUROPEAN
EQUITY FUND
CLASS A
(INCLUDES SALES MSCI EUROPE LIPPER EUROPEAN
CHARGE) INDEX(1 INDEX(2)
----------------- ------------------ ---------------
11/1/00 $ 9,425 $10,000 $10,000
1/01 9,136 10,270 10,144
4/01 8,129 9,297 9,034
7/01 7,026 8,546 8,248
10/01 6,387 7,732 7,385
1/02 6,431 7,819 7,523
4/02 6,779 8,188 7,884
7/02 5,791 7,015 6,875
10/02 5,482 6,682 6,442
1/03 5,160 6,438 6,214
4/03 5,531 6,976 6,646
7/03 5,922 7,667 7,329
10/03 6,372 8,333 8,027
1/04 7,129 9,512 9,238
4/04 6,852 9,423 9,071
7/04 6,813 9,455 9,015
10/04 7,326 10,197 9,770
1/05 7,808 11,202 10,833
4/05 7,788 11,198 10,830
7/05 8,226 11,830 11,605
10/05 8,346 11,915 11,723
1/06 9,466 13,366 13,440
4/06 10,437 14,630 14,960
7/06 10,255 14,525 14,373
10/06 10,902 15,766 15,537
1/07 11,812 16,957 17,158
4/07 12,814 18,671 18,838
7/07 12,609 18,633 18,803
10/07 13,981 20,269 20,644
1/08 12,429 17,272 17,774
4/08 12,739 18,462 18,613
7/08 11,541 16,492 16,757
10/08 8,011 10,599 10,516
1/09 7,292 9,249 9,273
4/09 7,857 10,156 10,523
7/09 9,513 12,375 12,732
10/09 10,184 13,611 13,899
1/10 10,146 13,385 13,790
4/10 10,550 13,620 14,356
7/10 10,805 13,294 14,003
10/10 12,336 14,832 15,932
</Table>
(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.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 13
FUND EXPENSES EXAMPLE ----------------------------------------------------------
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (i) transaction
costs, including sales charges (loads) on purchase payments; and (ii) ongoing
costs, which may include management fees; distribution and service (Rule 12b-1)
fees; and other Fund fees and expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
In addition to the ongoing expenses which the Fund bears directly, the Fund's
shareholders indirectly bear the ongoing expenses of any funds in which the Fund
invests (also referred to as "acquired funds"), including affiliated and non-
affiliated pooled investment vehicles (including mutual funds and exchange
traded funds). The Fund's indirect expense from investing in the acquired funds
is based on the Fund's pro rata portion of the ongoing expenses charged by
acquired funds using the expense ratio of each of the acquired funds as of the
acquired fund's most recent shareholder report.
The example is based on an investment of $1,000 invested at the beginning of the
period indicated and held until October 31, 2010.
ACTUAL EXPENSES
The first line of the table provides information about actual account values and
actual expenses for each class. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading titled "Expenses paid during the
period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the actual expense ratio for each
class and an assumed rate of return of 5% per year before expenses, which is not
the actual return for the class. The hypothetical account values and expenses
may not be used to estimate the actual ending account balance or expenses you
paid for the period. You may use this information to compare the ongoing costs
of investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
14 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
MAY 1, 2010(a) OCT. 31, 2010 THE PERIOD(b) EXPENSE RATIO
- -------------------------------------------------------------------------------------------
Class A
- -------------------------------------------------------------------------------------------
Actual(d) $1,000 $1,169.40 $ 8.11(c) 1.50%(c)
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,017.45 $ 7.54(c) 1.50%(c)
- -------------------------------------------------------------------------------------------
Class B
- -------------------------------------------------------------------------------------------
Actual(d) $1,000 $1,165.30 $12.20(c) 2.26%(c)
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,013.66 $11.35(c) 2.26%(c)
- -------------------------------------------------------------------------------------------
Class C
- -------------------------------------------------------------------------------------------
Actual(d) $1,000 $1,165.00 $12.20(c) 2.26%(c)
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,013.66 $11.35(c) 2.26%(c)
- -------------------------------------------------------------------------------------------
Class I
- -------------------------------------------------------------------------------------------
Actual(d) $1,000 $1,174.10 $ 5.69(c) 1.05%(c)
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,019.70 $ 5.29(c) 1.05%(c)
- -------------------------------------------------------------------------------------------
Class R4
- -------------------------------------------------------------------------------------------
Actual(d) $1,000 $1,169.70 $ 7.30(c) 1.35%(c)
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,018.20 $ 6.79(c) 1.35%(c)
- -------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 15
FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
MAY 1, 2010(a) OCT. 31, 2010 THE PERIOD(b) EXPENSE RATIO
- -------------------------------------------------------------------------------------------
Class Z
- -------------------------------------------------------------------------------------------
Actual(e) $1,000 $1,050.70 $ 1.14(c) 1.27%(c)
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,018.60 $ 6.39(c) 1.27%(c)
- -------------------------------------------------------------------------------------------
</Table>
(a) The beginning account value for Class Z is as of September 27, 2010 (when
shares became available) for actual expense calculations.
(b) Expenses are equal to the annualized expense ratio for each class as
indicated above, multiplied by the average account value over the period,
multiplied by 182/365 (to reflect the one over the period, multiplied by
32/365 (to reflect the number of days in the period).
(c) Columbia Management Investment Advisers, LLC (formerly known as RiverSource
Investments, LLC) (the Investment Manager) and its affiliates have
contractually agreed to waive certain fees and to absorb certain expenses
until December 31, 2011, unless sooner terminated at the sole discretion of
the Fund's Board, such that net expenses (excluding fees and expenses of
acquired funds), before giving effect to any performance incentive
adjustment, will not exceed 1.53% for Class A, 2.28% for Class B, 2.28% for
Class C, 1.08% for Class I, 1.38% for Class R4 and 1.28% for Class Z. Any
amounts waived will not be reimbursed by the Fund. This change is effective
January 1, 2011. Had this change been in place for the entire six month
period ended October 31, 2010, the actual expenses paid would have been
$8.65 for Class A, $12.63 for Class B, $12.68 for Class C, $6.23 for Class
I, $7.84 for Class R4 and $1.25 for Class Z; the hypothetical expenses paid
would have been $8.05 for Class A, $11.75 for Class B, $11.80 for Class C,
$5.79 for Class I, $7.29 for Class R4 and $6.99 for Class Z.
(d) Based on the actual return for the six months ended October 31, 2010:
+16.94% for Class A, +16.53% for Class B, +16.50% for Class C, +17.41% for
Class I and +16.97% for Class R4.
(e) Based on the actual return for the period from September 27, 2010 (when
shares became available) to October 31, 2010 of +5.07% for Class Z.
- --------------------------------------------------------------------------------
16 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
Columbia European Equity Fund
OCTOBER 31, 2010
(Percentages represent value of investments compared to net assets)
<Table>
<Caption>
ISSUER SHARES VALUE
COMMON STOCKS (97.0%)
BELGIUM (3.4%)
Anheuser-Busch InBev
NV 26,763 $1,676,895
Umicore 18,294 860,802
-----------
Total 2,537,697
- ---------------------------------------------
BERMUDA (1.0%)
SeaDrill Ltd. 25,537 773,690
- ---------------------------------------------
DENMARK (1.8%)
Novo Nordisk A/S,
Series B 12,881 1,355,591
- ---------------------------------------------
FINLAND (0.9%)
Outotec OYJ 14,943 697,303
- ---------------------------------------------
FRANCE (10.8%)
BNP Paribas 16,909 1,236,265
Edenred (a) 27,787 581,834
Legrand SA 21,316 822,684
LVMH Moet Hennessy
Louis Vuitton SA 9,636 1,509,580
Publicis Groupe SA 20,443 1,017,952
Safran SA 26,493 839,664
Schneider Electric
SA 6,826 968,696
Societe Generale 19,620 1,174,467
-----------
Total 8,151,142
- ---------------------------------------------
GERMANY (12.0%)
Aixtron AG 19,098 623,091
BASF SE 16,345 1,188,889
BMW AG 16,307 1,168,656
Fresenius Medical
Care AG & Co. KGaA 32,323 2,058,323
Infineon
Technologies AG (a) 88,402 695,653
Kabel Deutschland
Holding AG (a) 8,570 385,783
Linde AG 5,611 807,592
MAN SE 5,450 599,024
SAP AG 11,700 609,945
Siemens AG 8,185 934,710
-----------
Total 9,071,666
- ---------------------------------------------
ITALY (1.1%)
Saipem SpA 18,386 816,784
- ---------------------------------------------
NETHERLANDS (5.4%)
ASML Holding NV 24,204 798,435
ING Groep NV-CVA (a) 149,722 1,597,725
Koninklijke Philips
Electronics NV 27,540 832,616
Koninklijke Vopak NV 16,287 814,404
-----------
Total 4,043,180
- ---------------------------------------------
NORWAY (1.0%)
Telenor ASA 44,962 725,256
- ---------------------------------------------
SPAIN (2.4%)
Amadeus IT Holding
SA, Series A (a) 49,474 1,007,374
Inditex SA 9,815 819,473
-----------
Total 1,826,847
- ---------------------------------------------
SWEDEN (6.1%)
Assa Abloy AB,
Series B 28,717 735,959
Atlas Copco AB,
Series A 39,845 832,664
Autoliv, Inc., SDR 14,679 1,051,671
Swedish Match AB 43,183 1,206,890
TeliaSonera AB 91,190 761,031
-----------
Total 4,588,215
- ---------------------------------------------
SWITZERLAND (8.2%)
Credit Suisse Group
AG 22,905 946,036
Nestle SA 38,609 2,114,433
SGS SA 487 779,339
Sika AG 359 711,288
Swatch Group AG
(The) 14,332 996,046
Syngenta AG 2,319 641,365
-----------
Total 6,188,507
- ---------------------------------------------
TURKEY (2.3%)
BIM Birlesik
Magazalar AS 24,666 847,329
Turkiye Garanti
Bankasi AS 144,832 875,038
-----------
Total 1,722,367
- ---------------------------------------------
UNITED KINGDOM (40.6%)
Admiral Group PLC 66,855 1,745,975
Aggreko PLC 54,818 1,383,313
ARM Holdings PLC 111,928 651,509
BG Group PLC 96,360 1,876,585
BP PLC 252,883 1,725,210
British Airways PLC
(a) 203,326 881,856
</Table>
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 17
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
ISSUER SHARES VALUE
COMMON STOCKS (CONTINUED)
UNITED KINGDOM (CONT.)
British American
Tobacco PLC 28,721 $1,095,199
Burberry Group PLC 62,535 1,020,972
Carnival PLC 15,939 686,958
Carphone Warehouse
Group PLC (a) 228,406 1,114,324
Centamin Egypt Ltd.
(a) 274,599 761,135
Hargreaves Lansdown
PLC 124,718 936,171
HSBC Holdings PLC 67,581 702,834
IG Group Holdings
PLC 137,922 1,167,872
Lloyds Banking Group
PLC (a) 1,053,941 1,164,137
Lonmin PLC (a) 14,247 399,236
Prudential PLC 104,392 1,054,554
Rio Tinto PLC 40,537 2,621,316
Shire PLC 48,288 1,138,069
Standard Chartered
PLC 57,467 1,662,389
Tesco PLC 218,884 1,496,945
Tullow Oil PLC 74,832 1,420,765
Vodafone Group PLC 836,880 2,277,432
Weir Group PLC (The) 31,394 783,665
Xstrata PLC 40,421 783,303
-----------
Total 30,551,724
- ---------------------------------------------
TOTAL COMMON STOCKS
(Cost: $58,360,460) $73,049,969
- ---------------------------------------------
PREFERRED STOCKS (1.4%)
GERMANY (1.4%)
Volkswagen AG 7,001 $1,051,973
- ---------------------------------------------
TOTAL PREFERRED STOCKS
(Cost: $636,366) $1,051,973
- ---------------------------------------------
RIGHTS (0.1%)
UNITED KINGDOM (0.1%)
Standard Chartered
PLC (a) 7,183 $60,478
- ---------------------------------------------
TOTAL RIGHTS
(Cost: $--) $60,478
- ---------------------------------------------
MONEY MARKET FUND (2.3%)
Columbia Short-Term
Cash Fund, 0.241%
(b)(c) 1,758,836 $1,758,836
- ---------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $1,758,836) $1,758,836
- ---------------------------------------------
</Table>
<Table>
<Caption>
EFFECTIVE PAR/
ISSUER YIELD PRINCIPAL VALUE
INVESTMENTS OF CASH COLLATERAL RECEIVED
FOR SECURITIES ON LOAN (6.8%)
REPURCHASE AGREEMENTS (6.8%)
Cantor Fitzgerald & Co. (d)
dated 10/29/10, matures 11/01/10,
repurchase price
$2,000,040 0.240% $2,000,000 $2,000,000
Deutsche Bank AG (d)
dated 10/29/10, matures 11/01/10,
repurchase price
$3,101,503 0.230% 3,101,443 3,101,443
-----------
Total 5,101,443
- ------------------------------------------------------
TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR
SECURITIES ON LOAN
(Cost: $5,101,443) $5,101,443
- ------------------------------------------------------
TOTAL INVESTMENTS
(Cost: $65,857,105) $81,022,699
OTHER ASSETS & LIABILITIES, NET (5,698,671)
- ------------------------------------------------------
NET ASSETS $75,324,028
======================================================
</Table>
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
SUMMARY OF INVESTMENTS IN SECURITIES BY INDUSTRY
The following table represents the portfolio investments of the Fund by industry
classifications as a percentage of net assets at October 31, 2010:
<Table>
<Caption>
PERCENTAGE OF
INDUSTRY NET ASSETS VALUE(a)
- -----------------------------------------------------------------------
Aerospace & Defense 1.1% $839,665
Airlines 1.2 881,856
Auto Components 1.4 1,051,671
Automobiles 3.0 2,220,629
Beverages 2.2 1,676,895
Building Products 1.0 735,959
Capital Markets 2.5 1,882,207
Chemicals 5.6 4,209,936
Commercial Banks 9.1 6,875,607
Commercial Services & Supplies 2.6 1,965,147
Construction & Engineering 0.9 697,303
Diversified Financial Services 3.7 2,765,596
Diversified Telecommunication Services 2.0 1,486,287
Electrical Equipment 2.4 1,791,380
Energy Equipment & Services 2.1 1,590,474
Food & Staples Retailing 3.1 2,344,274
Food Products 2.8 2,114,433
Health Care Providers & Services 2.7 2,058,323
Hotels, Restaurants & Leisure 0.9 686,958
Industrial Conglomerates 2.3 1,767,326
Insurance 3.7 2,800,529
IT Services 1.3 1,007,374
Machinery 2.9 2,215,354
Media 1.9 1,403,735
Metals & Mining 6.1 4,564,989
Oil, Gas & Consumable Fuels 6.7 5,022,560
Pharmaceuticals 3.3 2,493,660
Professional Services 1.0 779,339
Semiconductors & Semiconductor Equipment 3.7 2,768,688
Software 0.8 609,945
Specialty Retail 2.6 1,933,797
Textiles, Apparel & Luxury Goods 4.7 3,526,599
Tobacco 3.1 2,302,089
Transportation Infrastructure 1.1 814,404
Wireless Telecommunication Services 3.0 2,277,432
Other(1) 9.1 6,860,279
- -----------------------------------------------------------------------
Total $81,022,699
- -----------------------------------------------------------------------
</Table>
(1) Cash & Cash Equivalents.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 19
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Non-income producing.
(b) Investments in affiliates during the year ended October 31, 2010:
<Table>
<Caption>
DIVIDENDS
SALES COST/ PAID/
BEGINNING PURCHASE PROCEEDS REALIZED ENDING INCOME
ISSUER COST COST FROM SALES GAIN/LOSS COST DISTRIBUTIONS VALUE
----------------------------------------------------------------------------------------------------------
Columbia Short-
Term Cash Fund $1,652,737 $25,021,927 $24,915,828 $-- $1,758,836 $1,512 $1,758,836
</Table>
(c) The rate shown is the seven-day current annualized yield at October 31,
2010.
(d) The table below represents securities received as collateral for repurchase
agreements. This collateral, which is generally high quality short-term
obligations, is deposited with the Fund's custodian and, pursuant to the
terms of the repurchase agreement, must have an aggregate market value
greater than or equal to the repurchase price plus accrued interest at all
times. The value of securities and/or cash held as collateral for
repurchase agreements is monitored on a daily basis to ensure the existence
of the proper level of collateral.
<Table>
<Caption>
CANTOR FITZGERALD & CO. (0.240%)
SECURITY DESCRIPTION VALUE
- -----------------------------------------------------------
Fannie Mae Grantor Trust $103
Fannie Mae Interest Strip 32,027
Fannie Mae Pool 249,157
Fannie Mae Principal Strip 5,802
Fannie Mae REMICS 299,973
Fannie Mae Whole Loan 4,940
Federal National Mortgage Association 12,096
FHLMC Multifamily Structured Pass Through
Certificates 79
FHLMC Structured Pass Through Securities 2,314
Freddie Mac Coupon Strips 218
Freddie Mac Non Gold Pool 120,441
Freddie Mac Reference REMIC 1,678
Freddie Mac REMICS 130,798
Freddie Mac Strips 69,254
Ginnie Mae I Pool 269,702
Ginnie Mae II Pool 506,605
Government National Mortgage Association 175,891
United States Treasury Inflation Indexed Bonds 20,255
United States Treasury Strip Coupon 104,650
United States Treasury Strip Principal 34,017
- -----------------------------------------------------------
Total market value of collateral securities $2,040,000
- -----------------------------------------------------------
</Table>
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF
INVESTMENTS (CONTINUED)
<Table>
<Caption>
DEUTSCHE BANK AG (0.230%)
SECURITY DESCRIPTION VALUE
- -----------------------------------------------------------
Fannie Mae Pool $3,163,472
- -----------------------------------------------------------
Total market value of collateral securities $3,163,472
- -----------------------------------------------------------
</Table>
ABBREVIATION LEGEND
<Table>
SDR Swedish Depositary Receipt
</Table>
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 21
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
FAIR VALUE MEASUREMENTS
Generally accepted accounting principles (GAAP) require disclosure regarding the
inputs and valuation techniques used to measure fair value and any changes in
valuation inputs or techniques. In addition, investments shall be disclosed by
major category.
The Fund categorizes its fair value measurements according to a three-level
hierarchy that maximizes the use of observable inputs and minimizes the use of
unobservable inputs by prioritizing that the most observable input be used when
available. Observable inputs are those that market participants would use in
pricing an investment based on market data obtained from sources independent of
the reporting entity. Unobservable inputs are those that reflect the Fund's
assumptions about the information market participants would use in pricing an
investment. An investment's level within the fair value hierarchy is based on
the lowest level of any input that is deemed significant to the asset or
liability's fair value measurement. The input levels are not necessarily an
indication of the risk or liquidity associated with investments at that level.
For example, certain U.S. government securities are generally high quality and
liquid, however, they are reflected as Level 2 because the inputs used to
determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in the three broad levels listed below:
- Level 1 -- Valuations based on quoted prices for investments in active
markets that the Fund has the ability to access at the measurement date
(to include NAV for open-end mutual funds). Valuation adjustments are not
applied to Level 1 investments.
- Level 2 -- Valuations based on other significant observable inputs
(including quoted prices for similar securities, interest rates,
prepayment speeds, credit risks, etc.).
- Level 3 -- Valuations based on significant unobservable inputs (including
the Fund's own assumptions and judgment in determining the fair value of
investments).
Inputs that are used in determining fair value of an investment may include
price information, credit data, volatility statistics, and other factors. These
inputs can be either observable or unobservable. The availability of observable
inputs can vary between investments, and is affected by various factors such as
the type of investment, and the volume and level of activity for that investment
or similar investments in the marketplace. The inputs will be considered by the
Fund Administrator, along with any other relevant factors in the calculation of
an investment's fair value. The Fund uses prices and inputs that are current as
of the measurement date, which may include periods of market dislocations.
During these periods, the availability of prices and inputs may be reduced for
many investments. This condition could cause an investment to be reclassified
between the various levels within the hierarchy.
Non-U.S. equity securities actively traded in foreign markets may be reflected
in Level 2 despite the availability of closing prices, because the Fund
evaluates and determines whether those closing prices reflect fair value at the
close of the New York Stock Exchange (NYSE) or require adjustment, as described
in Note 2 to the financial statements -- Security Valuation.
Investments falling into the Level 3 category are primarily supported by quoted
prices from brokers and dealers participating in the market for those
investments. However, these may be classified as
- --------------------------------------------------------------------------------
22 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
FAIR VALUE MEASUREMENTS (CONTINUED)
Level 3 investments due to lack of market transparency and corroboration to
support these quoted prices. Additionally, valuation models may be used as the
pricing source for any remaining investments classified as Level 3. These models
rely on one or more significant unobservable inputs and/or significant
assumptions by the Fund Administrator. Inputs used in valuations may include,
but are not limited to, financial statement analysis, capital account balances,
discount rates and estimated cash flows, and comparable company data.
The following table is a summary of the inputs used to value the Fund's
investments as of October 31, 2010:
<Table>
<Caption>
FAIR VALUE AT OCTOBER 31, 2010
-----------------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION(a) IDENTICAL ASSETS(b) INPUTS INPUTS TOTAL
- ---------------------------------------------------------------------------------------------
Equity Securities
Common Stocks $73,049,969 $-- $-- $73,049,969
Preferred Stocks 1,051,973 -- -- 1,051,973
Rights 60,478 -- -- 60,478
- ---------------------------------------------------------------------------------------------
Total Equity Securities 74,162,420 -- -- 74,162,420
- ---------------------------------------------------------------------------------------------
Other
Affiliated Money
Market Fund(c) 1,758,836 -- -- 1,758,836
Investments of Cash
Collateral Received
for Securities on
Loan -- 5,101,443 -- 5,101,443
- ---------------------------------------------------------------------------------------------
Total Other 1,758,836 5,101,443 -- 6,860,279
- ---------------------------------------------------------------------------------------------
Investments in
Securities 75,921,256 5,101,443 -- 81,022,699
- ---------------------------------------------------------------------------------------------
Total $75,921,256 $5,101,443 $-- $81,022,699
- ---------------------------------------------------------------------------------------------
</Table>
(a) See the Portfolio of Investments for all investment classifications not
indicated in the table.
(b) Includes certain securities trading outside the U.S. whose values were
adjusted at October 31, 2009 as a result of significant market movements
following the close of local trading, and were classified as Level 2.
Values were not adjusted as of October 31, 2010. Therefore, these
investment securities were classified as Level 1 instead of Level 2 at
October 31, 2010. The amount of securities transferred out of Level 2 into
Level 1 during the period was $32,508,124. Transfers between Levels 1 and 2
are determined based on the fair value at the beginning of the period for
security positions held throughout the period.
(c) Money market fund that is a sweep investment for cash balances in the Fund
at October 31, 2010.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 23
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 800.SEC.0330); and
(iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q,
can be obtained without charge, upon request, by calling 800.345.6611.
- --------------------------------------------------------------------------------
24 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
STATEMENT OF ASSETS AND LIABILITIES --------------------------------------------
OCTOBER 31, 2010
<Table>
<Caption>
ASSETS
Investments, at value
Unaffiliated issuers* (identified cost $58,996,826) $ 74,162,420
Affiliated issuers (identified cost $1,758,836) 1,758,836
Investment of cash collateral received for securities on loan
(identified cost $5,101,443) 5,101,443
- -------------------------------------------------------------------------------
Total investments (identified cost $65,857,105) 81,022,699
Foreign currency (identified cost $2,943) 3,042
Receivable for:
Capital shares sold 28,557
Investments sold 462,183
Dividends 15,725
Interest 4,600
Reclaims 170,514
Expense reimbursement due from Investment Manager 3,438
- -------------------------------------------------------------------------------
Total assets 81,710,758
- -------------------------------------------------------------------------------
LIABILITIES
Due upon return of securities on loan 5,101,443
Payable for:
Investments purchased 1,052,892
Capital shares purchased 150,058
Investment management fees 1,654
Distribution fees 629
Transfer agent fees 1,980
Administration fees 165
Other expenses 77,909
- -------------------------------------------------------------------------------
Total liabilities 6,386,730
- -------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $ 75,324,028
- -------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 25
STATEMENT OF ASSETS AND LIABILITIES (continued) --------------------------------
OCTOBER 31, 2010
<Table>
<Caption>
REPRESENTED BY
Capital stock -- $ .01 par value $ 129,972
Additional paid-in capital 88,111,079
Undistributed net investment income 386,089
Accumulated realized loss (28,474,731)
Unrealized appreciation (depreciation) on:
Investments 15,165,594
Foreign currency translations 6,025
- -------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding
capital stock $ 75,324,028
- -------------------------------------------------------------------------------
*Value of securities on loan $ 4,861,773
- -------------------------------------------------------------------------------
Net assets
Class A $ 69,831,477
Class B $ 4,050,968
Class C $ 1,405,823
Class I $ 7,743
Class R4 $ 25,391
Class Z $ 2,626
Shares outstanding
Class A 12,044,258
Class B 701,073
Class C 245,717
Class I 1,336
Class R4 4,385
Class Z 453
Net asset value per share
Class A(a) $ 5.80
Class B $ 5.78
Class C $ 5.72
Class I $ 5.80
Class R4 $ 5.79
Class Z $ 5.80
- -------------------------------------------------------------------------------
</Table>
(a) The maximum offering price per share for Class A is $6.15. The offering
price is calculated by dividing the net asset value by 1.0 minus the maximum
sales charge of 5.75%.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
26 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
STATEMENT OF OPERATIONS --------------------------------------------------------
YEAR ENDED OCTOBER 31, 2010
<Table>
<Caption>
NET INVESTMENT INCOME
Income:
Dividends $ 1,582,785
Dividends from affiliates 1,512
Income from securities lending -- net 58,044
Foreign taxes withheld (191,161)
- ------------------------------------------------------------------------------
Total income 1,451,180
- ------------------------------------------------------------------------------
Expenses:
Investment management fees 552,061
Distribution fees
Class A 160,871
Class B 53,686
Class C 12,402
Transfer agent fees
Class A 188,276
Class B 16,960
Class C 3,722
Class R4 18
Administration fees 56,787
Plan administration fees
Class R4 50
Compensation of board members 2,094
Custodian fees 30,680
Printing and postage fees 38,245
Registration fees 74,005
Professional fees 34,613
Other 9,537
- ------------------------------------------------------------------------------
Total expenses 1,234,007
Fees waived or expenses reimbursed by Investment Manager and its
affiliates (184,076)
- ------------------------------------------------------------------------------
Total net expenses 1,049,931
- ------------------------------------------------------------------------------
Net investment income 401,249
- ------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Investments 6,430,270
Foreign currency transactions (27,997)
Forward foreign currency exchange contracts 14,274
- ------------------------------------------------------------------------------
Net realized gain 6,416,547
Net change in unrealized appreciation (depreciation) on:
Investments 6,498,570
Foreign currency translations 5,249
- ------------------------------------------------------------------------------
Net change in unrealized appreciation 6,503,819
- ------------------------------------------------------------------------------
Net realized and unrealized gain 12,920,366
- ------------------------------------------------------------------------------
Net increase in net assets resulting from operations $13,321,615
- ------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 27
STATEMENTS OF CHANGES IN NET
ASSETS ----------------------------------------------------------------------
<Table>
<Caption>
YEAR ENDED OCTOBER 31,
2010 2009
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS
Net investment income $ 401,249 $ 1,070,263
Net realized gain (loss) 6,416,547 (16,167,526)
Net change in unrealized appreciation 6,503,819 29,560,125
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 13,321,615 14,462,862
- --------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (1,000,172) (788,537)
Class B (22,699) --
Class C (10,493) (1,022)
Class I (126) (113)
Class R4 (304) (297)
- --------------------------------------------------------------------------------------------
Total distributions to shareholders (1,033,794) (789,969)
- --------------------------------------------------------------------------------------------
Decrease in net assets from capital share transactions (8,985,725) (10,689,983)
- --------------------------------------------------------------------------------------------
Proceeds from regulatory settlement (see Note 9) -- 70,652
- --------------------------------------------------------------------------------------------
Total increase in net assets 3,302,096 3,053,562
Net assets at beginning of year 72,021,932 68,968,370
- --------------------------------------------------------------------------------------------
Net assets at end of year $75,324,028 $ 72,021,932
- --------------------------------------------------------------------------------------------
Undistributed net investment income $ 386,089 $ 961,705
- --------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
28 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS (continued) -----
<Table>
<Caption>
YEAR ENDED OCTOBER 31,
2010 2009
------------------------- -------------------------
SHARES DOLLARS ($) SHARES DOLLARS ($)
CAPITAL STOCK ACTIVITY
CLASS A SHARES
Subscriptions 2,129,476 10,777,670 2,433,564 10,027,749
Conversions from Class B 304,151 1,545,088 858,356 3,897,259
Distributions reinvested 196,524 974,758 206,157 771,028
Redemptions (3,897,263) (19,493,353) (5,121,201) (19,626,666)
- -----------------------------------------------------------------------------------------------------------------------
Net decrease (1,267,112) (6,195,837) (1,623,124) (4,930,630)
- -----------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Subscriptions 104,688 529,881 231,223 928,606
Distributions reinvested 4,410 21,913 -- --
Conversions to Class A (304,751) (1,545,088) (862,157) (3,897,259)
Redemptions (372,204) (1,833,615) (736,777) (2,764,161)
- -----------------------------------------------------------------------------------------------------------------------
Net decrease (567,857) (2,826,909) (1,367,711) (5,732,814)
- -----------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Subscriptions 63,917 321,587 52,773 214,721
Distributions reinvested 1,921 9,471 256 954
Redemptions (60,828) (300,303) (62,778) (243,342)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 5,010 30,755 (9,749) (27,667)
- -----------------------------------------------------------------------------------------------------------------------
CLASS R4 SHARES
Subscriptions 1,300 6,366 2,946 13,524
Distributions reinvested 51 255 66 244
Redemptions (677) (2,855) (2,661) (12,640)
- -----------------------------------------------------------------------------------------------------------------------
Net increase 674 3,766 351 1,128
- -----------------------------------------------------------------------------------------------------------------------
CLASS Z SHARES
Subscriptions 453 2,500 -- --
- -----------------------------------------------------------------------------------------------------------------------
Net increase 453 2,500 -- --
- -----------------------------------------------------------------------------------------------------------------------
TOTAL NET INCREASE (DECREASE) (1,828,832) (8,985,725) 3,000,233 10,689,983
- -----------------------------------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 29
FINANCIAL HIGHLIGHTS -----------------------------------------------------------
The following tables are intended to help you understand the Fund's financial
performance. Certain information reflects financial results for a single share
of a class held for the periods shown. For periods ended 2007 and after, per
share net investment income (loss) amounts are calculated based on average
shares outstanding during the period. Total returns assume reinvestment of all
dividends and distributions. Total returns do not reflect payment of sales
charges, if any, and are not annualized for periods of less than one year.
<Table>
<Caption>
YEAR ENDED OCT. 31,
CLASS A ------------------------------------------------------------
PER SHARE DATA 2010 2009 2008 2007 2006
Net asset value, beginning of period $4.86 $3.88 $6.83 $5.39 $4.19
- ---------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .03 .07 .06 .04 .05
Net realized and unrealized gain (loss) on
investments .98 .96 (2.96) 1.47 1.22
- ---------------------------------------------------------------------------------------------------------------
Total from investment operations 1.01 1.03 (2.90) 1.51 1.27
- ---------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (.07) (.06) (.05) (.07) (.07)
- ---------------------------------------------------------------------------------------------------------------
Proceeds from regulatory settlement -- .01 -- -- --
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.80 $4.86 $3.88 $6.83 $5.39
- ---------------------------------------------------------------------------------------------------------------
TOTAL RETURN 21.14% 27.11%(a) (42.70%) 28.24% 30.63%
- ---------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(b)
Expenses prior to fees waived or expenses
reimbursed 1.67% 1.93% 1.58% 1.43% 1.52%
- ---------------------------------------------------------------------------------------------------------------
Net expenses after fees waived or expenses
reimbursed(c) 1.41% 1.61% 1.58% 1.43% 1.52%
- ---------------------------------------------------------------------------------------------------------------
Net investment income 0.63% 1.79% 0.95% 0.70% 1.00%
- ---------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $69,831 $64,717 $57,916 $114,600 $85,143
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover 115% 154% 180% 114% 64%
- ---------------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
30 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31,
CLASS B ---------------------------------------------------------
PER SHARE DATA 2010 2009 2008 2007 2006
Net asset value, beginning of period $4.83 $3.82 $6.73 $5.31 $4.12
- ------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.00)(d) .05 .02 .00(d) .02
Net realized and unrealized gain (loss) on
investments .97 .95 (2.93) 1.44 1.20
- ------------------------------------------------------------------------------------------------------------
Total from investment operations .97 1.00 (2.91) 1.44 1.22
- ------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (.02) -- -- (.02) (.03)
- ------------------------------------------------------------------------------------------------------------
Proceeds from regulatory settlement -- .01 -- -- --
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.78 $4.83 $3.82 $6.73 $5.31
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN 20.10% 26.44%(a) (43.24%) 27.28% 29.74%
- ------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(b)
Expenses prior to fees waived or expenses
reimbursed 2.41% 2.74% 2.32% 2.19% 2.29%
- ------------------------------------------------------------------------------------------------------------
Net expenses after fees waived or expenses
reimbursed(c) 2.16% 2.40% 2.32% 2.19% 2.29%
- ------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.06%) 1.22% 0.28% (0.03%) 0.28%
- ------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $4,051 $6,124 $10,080 $30,143 $29,439
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover 115% 154% 180% 114% 64%
- ------------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 31
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31,
CLASS C -------------------------------------------------------
PER SHARE DATA 2010 2009 2008 2007 2006
Net asset value, beginning of period $4.81 $3.81 $6.71 $5.30 $4.12
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.01) .04 .01 .00(d) .02
Net realized and unrealized gain (loss) on
investments .96 .95 (2.90) 1.44 1.19
- ----------------------------------------------------------------------------------------------------------
Total from investment operations .95 .99 (2.89) 1.44 1.21
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (.04) (.00)(d) (.01) (.03) (.03)
- ----------------------------------------------------------------------------------------------------------
Proceeds from regulatory settlement -- .01 -- -- --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.72 $4.81 $3.81 $6.71 $5.30
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN 19.96% 26.39%(a) (43.10%) 27.21% 29.65%
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(b)
Expenses prior to fees waived or expenses
reimbursed 2.43% 2.69% 2.33% 2.19% 2.29%
- ----------------------------------------------------------------------------------------------------------
Net expenses after fees waived or expenses
reimbursed(c) 2.17% 2.37% 2.33% 2.19% 2.29%
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.10%) 1.07% 0.25% (0.05%) 0.24%
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $1,406 $1,157 $954 $2,138 $1,489
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover 115% 154% 180% 114% 64%
- ----------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
32 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31,
CLASS I -------------------------------------------------------
PER SHARE DATA 2010 2009 2008 2007 2006
Net asset value, beginning of period $4.86 $3.89 $6.84 $5.40 $4.20
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .05 .09 .09 .07 .06
Net realized and unrealized gain (loss) on
investments .98 .95 (2.96) 1.46 1.23
- ----------------------------------------------------------------------------------------------------------
Total from investment operations 1.03 1.04 (2.87) 1.53 1.29
- ----------------------------------------------------------------------------------------------------------
LESS DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (.09) (.08) (.08) (.09) (.09)
- ----------------------------------------------------------------------------------------------------------
Proceeds from regulatory settlement -- .01 -- -- --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.80 $4.86 $3.89 $6.84 $5.40
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN 21.61% 27.78%(a) (42.38%) 28.78% 31.34%
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(b)
Expenses prior to fees waived or expenses
reimbursed 1.14% 1.31% 1.08% 0.95% 0.99%
- ----------------------------------------------------------------------------------------------------------
Net expenses after fees waived or expenses
reimbursed(c) 0.96% 1.16% 1.08% 0.95% 0.99%
- ----------------------------------------------------------------------------------------------------------
Net investment income 1.07% 2.27% 1.50% 1.17% 1.55%
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $8 $6 $5 $3 $15
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover 115% 154% 180% 114% 64%
- ----------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 33
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31,
CLASS R4 -------------------------------------------------------
PER SHARE DATA 2010 2009 2008 2007 2006
Net asset value, beginning of period $4.86 $3.90 $6.84 $5.41 $4.20
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .04 .07 .08 .00(d) .05
Net realized and unrealized gain (loss) on
investments .97 .97 (2.94) 1.51 1.24
- ----------------------------------------------------------------------------------------------------------
Total from investment operations 1.01 1.04 (2.86) 1.51 1.29
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (.08) (.09) (.08) (.08) (.08)
- ----------------------------------------------------------------------------------------------------------
Proceeds from regulatory settlement -- .01 -- -- --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.79 $4.86 $3.90 $6.84 $5.41
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN 21.08% 27.57%(a) (42.29%) 28.16% 31.10%
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(b)
Expenses prior to fees waived or expenses
reimbursed 1.49% 1.58% 1.36% 1.26% 1.31%
- ----------------------------------------------------------------------------------------------------------
Net expenses after fees waived or expenses
reimbursed(c) 1.27% 1.39% 1.11% 1.26% 1.31%
- ----------------------------------------------------------------------------------------------------------
Net investment income 0.79% 1.79% 1.35% 0.04% 1.05%
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $25 $18 $13 $7 $4
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover 115% 154% 180% 114% 64%
- ----------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
34 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
YEAR ENDED
CLASS Z OCT. 31,
PER SHARE DATA 2010(e)
Net asset value, beginning of period $5.52
- -------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .00(d)
Net realized and unrealized gain on
investments .28
- -------------------------------------------------------------
Total from investment operations .28
- -------------------------------------------------------------
Net asset value, end of period $5.80
- -------------------------------------------------------------
TOTAL RETURN 5.07%
- -------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(b)
Expenses prior to fees waived or expenses
reimbursed 1.96%
- -------------------------------------------------------------
Net expenses after fees waived or expenses
reimbursed(c) 1.27%
- -------------------------------------------------------------
Net investment income 0.12%
- -------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $3
- -------------------------------------------------------------
Portfolio turnover 115%
- -------------------------------------------------------------
</Table>
NOTES TO FINANCIAL HIGHLIGHTS
(a) During the year ended October 31, 2009, the Fund received proceeds from a
regulatory settlement. Had the Fund not received these proceeds, the total
return would have been lower by 0.12%.
(b) Expense ratios include the impact of a performance incentive adjustment, if
any. In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the reported expense ratios.
(c) The Investment Manager and its affiliates agreed to waive/reimburse certain
fees and expenses (excluding fees and expenses of acquired funds), before
giving effect to any performance incentive adjustment.
(d) Rounds to less than $0.01.
(e) For the period from September 27, 2010 (when shares became available) to
October 31, 2010.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 35
NOTES TO FINANCIAL STATEMENTS --------------------------------------------------
OCTOBER 31, 2010
NOTE 1. ORGANIZATION
Columbia European Equity Fund (formerly known as Threadneedle European Equity
Fund) (the Fund), a series of RiverSource International Series, Inc. (the
Corporation), is a diversified Fund. The Corporation is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an open-end
management investment company.
FUND SHARES
The Corporation has 10 billion authorized shares of capital stock that can be
allocated among the separate series as designated by the Corporation's Board of
Directors (the Board), and the Fund offers Class A, Class B, Class C, Class I,
Class R4 and Class Z shares. All share classes have identical voting, dividend
and liquidation rights. Each share class has its own expense structure and sales
charges, as applicable.
Class A shares are subject to a maximum front-end sales charge of 5.75% based on
the investment amount. Class A shares purchased without an initial sales charge
in accounts aggregating $1 million at the time of purchase are subject to a
1.00% contingent deferred sales charge (CDSC) if the shares are sold within 18
months of purchase, charged as follows: 1.00% CDSC if redeemed within 12 months
of purchase, and 0.50% CDSC if redeemed more than 12, but less than 18, months
after purchase.
The Fund no longer accepts investments by new or existing investors in the
Fund's Class B shares, except in connection with the reinvestment of any
dividend and/or capital gain distributions in Class B shares of the Fund and
exchanges by existing Class B shareholders of other funds within the Columbia
Family of Funds. Class B shares may be subject to a maximum CDSC of 5.00% based
upon the holding period after purchase. Class B shares will generally convert to
Class A shares eight years after purchase.
Class C shares are subject to a 1.00% CDSC on shares redeemed within one year of
purchase.
Class I shares are not subject to sales charges and are available only to the
Columbia Family of Funds.
Class R4 shares are not subject to sales charges, however, the class is closed
to new investors effective December 31, 2010.
Class Z shares are not subject to sales charges and are available only to
certain investors, as described in the Fund's prospectus. Class Z shares became
effective September 27, 2010.
- --------------------------------------------------------------------------------
36 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles (GAAP) requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
SECURITY VALUATION
All securities are valued at the close of business of the New York Stock
Exchange (NYSE). Equity securities are valued at the last quoted sales price on
the principal exchange or market on which they trade, except for securities
traded on the NASDAQ Stock Market, which are valued at the NASDAQ official close
price. Unlisted securities or listed securities for which there were no sales
during the day are valued at the mean of the latest quoted bid and asked prices
on such exchanges or markets.
Foreign securities are valued based on quotations from the principal market in
which such securities are normally traded. However, many securities markets and
exchanges outside the U.S. close prior to the close of the NYSE; 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.
Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise
Financial), parent company of Columbia Management Investment Advisors, LLC
(formerly known as RiverSource Investments, LLC) (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. The third party pricing service takes
into account multiple factors, including, but not limited to, movements in the
U.S. securities markets, certain depositary receipts, futures contracts and
foreign exchange rates that have occurred subsequent to the close of the foreign
exchange, to determine a good faith estimate that reasonably reflects the
current market conditions as of the close of the NYSE. The fair value of a
security is likely to be different from the quoted or published price, if
available.
Short-term securities purchased within 60 days to maturity are valued at
amortized cost, which approximates fair value. The value of short-term
securities originally purchased with maturities greater than 60 days is
determined based on an amortized value to par upon reaching 60 days to maturity.
Short-term
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 37
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
OCTOBER 31, 2010
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.
Investments in other open-end investment companies, including money market
funds, are valued at net asset value.
Foreign currency contracts are marked-to-market daily based upon foreign
currency exchange rates provided by a pricing service.
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.
FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION
The values of all assets and liabilities denominated in foreign currencies are
translated into U.S. dollars at that day's exchange rates. Net realized and
unrealized gains (losses) on foreign currency transactions and translations
include gains (losses) arising from the fluctuation in exchange rates between
trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the
accrual and payment dates on dividends, interest income and foreign withholding
taxes.
For financial statement purposes, the Fund does not distinguish that portion of
gains (losses) on investments which is due to changes in foreign exchange rates
from that which is due to changes in market prices of the investments. Such
fluctuations are included with the net realized and unrealized gains (losses) on
investments in the Statement of Operations.
DERIVATIVE INSTRUMENTS
The Fund invests in certain derivative instruments as detailed below to meet its
investment objectives. Derivative instruments are transactions whose values
depend on, or are derived from, in whole or in part, the value of one or more
other assets, such as securities, currencies, commodities or indices. Derivative
instruments may be used to maintain cash reserves while maintaining exposure to
certain other assets, to offset anticipated declines in values of investments,
to facilitate trading, to reduce transaction costs and to pursue higher
investment returns. The Fund may also use derivative instruments to mitigate
certain investment risks, such as foreign currency exchange rate risk, interest
rate risk and credit risk. Derivatives may involve various risks, including the
potential
- --------------------------------------------------------------------------------
38 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
inability of the counterparty to fulfill its obligation under the terms of the
contract, the potential for an illiquid secondary market and the potential for
market movements which may expose the Fund to gains or losses in excess of the
amount shown in the Statement of Assets and Liabilities.
The Fund and any counterparty are required to maintain an agreement that
requires the Fund and that counterparty to monitor (on a daily basis) the net
fair value of all derivatives entered into pursuant to the contract between the
Fund and such counterparty. If the net fair value of such derivatives between
the Fund and that counterparty exceeds a certain threshold (as defined in the
agreement), the Fund or the counterparty (as the case may be) is required to
post cash and/or securities as collateral. Fair values of derivatives presented
in the financial statements are not netted with the fair value of other
derivatives or with any collateral amounts posted by the Fund or any
counterparty.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Forward foreign currency exchange contracts are agreements between two parties
to buy and sell a currency at a set price on a future date. These contracts are
intended to be used to minimize the exposure to foreign exchange rate
fluctuations during the period between the trade and settlement dates of the
contract. The Fund utilized forward foreign currency exchange contracts to hedge
the currency exposure associated with some or all of the Fund's securities.
The market values of forward foreign currency exchange contracts fluctuate with
changes in foreign currency exchange rates. The Fund will record a realized gain
or loss when the forward foreign currency exchange contract is closed.
The use of forward foreign currency exchange contracts does not eliminate
fluctuations in the prices of the Fund's portfolio securities. The risks of
forward foreign currency contracts include movement in the values of the foreign
currencies relative to the U.S. dollar (or other foreign currencies) and the
possibility that counterparties will not complete their contractual obligations,
which may be in excess of the amount reflected, if any, in the Statement of
Assets and Liabilities.
EFFECTS OF DERIVATIVE TRANSACTIONS IN THE FINANCIAL STATEMENTS
The following tables are intended to provide additional information about the
effect of derivatives on the financial statements of the Fund including: the
fair value of derivatives by risk category and the location of those fair values
in the Statement of Assets and Liabilities; the impact of derivative
transactions on the Fund's operations over the period including realized gains
or losses and unrealized gains or losses. The derivative schedules following the
Portfolio of
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 39
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
OCTOBER 31, 2010
Investments present additional information regarding derivative instruments
outstanding at the end of the period, if any.
At October 31, 2010, the Fund had no outstanding derivatives.
EFFECT OF DERIVATIVE INSTRUMENTS IN THE FUND'S STATEMENT OF OPERATIONS FOR THE
YEAR ENDED OCTOBER 31, 2010:
<Table>
<Caption>
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME
- --------------------------------------------------------------------
FORWARD FOREIGN
RISK EXPOSURE CATEGORY CURRENCY EXCHANGE CONTRACTS
- --------------------------------------------------------------------------
Foreign exchange contracts $14,274
- --------------------------------------------------------------------------
</Table>
<Table>
<Caption>
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES
RECOGNIZED IN INCOME
- --------------------------------------------------------------------
FORWARD FOREIGN
RISK EXPOSURE CATEGORY CURRENCY EXCHANGE CONTRACTS
- --------------------------------------------------------------------------
Foreign exchange contracts $--
- --------------------------------------------------------------------------
</Table>
VOLUME OF DERIVATIVE ACTIVITY
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
At October 31, 2010, the Fund had no outstanding forward foreign currency
contracts. The average gross notional amount of forward foreign currency
exchange contracts opened, and subsequently closed, was $200,000 for the year
ended October 31, 2010.
REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement transactions with institutions that
the Fund's Investment Manager has determined are creditworthy. The Fund, through
its custodian, receives delivery of the underlying securities collateralizing a
repurchase agreement. The Investment Manager is responsible for determining that
the collateral is at least equal, at all times, to the value of the repurchase
obligation including interest. A repurchase agreement transaction involves
certain risks in the event of default or insolvency of the counterparty. These
risks include possible delays in or restrictions on the Fund's ability to
dispose of the underlying securities and a possible decline in the value of the
underlying securities during the period while the Fund seeks to assert its
rights.
SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date. Cost is determined
and gains (losses) are based upon the specific identification method for both
financial statement and federal income tax purposes.
- --------------------------------------------------------------------------------
40 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
INCOME RECOGNITION
Corporate actions and dividend income are recorded net of any non-reclaimable
tax withholdings, on the ex-dividend date or upon receipt of ex-dividend
notification in the case of certain foreign securities.
EXPENSES
General expenses of the Corporation are allocated to the Fund and other funds of
the Corporation based upon relative net assets or other expense allocation
methodologies determined by the nature of the expense. Expenses directly
attributable to a specific class of shares are charged to that share class.
Expenses directly attributable to the Fund are charged to the Fund.
DETERMINATION OF CLASS NET ASSET VALUE
All income, expenses (other than class-specific expenses, which are charged to
that share class, as shown in the Statement of Operations) and realized and
unrealized gains (losses) are allocated to each class of the Fund on a daily
basis, based on the relative net assets of each class, for purposes of
determining the net asset value of each class.
FEDERAL INCOME TAX STATUS
The Fund intends to qualify each year as a "regulated investment company" under
Subchapter M of the Internal Revenue Code, as amended, and will distribute
substantially all of its taxable income for its tax year, and as such will not
be subject to federal income taxes. In addition, the Fund intends to distribute
in each calendar year substantially all of its net investment income, capital
gains and certain other amounts, if any, such that the Fund should not be
subject to federal excise tax. Therefore, no federal income or excise tax
provision is recorded.
FOREIGN TAX
The Fund may be subject to foreign taxes on income, gains on investments or
currency repatriation, a portion of which may be recoverable. The Fund will
accrue such taxes and recoveries, as applicable, based upon its current
interpretation of tax rules and regulations that exist in the markets in which
it invests.
Realized gains in certain countries may be subject to foreign taxes at the Fund
level, at rates ranging from approximately 10% to 15%. The Fund accrues for such
foreign taxes on net realized and unrealized gains at the appropriate rate for
each jurisdiction.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 41
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
OCTOBER 31, 2010
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income are declared and paid annually. Net
realized capital gains, if any, are distributed along with the income dividend.
Income distributions and capital gain distributions are determined in accordance
with federal income tax regulations which may differ from GAAP.
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.
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
INVESTMENT MANAGEMENT FEES
Under an Investment Management Services Agreement (IMSA), the Investment Manager
is responsible for the management of the Fund. Day-to-day portfolio management
of the Fund is provided by the Fund's subadviser. See Subadvisory Agreement
below. The management fee is an annual fee that is equal to a percentage of the
Fund's average daily net assets that declines from 0.80% to 0.57% as the Fund's
net assets increase. The fee may be adjusted upward or downward by a performance
incentive adjustment (PIA) 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
decreased the management fee by $15,810 for the year ended October 31, 2010. The
management fee for the year ended October 31, 2010 was 0.78% of the Fund's
average daily net assets, including the adjustment under the terms of the
performance incentive arrangement.
In September 2010, the Board approved, subject to approval by shareholders, an
amended IMSA that would eliminate the Fund's PIA. If approved by Fund
shareholders, the IMSA proposal is expected to be effective in the second
quarter of 2011. If not approved, the current IMSA will stay in effect including
any adjustment under the terms of the PIA.
- --------------------------------------------------------------------------------
42 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
SUBADVISORY AGREEMENT
The Investment Manager has a Subadvisory Agreement with Threadneedle
International Limited (Threadneedle), an affiliate of the Investment Manager and
an indirect wholly-owned subsidiary of Ameriprise Financial, to subadvise the
assets of the Fund. The Investment Manager contracts with and compensates
Threadneedle to manage the investment of the Fund's assets.
ADMINISTRATION FEES
Under an Administrative Services Agreement, the Fund pays Ameriprise Financial
an annual fee for administration and accounting services equal to a percentage
of the Fund's average daily net assets that declines from 0.08% to 0.05% as the
Fund's net assets increase. The fee for the year ended October 31, 2010 was
0.08% of the Fund's average daily net assets.
OTHER FEES
Other expenses are for, among other things, certain expenses of the Fund or the
Board including: Fund boardroom and office expense, employee compensation,
employee health and retirement benefits, and certain other expenses. Payment of
these Fund and Board expenses is facilitated by a company providing limited
administrative services to the Fund and the Board. For the year ended October
31, 2010, other expenses paid to this company were $115.
COMPENSATION OF BOARD MEMBERS
Under a Deferred Compensation Plan (the Plan), the board members who are not
"interested persons" of the Fund as defined under the 1940 Act may defer receipt
of their compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the Fund or certain other funds managed
by the Investment Manager. 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 AGENT FEES
Under a Transfer Agency Agreement, Columbia Management Investment Services Corp.
(formerly known as RiverSource Service Corporation) (the Transfer Agent) is
responsible for providing transfer agency services to the Fund.
Prior to September 7, 2010, the Transfer Agent received annual account-based
service fees from Class A, Class B and Class C shares which amount varied by
class and annual asset-based service fees based on the Fund's average daily net
assets attributable to Class R4 shares. In addition, the Transfer Agent charged
an annual fee per inactive account and received reimbursement from the Fund for
certain out-of-pocket expenses.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 43
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
OCTOBER 31, 2010
Under a new Transfer Agency Agreement effective September 7, 2010, the Transfer
Agent has contracted with Boston Financial Data Services (BFDS) to serve as sub-
transfer agent. The Transfer Agent receives monthly account-based service fees
based on the number of open accounts and is reimbursed by the Fund for the fees
and expenses the Transfer Agent pays to financial intermediaries that maintain
omnibus accounts with the Fund subject to an annual limitation (that varies by
class) that is a percentage of the average aggregate value of the Fund's shares
maintained in each such omnibus account (other than omnibus accounts for which
American Enterprise Investment Services, Inc. is the broker of record or
accounts where the beneficial shareholder is a customer of Ameriprise Financial
Services, Inc., which are paid a per account fee). The Transfer Agent pays the
fees of BFDS for services as sub-transfer agent and is not entitled to
reimbursement for such fees from the Fund.
The Transfer Agent also receives reimbursement for certain out-of-pocket
expenses and may also retain, as additional compensation for its services, fees
for wire, telephone and redemption orders, Individual Retirement Account (IRA)
trustee agent fees and account transcript fees due to the Transfer Agent from
shareholders of the Fund and credits (net of bank charges) earned with respect
to balances in accounts the Transfer Agent maintains in connection with its
services to the Fund.
For the year ended October 31, 2010, the Fund's effective transfer agent fee
rates as a percentage of average daily net assets of each class were as follows:
<Table>
Class A.............................................. 0.29%
Class B.............................................. 0.32
Class C.............................................. 0.30
Class R4............................................. 0.09
Class Z.............................................. 0.19*
</Table>
* Annualized
Class I shares do not pay transfer agent fees.
PLAN ADMINISTRATION FEES
Under a Plan Administration Services Agreement with the Transfer Agent, the Fund
pays an annual fee at a rate of 0.25% of the Fund's average daily net assets
attributable to Class R4 shares for the provision of various administrative,
recordkeeping, communication and educational services.
DISTRIBUTION FEES
The Fund has an agreement with Columbia Management Investment Distributors, Inc.
(formerly known as RiverSource Fund Distributors, Inc.) (the Distributor) for
- --------------------------------------------------------------------------------
44 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
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, of the 1.00% fee, up to 0.75% is reimbursed for distribution expenses.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed (unreimbursed expense) was approximately $179,000 and $22,000 for
Class B and Class C shares, respectively. These amounts are based on the most
recent information available as of July 31, 2010, and may be recovered from
future payments under the distribution plan or CDSCs. To the extent the
unreimbursed expense has been fully recovered, the distribution fee is reduced.
SALES CHARGES
Sales charges, including front-end and CDSCs, received by the Distributor for
distributing Fund shares were $72,319 for Class A, $3,455 for Class B and $525
for Class C for the year ended October 31, 2010.
EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES
For the year ended October 31, 2010, the Investment Manager and its affiliates
waived/reimbursed certain fees and expenses such that net expenses (excluding
fees and expenses of acquired funds*), including the adjustment under the terms
of PIA were as follows:
<Table>
Class A.............................................. 1.41%
Class B.............................................. 2.16
Class C.............................................. 2.17
Class I.............................................. 0.96
Class R4............................................. 1.27
Class Z.............................................. 1.27
</Table>
The waived/reimbursed fees and expenses for the transfer agent fees at the class
level were as follows:
<Table>
Class A............................................ $59,580
Class B............................................ 5,149
Class C............................................ 1,148
Class R4........................................... 8
</Table>
The management fees waived/reimbursed at the Fund level were $118,191.
The Investment Manager and its affiliates contractually agreed to waive certain
fees and reimburse certain expenses until December 31, 2010, unless sooner
terminated at the sole discretion of the Board such that net expenses (excluding
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 45
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
OCTOBER 31, 2010
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.............................................. 1.43%
Class B.............................................. 2.20
Class C.............................................. 2.19
Class I.............................................. 0.98
Class R4............................................. 1.28
Class Z.............................................. 1.18
</Table>
Effective January 1, 2011, the Investment Manager and its affiliates have
contractually agreed to waive certain fees and reimburse certain expenses until
December 31, 2011, unless sooner terminated at the sole discretion of the Board,
such that net expenses (excluding fees and expenses of acquired funds*), before
giving effect to any performance incentive adjustment, will not exceed the
following percentage of the class' average daily net assets:
<Table>
Class A.............................................. 1.53%
Class B.............................................. 2.28
Class C.............................................. 2.28
Class I.............................................. 1.08
Class R4............................................. 1.38
Class Z.............................................. 1.28
</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.
NOTE 4. PORTFOLIO INFORMATION
The cost of purchases and proceeds from sales of securities, excluding short-
term obligations, aggregated $79,613,923 and $88,251,678, respectively, for the
year ended October 31, 2010.
NOTE 5. LENDING OF PORTFOLIO SECURITIES
The Fund has entered into a Master Securities Lending Agreement (the Agreement)
with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement
authorizes JPMorgan as lending agent to lend securities to authorized borrowers
in order to generate additional income on behalf of the Fund. Pursuant to the
Agreement, the securities loaned are secured by cash or U.S. government
- --------------------------------------------------------------------------------
46 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
securities equal to at least 100% of the market value of the loaned securities.
Any additional collateral required to maintain those levels due to market
fluctuations of the loaned securities is delivered the following business day.
Cash collateral received is invested by the lending agent on behalf of the Fund
into authorized investments pursuant to the Agreement. The investments made with
the cash collateral are listed in the Portfolio of Investments. The values of
such investments and any uninvested cash collateral are disclosed in the
Statement of Assets and Liabilities along with the related obligation to return
the collateral upon the return of the securities loaned. At October 31, 2010,
securities valued at $4,861,773 were on loan, secured by cash collateral of
$5,101,443 partially or fully invested in short-term securities or other cash
equivalents.
Risks of delay in recovery of securities or even loss of rights in the
securities may occur should the borrower of the securities fail financially.
Risks may also arise to the extent that the value of the securities loaned
increases above the value of the collateral received. JPMorgan will indemnify
the Fund from losses resulting from a borrower's failure to return a loaned
security when due. Such indemnification does not extend to losses associated
with declines in the value of cash collateral investments. Loans are subject to
termination by the Fund or the borrower at any time, and are, therefore, not
considered to be illiquid investments.
Pursuant to the Agreement, the Fund receives income for lending its securities
either in the form of fees or by earning interest on invested cash collateral,
net of negotiated rebates paid to borrowers and fees paid to the lending agent
for services provided and any other securities lending expenses. Net income of
$58,044 earned from securities lending for the year ended October 31, 2010, is
included in the Statement of Operations. The Fund continues to earn and accrue
interest and dividends on the securities loaned.
NOTE 6. AFFILIATED MONEY MARKET FUND
The Fund may invest its daily cash balances in Columbia Short-Term Cash Fund
(formerly known as RiverSource Short-Term Cash Fund), a money market fund
established for the exclusive use by the Fund and other affiliated Funds. The
income earned by the Fund from such investments is included as "Dividends from
affiliates" in the Statement of Operations. As an investing fund, the Fund
indirectly bears its proportionate share of the expenses of Columbia Short-Term
Cash Fund.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 47
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
OCTOBER 31, 2010
NOTE 7. SHAREHOLDER CONCENTRATION
At October 31, 2010, the Investment Manager owned 100% of Class I and Class Z
shares.
NOTE 8. LINE OF CREDIT
The Fund has entered into a revolving credit facility with a syndicate of banks
led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund
may borrow for the temporary funding of shareholder redemptions or for other
temporary or emergency purposes. The credit facility became effective on October
14, 2010, replacing a prior credit facility. The credit facility agreement,
which is a collective agreement between the Fund and certain other funds managed
by the Investment Manager, severally and not jointly, permits collective
borrowings up to $300 million. The borrowers shall have the right, upon written
notice to the Administrative Agent, to request an increase of up to $200 million
in the aggregate amount of the credit facility from new or existing lenders,
provided that the aggregate amount of the credit facility shall at no time
exceed $500 million. Participation in such increase by any existing lender shall
be at such lender's sole discretion. Interest is charged to each fund based on
its borrowings at a rate equal to the sum of the federal funds rate plus (i)
1.25% per annum plus (ii) if one-month LIBOR exceeds the federal funds rate, the
amount of such excess. Each borrowing under the credit facility matures no later
than 60 days after the date of borrowing. The Fund also pays a commitment fee
equal to its pro rata share of the amount of the credit facility at a rate of
0.10% per annum.
Prior to October 14, 2010, the credit facility agreement, which was a collective
agreement between the Fund and certain other funds managed by the Investment
Manager, severally and not jointly, permitted collective borrowings up to $300
million. The Fund also paid a commitment fee equal to its pro rata share of the
amount of the credit facility at a rate of 0.10% per annum, in addition to an
upfront fee equal to its pro rata share of 0.04% of the amount of the credit
facility. The Fund had no borrowings during the year ended October 31, 2010.
NOTE 9. REGULATORY SETTLEMENTS
During the year ended October 31, 2009, the Fund received $70,652, as a result
of a settlement of an administrative proceeding brought by the Securities and
Exchange Commission against an unaffiliated third party relating to market
timing and/or late trading of mutual funds which represented the Fund's portion
of the proceeds from the settlement (the Fund was not a party to the
proceeding).
- --------------------------------------------------------------------------------
48 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
The proceeds received by the Fund were recorded as an increase to additional
paid-in capital.
NOTE 10. FEDERAL TAX INFORMATION
The timing and character of income and capital gain distributions are determined
in accordance with income tax regulations, which may differ from GAAP.
Reclassifications are made to the Fund's capital accounts for permanent tax
differences to reflect income and gains available for distribution (or available
capital loss carryforwards) under income tax regulations.
For the year ended October 31, 2010, permanent and timing book to tax
differences resulting primarily from differing treatments for capital loss
carryforward expired, foreign currency transactions, foreign tax credits and
losses deferred due to wash sales were identified and permanent differences
reclassed among the components of the Fund's net assets in the Statement of
Assets and Liabilities as follows:
<Table>
Undistributed net investment income............. $ 56,929
Accumulated net realized loss................... 10,589,760
Paid-in capital................................. (10,646,689)
</Table>
Net investment income and net realized gains (losses), as disclosed in the
Statement of Operations, and net assets were not affected by this
reclassification.
The tax character of distributions paid during the years indicated was as
follows:
<Table>
<Caption>
YEAR ENDED OCTOBER 31, 2010 2009
- -----------------------------------------------------------------
Ordinary income............................ $1,033,794 $789,969
Long-term capital gain..................... -- --
</Table>
At October 31, 2010, the components of distributable earnings on a tax basis
were as follows:
<Table>
Undistributed ordinary income................... $ 438,993
Undistributed accumulated long-term gain........ $ --
Accumulated realized loss....................... $(28,018,651)
Unrealized appreciation (depreciation).......... $ 14,662,635
</Table>
At October 31, 2010, the cost of investments for federal income tax purposes was
$66,364,133 and the aggregate gross unrealized appreciation and depreciation
based on that cost was:
<Table>
<Caption>
Unrealized appreciation $15,075,021
Unrealized depreciation (416,455)
- --------------------------------------------------------------
Net unrealized appreciation $14,658,566
</Table>
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 49
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
OCTOBER 31, 2010
The following capital loss carryforwards, determined at October 31, 2010 may be
available to reduce taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code:
<Table>
<Caption>
YEAR OF EXPIRATION AMOUNT
- --------------------------------------------------------------
2011 $ 5,021,215
2016 4,272,956
2017 18,724,480
- --------------------------------------------------------------
Total $28,018,651
</Table>
For the year ended October 31, 2010, $5,938,481 of capital loss carryforward was
utilized and $10,576,037 expired unused. It is unlikely the Board will authorize
a distribution of any net realized capital gains until the available capital
loss carryforward has been offset or expires. There is no assurance that the
Fund will be able to utilize all of its capital loss carryover before it
expires.
Management of the Fund has concluded that there are no significant uncertain tax
positions that would require recognition in the financial statements. However,
management's conclusion may be subject to review and adjustment at a later date
based on factors including, but not limited to, new tax laws, regulations, and
administrative interpretations (including relevant court decisions). The Fund's
federal tax returns for the prior three fiscal years remain subject to
examination by the Internal Revenue Service.
NOTE 11. SIGNIFICANT RISKS
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.
GEOGRAPHIC CONCENTRATION RISK
The Fund may be particularly susceptible to economic, political, regulatory or
other events or conditions affecting companies and countries within the specific
geographic region in which the Fund focuses its investments. The Fund may be
more volatile than a more geographically diversified fund.
- --------------------------------------------------------------------------------
50 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
NOTE 12. SUBSEQUENT EVENTS
Management has evaluated the events and transactions that have occurred through
the date the financial statements were issued and noted no items requiring
adjustment of the financial statements or additional disclosure.
NOTE 13. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In June 2004, an action captioned John E. Gallus et al. v. American Express
Financial Corp. and American Express Financial Advisors Inc. was filed in the
United States District Court for the District of Arizona. The plaintiffs allege
that they are investors in several American Express Company (now known as legacy
RiverSource) mutual funds and they purport to bring the action derivatively on
behalf of those funds under the Investment Company Act of 1940. The plaintiffs
allege that fees allegedly paid to the defendants by the funds for investment
advisory and administrative services are excessive. The plaintiffs seek remedies
including restitution and rescission of investment advisory and distribution
agreements. The plaintiffs voluntarily agreed to transfer this case to the
United States District Court for the District of Minnesota (the District Court).
In response to defendants' motion to dismiss the complaint, the District Court
dismissed one of plaintiffs' four claims and granted plaintiffs limited
discovery. Defendants moved for summary judgment in April 2007. Summary judgment
was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a
notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit)
on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary
judgment and remanded to the District Court for further proceedings. On August
6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court (the
Supreme Court), asking the Supreme Court to stay the District Court proceedings
while the Supreme Court considers and rules in a case captioned Jones v. Harris
Associates, which involves issues of law similar to those presented in the
Gallus case. On March 30, 2010, the Supreme Court issued its ruling in Jones v.
Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth
Circuit's decision in the Gallus case and remanded the case to the Eighth
Circuit for further consideration in light of the Supreme Court's decision in
Jones v. Harris Associates. On June 4, 2010, the Eighth Circuit remanded the
Gallus case to the District Court for further consideration in light of the
Supreme Court's decision in Jones v. Harris Associates. On December 9, 2010, the
District Court reinstated its July 9, 2007, summary judgement order in favor of
the defendants.
In December 2005, without admitting or denying the allegations, American Express
Financial Corporation (AEFC, which is now known as Ameriprise
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 51
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
OCTOBER 31, 2010
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 funds' Boards of Directors/Trustees.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, arbitration and regulatory proceedings, including
routine litigation, class actions, and governmental actions, concerning matters
arising in connection with the conduct of their business activities. Ameriprise
Financial believes that the Funds are not currently the subject of, and that
neither Ameriprise Financial nor any of its affiliates are the subject of, any
pending legal, arbitration or regulatory proceedings that are likely to have a
material adverse effect on the Funds or the ability of Ameriprise Financial or
its affiliates to perform under their contracts with the Funds. Ameriprise
Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the
Securities and Exchange Commission on legal and regulatory matters that relate
to Ameriprise Financial and its affiliates. Copies of these filings may be
obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse publicity
associated with them, will not result in increased fund redemptions, reduced
sale of fund shares or other adverse consequences to the Funds. Further,
although we believe proceedings are not likely to have a material adverse effect
on the Funds or the ability of Ameriprise Financial or its affiliates to perform
under their contracts with the Funds, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range
of loss that may result. An adverse outcome in one or more of these proceedings
could result in adverse judgments, settlements, fines, penalties or other relief
that could have a material adverse effect on the consolidated financial
condition or results of operations of Ameriprise Financial.
- --------------------------------------------------------------------------------
52 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
COLUMBIA EUROPEAN EQUITY FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Columbia European Equity Fund (formerly known
as Threadneedle European Equity Fund) (the Fund) (one of the portfolios
constituting the RiverSource International Series, Inc.) as of October 31, 2010,
and the related statement of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the four years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights of the Fund for the period ended October 31, 2006, were audited by
other auditors whose report dated December 20, 2006, expressed an unqualified
opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of October 31, 2010, by correspondence with the custodian
and brokers, or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 53
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued) ------------
In our opinion, the financial statements and financial highlights audited by us
as referred to above present fairly, in all material respects, the financial
position of Columbia European Equity Fund of the RiverSource International
Series, Inc. at October 31, 2010, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the four years in
the period then ended, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
December 20, 2010
- --------------------------------------------------------------------------------
54 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
FEDERAL INCOME TAX INFORMATION -------------------------------------------------
(UNAUDITED)
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
Fiscal year ended October 31, 2010
<Table>
<Caption>
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for
distributions:
Qualified Dividend Income for individuals.................... 100.00%
Dividends Received Deduction for corporations................ 0.00%
U.S. Government Obligations.................................. 0.00%
Federal Taxes Paid........................................... $131,931
Foreign Source Income........................................ $898,244
</Table>
The Fund designates as distributions of long-term gains, to the extent necessary
to fully distribute such capital gains, earnings and profits distributed to
shareholders on the redemption of shares.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 55
BOARD MEMBERS AND OFFICERS -----------------------------------------------------
Shareholders elect a Board that oversees the Fund's operations. The Board
appoints officers who are responsible for day-to-day business decisions based on
policies set by the Board. The following is a list of the Fund's Board members.
Each Board member oversees 145 Columbia, RiverSource, Seligman and Threadneedle
funds. Under current Board policy, members generally serve until the next Board
meeting after he or she reaches the mandatory retirement age established by the
Board, or the fifteenth anniversary of the first Board meeting they attended as
members of the Board.
INDEPENDENT BOARD MEMBERS
<Table>
<Caption>
OTHER PRESENT OR
NAME, POSITION HELD PAST DIRECTORSHIPS
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION (WITHIN PAST 5
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS YEARS)
- ------------------------------------------------------------------------------------------------------------------------------
Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None
901 S. Marquette Ave. 1/11/06 Attorney
Minneapolis, MN 55402
Age 56
- ------------------------------------------------------------------------------------------------------------------------------
Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None
901 S. Marquette Ave. 7/11/07 Leadership (consulting company)
Minneapolis, MN 55402
Age 56
- ------------------------------------------------------------------------------------------------------------------------------
Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None
901 S. Marquette Ave. 11/1/04 University; former Dean, McCallum Graduate School of
Minneapolis, MN 55402 Business, Bentley University
Age 60
- ------------------------------------------------------------------------------------------------------------------------------
Anne P. Jones Board member since Attorney and Consultant None
901 S. Marquette Ave. 3/1/85
Minneapolis, MN 55402
Age 75
- ------------------------------------------------------------------------------------------------------------------------------
Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries,
901 S. Marquette Ave. since 1/1/07, College Inc. (manufactures
Minneapolis, MN 55402 Board member irrigation systems)
Age 71 since 1/1/02
- ------------------------------------------------------------------------------------------------------------------------------
John F. Maher Board member Retired President and Chief Executive Officer and None
901 S. Marquette Ave. since 12/10/08 former Director, Great Western Financial Corporation
Minneapolis, MN 55402 (financial services), 1986-1997
Age 67
- ------------------------------------------------------------------------------------------------------------------------------
Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None
901 S. Marquette Ave. 11/1/04 real estate and asset management company)
Minneapolis, MN 55402
Age 58
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
56 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
INDEPENDENT BOARD MEMBERS (CONTINUED)
<Table>
<Caption>
OTHER PRESENT OR
NAME, POSITION HELD PAST DIRECTORSHIPS
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION (WITHIN PAST 5
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS YEARS)
- ------------------------------------------------------------------------------------------------------------------------------
Leroy C. Richie Board member Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc.
901 S. Marquette Ave. since 11/11/08 President and General Counsel, Automotive Legal (digital imaging);
Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil
Age 69 and gas exploration
and production); OGE
Energy Corp. (energy
and energy services)
- ------------------------------------------------------------------------------------------------------------------------------
Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera
901 S. Marquette Ave. 11/13/02 since 2003 (biotechnology); former President, Aquila Pharmaceuticals,
Minneapolis, MN 55402 Biopharmaceuticals Inc.
Age 66 (biotechnology);
Healthways, Inc.
(health management
programs)
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 57
BOARD MEMBERS AND OFFICERS (continued) -----------------------------------------
BOARD MEMBER AFFILIATED WITH THE INVESTMENT MANAGER*
<Table>
<Caption>
OTHER PRESENT OR
NAME, POSITION HELD PAST DIRECTORSHIPS
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION (WITHIN PAST 5
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS YEARS)
- ------------------------------------------------------------------------------------------------------------------------------
William F. Truscott Board member Chairman of the Board, Columbia Management Investment None
53600 Ameriprise since 11/7/01, Advisers, LLC (formerly RiverSource Investments, LLC)
Financial Center Vice President since since May 2010 (previously President, Chairman of the
Minneapolis, MN 55474 2002 Board and Chief Investment Officer, 2001-April 2010);
Age 50 Senior Vice President, Atlantic Funds, Columbia Funds
and Nations Funds since May 2010; Chief Executive
Officer, U.S. Asset Management &
President -- Annuities, Ameriprise Financial, Inc.
since May 2010 (previously President -- U.S. Asset
Management and Chief Investment Officer, 2005-April
2010 and Senior Vice President -- Chief Investment
Officer, 2001-2005); Director, President and Chief
Executive Officer, Ameriprise Certificate Company since
2006; Director, Columbia Management Investment
Distributors, Inc. (formerly RiverSource Fund
Distributors, Inc.) since May 2010 (previously Chairman
of the Board and Chief Executive Officer, 2008-April
2010); Chairman of the Board and Chief Executive
Officer, RiverSource Distributors, Inc. since 2006
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
* Interested person (as defined under the 1940 Act) by reason of being an
officer, director, security holder and/or employee of the investment manager
or Ameriprise Financial.
The SAI has additional information about the Fund's Board members and is
available, without charge, upon request by calling 800.345.6611; contacting your
financial intermediary; or visiting columbiamanagement.com.
- --------------------------------------------------------------------------------
58 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
The Board has appointed officers who are responsible for day-to-day business
decisions based on policies it has established. The officers serve at the
pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the
Fund's other officers are:
FUND OFFICERS
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUNDS AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------
J. Kevin Connaughton President since Senior Vice President and General Manager -- Mutual
One Financial Center 5/1/10 Fund Products, Columbia Management Investment Advisers,
Boston, MA 02111 LLC since May 2010; President, Columbia Funds since
Age 46 2009 (previously Senior Vice President and Chief
Financial Officer, June 2008 -- January 2009);
President, Atlantic Funds and Nations Funds since 2009;
Managing Director of Columbia Management Advisors, LLC,
December 2004 -- April 2010; Treasurer, Columbia Funds,
October 2003 -- May 2008; Treasurer, the Liberty Funds,
Stein Roe Funds and Liberty All-Star Funds, December
2000 -- December 2006
- --------------------------------------------------------------------------------------------------------
Amy K. Johnson Vice President since Senior Vice President and Chief Operating Officer,
5228 Ameriprise Financial 12/5/06 Columbia Management Investment Advisers, LLC (formerly
Center Minneapolis, MN RiverSource Investments, LLC) since May 2010
55474 (previously Chief Administrative Officer, 2009 -- April
Age 45 2010 and Vice President -- Asset Management and Trust
Company Services, 2006-2009 and Vice
President -- Operations and Compliance, 2004-2006);
Senior Vice President, Atlantic Funds, Columbia Funds
and Nations Funds since May 2010
- --------------------------------------------------------------------------------------------------------
Jeffrey P. Fox Treasurer since Chief Financial Officer, Columbia Management Investment
105 Ameriprise 7/10/02 Distributors, Inc. (formerly RiverSource Fund
Financial Center Distributors, Inc.) and of Seligman Data Corp. since
Minneapolis, MN 55474 2008; Vice President -- Investment Accounting,
Age 55 Ameriprise Financial, Inc. since 2002; Chief Financial
Officer, RiverSource Distributors, Inc. since 2006
- --------------------------------------------------------------------------------------------------------
Scott R. Plummer Vice President, Chief Legal Officer and Assistant Secretary, Columbia
5228 Ameriprise Financial General Counsel and Management Investment Advisers, LLC (formerly
Center Secretary since RiverSource Investments, LLC) since June 2005; Vice
Minneapolis, MN 55474 12/5/06 President and Lead Chief Counsel -- Asset Management,
Age 51 Ameriprise Financial, Inc. since May 2010 (previously
Vice President and Chief Counsel -- Asset Management,
2005-April 2010 and Vice President -- Asset Management
Compliance, 2004-2005); Senior Vice President,
Secretary and Chief Legal Officer, Atlantic Funds,
Columbia Funds and Nations Funds since May 2010; Vice
President, Chief Counsel and Assistant Secretary,
Columbia Management Investment Distributors, Inc.
(formerly RiverSource Fund Distributors, Inc.) since
2008; Vice President, General Counsel and Secretary,
Ameriprise Certificate Company since 2005
- --------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 59
BOARD MEMBERS AND OFFICERS (continued) -----------------------------------------
FUND OFFICERS (CONTINUED)
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUNDS AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------
Michael A. Jones Vice President since Director and President, Columbia Management Investment
100 Federal Street 5/1/10 Advisers, LLC since May 2010; President and Director,
Boston, MA 02110 Columbia Management Investment Distributors, Inc. since
Age 51 May 2010; Senior Vice President, Atlantic Funds,
Columbia Funds and Nations Funds since May 2010;
Manager, Chairman, Chief Executive Officer and
President, Columbia Management Advisors, LLC,
2007 -- April 2010; Chief Executive Officer, President
and Director, Columbia Management Distributors, Inc.,
2006 -- April 2010; former Co-President and Senior
Managing Director, Robeco Investment Management
- --------------------------------------------------------------------------------------------------------
Colin Moore Vice President since Chief Investment Officer, Columbia Management
One Financial Center 5/1/10 Investment Advisers, LLC since May 2010; Senior Vice
Boston, MA 02111 President, Atlantic Funds, Columbia Funds and Nations
Age 52 Funds since May 2010; Manager, Managing Director and
Chief Investment Officer, Columbia Management Advisors,
LLC, 2007- April 2010; Head of Equities, Columbia
Management Advisors, LLC, 2002-Sept. 2007
- --------------------------------------------------------------------------------------------------------
Linda Wondrack Chief Compliance Vice President and Chief Compliance Officer, Columbia
One Financial Center Officer since 5/1/10 Management Investment Advisers, LLC since May 2010;
Boston, MA 02111 Chief Compliance Officer, Columbia Funds since 2007;
Age 46 Senior Vice President and Chief Compliance Officer,
Atlantic Funds and Nations Funds since 2007; Director
(Columbia Management Group, LLC and Investment Product
Group Compliance), Bank of America, June 2005 -- April
2010
- --------------------------------------------------------------------------------------------------------
Neysa M. Alecu Money Laundering Vice President -- Compliance, Ameriprise Financial,
2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer and
Center since 11/9/05 and Identity Theft Prevention Officer, Columbia Management
Minneapolis, MN 55474 Identity Theft Investment Distributors, Inc. (formerly RiverSource
Age 46 Prevention Officer Fund Distributors, Inc.) since 2008; Anti-Money
since 2008 Laundering Officer, Ameriprise Financial, Inc. since
2005; Compliance Director, Ameriprise Financial, Inc.,
2004-2008
- --------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
60 COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT
PROXY VOTING ------------------------------------------------------------------
The policy of the Board is to vote the proxies of the companies in which the
Fund holds investments consistent with the procedures as stated in the Statement
of Additional Information (SAI). You may obtain a copy of the SAI without charge
by calling 800.345.6611; contacting your financial intermediary; visiting
columbiamanagement.com; 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 columbiamanagement.com; or searching the website of
the SEC at www.sec.gov.
- --------------------------------------------------------------------------------
COLUMBIA EUROPEAN EQUITY FUND -- 2010 ANNUAL REPORT 61
COLUMBIA EUROPEAN EQUITY FUND
(formerly known as Threadneedle European Equity Fund)
P.O. Box 8081
Boston, MA 02266-8081
COLUMBIAMANAGEMENT.COM
<Table>
This report must be accompanied or preceded by the Fund's
current prospectus. The Fund is distributed by Columbia
Management Investment Distributors, Inc., member FINRA, and
managed by Columbia Management Investment Advisers, LLC.
(C)2010 Columbia Management Investment Advisers, LLC. All
(COLUMBIA MANAGEMENT LOGO) rights reserved. S-6006 R (12/10)
</Table>
Annual Report
and Prospectus
(COLUMBIA MANAGEMENT LOGO)
RIVERSOURCE
DISCIPLINED INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
ANNUAL REPORT FOR THE PERIOD ENDED
OCTOBER 31, 2010
(Prospectus also enclosed)
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND SEEKS TO PROVIDE SHAREHOLDERS
WITH LONG-TERM CAPITAL GROWTH.
This annual report includes a prospectus that describes in detail the Fund's
objective, investment strategy, risks, sales charges, fees and other matters of
interest. Please read the prospectus carefully before you invest or send money.
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
TABLE OF CONTENTS --------------------------------------------------------------
<Table>
Your Fund at a Glance.................................. 3
Manager Commentary..................................... 6
The Fund's Long-term Performance....................... 14
Fund Expenses Example.................................. 16
Portfolio of Investments............................... 19
Statement of Assets and Liabilities.................... 30
Statement of Operations................................ 32
Statements of Changes in Net Assets.................... 34
Financial Highlights................................... 36
Notes to Financial Statements.......................... 43
Report of Independent Registered Public Accounting
Firm................................................. 62
Federal Income Tax Information......................... 64
Board Members and Officers............................. 65
Proxy Voting........................................... 70
</Table>
The Board of Directors of RiverSource Disciplined International Equity Fund
(the "Fund") approved a proposal to merge the Fund with and into Columbia
Multi-Advisor International Equity Fund. The merger is expected to be a tax-
free reorganization for U.S. federal income tax purposes. More information
about Columbia Multi-Advisor International Equity Fund and the definitive
terms of the proposed merger will be included in proxy materials.
The merger is subject to certain conditions, including final approval by
shareholders of the Fund. It is currently anticipated that proxy materials
regarding the merger will be distributed to shareholders of the Fund later
this year or in early 2011, and the meeting of shareholders to consider the
merger will be held in the first half of 2011.
SEE THE FUND'S PROSPECTUS FOR RISKS ASSOCIATED WITH INVESTING IN THE FUND.
- --------------------------------------------------------------------------------
2 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
YOUR FUND AT A GLANCE ----------------------------------------------------------
FUND SUMMARY
- --------------------------------------------------------------------------------
> RiverSource Disciplined International Equity Fund (the Fund) Class A shares
gained 6.48% (excluding sales charge) during the 12 months ended Oct. 31,
2010.
> The Fund underperformed its benchmark, the Morgan Stanley Capital
International (MSCI) EAFE Index (MSCI Index), which rose 8.82% for the 12-
month period.
> The Fund also underperformed its peer group, as represented by the Lipper
International Large-Cap Core Funds Index, which increased 11.06% for the same
time period.
ANNUALIZED TOTAL RETURNS (for period ended Oct. 31, 2010)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
INCEPTION
1 YEAR 3 YEARS 5/18/06
- ------------------------------------------------------------------
RiverSource Disciplined International
Equity Fund
Class A (excluding sales charge) +6.48% -15.28% -3.10%
- ------------------------------------------------------------------
MSCI Index (unmanaged) +8.82% -9.15% +0.11%
- ------------------------------------------------------------------
Lipper International Large-Cap Core
Funds Index (unmanaged) +11.06% -9.97% -0.34%
- ------------------------------------------------------------------
</Table>
(See "The Fund's Long-term Performance" for Index descriptions)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by contacting your financial intermediary,
visiting columbiamanagement.com or calling 800.345.6611.
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the table above. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
fees and expenses. The Fund's returns reflect the effect of fee waivers/expense
reimbursements, if any. Without such waivers/reimbursements, the Fund's returns
would be lower. See the Average Annual Total Returns table for performance of
other share classes of the Fund.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes. It is not possible to invest directly in an index.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 3
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT OCT. 31, 2010
SINCE
Without sales charge 1 YEAR 3 YEARS INCEPTION
Class A (inception 5/18/06) +6.48% -15.28% -3.10%
- -------------------------------------------------------------------
Class B (inception 5/18/06) +5.75% -16.00% -3.90%
- -------------------------------------------------------------------
Class C (inception 5/18/06) +5.74% -15.95% -3.88%
- -------------------------------------------------------------------
Class I (inception 5/18/06) +7.31% -14.73% -2.58%
- -------------------------------------------------------------------
Class R* (inception 8/1/08) +6.41% N/A -9.05%
- -------------------------------------------------------------------
Class R4 (inception 5/18/06) +6.75% -14.86% -2.74%
- -------------------------------------------------------------------
Class W (inception 12/1/06) +6.86% -15.17% -5.73%
- -------------------------------------------------------------------
With sales charge
Class A (inception 5/18/06) +0.36% -16.94% -4.38%
- -------------------------------------------------------------------
Class B (inception 5/18/06) +0.75% -16.80% -4.31%
- -------------------------------------------------------------------
Class C (inception 5/18/06) +4.74% -15.95% -3.88%
- -------------------------------------------------------------------
</Table>
Class A share performance reflects the maximum initial sales charge of 5.75%.
Class B share performance reflects a contingent deferred sales charge (CDSC)
applied as follows: first year 5%; second year 4%; third and fourth years 3%;
fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be
subject to a 1% CDSC if shares are sold within one year after purchase. Sales
charges do not apply to Class I, Class R, Class R4 and Class W shares. Class I,
Class R and Class R4 are available to qualifying institutional investors only.
Class W shares are offered through qualifying discretionary accounts.
* Effective Sept. 7, 2010, Class R2 shares were renamed Class R shares.
- --------------------------------------------------------------------------------
4 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
MORNINGSTAR STYLE BOX(TM)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Equity Style
Value Blend Growth
X Large
Medium Size
Small
</Table>
The Morningstar Style Box(TM) is based on the fund's portfolio holdings as of
period end. The vertical axis shows the market capitalization of the stocks
owned, and the horizontal axis shows investment style (value, blend, or growth).
Information shown is based on the most recent data provided by Morningstar.
(C)2010 Morningstar, Inc. All rights reserved. The information contained herein
is proprietary to Morningstar and/or its content providers, may not be copied or
distributed and is not warranted to be accurate, complete, or timely. Neither
Morningstar nor its content providers are responsible for any damages or losses
arising from any use of this information. Past performance is no guarantee of
future results.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 5
MANAGER COMMENTARY ------------------------------------------------------------
Effective May 1, 2010, Fred Copper assumed day-to-day management of RiverSource
Disciplined International Equity Fund from Dimitris Bertsimas, PhD and Alexander
Sauer-Budge, PhD.
At Oct. 31, 2010, approximately 35% of the Fund's shares were owned in the
aggregate by affiliated funds-of-funds managed by Columbia Management Investment
Advisers, LLC (Columbia Management). As a result of asset allocation decisions
by Columbia Management, it is possible that RiverSource Disciplined
International Equity Fund may experience relatively large purchases or
redemptions from affiliated funds-of-funds (see page 55, Class I capital share
transactions for related activity during the most recent fiscal period).
Columbia Management seeks to minimize the impact of these transactions by
structuring them over a reasonable period of time. RiverSource Disciplined
International Equity Fund may experience increased expenses as it buys and sells
securities as a result of purchases or redemptions by affiliated funds-of-funds.
For more information on the Fund's expenses, see the discussions beginning on
pages 16 and 51.
Dear Shareholders,
RiverSource Disciplined International Equity Fund (the Fund) Class A shares
gained 6.48% (excluding sales charge) during the 12 months ended Oct. 31, 2010.
The Fund underperformed its benchmark, the Morgan Stanley Capital International
(MSCI) EAFE Index (MSCI Index), which rose 8.82%. The Fund also underperformed
the Lipper International Large-Cap Core Funds Index, representing the Fund's
peer group, which was up 11.06% during the same period.
SIGNIFICANT PERFORMANCE FACTORS
International equities generated healthy gains during the annual period overall,
but such solid performance masks what was significant volatility. Through early
May, investor sentiment was generally positive even as the economic and
corporate backdrop remained mixed. The U.S. and Europe officially came out of
recession toward the end of 2009, though economic data remained lackluster and
corporate earnings reflected the benefits of cost cutting rather than
significant increases in revenues. Then, sovereign debt concerns flared as
headlines about the crisis in Greece and other peripheral European nations
dominated. The international equity markets
- --------------------------------------------------------------------------------
6 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
sold off. Another factor impacting the international equity markets during the
annual period was the weight of fiscal austerity under which both
COUNTRY BREAKDOWN(1) (at Oct. 31, 2010)
- ---------------------------------------------------------------------
<Table>
<Caption>
Australia 3.7%
- ------------------------------------------------
Brazil 0.3%
- ------------------------------------------------
Canada 3.3%
- ------------------------------------------------
China 1.6%
- ------------------------------------------------
Denmark 1.2%
- ------------------------------------------------
Finland 2.3%
- ------------------------------------------------
France 6.0%
- ------------------------------------------------
Germany 9.2%
- ------------------------------------------------
Greece 1.1%
- ------------------------------------------------
Hong Kong 1.5%
- ------------------------------------------------
India 0.9%
- ------------------------------------------------
Indonesia 0.2%
- ------------------------------------------------
Ireland 1.2%
- ------------------------------------------------
Israel 0.7%
- ------------------------------------------------
Italy 2.8%
- ------------------------------------------------
Japan 19.6%
- ------------------------------------------------
Malta 0.0%*
- ------------------------------------------------
Netherlands 2.5%
- ------------------------------------------------
Norway 1.9%
- ------------------------------------------------
Russia 0.6%
- ------------------------------------------------
Singapore 0.2%
- ------------------------------------------------
South Korea 1.4%
- ------------------------------------------------
Spain 4.1%
- ------------------------------------------------
Sweden 2.8%
- ------------------------------------------------
Switzerland 6.8%
- ------------------------------------------------
Taiwan 3.1%
- ------------------------------------------------
Thailand 0.4%
- ------------------------------------------------
Turkey 0.5%
- ------------------------------------------------
United Kingdom 16.4%
- ------------------------------------------------
United States 3.4%
- ------------------------------------------------
Other(2) 0.3%
- ------------------------------------------------
</Table>
* Rounds to less than 0.1%
(1) Percentages indicated are based upon total investments (excluding
Investments of Cash Collateral Received for Securities on Loan). The Fund's
composition is subject to change.
(2) Cash & Cash Equivalents.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 7
MANAGER COMMENTARY (continued) -------------------------------------------------
Europe and Japan operated. High debt loads and attempts to cut substantial
budget deficits made the economies of most developed markets rather weak. In
contrast, the economic backdrop of most emerging markets was comparatively
stronger, driven by solid domestic demand as well as much better government
balance sheets.
When the International Monetary Fund, in concert with the European Central Bank
and other central banks, announced plans for a liquidity facility that would
allow what are known as the PIIGS nations (Portugal, Italy, Ireland, Greece and
Spain) to borrow at reasonable rates, the international equity markets
rebounded. Reports of bank stress tests also restored some level of confidence
in Europe's financial structure, helping international equity markets to roar
back during the third calendar quarter and through October, fueled by corporate
earnings growth that generally surprised to the upside.
Against this economic backdrop, the more economically-sensitive, cyclically-
oriented sectors within the MSCI Index performed best, namely materials,
industrials and consumer discretionary. The more defensive sectors, including
financials, energy and health care, were weaker. From a regional perspective,
the northern European countries, including Sweden, Denmark and Germany,
performed best. Without the same financing problems as the PIIGS nations, these
northern European nations benefited
TOP TEN HOLDINGS(1) (at Oct. 31, 2010)
- ---------------------------------------------------------------------
<Table>
<Caption>
BHP Billiton PLC (United Kingdom) 1.9%
- ------------------------------------------------
BASF SE (Germany) 1.8%
- ------------------------------------------------
Banco Santander SA (Spain) 1.8%
- ------------------------------------------------
Royal Dutch Shell PLC, Series B
(Netherlands) 1.6%
- ------------------------------------------------
Roche Holding AG (Switzerland) 1.5%
- ------------------------------------------------
AstraZeneca PLC, ADR (United Kingdom) 1.5%
- ------------------------------------------------
Australia & New Zealand Banking Group Ltd.
(Australia) 1.5%
- ------------------------------------------------
International Power PLC (United Kingdom) 1.3%
- ------------------------------------------------
BNP Paribas (France) 1.3%
- ------------------------------------------------
BP PLC (United Kingdom) 1.2%
- ------------------------------------------------
</Table>
(1) Percentages indicated are based upon total investments (excluding
Investments of Cash Collateral Received for Securities on Loan and Cash &
Cash Equivalents).
For further detail about these holdings, please refer to the section entitled
"Portfolio of Investments."
- --------------------------------------------------------------------------------
8 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
from a weaker euro during the annual period given the strong export component to
their economies. Asian countries strongly levered to China also performed well.
These included Hong Kong and Singapore. Conversely and not surprisingly, Greece,
Spain and Portugal were the weakest components within the MSCI Index during the
annual period, each generating negative returns.
The Fund generated solid absolute gains during the annual period but
underperformed the MSCI Index due primarily to stock selection in the consumer
discretionary and information technology sectors. In consumer discretionary,
FOSTER ELECTRIC, a Japanese audio equipment manufacturer, disappointed on the
back of weak consumer spending. In information technology, Japanese video game
manufacturer NINTENDO detracted from Fund results. Nintendo struggled in the
face of both weak consumer spending and a lull between its releases of new game
platforms. Another information technology position that hurt the Fund's
performance was U.K. software developer AUTONOMY, which announced a significant
earnings miss toward the end of the annual period. From a country perspective, a
sizable allocation to Spain detracted from the Fund's results, for, as
mentioned, Spain was one of the worst performers in the MSCI Index during the
annual period. An exposure to Spanish banks especially hurt.
On the positive side, effective stock selection within the utilities and
materials sectors boosted the Fund's returns. Having a sizable allocation to
materials, which, as mentioned, was the best performing sector within the MSCI
Index during the annual period, also helped. Within utilities, the
International equities generated healthy gains during the annual period
overall, but such solid performance masks what was significant volatility.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 9
MANAGER COMMENTARY (continued) -------------------------------------------------
U.K.'s INTERNATIONAL POWER was a particularly strong performer, benefiting from
announcements of its acquisition by France's GDF SUEZ, which is anticipated to
create the world's largest utility with annual revenue of $111.5 billion. Within
materials, several miners located in Canada performed well, benefiting as
commodity prices rose, particularly during the second half of the annual period.
These included CENTERRA GOLD, EASTERN PLATINUM AND FIRST QUANTUM MINERALS.
Driven by these materials names, Canada was the best performing country for the
Fund during the annual period. A tactical exposure to the emerging markets, via
investments in underlying exchange-traded funds, mutual funds and individual
holdings, also contributed positively to the Fund's performance. As mentioned
above, emerging market equities overall rallied even stronger than their
developed counterparts during the annual period.
CHANGES TO THE FUND'S PORTFOLIO
In assuming day-to-day management of the Fund in early May, several changes were
made. While the Fund's investment objective remained the same, our investment
process was distinct. We continued to employ quantitative investment themes in
selecting stocks for the Fund's portfolio, but the themes we use are somewhat
different than those of our predecessors. The three themes we use are quality,
valuation and momentum. The quality theme seeks to identify good businesses,
that is, those with attractive returns and with management teams that follow
shareholder friendly practices. The valuation theme seeks to identify stocks
whose price is trading at a discount to the company's intrinsic value. And the
momentum theme seeks to identify companies demonstrating good price and/or
earnings trends that may serve as a catalyst for a turnaround in the perception
of the company. In addition to employing these three quantitative themes, we
also implement a fundamental research component to the Fund's stock selection
process. We use fundamental research both to confirm what the quantitative
themes indicate and also to make sure the themes have not missed an important
aspect of the company that only the "human touch" can measure.
As we gradually shifted the Fund to our quantitative-plus-fundamental strategy,
some changes were made to its portfolio. We reduced what is known as the beta of
the Fund's portfolio to reflect individual stock
- --------------------------------------------------------------------------------
10 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
selection rather than any bias toward the direction of the market. (Beta is a
measure of sensitivity to market movements.) In doing so, we reduced the
magnitude of exposures to sectors and individual stocks, especially those that
usually perform well only in rallying markets. We also reduced the Fund's
exposure to historically volatile stocks, such as Spanish banks like BANCO
SANTANDER, which had been one of the Fund's largest individual holdings at the
start of the annual period. With all of these changes, the Fund's portfolio
turnover rate for the 12-month period was 137%.
At the end of Oct. 2010, the Fund had its most significant allocations, relative
to the MSCI Index, in telecommunication services and energy, and its most modest
exposure, relative to the MSCI Index in financials, especially banks.
OUR FUTURE STRATEGY
We remain rather bullish on the international equity markets despite strong
performance during the last several months of the fiscal year. Our view is based
on three primary factors. First, toward the end of the annual period, leading
economic indicators had begun to improve, albeit from low levels but consistent
with that of a reasonable growth scenario. Second, global monetary policy,
including the second round of quantitative easing by the U.S. Federal Reserve
Board (the Fed) announced in October and designed to stimulate economic growth,
remains accommodative. Third, emerging market demand remains remarkably strong,
providing a solid end-market for exporters in Europe and Asia.
That said, Europe comprises approximately 70% of the MSCI Index and thus there
are risks to our view. One risk is that of a stronger euro, which would make
exports from the continent less competitive. In the absence of the European
Central Bank implementing a policy similar to the Fed's second round of
quantitative easing, there may indeed be upward pressure on the euro over the
next several months. The other notable risk to our view is if sovereign debt
concerns for the PIIGS nations come to the fore again. European banks have a
high exposure to the government bonds of these peripheral European nations. If
these banks have to take a write-down on the value of those holdings, it could
spark another correction in
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 11
MANAGER COMMENTARY (continued) -------------------------------------------------
the international equity markets such as the one we saw during this past summer.
Given this view, we intend to pursue two primary strategies within the Fund over
the near term. We intend to emphasize identifying investments in faster-growing
companies. Currently, in an environment in which the major developed market
countries are deleveraging, it is our expectation that economic growth is going
to be lower than it has been historically. We believe that companies able to
preserve higher rates of growth in a generally low growth environment are going
to be favored. We also presently intend to emphasize investment in companies
with attractive dividend yields. If economic growth is sub-par, then, in our
view, so, too, will stock market returns be sub-par. Therefore, we believe
dividend yield may well account for a more significant portion of total return
than it normally does. In turn, companies with high and sustainable dividend
yields, such as many in the telecommunication services sector, become
increasingly attractive.
<Table>
Fred Copper, CFA
Portfolio Manager
</Table>
Any specific securities mentioned are for illustrative purposes only and are not
a complete list of securities that have increased or decreased in value. The
views expressed in this statement reflect those of the portfolio manager(s) only
through the end of the period of the report as stated on the cover and do not
necessarily represent the views of Columbia Management Investment Advisers, LLC*
(the Investment Manager) or any subadviser to the Fund or any other person in
the Investment Manager or subadviser organizations. Any such views are subject
to change at any time based upon market or other conditions and the Investment
Manager disclaims any responsibility to update such views. These views may not
be relied on as investment advice and, because investment decisions for the Fund
are based on numerous factors, may not be relied on as an indication of trading
intent on behalf of the Fund.
* Effective May 1, 2010, RiverSource Investments, LLC became known as Columbia
Management Investment Advisers, LLC.
- --------------------------------------------------------------------------------
12 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
THIS PAGE LEFT BLANK INTENTIONALLY
THE FUND'S LONG-TERM PERFORMANCE -----------------------------------------------
The chart on the facing page illustrates the total value of an assumed $10,000
investment in RiverSource Disciplined International Equity Fund Class A shares
(from 5/18/06 to 10/31/10) as compared to the performance of the Morgan Stanley
Capital International (MSCI) EAFE Index (MSCI Index) and Lipper International
Large-Cap Core Funds Index. In comparing the Fund's Class A shares to these
indices, you should take into account the fact that the Fund's performance
reflects the maximum initial sales charge of 5.75%, while such charges are not
reflected in the performance of the indices. Returns for the Fund include the
reinvestment of any distributions paid during each period.
The performance information shown represents past performance and is not a
guarantee of future results. The table below and the chart on the facing page do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. The investment return and
principal value of your investment will fluctuate so that your shares, when
redeemed, may be worth more or less than their original cost. Current
performance may be lower or higher than the performance information shown. You
may obtain performance information current to the most recent month-end by
contacting your financial intermediary or visiting columbiamanagement.com. Also
see "Past Performance" in the Fund's current prospectus.
COMPARATIVE RESULTS
- --------------------------------------------------------------------------------
<Table>
<Caption>
Results at Oct. 31, 2010
SINCE INCEPTION
1 YEAR 3 YEARS 5/18/06
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND
(INCLUDES SALES CHARGE)
Class A Cumulative value of $10,000 $10,036 $5,730 $8,279
- ---------------------------------------------------------------------------------------
Average annual total return +0.36% -16.94% -4.38%
- ---------------------------------------------------------------------------------------
MSCI INDEX(1)
Cumulative value of $10,000 $10,882 $7,499 $10,043
- ---------------------------------------------------------------------------------------
Average annual total return +8.82% -9.15% +0.11%
- ---------------------------------------------------------------------------------------
LIPPER INTERNATIONAL LARGE-CAP CORE FUNDS INDEX(2)
Cumulative value of $10,000 $11,106 $7,297 $9,947
- ---------------------------------------------------------------------------------------
Average annual total return +11.06% -9.97% -0.34%
- ---------------------------------------------------------------------------------------
</Table>
Results for other share classes can be found on page 4.
- --------------------------------------------------------------------------------
14 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
(VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE DISCIPLINED
INTERNATIONAL EQUITY FUND LINE GRAPH)
<Table>
<Caption>
RIVERSOURCE DISCIPLINED
INTERNATIONAL EQUITY
FUND CLASS LIPPER INTERNATIONAL
A (INCLUDES LARGE-CAP CORE
SALES CHARGE) MSCI INDEX(1) FUNDS INDEX(2)
----------------------- ------------- --------------------
5/18/06 $ 9,525 $10,000 $10,000
7/06 9,421 9,988 9,965
10/06 10,155 10,684 10,637
1/07 11,018 11,430 11,433
4/07 11,883 12,359 12,144
7/07 12,123 12,428 12,283
10/07 13,614 13,401 13,498
1/08 11,256 11,504 11,655
4/08 11,907 12,197 12,241
7/08 10,383 10,969 10,989
10/08 6,418 7,192 7,198
1/09 5,421 6,509 6,423
4/09 6,043 7,023 6,870
7/09 7,299 8,534 8,468
10/09 7,754 9,229 8,957
1/10 7,469 9,133 8,932
4/10 7,863 9,477 9,317
7/10 7,413 9,107 8,990
10/10 8,279 10,043 9,947
</Table>
(1) The Morgan Stanley Capital International (MSCI) EAFE Index (MSCI Index), an
unmanaged index, is compiled from a composite of securities markets of
Europe, Australia 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
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 -- 2010 ANNUAL REPORT 15
FUND EXPENSES EXAMPLE ----------------------------------------------------------
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (i) transaction
costs, including sales charges (loads) on purchase payments; and (ii) ongoing
costs, which may include management fees; distribution and service (Rule 12b-1)
fees; and other Fund fees and expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
In addition to the ongoing expenses which the Fund bears directly, the Fund's
shareholders indirectly bear the ongoing expenses of any funds in which the Fund
invests (also referred to as "acquired funds"), including affiliated and non-
affiliated pooled investment vehicles (including mutual funds and exchange
traded funds). The Fund's indirect expense from investing in the acquired funds
is based on the Fund's pro rata portion of the ongoing expenses charged by
acquired funds using the expense ratio of each of the acquired funds as of the
acquired fund's most recent shareholder report.
The example is based on an investment of $1,000 invested at the beginning of the
period indicated and held until Oct. 31, 2010.
ACTUAL EXPENSES
The first line of the table provides information about actual account values and
actual expenses for each class. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading titled "Direct expenses paid during
the period" to estimate the expenses you paid on your account during this
period. You can also estimate the direct and indirect expenses you paid over the
period by using the number in the first line under the heading "Direct and
indirect expenses paid during the period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the actual expense ratio for each
class and an assumed rate of return of 5% per year before expenses, which is not
the actual return for the class. The hypothetical account values and expenses
may not be used to estimate the actual ending account balance or expenses you
paid for the period. You may use this information to compare the ongoing costs
of investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
- --------------------------------------------------------------------------------
16 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
<Table>
<Caption>
DIRECT AND
DIRECT INDIRECT
BEGINNING ENDING EXPENSES EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING PAID DURING
MAY 1, 2010 OCT. 31, 2010 THE PERIOD(a) THE PERIOD
- ----------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------
Actual(b) $1,000 $1,050.10 $ 7.31(c) $ 7.36(c)
- ----------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,017.80 $ 7.19(c) $ 7.24(c)
- ----------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------
Actual(b) $1,000 $1,046.20 $11.27(c) $11.33(c)
- ----------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,013.91 $11.10(c) $11.15(c)
- ----------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------
Actual(b) $1,000 $1,046.30 $11.17(c) $11.22(c)
- ----------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,014.01 $11.00(c) $11.05(c)
- ----------------------------------------------------------------------------------------
Class I
- ----------------------------------------------------------------------------------------
Actual(b) $1,000 $1,055.70 $ 4.41 $ 4.46
- ----------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,020.64 $ 4.33 $ 4.38
- ----------------------------------------------------------------------------------------
Class R
- ----------------------------------------------------------------------------------------
Actual(b) $1,000 $1,050.50 $ 8.13 $ 8.18
- ----------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,017.00 $ 8.00 $ 8.05
- ----------------------------------------------------------------------------------------
Class R4
- ----------------------------------------------------------------------------------------
Actual(b) $1,000 $1,051.60 $ 5.98 $ 6.04
- ----------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,019.10 $ 5.89 $ 5.94
- ----------------------------------------------------------------------------------------
Class W
- ----------------------------------------------------------------------------------------
Actual(b) $1,000 $1,053.10 $ 6.55 $ 6.60
- ----------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,018.55 $ 6.44 $ 6.49
- ----------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 17
FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
ANNUALIZED EXPENSE RATIOS
<Table>
<Caption>
FUND'S ACQUIRED FUND TOTAL FUND AND
ANNUALIZED FEES AND ACQUIRED FUND FEES
EXPENSE RATIO EXPENSES AND EXPENSES
- --------------------------------------------------------------------------------
Class A 1.43% .01% 1.44%
- --------------------------------------------------------------------------------
Class B 2.21% .01% 2.22%
- --------------------------------------------------------------------------------
Class C 2.19% .01% 2.20%
- --------------------------------------------------------------------------------
Class I .86% .01% .87%
- --------------------------------------------------------------------------------
Class R 1.59% .01% 1.60%
- --------------------------------------------------------------------------------
Class R4 1.17% .01% 1.18%
- --------------------------------------------------------------------------------
Class W 1.28% .01% 1.29%
- --------------------------------------------------------------------------------
</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 182/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Oct. 31, 2010: +5.01%
for Class A, +4.62% for Class B, +4.63% for Class C, +5.57% for Class I,
+5.05% for Class R, +5.16% for Class R4 and +5.31% for Class W.
(c) Columbia Management Investment Advisers, LLC (formerly RiverSource
Investments, LLC) (the Investment Manager) and its affiliates have
contractually agreed to waive certain fees and to absorb certain expenses
until Dec. 31, 2011, unless sooner terminated at the sole discretion of the
Fund's Board, such that net expenses (excluding fees and expenses of
acquired funds), before giving effect to any performance incentive
adjustment, will not exceed 1.50% for Class A, 2.25% for Class B, 2.25% for
Class C, 1.13% for Class I, 1.75% for Class R, 1.43% for Class R4 and 1.50%
for Class W. Any amounts waived will not be reimbursed by the Fund.
This change is effective Jan. 1, 2011. Had this change been in place for the
entire six month period ended Oct. 31, 2010, the actual direct expenses paid
would have been $8.28 for Class A, $12.09 for Class B and $12.09 for Class
C; the hypothetical direct expenses paid would have been $8.15 for Class A,
$11.90 for Class B and $11.90 for Class C. The actual and hypothetical
expenses paid for Class I, Class R, Class R4 and Class W would have been the
same as those expenses presented in the table above.
Additionally, had this change been in place for the entire six month period
ended Oct. 31, 2010, the actual direct and indirect expenses paid would have
been $8.33 for Class A, $12.14 for Class B and $12.14 for Class C; the
hypothetical direct and indirect expenses paid would have been $8.20 for
Class A, $11.95 for Class B and $11.95 for Class C.
- --------------------------------------------------------------------------------
18 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
OCT. 31, 2010
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
COMMON STOCKS (98.1%)(c)
ISSUER SHARES VALUE(a)
AUSTRALIA (3.7%)
AGL Energy Ltd. 237,091 $3,736,591
Australia & New Zealand Banking Group Ltd. 254,371 6,181,570
AWE Ltd. 1,300,885(b) 1,917,696
OneSteel Ltd. 745,122 1,970,587
Origin Energy Ltd. 44,048(d) 687,732
Wesfarmers Ltd. 31,098 1,017,076
---------------
Total 15,511,252
- -------------------------------------------------------------------------------------
BRAZIL (0.3%)
Vivo Participacoes SA, ADR 40,333 1,155,137
- -------------------------------------------------------------------------------------
CANADA (3.3%)
Centerra Gold, Inc. 120,327 2,400,877
Cott Corp. 275,941(b) 2,262,716
Eastern Platinum Ltd. 1,341,123(b) 2,445,817
First Quantum Minerals Ltd. 23,400 2,049,077
George Weston Ltd. 15,742 1,264,886
Teck Resources Ltd., Class B 42,097(h) 1,883,420
Thompson Creek Metals Co., Inc. 146,305(b) 1,761,570
---------------
Total 14,068,363
- -------------------------------------------------------------------------------------
CHINA (1.6%)
Bank of China Ltd., Series H 4,501,000(d) 2,694,445
Solarfun Power Holdings Co., Ltd., ADR 122,695(b) 1,252,716
Yanzhou Coal Mining Co., Ltd., ADR 7,200(d) 207,936
Yanzhou Coal Mining Co., Ltd., Series H 870,000(d) 2,503,032
---------------
Total 6,658,129
- -------------------------------------------------------------------------------------
DENMARK (1.2%)
Carlsberg A/S, Series B 46,777 5,114,816
- -------------------------------------------------------------------------------------
FINLAND (2.3%)
Fortum OYJ 177,706 5,036,328
Sampo OYJ, Series A 170,803 4,783,659
---------------
Total 9,819,987
- -------------------------------------------------------------------------------------
FRANCE (6.0%)
BNP Paribas 74,971 5,481,343
Ciments Francais SA 18,286 1,679,890
Sanofi-Aventis SA 73,891 5,158,734
Schneider Electric SA 31,452 4,463,437
SEB SA 38,981 3,735,115
Total SA 86,986 4,725,369
---------------
Total 25,243,888
- -------------------------------------------------------------------------------------
GERMANY (8.3%)
Adidas AG 67,252 4,385,519
Allianz SE 24,810 3,108,016
Aurubis AG 54,880(d) 2,822,065
BASF SE 106,768 7,766,004
Demag Cranes AG 22,499(b) 1,123,617
Deutsche Bank AG 61,736 3,557,701
Freenet AG 171,391 2,171,384
Henkel AG & Co. KGaA 14,664 728,046
Kloeckner & Co., SE 84,596(b) 1,871,405
MTU Aero Engines Holding AG 46,303 2,795,888
RWE AG 64,925 4,652,005
---------------
Total 34,981,650
- -------------------------------------------------------------------------------------
GREECE (1.1%)
National Bank of Greece SA 174,694(b) 1,912,818
OPAP SA 138,114 2,603,742
---------------
Total 4,516,560
- -------------------------------------------------------------------------------------
HONG KONG (1.5%)
Hongkong Land Holdings Ltd. 566,000 3,905,400
Swire Pacific Ltd., Series A 168,000 2,384,208
---------------
Total 6,289,608
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 19
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
INDIA (0.9%)
Balrampur Chini Mills Ltd. 1,045,052 $1,985,422
Indian Bank 280,192 1,840,406
---------------
Total 3,825,828
- -------------------------------------------------------------------------------------
INDONESIA (0.2%)
PT Perusahaan Gas Negara Tbk 2,227,500 1,009,667
- -------------------------------------------------------------------------------------
IRELAND (1.2%)
DCC PLC 112,207 3,240,919
The Governor & Co. of the Bank of Ireland 2,633,179(b) 1,952,669
---------------
Total 5,193,588
- -------------------------------------------------------------------------------------
ISRAEL (0.7%)
Bezeq Israeli Telecommunication Corp., Ltd. 1,159,592 3,054,333
- -------------------------------------------------------------------------------------
ITALY (2.8%)
Enel SpA 765,065 4,366,846
Maire Tecnimont SpA 817,793 3,535,700
Parmalat SpA 1,378,515 3,789,827
---------------
Total 11,692,373
- -------------------------------------------------------------------------------------
JAPAN (19.6%)
Aeon Delight Co., Ltd. 155,200 2,885,289
Arnest One Corp. 236,400 2,500,017
Dena Co., Ltd. 74,300 1,922,364
Denso Corp. 54,100 1,684,112
EDION Corp. 213,600 1,582,026
Exedy Corp. 38,800 1,214,097
Foster Electric Co., Ltd. 149,500 3,453,716
FUJIFILM Holdings Corp. 103,000 3,436,747
Hitachi Chemical Co., Ltd. 127,400 2,366,882
ITOCHU Corp. 332,700 2,918,929
Japan Petroleum Exploration Co. 78,000 2,980,614
Japan Retail Fund Investment Corp. 2,866 4,476,901
Miraca Holdings, Inc. 117,000 4,210,662
Mitsubishi Electric Corp. 428,000 4,015,658
Mitsui & Co., Ltd. 207,700 3,265,074
Murata Manufacturing Co., Ltd. 61,100 3,435,784
Nintendo Co., Ltd. 10,600 2,746,489
Nissan Motor Co., Ltd. 574,800 5,071,555
NTT DoCoMo, Inc. 1,251 2,106,506
Santen Pharmaceutical Co., Ltd. 67,893 2,343,815
Seven & I Holdings Co., Ltd. 180,400 4,198,946
Shinko Plantech Co., Ltd. 294,400 2,729,246
Softbank Corp. 143,700 4,625,114
Sumitomo Mitsui Financial Group, Inc. 167,100 5,008,639
Tokai Tokyo Financial Holdings, Inc. 496,000 1,725,861
USS Co., Ltd. 49,350 3,839,082
Yamada Denki Co., Ltd. 34,450 2,239,015
---------------
Total 82,983,140
- -------------------------------------------------------------------------------------
MALTA (--%)
BGP Holdings PLC 2,232,232(b,e,i) 3
- -------------------------------------------------------------------------------------
NETHERLANDS (2.5%)
Core Laboratories NV 10,683(d) 830,817
European Aeronautic Defence and Space Co. 31,693(b) 832,724
ING Groep NV-CVA 436,627(b) 4,659,367
Koninklijke Ahold NV 321,756 4,445,256
---------------
Total 10,768,164
- -------------------------------------------------------------------------------------
NORWAY (1.9%)
Marine Harvest ASA 4,530,369 4,502,979
Norsk Hydro ASA 186,330 1,141,134
Telenor ASA 159,314 2,569,800
---------------
Total 8,213,913
- -------------------------------------------------------------------------------------
RUSSIA (0.6%)
Rosneft Oil Co., GDR 342,525 2,387,399
- -------------------------------------------------------------------------------------
SINGAPORE (0.2%)
United Overseas Bank Ltd. 55,000(d) 792,333
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
20 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
SOUTH KOREA (1.4%)
LG Fashion Corp. 115,030 $3,281,956
Samsung Electronics Co., Ltd. 2,736 1,811,711
Youngone Corp. 100,169 979,361
---------------
Total 6,073,028
- -------------------------------------------------------------------------------------
SPAIN (4.1%)
Banco Bilbao Vizcaya Argentaria SA 360,417 4,738,687
Banco Santander SA 603,680 7,753,118
Tecnicas Reunidas SA 36,020 2,240,876
Telefonica SA 100,430 2,710,729
---------------
Total 17,443,410
- -------------------------------------------------------------------------------------
SWEDEN (2.8%)
Svenska Cellulosa AB, Series B 244,105(d) 3,785,707
Svenska Handelsbanken AB, Series A 112,254 3,669,991
Tele2 AB, Series B 205,882 4,530,501
---------------
Total 11,986,199
- -------------------------------------------------------------------------------------
SWITZERLAND (6.8%)
Clariant AG 258,660(b) 4,373,199
Credit Suisse Group AG 59,007 2,437,141
Nestle SA 81,188 4,446,285
Noble Corp. 72,391 2,499,661
Novartis AG 61,661 3,574,233
Roche Holding AG 43,965 6,454,929
Zurich Financial Services AG 21,067 5,156,512
---------------
Total 28,941,960
- -------------------------------------------------------------------------------------
TAIWAN (3.1%)
Altek Corp. 1,075,285 1,541,791
CTCI Corp. 2,615,000 2,942,377
Huaku Development Co., Ltd. 1,639,449 4,546,142
Macronix International 3,442,000 2,119,140
MediaTek, Inc. 154,219 1,939,260
---------------
Total 13,088,710
- -------------------------------------------------------------------------------------
THAILAND (0.4%)
Advanced Information Service PCL 535,400 1,612,651
- -------------------------------------------------------------------------------------
TURKEY (0.5%)
Turk Hava Yollari AO 523,356 2,150,163
- -------------------------------------------------------------------------------------
UNITED KINGDOM (16.4%)
AstraZeneca PLC, ADR 125,345(d) 6,324,909
Atkins WS PLC 299,305 3,610,984
Autonomy Corp. PLC 120,258(b) 2,816,943
BAE Systems PLC 803,796 4,439,190
BHP Billiton PLC 224,723 7,969,731
BP PLC 763,507 5,208,771
GAME Group PLC 2,131,353 2,416,008
GlaxoSmithKline PLC 196,783 3,849,637
Halma PLC 448,109 2,345,575
HSBC Holdings PLC 439,232 4,567,959
ICAP PLC 358,166 2,617,919
Intermediate Capital Group PLC 671,790 3,474,431
International Power PLC 847,787 5,668,286
McBride PLC 553,493 1,590,044
Royal Dutch Shell PLC, Series B 207,673 6,649,681
SABMiller PLC 43,678 1,416,063
Vodafone Group PLC 1,280,866 3,485,667
Wolseley PLC 31,447(b) 837,892
---------------
Total 69,289,690
- -------------------------------------------------------------------------------------
UNITED STATES (2.7%)
Amgen, Inc. 30,924(b) 1,768,544
Axis Capital Holdings Ltd. 93,757 3,188,676
Freeport-McMoRan Copper & Gold, Inc. 23,311 2,207,085
Tyco International Ltd. 90,156 3,451,172
XL Group PLC 41,979 887,856
---------------
Total 11,503,333
- -------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $380,080,326) $415,369,275
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 21
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
PREFERRED STOCKS (0.9%)(c)
ISSUER SHARES VALUE(a)
GERMANY
Henkel AG & Co. KGaA 67,404 $3,974,363
- -------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost: $3,488,112) $3,974,363
- -------------------------------------------------------------------------------------
<Caption>
EXCHANGE-TRADED FUNDS (0.7%)
SHARES VALUE(a)
UNITED STATES
iShares MSCI EAFE Index Fund 51,271 $2,922,960
- -------------------------------------------------------------------------------------
TOTAL EXCHANGE-TRADED FUNDS
(Cost: $2,935,509) $2,922,960
- -------------------------------------------------------------------------------------
<Caption>
MONEY MARKET FUND (0.3%)
SHARES VALUE(a)
Columbia Short-Term Cash Fund, 0.241% 1,205,364(f) $1,205,364
- -------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $1,205,364) $1,205,364
- -------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
INVESTMENTS OF CASH COLLATERAL RECEIVED
FOR SECURITIES ON LOAN (1.8%)
EFFECTIVE PRINCIPAL
ISSUER YIELD AMOUNT VALUE(a)
REPURCHASE AGREEMENTS(G)
Deutsche Bank AG
dated 10-29-10, matures 11-01-10,
repurchase price
$620,487 0.230% $620,475 $620,475
Mizuho Securities USA, Inc.
dated 10-29-10, matures 11-01-10,
repurchase price
$5,000,104 0.250 5,000,000 5,000,000
Pershing LLC
dated 10-29-10, matures 11-01-10,
repurchase price
$2,000,053 0.320 2,000,000 2,000,000
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN
(Cost: $7,620,475) $7,620,475
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $395,329,786)(j) $431,092,437
=====================================================================================
</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 net assets at Oct. 31, 2010:
<Table>
<Caption>
PERCENTAGE OF
INDUSTRY NET ASSETS VALUE(a)
- -----------------------------------------------------------------------
Aerospace & Defense 1.9% $8,067,802
Airlines 0.5 2,150,163
Auto Components 0.7 2,898,209
Automobiles 1.2 5,071,555
Beverages 2.1 8,793,595
Biotechnology 0.4 1,768,544
Capital Markets 3.3 13,813,053
Chemicals 4.4 18,480,448
Commercial Banks 11.0 46,593,978
Commercial Services & Supplies 0.7 2,885,289
Construction & Engineering 1.5 6,478,077
Construction Materials 0.4 1,679,890
Diversified Financial Services 1.1 4,659,367
Diversified Telecommunication 12,865,363
Services 3.0
Electric Utilities 2.2 9,403,174
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
22 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
SUMMARY OF INVESTMENTS IN SECURITIES
BY INDUSTRY (CONTINUED)
<Table>
<Caption>
PERCENTAGE OF
INDUSTRY NET ASSETS VALUE(a)
- -----------------------------------------------------------------------
Electrical Equipment 2.0% $8,479,095
Electronic Equipment, Instruments & 9,218,106
Components 2.2
Energy Equipment & Services 2.0 8,300,600
Food & Staples Retailing 2.6 10,926,164
Food Products 3.5 14,724,513
Gas Utilities 0.2 1,009,667
Health Care Providers & Services 1.0 4,210,662
Hotels, Restaurants & Leisure 0.6 2,603,742
Household Durables 2.3 9,688,848
Household Products 0.5 2,318,090
Independent Power Producers & Energy 5,668,286
Traders 1.3
Industrial Conglomerates 1.6 6,692,091
Insurance 4.0 17,124,719
Internet & Catalog Retail 0.5 1,922,364
Leisure Equipment & Products 0.4 1,541,791
Machinery 0.3 1,123,617
Metals & Mining 6.3 26,651,363
Multi-Utilities 2.0 8,388,596
Oil, Gas & Consumable Fuels 6.4 27,268,230
Paper & Forest Products 0.9 3,785,707
Pharmaceuticals 6.5 27,706,257
Professional Services 0.9 3,610,984
Real Estate 0.0* 3
Real Estate Investment Trusts 4,476,901
(REITs) 1.1
Real Estate Management & Development 2.5 10,835,750
Semiconductors & Semiconductor 7,122,827
Equipment 1.7
Software 1.3 5,563,432
Specialty Retail 2.4 10,076,131
Textiles, Apparel & Luxury Goods 2.0 8,646,836
Trading Companies & Distributors 2.1 8,893,300
Wireless Telecommunication Services 3.6 15,156,459
Exchange-Traded Funds 0.7 2,922,960
Other(1) 2.1 8,825,839
- -----------------------------------------------------------------------
Total $431,092,437
- -----------------------------------------------------------------------
</Table>
* Rounds to less than 0.1%
(1) Cash & Cash Equivalents.
The industries identified above are based on the Global Industry Classification
Standard (GICS), which was developed by, and is the exclusive property of,
Morgan Stanley Capital International Inc. and Standard & Poor's, a division of
The McGraw-Hill Companies, Inc.
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 23
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
INVESTMENTS IN DERIVATIVES
OPEN OPTIONS CONTRACTS WRITTEN AT OCT. 31, 2010
<Table>
<Caption>
NUMBER OF EXERCISE PREMIUM EXPIRATION
ISSUER PUTS/CALLS CONTRACTS PRICE RECEIVED DATE VALUE(A)
- --------------------------------------------------------------------------------------
Teck Resources Ltd. Call 420 $49 $18,026 Nov. 2010 $17,850
- --------------------------------------------------------------------------------------
</Table>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS OPEN AT OCT. 31, 2010
<Table>
<Caption>
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED
COUNTERPARTY EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION
- ------------------------------------------------------------------------------------------
Goldman, Sachs & Co. Nov. 1, 2010 1,216,824 1,918,277 $-- $(31,318)
(GBP) (USD)
- ------------------------------------------------------------------------------------------
</Table>
NOTES TO PORTFOLIO OF INVESTMENTS
<Table>
ADR -- American Depositary Receipt
GBP -- British Pound Sterling
GDR -- Global Depositary Receipt
</Table>
(a) Securities are valued by using policies described in Note 2 to the
financial statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) At Oct. 31, 2010, security was partially or fully on loan. See Note 7 to
the financial statements.
(e) Identifies issues considered to be illiquid as to their marketability (see
Note 2 to the financial statements). The aggregate value of such securities
at Oct. 31, 2010 was $3, representing less than 0.01% of net assets.
Information concerning such security holdings at Oct. 31, 2010 was as
follows:
<Table>
<Caption>
ACQUISITION
SECURITY DATES COST
---------------------------------------------------------------------
BGP Holdings PLC 02-04-09 thru 05-14-09 $--
</Table>
(f) Affiliated Money Market Fund -- See Note 9 to the financial statements. The
rate shown is the seven-day current annualized yield at Oct. 31, 2010.
- --------------------------------------------------------------------------------
24 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(g) The table below represents securities received as collateral for repurchase
agreements. This collateral, which is generally high quality short-term
obligations, is deposited with the Fund's custodian and, pursuant to the
terms of the repurchase agreement, must have an aggregate market value
greater than or equal to the repurchase price plus accrued interest at all
times. The value of securities and/or cash held as collateral for
repurchase agreements is monitored on a daily basis to ensure the existence
of the proper level of collateral.
<Table>
<Caption>
DEUTSCHE BANK AG (0.230%)
SECURITY DESCRIPTION VALUE(a)
- -----------------------------------------------------------
Fannie Mae Pool $632,885
- -----------------------------------------------------------
Total market value of collateral securities $632,885
- -----------------------------------------------------------
<Caption>
MIZUHO SECURITIES USA, INC. (0.250%)
SECURITY DESCRIPTION VALUE(a)
- -----------------------------------------------------------
Fannie Mae Pool $1,859,017
Freddie Mac Gold Pool 764,978
Freddie Mac Non Gold Pool 304,066
Freddie Mac REMICS 426,522
Ginnie Mae I Pool 1,048,719
Government National Mortgage Association 696,698
- -----------------------------------------------------------
Total market value of collateral securities $5,100,000
- -----------------------------------------------------------
<Caption>
PERSHING LLC (0.320%)
SECURITY DESCRIPTION VALUE(a)
- -----------------------------------------------------------
Fannie Mae Pool $304,761
Fannie Mae REMICS 141,340
Fannie Mae Whole Loan 2,351
Federal Farm Credit Bank 71,626
Federal Home Loan Banks 26,117
Federal Home Loan Mortgage Corp 3,543
Federal National Mortgage Association 41,283
Freddie Mac Gold Pool 277,398
Freddie Mac REMICS 170,330
Ginnie Mae I Pool 258,294
Ginnie Mae II Pool 231,771
Government National Mortgage Association 216,183
United States Treasury Inflation Indexed Bonds 3,901
United States Treasury Note/Bond 291,102
- -----------------------------------------------------------
Total market value of collateral securities $2,040,000
- -----------------------------------------------------------
</Table>
(h) At Oct. 31, 2010, securities valued at $1,879,080 were held to cover open
call options written. See Note 3 and Note 8 to the financial statements.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 25
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(i) Security valued by management at fair value according to procedures
approved, in good faith, by the Board.
(j) At Oct. 31, 2010, the cost of securities for federal income tax purposes
was $400,347,244 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
<Table>
Unrealized appreciation $40,740,326
Unrealized depreciation (9,995,133)
-----------------------------------------------------------
Net unrealized appreciation $30,745,193
-----------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
26 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
FAIR VALUE MEASUREMENTS
Generally accepted accounting principles (GAAP) require disclosure regarding the
inputs and valuation techniques used to measure fair value and any changes in
valuation inputs or techniques. In addition, investments shall be disclosed by
major category.
The Fund categorizes its fair value measurements according to a three-level
hierarchy that maximizes the use of observable inputs and minimizes the use of
unobservable inputs by prioritizing that the most observable input be used when
available. Observable inputs are those that market participants would use in
pricing an investment based on market data obtained from sources independent of
the reporting entity. Unobservable inputs are those that reflect the Fund's
assumptions about the information market participants would use in pricing an
investment. An investment's level within the fair value hierarchy is based on
the lowest level of any input that is deemed significant to the asset or
liability's fair value measurement. The input levels are not necessarily an
indication of the risk or liquidity associated with investments at that level.
For example, certain U.S. government securities are generally high quality and
liquid, however, they are reflected as Level 2 because the inputs used to
determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in the three broad levels listed below:
- Level 1 -- Valuations based on quoted prices for investments in active
markets that the Fund has the ability to access at the measurement date
(to include NAV for open-end mutual funds). Valuation adjustments are not
applied to Level 1 investments.
- Level 2 -- Valuations based on other significant observable inputs
(including quoted prices for similar securities, interest rates,
prepayment speeds, credit risks, etc.).
- Level 3 -- Valuations based on significant unobservable inputs (including
the Fund's own assumptions and judgment in determining the fair value of
investments).
Inputs that are used in determining fair value of an investment may include
price information, credit data, volatility statistics, and other factors. These
inputs can be either observable or unobservable. The availability of observable
inputs can vary between investments, and is affected by various factors such as
the type of investment, and the volume and level of activity for that investment
or similar investments in the marketplace. The inputs will be considered by the
Fund Administrator, along with any other relevant factors in the calculation of
an investment's fair value. The Fund uses prices and inputs that are current as
of the measurement date, which may include periods of market dislocations.
During these periods, the availability of prices and inputs may be reduced for
many investments. This condition could cause an investment to be reclassified
between the various levels within the hierarchy.
Non-U.S. equity securities actively traded in foreign markets may be reflected
in Level 2 despite the availability of closing prices, because the Fund
evaluates and determines whether those closing prices reflect fair value at the
close of the New York StockExchange (NYSE) or require adjustment, as described
in Note 2 to the financial statements -- Valuation of securities.
Investments falling into the Level 3 category are primarily supported by quoted
prices from brokers and dealers participating in the market for those
investments. However, these may be classified as
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 27
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
FAIR VALUE MEASUREMENTS (CONTINUED)
Level 3 investments due to lack of market transparency and corroboration to
support these quoted prices. Additionally, valuation models may be used as the
pricing source for any remaining investments classified as Level 3. These models
rely on one or more significant unobservable inputs and/or significant
assumptions by the Fund Administrator. Inputs used in valuations may include,
but are not limited to, financial statement analysis, capital account balances,
discount rates and estimated cash flows, and comparable company data.
The following table is a summary of the inputs used to value the Fund's
investments as of
Oct. 31, 2010:
<Table>
<Caption>
FAIR VALUE AT OCT. 31, 2010
------------------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION(A) IDENTICAL ASSETS(B) INPUTS INPUTS TOTAL
- -----------------------------------------------------------------------------------------------
Equity Securities
Common Stocks
Real Estate $-- $-- $3 $3
All Other Industries 415,369,272 -- -- 415,369,272
Preferred Stocks 3,974,363 -- -- 3,974,363
- -----------------------------------------------------------------------------------------------
Total Equity Securities 419,343,635 -- 3 419,343,638
- -----------------------------------------------------------------------------------------------
Other
Exchange-Traded Funds 2,922,960 -- -- 2,922,960
Affiliated Money Market
Fund(c) 1,205,364 -- -- 1,205,364
Investments of Cash
Collateral Received
for Securities on
Loan -- 7,620,475 -- 7,620,475
- -----------------------------------------------------------------------------------------------
Total Other 4,128,324 7,620,475 -- 11,748,799
- -----------------------------------------------------------------------------------------------
Investments in Securities 423,471,959 7,620,475 3 431,092,437
Derivatives(d)
Liabilities
Options Contracts
Written (17,850) -- -- (17,850)
Forward Foreign
Currency Exchange
Contracts -- (31,318) -- (31,318)
- -----------------------------------------------------------------------------------------------
Total $423,454,109 $7,589,157 $3 $431,043,269
- -----------------------------------------------------------------------------------------------
</Table>
(a) See the Portfolio of Investments for all investment classifications not
indicated in the table.
(b) Includes certain securities trading outside the U.S. whose values were
adjusted at Oct. 31, 2009 as a result of significant market movements
following the close of local trading, and were classified as Level 2.
Values were not adjusted as of Oct. 31, 2010. Therefore, these investment
securities were classified as Level 1 instead of Level 2 at Oct. 31, 2010.
The amount of securities transferred out of Level 2 into Level 1 during the
period was $88,483,358. Transfers between Levels 1 and 2 are determined
based on the fair value at the beginning of the period for security
positions held throughout the period.
- --------------------------------------------------------------------------------
28 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
FAIR VALUE MEASUREMENTS (CONTINUED)
(c) Money market fund that is a sweep investment for cash balances in the Fund
at Oct. 31, 2010.
(d) Forward Foreign Currency Exchange Contracts are valued at unrealized
appreciation (depreciation).
The following table is a reconciliation of Level 3 assets for which significant
unobservable inputs were used to determine fair value.
<Table>
<Caption>
COMMON
STOCKS
- -------------------------------------------------------------
Balance as of Oct. 31, 2009 $3
Accrued discounts/premiums --
Realized gain (loss) --
Change in unrealized appreciation (depreciation)* --
Sales --
Purchases --
Transfers into Level 3 --
Transfers out of Level 3 --
- -------------------------------------------------------------
Balance as of Oct. 31, 2010 $3
- -------------------------------------------------------------
</Table>
* Change in unrealized appreciation (depreciation) relating to securities
held at Oct. 31, 2010 was $0.
Transfers in and/or out of Level 3 are determined based on the fair value at the
beginning of the period for security positions held throughout the period.
HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 800.SEC.0330); and
(iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q,
can be obtained without charge, upon request, by calling 800.345.6611.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 29
STATEMENT OF ASSETS AND LIABILITIES --------------------------------------------
OCT. 31, 2010
<Table>
<Caption>
ASSETS
Investments in securities, at value
Unaffiliated issuers* (identified cost $386,503,947) $ 422,266,598
Affiliated money market fund (identified cost $1,205,364) 1,205,364
Investments of cash collateral received for securities on loan
(identified cost $7,620,475) 7,620,475
- --------------------------------------------------------------------------------
Total investments in securities (identified cost $395,329,786) 431,092,437
Foreign currency holdings (identified cost $681,804) 681,728
Capital shares receivable 516,885
Dividends and accrued interest receivable 1,409,824
Receivable for investment securities sold 2,375,011
- --------------------------------------------------------------------------------
Total assets 436,075,885
- --------------------------------------------------------------------------------
LIABILITIES
Options contracts written, at value (premiums received $18,026) 17,850
Disbursements in excess of cash 4,449
Capital shares payable 2,101,107
Payable for investment securities purchased 2,667,786
Payable upon return of securities loaned 7,620,475
Unrealized depreciation on forward foreign currency exchange
contracts 31,318
Accrued investment management services fees 9,213
Accrued distribution fees 2,019
Accrued transfer agency fees 17,577
Accrued administrative services fees 933
Other accrued expenses 187,264
- --------------------------------------------------------------------------------
Total liabilities 12,659,991
- --------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $ 423,415,894
- --------------------------------------------------------------------------------
REPRESENTED BY
Capital stock -- $.01 par value $ 575,877
Additional paid-in capital 772,969,659
Undistributed net investment income 7,913,561
Accumulated net realized gain (loss) (393,847,226)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign
currencies 35,804,023
- --------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding
capital stock $ 423,415,894
- --------------------------------------------------------------------------------
*Value of securities on loan $ 7,237,350
- --------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
30 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
NET ASSET VALUE PER SHARE
NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE
Class A $ 38,153,014 5,195,522 $7.34(1)
Class B $ 4,503,501 621,082 $7.25
Class C $ 991,847 137,200 $7.23
Class I $146,207,418 19,793,638 $7.39
Class R $ 3,705 509 $7.28
Class R4 $ 41,994 5,722 $7.34
Class W $233,514,415 31,833,978 $7.34
- ------------------------------------------------------------------------------
</Table>
(1) The maximum offering price per share for Class A is $7.79. The offering
price is calculated by dividing the net asset value by 1.0 minus the maximum
sales charge of 5.75%.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 31
STATEMENT OF OPERATIONS --------------------------------------------------------
YEAR ENDED OCT. 31, 2010
<Table>
<Caption>
INVESTMENT INCOME
Income:
Dividends $ 16,377,394
Interest 4,251
Income distributions from affiliated money market fund 10,231
Income from securities lending -- net 258,157
Foreign taxes withheld (1,553,829)
- --------------------------------------------------------------------------------
Total income 15,096,204
- --------------------------------------------------------------------------------
Expenses:
Investment management services fees 3,607,751
Distribution fees
Class A 104,529
Class B 58,603
Class C 10,060
Class R 17
Class R3 7
Class W 751,071
Transfer agency fees
Class A 143,239
Class B 21,784
Class C 3,517
Class R 1
Class R3 1
Class R4 45
Class R5 1
Class W 574,484
Administrative services fees 398,102
Plan administration services fees
Class R 7
Class R3 7
Class R4 178
Compensation of board members 15,096
Custodian fees 166,050
Printing and postage 73,040
Registration fees 110,760
Professional fees 41,690
Other 88,481
- --------------------------------------------------------------------------------
Total expenses 6,168,521
- --------------------------------------------------------------------------------
Investment income (loss) -- net 8,927,683
- --------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
32 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions $(105,674,621)
Foreign currency transactions 227,028
Futures contracts 1,037,611
- --------------------------------------------------------------------------------
Net realized gain (loss) on investments (104,409,982)
Net change in unrealized appreciation (depreciation) on
investments
and on translation of assets and liabilities in foreign
currencies 106,894,486
- --------------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies 2,484,504
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 11,412,187
- --------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 33
STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31, 2010 2009
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 8,927,683 $ 6,946,827
Net realized gain (loss) on investments (104,409,982) (263,789,867)
Net change in unrealized appreciation (depreciation) on
investments and on translation of assets and liabilities in
foreign currencies 106,894,486 307,402,646
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 11,412,187 50,559,606
- -----------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (594,998) (2,036,880)
Class B (24,553) (251,061)
Class C (6,772) (31,630)
Class I (2,738,585) (4,505,003)
Class R (46) (132)
Class R3 (53) (136)
Class R4 (1,157) (2,822)
Class R5 (68) (140)
Class W (4,933,830) (9,771,565)
- -----------------------------------------------------------------------------------------------
Total distributions (8,300,062) (16,599,369)
- -----------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
34 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31, 2010 2009
CAPITAL SHARE TRANSACTIONS
Proceeds from sales
Class A shares $ 1,919,358 $ 5,050,209
Class B shares 177,363 368,662
Class C shares 64,292 153,693
Class I shares 86,550,322 63,916,943
Class R4 shares 6,050 520
Class W shares 184,739,797 110,495,372
Reinvestment of distributions at net asset value
Class A shares 580,387 1,996,055
Class B shares 23,945 246,989
Class C shares 6,412 30,209
Class I shares 2,738,468 4,504,765
Class R4 shares 1,061 2,589
Class W shares 4,933,774 9,771,449
Conversions from Class B to Class A
Class A shares 1,099,391 1,217,602
Class B shares (1,099,391) (1,217,602)
Payments for redemptions
Class A shares (16,124,405) (21,055,342)
Class B shares (1,766,310) (2,993,952)
Class C shares (213,912) (350,361)
Class I shares (74,504,000) (50,287,372)
Class R3 shares (5,018) --
Class R4 shares (38,286) (4,409)
Class R5 shares (5,018) --
Class W shares (235,893,043) (108,273,459)
- -----------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions (46,808,763) 13,572,560
- -----------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (43,696,638) 47,532,797
Net assets at beginning of year 467,112,532 419,579,735
- -----------------------------------------------------------------------------------------------
Net assets at end of year $ 423,415,894 $ 467,112,532
- -----------------------------------------------------------------------------------------------
Undistributed net investment income $ 7,913,561 $ 6,121,811
- -----------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 35
FINANCIAL HIGHLIGHTS -----------------------------------------------------------
The following tables are intended to help you understand the Fund's financial
performance. Certain information reflects financial results for a single share
of a class held for the periods shown. For periods ended 2007 and after, per
share net investment income (loss) amounts are calculated based on average
shares outstanding during the period. Total returns assume reinvestment of all
dividends and distributions. Total returns do not reflect payment of sales
charges, if any, and are not annualized for periods of less than one year.
<Table>
<Caption>
YEAR ENDED OCT. 31,
CLASS A -------------------------------------------------------
PER SHARE DATA 2010 2009 2008 2007 2006(a)
Net asset value, beginning of period $6.98 $6.02 $13.06 $9.82 $9.21
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .10 .10 .27 .15 .01
Net gains (losses) (both realized and
unrealized) .35 1.09 (7.06) 3.17 .60
- ----------------------------------------------------------------------------------------------------------
Total from investment operations .45 1.19 (6.79) 3.32 .61
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.23) (.09) (.07) --
Distributions from realized gains -- -- (.16) (.01) --
- ----------------------------------------------------------------------------------------------------------
Total distributions (.09) (.23) (.25) (.08) --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $7.34 $6.98 $6.02 $13.06 $9.82
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN 6.48% 20.82% (52.87%) 34.06% 6.62%
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(b)
Gross expenses prior to expense
waiver/reimbursement 1.49% 1.48% 1.40% 1.43% 1.92%(c)
- ----------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d) 1.49% 1.48% 1.40% 1.43% 1.42%(c)
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) 1.47% 1.70% 2.75% 1.37% 1.48%(c)
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $38 $49 $56 $25 $11
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 137% 85% 61% 47% 10%
- ----------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
36 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31,
CLASS B -------------------------------------------------------
PER SHARE DATA 2010 2009 2008 2007 2006(a)
Net asset value, beginning of period $6.88 $5.91 $12.92 $9.79 $9.21
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .05 .05 .20 .08 --
Net gains (losses) (both realized and
unrealized) .34 1.08 (6.99) 3.13 .58
- ----------------------------------------------------------------------------------------------------------
Total from investment operations .39 1.13 (6.79) 3.21 .58
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.02) (.16) (.06) (.07) --
Distributions from realized gains -- -- (.16) (.01) --
- ----------------------------------------------------------------------------------------------------------
Total distributions (.02) (.16) (.22) (.08) --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $7.25 $6.88 $5.91 $12.92 $9.79
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN 5.75% 19.83% (53.35%) 32.94% 6.30%
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(b)
Gross expenses prior to expense
waiver/reimbursement 2.27% 2.26% 2.18% 2.20% 2.71%(c)
- ----------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d) 2.27% 2.26% 2.18% 2.20% 2.21%(c)
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) .70% .97% 2.11% .73% (.03%)(c)
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $5 $7 $10 $3 $--
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 137% 85% 61% 47% 10%
- ----------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 37
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31,
CLASS C -------------------------------------------------------
PER SHARE DATA 2010 2009 2008 2007 2006(a)
Net asset value, beginning of period $6.88 $5.92 $12.92 $9.79 $9.21
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .05 .03 .19 .08 --
Net gains (losses) (both realized and
unrealized) .34 1.10 (6.98) 3.12 .58
- ----------------------------------------------------------------------------------------------------------
Total from investment operations .39 1.13 (6.79) 3.20 .58
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.04) (.17) (.05) (.06) --
Distributions from realized gains -- -- (.16) (.01) --
- ----------------------------------------------------------------------------------------------------------
Total distributions (.04) (.17) (.21) (.07) --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $7.23 $6.88 $5.92 $12.92 $9.79
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN 5.74% 19.91% (53.30%) 32.85% 6.30%
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(b)
Gross expenses prior to expense
waiver/reimbursement 2.25% 2.22% 2.17% 2.19% 2.71%(c)
- ----------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d) 2.25% 2.22% 2.17% 2.19% 2.21%(c)
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) .73% .97% 1.98% .71% .74%(c)
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $1 $1 $1 $-- $--
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 137% 85% 61% 47% 10%
- ----------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
38 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31,
CLASS I -------------------------------------------------------
PER SHARE DATA 2010 2009 2008 2007 2006(a)
Net asset value, beginning of period $7.02 $6.07 $13.11 $9.83 $9.21
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .14 .14 .29 .24 .02
Net gains (losses) (both realized and
unrealized) .37 1.09 (7.05) 3.14 .60
- ----------------------------------------------------------------------------------------------------------
Total from investment operations .51 1.23 (6.76) 3.38 .62
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.14) (.28) (.12) (.09) --
Distributions from realized gains -- -- (.16) (.01) --
- ----------------------------------------------------------------------------------------------------------
Total distributions (.14) (.28) (.28) (.10) --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $7.39 $7.02 $6.07 $13.11 $9.83
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN 7.31% 21.50% (52.55%) 34.61% 6.73%
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(b)
Gross expenses prior to expense
waiver/reimbursement .90% .77% .90% 1.05% 1.65%(c)
- ----------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d) .90% .77% .90% 1.05% 1.15%(c)
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.12% 2.35% 2.84% 2.06% 1.17%(c)
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $146 $127 $103 $195 $63
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 137% 85% 61% 47% 10%
- ----------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 39
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31,
CLASS R* ------------------------------
PER SHARE DATA 2010 2009 2008(e)
Net asset value, beginning of period $6.93 $6.02 $9.59
- ---------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .09 .10 .03
Net gains (losses) (both realized and
unrealized) .35 1.07 (3.60)
- ---------------------------------------------------------------------------------
Total from investment operations .44 1.17 (3.57)
- ---------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.26) --
- ---------------------------------------------------------------------------------
Net asset value, end of period $7.28 $6.93 $6.02
- ---------------------------------------------------------------------------------
TOTAL RETURN 6.41% 20.62% (37.23%)
- ---------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(b)
Gross expenses prior to expense
waiver/reimbursement 1.65% 1.56% 1.64%(c)
- ---------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d) 1.65% 1.49% 1.44%(c)
- ---------------------------------------------------------------------------------
Net investment income (loss) 1.32% 1.67% 1.61%(c)
- ---------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $-- $--
- ---------------------------------------------------------------------------------
Portfolio turnover rate 137% 85% 61%
- ---------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
40 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31,
CLASS R4 -------------------------------------------------------
PER SHARE DATA 2010 2009 2008 2007 2006(a)
Net asset value, beginning of period $6.99 $6.07 $13.07 $9.83 $9.21
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .12 .13 .33 .20 .02
Net gains (losses) (both realized and
unrealized) .35 1.07 (7.06) 3.13 .60
- ----------------------------------------------------------------------------------------------------------
Total from investment operations .47 1.20 (6.73) 3.33 .62
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.12) (.28) (.11) (.08) --
Distributions from realized gains -- -- (.16) (.01) --
- ----------------------------------------------------------------------------------------------------------
Total distributions (.12) (.28) (.27) (.09) --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $7.34 $6.99 $6.07 $13.07 $9.83
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN 6.75% 21.11% (52.46%) 34.13% 6.73%
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(b)
Gross expenses prior to expense
waiver/reimbursement 1.20% 1.06% 1.20% 1.35% 1.77%(c)
- ----------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d) 1.20% 1.00% .95% 1.35% 1.27%(c)
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) 1.78% 2.18% 3.27% 1.79% 1.72%(c)
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $-- $-- $-- $--
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 137% 85% 61% 47% 10%
- ----------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 41
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31,
CLASS W -------------------------------------------
PER SHARE DATA 2010 2009 2008 2007(f)
Net asset value, beginning of period $6.98 $6.02 $13.05 $10.13
- ----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .12 .11 .23 .13
Net gains (losses) (both realized and
unrealized) .35 1.08 (7.00) 2.89
- ----------------------------------------------------------------------------------------------
Total from investment operations .47 1.19 (6.77) 3.02
- ----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.11) (.23) (.10) (.09)
Distributions from realized gains -- -- (.16) (.01)
- ----------------------------------------------------------------------------------------------
Total distributions (.11) (.23) (.26) (.10)
- ----------------------------------------------------------------------------------------------
Net asset value, end of period $7.34 $6.98 $6.02 $13.05
- ----------------------------------------------------------------------------------------------
TOTAL RETURN 6.86% 20.90% (52.81%) 30.03%
- ----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(b)
Total expenses 1.34% 1.22% 1.35% 1.48%(c)
- ----------------------------------------------------------------------------------------------
Net investment income (loss) 1.69% 1.90% 2.32% 1.17%(c)
- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $234 $283 $249 $426
- ----------------------------------------------------------------------------------------------
Portfolio turnover rate 137% 85% 61% 47%
- ----------------------------------------------------------------------------------------------
</Table>
NOTES TO FINANCIAL HIGHLIGHTS
* Effective Sept. 7, 2010, Class R2 shares were renamed Class R shares.
(a) For the period from May 18, 2006 (when shares became available) to Oct. 31,
2006.
(b) Expense ratios include the impact of a performance incentive adjustment, if
any. In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the reported expense ratios.
(c) Annualized.
(d) The Investment Manager and its affiliates agreed to waive/reimburse certain
fees and expenses (excluding fees and expenses of acquired funds), before
giving effect to any performance incentive adjustment.
(e) For the period from Aug. 1, 2008 (when shares became available) to Oct. 31,
2008.
(f) For the period from Dec. 1, 2006 (when shares became available) to Oct. 31,
2007.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
42 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS --------------------------------------------------
1. ORGANIZATION
RiverSource Disciplined International Equity Fund (the Fund) is a series of
RiverSource International Series, Inc. (the Corporation) and is registered under
the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified,
open-end management investment company. The Corporation has 10 billion
authorized shares of capital stock that can be allocated among the separate
series as designated by the Corporation's Board of Directors (the Board).
The Fund offers Class A, Class B, Class C, Class I, Class R, Class R4 and Class
W shares.
- - Class A shares are offered with a front-end sales charge, which may be waived
under certain circumstances.
- - Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares one month after the completion of
the eighth year of ownership if originally purchased in a RiverSource fund on
or after May 21, 2005 or originally purchased in a Seligman fund on or after
June 13, 2009. Class B shares originally purchased in a RiverSource fund
prior to May 21, 2005 will convert to Class A shares in the ninth calendar
year of ownership. Class B shares originally purchased in a Seligman fund
prior to June 13, 2009 will convert to Class A shares in the month prior to
the ninth year of ownership. Effective Sept. 7, 2010, the Fund no longer
accepts investments from new or existing investors in the Fund's Class B
shares, except that (i) dividend and/or capital gain distributions may
continue to be reinvested in Class B shares of the Fund and (ii) shareholders
invested in Class B shares of the Fund may exchange those shares for Class B
shares of other Columbia, RiverSource, Seligman and Threadneedle funds
offering such shares.
- - Class C shares may be subject to a CDSC on shares redeemed within one year of
purchase.
- - Class I shares are not subject to sales charges and are available only to the
Columbia Family of Funds.
- - Class R shares are offered without a front-end sales charge or CDSC to
qualifying institutional investors. Effective Sept. 7, 2010, Class R2 shares
were renamed Class R shares.
- - Class R4 shares are not subject to sales charges, however, this class is
closed to new investors effective Dec. 31, 2010.
- - Class W shares are offered without a front-end sales charge or CDSC and are
offered through qualifying discretionary accounts.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 43
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
At Aug. 27, 2010, all Class R3 and Class R5 shares were liquidated. The shares
in these classes had consisted solely of seed capital from Columbia Management
Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (the
Investment Manager).
At Oct. 31, 2010, the Investment Manager and affiliated funds-of-funds owned
100% of Class I shares, and the Investment Manager owned 100% of Class R shares.
At Oct. 31, 2010, the Investment Manager and affiliated funds-of-funds owned
approximately 35% 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
VALUATION OF SECURITIES
All securities are valued at the close of business of the New York Stock
Exchange (NYSE). Securities traded on national securities exchanges or included
in national market systems are valued at the last quoted sales price from the
primary exchange. Debt securities are generally traded in the over-the-counter
market and are valued by an independent pricing service using an evaluated bid.
When market quotes are not readily available, the pricing service, in
determining fair values of debt securities, takes into consideration such
factors as current quotations by broker/dealers, coupon, maturity, quality, type
of issue, trading characteristics, and other yield and risk factors it deems
relevant in determining valuations. Foreign securities are valued based on
quotations from the principal market in which such securities are normally
traded. The procedures adopted by the Board generally contemplate the use of
fair valuation in the event that price quotations or valuations are not readily
available, price quotations or valuations from other sources are not reflective
of market value and thus deemed unreliable, or a significant event has occurred
in relation to a security or class of securities (such as foreign securities)
that is not reflected in price quotations or valuations
- --------------------------------------------------------------------------------
44 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
from other sources. A fair value price is a good faith estimate of the value of
a security at a given point in time.
Many securities markets and exchanges outside the U.S. close prior to the close
of the NYSE and therefore the closing prices for securities in such markets or
on such exchanges may not fully reflect events that occur after such close but
before the close of the NYSE, including significant movements in the U.S. market
after foreign exchanges have closed. Accordingly, in those situations,
Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the
Investment Manager, as administrator to the Fund, will fair value foreign
securities pursuant to procedures adopted by the Board, including utilizing a
third party pricing service to determine these fair values. These procedures
take into account multiple factors, including movements in the U.S. securities
markets, to determine a good faith estimate that reasonably reflects the current
market conditions as of the close of the NYSE. The fair value of a security is
likely to be different from the quoted or published price, if available.
Short-term securities maturing in more than 60 days from the valuation date are
valued at the market price or approximate market value based on current interest
rates. Typically, those maturing in 60 days or less that originally had
maturities of more than 60 days at acquisition date are valued at amortized cost
using the market value on the 61st day before maturity. Short-term securities
maturing in 60 days or less at acquisition date are valued at amortized cost.
Amortized cost is an approximation of market value. Investments in money market
funds are valued at net asset value.
FOREIGN CURRENCY TRANSLATIONS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the Statement of Operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes. At Oct. 31, 2010, foreign currency holdings consisted of
multiple denominations, primarily Indian rupee.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements. Generally, securities received as
collateral subject to repurchase agreements are deposited with the Fund's
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 45
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
custodian and, pursuant to the terms of the repurchase agreement, must have an
aggregate market value greater than or equal to the repurchase price plus
accrued interest at all times. The market value of securities held as collateral
for repurchase agreements is monitored on a daily basis to ensure the existence
of the proper level of collateral.
ILLIQUID SECURITIES
At Oct. 31, 2010, investments in securities included issues that are illiquid
which the Fund currently limits to 15% of net assets, at market value, at the
time of purchase. The aggregate value of such securities at Oct. 31, 2010 was $3
representing less than 0.01% of net assets. Certain illiquid securities may be
valued, in good faith, by management at fair value according to procedures
approved by the Board. According to Board guidelines, certain unregistered
securities are determined to be liquid and are not included within the 15%
limitation specified above. Assets are liquid if they can be sold or disposed of
in the ordinary course of business within seven days at approximately the value
at which the asset is valued by the Fund.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue Code
that applies to regulated investment companies and to distribute substantially
all of its taxable income (which includes net short-term capital gains) to
shareholders. No provision for income or excise taxes is thus required.
Management of the Fund has concluded that there are no significant uncertain tax
positions that would require recognition in the financial statements. Generally,
the tax authorities can examine all tax returns filed for the last three years.
FOREIGN CAPITAL GAINS TAXES
Realized gains in certain countries may be subject to foreign taxes at the Fund
level, at rates ranging from approximately 10% to 15%. The Fund pays such
foreign taxes on net realized gains at the appropriate rate for each
jurisdiction.
- --------------------------------------------------------------------------------
46 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
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
normally distributed along with the income dividend.
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
3. DERIVATIVE INSTRUMENTS
The Fund invests in certain derivative instruments as detailed below to meet its
investment objectives. Derivatives are instruments whose values depend on, or
are derived from, in whole or in part, the value of one or more other assets,
such as securities, currencies, commodities or indices. Derivative instruments
may be used to maintain cash reserves while maintaining exposure to certain
other assets, to offset anticipated declines in values of investments, to
facilitate trading, to reduce transaction costs and to pursue higher investment
returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate
risk and credit risk. Derivatives may involve various risks, including the
potential inability of the counterparty to fulfill its obligation under the
terms of the contract, the potential for an illiquid secondary market and the
potential for market movements which may expose the Fund to gains or losses in
excess of the amount shown in the Statement of Assets and Liabilities.
The Fund and any counterparty are required to maintain an agreement that
requires the Fund and that counterparty to monitor (on a daily basis) the net
fair value of all derivatives entered into pursuant to the contract between the
Fund and such counterparty. If the net fair value of such derivatives between
the Fund and that counterparty exceeds a certain threshold (as defined in the
agreement), the Fund or the counterparty (as the case may be) is required to
post cash and/or securities as collateral. Fair values of derivatives presented
in the financial statements are not netted with the fair value of other
derivatives or with any collateral amounts posted by the Fund or any
counterparty.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Forward foreign currency exchange contracts are agreements between two parties
to buy and sell a currency at a set price on a future date. These contracts are
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 47
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
intended to be used to minimize the exposure to foreign exchange rate
fluctuations during the period between the trade and settlement dates of the
contract. The Fund utilized forward foreign currency exchange contracts in
connection with the settlement of purchases and sales of securities and to hedge
the currency exposure associated with some or all of the Fund's securities.
The market values of forward foreign currency exchange contracts fluctuate with
changes in foreign currency exchange rates. The Fund will record a realized gain
or loss when the forward foreign currency exchange contract is closed.
The use of forward foreign currency exchange contracts does not eliminate
fluctuations in the prices of the Fund's portfolio securities. The risks of
forward foreign currency contracts include movement in the values of the foreign
currencies relative to the U.S. dollar (or other foreign currencies) and the
possibility that counterparties will not complete their contractual obligations,
which may be in excess of the amount reflected, if any, in the Statement of
Assets and Liabilities.
FUTURES CONTRACTS
Futures contracts represent commitments for the future purchase or sale of an
asset at a specified price on a specified date. The Fund bought and sold futures
contracts traded on U.S. and foreign exchanges to equitize cash to maintain
appropriate equity market exposure while keeping sufficient cash to accommodate
daily redemptions (equity index futures). Upon entering into futures contracts,
the Fund bears risks which may include interest rates, exchange rates or
securities prices moving unexpectedly, in which case, the Fund may not achieve
the anticipated benefits of the futures contracts and may realize a loss.
Additional risks include counterparty credit risk, the possibility of an
illiquid market, and that a change in the value of the contract or option may
not correlate with changes in the value of the underlying asset.
Upon entering into a futures contract, the Fund pledges cash or securities with
the broker in an amount sufficient to meet the initial margin requirement.
Subsequent payments (variation margin) are made or received by the Fund each
day. The variation margin payments are equal to the daily change in the contract
value and are recorded as variation margin receivable or payable and are offset
in unrealized gains or losses. The Fund recognizes a realized gain or loss when
the contract is closed or expires. Futures contracts involve, to varying
degrees, risk of loss in excess of the variation margin disclosed in the
Statement of Assets and Liabilities.
OPTIONS
Options are contracts which entitle the holder to purchase or sell securities or
other identified assets at a specified price, or in the case of index options,
to
- --------------------------------------------------------------------------------
48 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
receive or pay the difference between the index value and the strike price of
the index option. The Fund wrote options traded on U.S. and foreign exchanges or
in the over-the-counter (OTC) markets to facilitate buying and selling of
securities for investments. Completion of transactions for options traded in the
OTC market depends upon the performance of the other party. Cash collateral may
be collected or posted by the Fund to secure certain OTC options trades. Cash
collateral held or posted by the Fund for such option trades must be returned to
the counterparty or the Fund upon closure, exercise or expiration of the
contract.
Option contracts purchased are recorded as investments and options contracts
written are recorded as liabilities of the Fund. The Fund will realize a gain or
loss when the option transaction expires or is exercised. When options on debt
securities or futures are exercised, the Fund will realize a gain or loss. When
other options are exercised, the proceeds on sales for a written call or
purchased put option, or the purchase cost for a written put or purchased call
option, is adjusted by the amount of premium received or paid.
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.
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 Fund's maximum payout in the case of
written put option contracts represents the maximum potential amount of future
payments (undiscounted) that the Fund could be required to make under the
contract. For OTC options contracts, the transaction is also subject to
counterparty credit risk. The maximum payout amount may be offset by the
subsequent sale, if any, of assets obtained upon the exercise of the put options
by holders of the option contracts or proceeds received upon entering into the
contracts.
EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS
The following tables are intended to provide additional information about the
effect of derivatives on the financial statements of the Fund including: the
fair value of derivatives by risk category and the location of those fair values
in the Statement of Assets and Liabilities; the impact of derivative
transactions on the Fund's operations over the period including realized gains
or losses and unrealized gains or losses. The derivative schedules following the
Portfolio of Investments present additional information regarding derivative
instruments outstanding at the end of the period, if any.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 49
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
FAIR VALUES OF DERIVATIVE INSTRUMENTS AT OCT. 31, 2010
<Table>
<Caption>
ASSET DERIVATIVES LIABILITY DERIVATIVES
------------------------------- -------------------------------------
STATEMENT OF ASSETS STATEMENT OF ASSETS
RISK EXPOSURE AND LIABILITIES AND LIABILITIES
CATEGORY LOCATION FAIR VALUE LOCATION FAIR VALUE
- -------------------------------------------------------------------------------------------
Options contracts
Equity contracts N/A N/A written, at value $17,850
- -------------------------------------------------------------------------------------------
Unrealized
depreciation on
forward foreign
Foreign exchange currency exchange
contracts N/A N/A contracts 31,318
- -------------------------------------------------------------------------------------------
Total N/A $49,168
- -------------------------------------------------------------------------------------------
</Table>
EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCT. 31, 2010
<Table>
<Caption>
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME
- -----------------------------------------------------------------------------------
FORWARD FOREIGN
CURRENCY
RISK EXPOSURE EXCHANGE FUTURES
CATEGORY CONTRACTS CONTRACTS OPTIONS TOTAL
- -----------------------------------------------------------------------------------
Equity contracts $ -- $1,037,611 $-- $ 1,037,611
- -----------------------------------------------------------------------------------
Foreign exchange contracts (1,333,731) -- -- $(1,333,731)
- -----------------------------------------------------------------------------------
Total $(1,333,731) $1,037,611 $-- $ (296,120)
- -----------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN
INCOME
- ----------------------------------------------------------------------------------
FORWARD FOREIGN
CURRENCY
RISK EXPOSURE EXCHANGE FUTURES
CATEGORY CONTRACTS CONTRACTS OPTIONS TOTAL
- ----------------------------------------------------------------------------------
Equity contracts $ -- $953,674 $176 $ 953,850
- ----------------------------------------------------------------------------------
Foreign exchange contracts 235,677 -- -- $ 235,677
- ----------------------------------------------------------------------------------
Total $235,677 $953,674 $176 $1,189,527
- ----------------------------------------------------------------------------------
</Table>
VOLUME OF DERIVATIVE ACTIVITY
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The gross notional amount of contracts outstanding was approximately $1.9
million at Oct. 31, 2010. The monthly average gross notional amount for these
contracts was $3.3 million for the year ended Oct. 31, 2010. The fair value of
such contracts at Oct. 31, 2010 is set forth in the table above.
- --------------------------------------------------------------------------------
50 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
FUTURES CONTRACTS
At Oct. 31, 2010, the Fund had no outstanding futures contracts. The monthly
average gross notional amount for long contracts was $9.5 million for the year
ended Oct. 31, 2010.
OPTIONS
The gross notional amount of contracts outstanding was approximately $300,000 at
Oct. 31, 2010. During the year ended Oct. 31, 2010, the Fund's transactions in
options contracts were limited to the contracts open at the end of the year. The
fair value of such contracts at Oct. 31, 2010 is set forth in the table above.
4. EXPENSES AND SALES CHARGES
INVESTMENT MANAGEMENT SERVICES FEES
Under an Investment Management Services Agreement, the Investment Manager
determines which securities will be purchased, held or sold. The management fee
is an annual fee that is equal to a percentage of the Fund's average daily net
assets that declines from 0.80% to 0.57% as the Fund's net assets increase. The
fee may be adjusted upward or downward by a performance incentive adjustment
determined monthly by measuring the percentage difference over a rolling 12-
month period between the annualized performance of one Class A share of the Fund
and the annualized performance of the Lipper 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 decreased the management
fee by $319,765 for the year ended Oct. 31, 2010. The management fee for the
year ended Oct. 31, 2010 was 0.72% 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
an annual fee for administration and accounting services equal to a percentage
of the Fund's average daily net assets that declines from 0.08% to 0.05% as the
Fund's net assets increase. The fee for the year ended Oct. 31, 2010 was 0.08%
of the Fund's average daily net assets.
OTHER FEES
Other expenses are for, among other things, certain expenses of the Fund or the
Board including: Fund boardroom and office expense, employee compensation,
employee health and retirement benefits, and certain other expenses. Payment of
these Fund and Board expenses is facilitated by a company providing limited
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 51
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
administrative services to the Fund and the Board. For the year ended Oct. 31,
2010, other expenses paid to this company were $766.
COMPENSATION OF BOARD MEMBERS
Under a Deferred Compensation Plan (the Plan), the board members who are not
"interested persons" of the Fund as defined under the 1940 Act may defer receipt
of their compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the Fund or certain other funds managed
by the Investment Manager. 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, Columbia Management Investment Services Corp.
(formerly known as RiverSource Service Corporation) (the Transfer Agent) is
responsible for providing transfer agency services to the Fund.
Prior to Sept. 7, 2010, the Transfer Agent received annual account-based service
fees from Class A, Class B and Class C shares that varied by class and annual
asset-based service fees based on the Fund's average daily net assets
attributable to Class R, Class R4 and Class W shares, which amount varied by
class. In addition, the Transfer Agent charged an annual fee per inactive
account and received reimbursement from the Fund for certain out-of-pocket
expenses.
Under a new Transfer Agency Agreement effective Sept. 7, 2010, the Transfer
Agent has contracted with Boston Financial Data Services ("BFDS") to serve as
sub-transfer agent. The Transfer Agent receives monthly account-based service
fees based on the number of open accounts and is reimbursed by the Fund for the
fees and expenses the Transfer Agent pays to financial intermediaries that
maintain omnibus accounts with the Fund subject to an annual limitation (that
varies by class) that is a percentage of the average aggregate value of the
Fund's shares maintained in each such omnibus account (other than omnibus
accounts for which American Enterprise Investment Services, Inc. is the broker
of record or accounts where the beneficial shareholder is a customer of
Ameriprise Financial Services, Inc., which paid a per account fee). The Transfer
Agent pays the fees of BFDS for services as sub-transfer agent and is not
entitled to reimbursement for such fees from the Fund.
The Transfer Agent also receives reimbursement for certain out-of-pocket
expenses and may also retain, as additional compensation for its services, fees
for wire, telephone and redemption orders, Individual Retirement Account ("IRA")
trustee agent fees and account transcript fees due to the Transfer Agent from
shareholders of the Fund and credits (net of bank charges) earned with respect
to
- --------------------------------------------------------------------------------
52 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
balances in accounts the Transfer Agent maintains in connection with its
services to the Fund.
For the year ended Oct. 31, 2010, the Fund's effective transfer agent fee rates
as a percentage of average daily net assets of each class were as follows:
<Table>
Class A.............................................. 0.34%
Class B.............................................. 0.37%
Class C.............................................. 0.35%
Class R.............................................. 0.04%
Class R4............................................. 0.06%
Class W.............................................. 0.19%
</Table>
Class I shares do not pay transfer agent fees.
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. Prior to Sept. 7, 2010,
the Fund also paid an annual fee at a rate of 0.25% of the Fund's average daily
net assets attributable to Class R shares for such services.
DISTRIBUTION FEES
The Fund has an agreement with Columbia Management Investment Distributors, Inc.
(formerly known as RiverSource Fund Distributors, Inc.) (the Distributor) for
distribution and shareholder services. Under a Plan and Agreement of
Distribution pursuant to Rule 12b-1, the Fund paid a fee at an annual rate of up
to 0.25% of the Fund's average daily net assets attributable to Class A and
Class W shares, a fee at an annual rate of up to 0.50% of the Fund's average
daily net assets attributable to Class R shares (of which up to 0.25% may be
used for services) and a fee at an annual rate of up to 1.00% of the Fund's
average daily net assets attributable to Class B and Class C shares. For Class B
and Class C shares, of the 1.00% fee, up to 0.75% is reimbursed for distribution
expenses.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed (unreimbursed expense) was approximately $321,000 and $14,000 for
Class B and Class C shares, respectively. These amounts are based on the most
recent information available as of July 31, 2010, and may be recovered from
future payments under the distribution plan or CDSCs. To the extent the
unreimbursed expense has been fully recovered, the distribution fee is reduced.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 53
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
SALES CHARGES
Sales charges, including front-end and CDSCs, received by the Distributor for
distributing Fund shares were $44,276 for Class A, $3,026 for Class B and $5 for
Class C for the year ended Oct. 31, 2010.
EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES
Effective Jan. 1, 2011, the Investment Manager and its affiliates have
contractually agreed to waive certain fees and reimburse certain expenses until
Dec. 31, 2011, unless sooner terminated at the sole discretion of the Board,
such that net expenses (excluding fees and expenses of acquired funds*), before
giving effect to any performance incentive adjustment, will not exceed the
following percentage of the class' average daily net assets:
<Table>
Class A.............................................. 1.50%
Class B.............................................. 2.25
Class C.............................................. 2.25
Class I.............................................. 1.13
Class R.............................................. 1.75
Class R4............................................. 1.43
Class W.............................................. 1.50
</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.
5. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $660,039,872 and $676,364,348, respectively, for the
year ended Oct. 31, 2010. Realized gains and losses are determined on an
identified cost basis.
6. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
<Table>
<Caption>
YEAR ENDED OCT. 31, 2010 2009
- -------------------------------------------------------------------
CLASS A
Sold 277,380 896,472
Converted from Class B* 166,827 185,314
Reinvested distributions 83,031 364,910
Redeemed (2,362,304) (3,790,356)
- -------------------------------------------------------------------
Net increase (decrease) (1,835,066) (2,343,660)
- -------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
54 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31, 2010 2009
- -------------------------------------------------------------------
CLASS B
Sold 25,661 65,653
Reinvested distributions 3,446 45,486
Converted to Class A* (168,618) (187,310)
Redeemed (260,801) (556,290)
- -------------------------------------------------------------------
Net increase (decrease) (400,312) (632,461)
- -------------------------------------------------------------------
CLASS C
Sold 9,332 26,274
Reinvested distributions 925 5,563
Redeemed (32,227) (62,897)
- -------------------------------------------------------------------
Net increase (decrease) (21,970) (31,060)
- -------------------------------------------------------------------
CLASS I
Sold 12,340,440 9,537,311
Reinvested distributions 391,769 822,037
Redeemed (11,023,641) (9,237,976)
- -------------------------------------------------------------------
Net increase (decrease) 1,708,568 1,121,372
- -------------------------------------------------------------------
CLASS R3
Redeemed (509) --
- -------------------------------------------------------------------
Net increase (decrease) (509) --
- -------------------------------------------------------------------
CLASS R4
Sold 873 101
Reinvested distributions 152 473
Redeemed (5,275) (587)
- -------------------------------------------------------------------
Net increase (decrease) (4,250) (13)
- -------------------------------------------------------------------
CLASS R5
Redeemed (509) --
- -------------------------------------------------------------------
Net increase (decrease) (509) --
- -------------------------------------------------------------------
CLASS W
Sold 26,414,262 17,093,328
Reinvested distributions 707,859 1,786,371
Redeemed (35,818,646) (19,740,841)
- -------------------------------------------------------------------
Net increase (decrease) (8,696,525) (861,142)
- -------------------------------------------------------------------
</Table>
* Automatic conversion of the Class B shares to Class A shares based on the
original purchase date.
7. LENDING OF PORTFOLIO SECURITIES
The Fund has entered into a Master Securities Lending Agreement (the Agreement)
with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement
authorizes JPMorgan as lending agent to lend securities to authorized
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 55
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
borrowers in order to generate additional income on behalf of the Fund. Pursuant
to the Agreement, the securities loaned are secured by cash or U.S. government
securities equal to at least 100% of the market value of the loaned securities.
Any additional collateral required to maintain those levels due to market
fluctuations of the loaned securities is delivered the following business day.
Cash collateral received is invested by the lending agent on behalf of the Fund
into authorized investments pursuant to the Agreement. The investments made with
the cash collateral are listed in the Portfolio of Investments. The values of
such investments and any uninvested cash collateral are disclosed in the
Statement of Assets and Liabilities along with the related obligation to return
the collateral upon the return of the securities loaned. At Oct. 31, 2010,
securities valued at $7,237,350 were on loan, secured by cash collateral of
$7,620,475 invested in short-term securities or in cash equivalents.
Risks of delay in recovery of securities or even loss of rights in the
securities may occur should the borrower of the securities fail financially.
Risks may also arise to the extent that the value of the securities loaned
increases above the value of the collateral received. JPMorgan will indemnify
the Fund from losses resulting from a borrower's failure to return a loaned
security when due. Such indemnification does not extend to losses associated
with declines in the value of cash collateral investments. Loans are subject to
termination by the Fund or the borrower at any time, and are, therefore, not
considered to be illiquid investments.
Pursuant to the Agreement, the Fund receives income for lending its securities
either in the form of fees or by earning interest on invested cash collateral,
net of negotiated rebates paid to borrowers and fees paid to the lending agent
for services provided and any other securities lending expenses. Net income of
$258,157 earned from securities lending for the year ended Oct. 31, 2010 is
included in the Statement of Operations. The Fund also continues to earn
interest and dividends on the securities loaned.
8. OPTIONS CONTRACTS WRITTEN
Contracts and premiums associated with options contracts written during the year
ended Oct. 31, 2010, were as follows:
<Table>
<Caption>
CALLS
CONTRACTS PREMIUMS
- -----------------------------------------------------------------
Balance Oct. 31, 2009 -- $ --
Opened 420 18,026
Expired -- --
- -----------------------------------------------------------------
Balance Oct. 31, 2010 420 $18,026
- -----------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
56 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
9. AFFILIATED MONEY MARKET FUND
The Fund may invest its daily cash balance in Columbia Short-Term Cash Fund
(formerly known as RiverSource Short-Term Cash Fund), a money market fund
established for the exclusive use of certain funds managed by the Investment
Manager and other institutional clients of the Investment Manager. The cost of
the Fund's purchases and proceeds from sales of shares of Columbia Short-Term
Cash Fund aggregated $296,466,971 and $327,779,567, respectively, for the year
ended Oct. 31, 2010. The income distributions received with respect to the
Fund's investment in Columbia Short-Term Cash Fund can be found in the Statement
of Operations and the Fund's invested balance in Columbia Short-Term Cash Fund
at Oct. 31, 2010, can be found in the Portfolio of Investments.
10. BANK BORROWINGS
The Fund has entered into a revolving credit facility with a syndicate of banks
led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund
may borrow for the temporary funding of shareholder redemptions or for other
temporary or emergency purposes. The credit facility became effective on Oct.
14, 2010, replacing a prior credit facility. The credit facility agreement,
which is a collective agreement between the Fund and certain other funds managed
by the Investment Manager, severally and not jointly, permits collective
borrowings up to $300 million. The borrowers shall have the right, upon written
notice to the Administrative Agent, to request an increase of up to $200 million
in the aggregate amount of the credit facility from new or existing lenders,
provided that the aggregate amount of the credit facility shall at no time
exceed $500 million. Participation in such increase by any existing lender shall
be at such lender's sole discretion. Interest is charged to each fund based on
its borrowings at a rate equal to the sum of the federal funds rate plus (i)
1.25% per annum plus (ii) if one-month LIBOR exceeds the federal funds rate, the
amount of such excess. Each borrowing under the credit facility matures no later
than 60 days after the date of borrowing. The Fund also pays a commitment fee
equal to its pro rata share of the amount of the credit facility at a rate of
0.10% per annum. Prior to Oct. 14, 2010, the credit facility agreement, which
was a collective agreement between the Fund and certain other funds managed by
the Investment Manager, severally and not jointly, permitted collective
borrowings up to $300 million. The Fund also paid a commitment fee equal to its
pro rata share of the amount of the credit facility at a rate of 0.10% per
annum, in addition to an upfront fee equal to its pro rata share of 0.04% of the
amount of the credit facility. The Fund had no borrowings during the year ended
Oct. 31, 2010.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 57
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
11. FEDERAL TAX INFORMATION
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of futures contracts,
foreign currency transactions, passive foreign investment company (PFIC)
holdings, re-characterization of real estate investment trust (REIT)
distributions, foreign tax credits and losses deferred due to wash sales. The
character of distributions made during the year from net investment income or
net realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to the timing of dividend distributions, the
fiscal year in which amounts are distributed may differ from the year that the
income or realized gains were recorded by the Fund.
In the Statement of Assets and Liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been increased by
$1,164,129 and accumulated net realized loss has been increased by $1,164,129.
The tax character of distributions paid for the years indicated was as follows:
<Table>
<Caption>
YEAR ENDED OCT. 31, 2010 2009
- ------------------------------------------------------------------
Ordinary income $8,300,062 $16,599,369
Long-term capital gain -- --
</Table>
At Oct. 31, 2010, the components of distributable earnings on a tax basis were
as follows:
<Table>
Undistributed ordinary income................... $ 9,211,790
Undistributed accumulated long-term gain........ $ --
Accumulated realized loss....................... $(390,115,334)
Unrealized appreciation (depreciation).......... $ 30,773,902
</Table>
For federal income tax purposes, the Fund had a capital loss carry-over of
$390,115,334 at Oct. 31, 2010, that if not offset by capital gains will expire
as follows:
<Table>
<Caption>
2016 2017 2018
$24,531,187 $262,961,946 $102,622,201
</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. There is no assurance that the Fund will be able to utilize all of its
capital loss carry-over before it expires.
- --------------------------------------------------------------------------------
58 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
12. RISKS RELATING TO CERTAIN INVESTMENTS
FOREIGN/EMERGING MARKETS RISK
Investments in foreign securities involve certain risks not associated with
investments in U.S. companies. Foreign securities in the Fund's portfolio
subject the Fund to the risks associated with investing in the particular
country, including the political, regulatory, economic, social and other
conditions or events occurring in the country, as well as fluctuations in its
currency and the risks associated with less developed custody and settlement
practices.
Investments in emerging markets may present greater risk of loss than a typical
foreign security investment. Because of the less developed markets and economics
and less mature governments and governmental institutions, the risks of
investing in foreign securities may be intensified in the case of investments in
issuers organized, domiciled or doing substantial business in emerging markets.
13. SUBSEQUENT EVENTS
Management has evaluated Fund related events and transactions that occurred
during the period from the date of the Statements of Assets and Liabilities
through the date of issuance of the Fund's financial statements. There were no
events or transactions that occurred during the period that materially impacted
the amounts or disclosures in the Fund's financial statements, other than as
noted below.
The Board of Directors of the Fund has approved the proposed merger of the Fund
into Columbia Multi-Advisor International Equity Fund. It is currently
anticipated that a meeting of shareholders will be held during the first half of
2011 to vote on the proposal.
14. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In June 2004, an action captioned John E. Gallus et al. v. American Express
Financial Corp. and American Express Financial Advisors Inc., was filed in the
United States District Court for the District of Arizona. The plaintiffs allege
that they are investors in several American Express Company (now known as legacy
RiverSource) mutual funds and they purport to bring the action derivatively on
behalf of those funds under the Investment Company Act of 1940. The plaintiffs
allege that fees allegedly paid to the defendants by the funds for investment
advisory and administrative services are excessive. The plaintiffs seek remedies
including restitution and rescission of investment advisory and distribution
agreements. The plaintiffs voluntarily agreed to transfer this case to the
United States District Court for the District of Minnesota (the District Court).
In
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 59
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
response to defendants' motion to dismiss the complaint, the District Court
dismissed one of plaintiffs' four claims and granted plaintiffs limited
discovery. Defendants moved for summary judgment in April 2007. Summary judgment
was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a
notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit)
on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary
judgment and remanded to the District Court for further proceedings. On August
6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court (the
Supreme Court), asking the Supreme Court to stay the District Court proceedings
while the Supreme Court considers and rules in a case captioned Jones v. Harris
Associates, which involves issues of law similar to those presented in the
Gallus case. On March 30, 2010, the Supreme Court issued its ruling in Jones v.
Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth
Circuit's decision in the Gallus case and remanded the case to the Eighth
Circuit for further consideration in light of the Supreme Court's decision in
Jones v. Harris Associates. On June 4, 2010, the Eighth Circuit remanded the
Gallus case to the District Court for further consideration in light of the
Supreme Court's decision in Jones v. Harris Associates. On Dec. 9, 2010, the
District Court reinstated its July 9, 2007 summary judgment order in favor of
the defendants.
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 funds' Boards of Directors/Trustees.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, arbitration and regulatory proceedings, including
routine litigation, class actions, and governmental actions, concerning matters
arising in connection with the conduct of their business activities. Ameriprise
Financial
- --------------------------------------------------------------------------------
60 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
believes that the Funds are not currently the subject of, and that neither
Ameriprise Financial nor any of its affiliates are the subject of, any pending
legal, arbitration or regulatory proceedings that are likely to have a material
adverse effect on the Funds or the ability of Ameriprise Financial or its
affiliates to perform under their contracts with the Funds. Ameriprise Financial
is required to make 10-Q, 10-K and, as necessary, 8-K filings with the
Securities and Exchange Commission on legal and regulatory matters that relate
to Ameriprise Financial and its affiliates. Copies of these filings may be
obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse publicity
associated with them, will not result in increased fund redemptions, reduced
sale of fund shares or other adverse consequences to the Funds. Further,
although we believe proceedings are not likely to have a material adverse effect
on the Funds or the ability of Ameriprise Financial or its affiliates to perform
under their contracts with the Funds, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range
of loss that may result. An adverse outcome in one or more of these proceedings
could result in adverse judgments, settlements, fines, penalties or other relief
that could have a material adverse effect on the consolidated financial
condition or results of operations of Ameriprise Financial.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 61
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of RiverSource Disciplined International Equity
Fund (the Fund) (one of the portfolios constituting the RiverSource
International Series, Inc) as of October 31, 2010, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the four years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights of the Fund
for the periods presented through October 31, 2006, were audited by other
auditors whose report dated December 20, 2006, expressed an unqualified opinion
on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of October 31, 2010, by correspondence with the custodian
and brokers, or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
- --------------------------------------------------------------------------------
62 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
In our opinion, the financial statements and financial highlights audited by us
as referred to above present fairly, in all material respects, the financial
position of RiverSource Disciplined International Equity Fund of the RiverSource
International Series, Inc. at October 31, 2010, the results of its operations
for the year then ended, the statement of changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the four years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
December 20, 2010
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 63
FEDERAL INCOME TAX INFORMATION -------------------------------------------------
(UNAUDITED)
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
Fiscal year ended Oct. 31, 2010
<Table>
<Caption>
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for
distributions:
Qualified Dividend Income for individuals.................... 100%
Dividends Received Deduction for corporations................ 0.42%
U.S. Government Obligations.................................. 0.00%
Foreign Taxes Paid........................................... $1,211,505
Foreign Source Income........................................ $10,563,168
</Table>
The Fund designates as distributions of long-term gains, to the extent necessary
to fully distribute such capital gains, earnings and profits distributed to
shareholders on the redemption of shares.
- --------------------------------------------------------------------------------
64 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
BOARD MEMBERS AND OFFICERS -----------------------------------------------------
Shareholders elect a Board that oversees the Fund's operations. The Board
appoints officers who are responsible for day-to-day business decisions based on
policies set by the Board. The following is a list of the Fund's Board members.
Each Board member oversees 145 Columbia, RiverSource, Seligman and Threadneedle
funds. Under current Board policy, members generally serve until the next Board
meeting after he or she reaches the mandatory retirement age established by the
Board, or the fifteenth anniversary of the first Board meeting they attended as
members of the Board.
INDEPENDENT BOARD MEMBERS
<Table>
<Caption>
OTHER PRESENT OR
NAME, POSITION HELD PAST DIRECTORSHIPS
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION (WITHIN PAST 5
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS YEARS)
- ------------------------------------------------------------------------------------------------------------------------------
Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None
901 S. Marquette Ave. 1/11/06 Attorney
Minneapolis, MN 55402
Age 56
- ------------------------------------------------------------------------------------------------------------------------------
Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None
901 S. Marquette Ave. 7/11/07 Leadership (consulting company)
Minneapolis, MN 55402
Age 56
- ------------------------------------------------------------------------------------------------------------------------------
Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None
901 S. Marquette Ave. 11/1/04 University; former Dean, McCallum Graduate School of
Minneapolis, MN 55402 Business, Bentley University
Age 60
- ------------------------------------------------------------------------------------------------------------------------------
Anne P. Jones Board member since Attorney and Consultant None
901 S. Marquette Ave. 3/1/85
Minneapolis, MN 55402
Age 75
- ------------------------------------------------------------------------------------------------------------------------------
Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries,
901 S. Marquette Ave. since 1/1/07, College Inc. (manufactures
Minneapolis, MN 55402 Board member irrigation systems)
Age 71 since 1/1/02
- ------------------------------------------------------------------------------------------------------------------------------
John F. Maher Board member Retired President and Chief Executive Officer and None
901 S. Marquette Ave. since 12/10/08 former Director, Great Western Financial Corporation
Minneapolis, MN 55402 (financial services), 1986-1997
Age 67
- ------------------------------------------------------------------------------------------------------------------------------
Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None
901 S. Marquette Ave. 11/1/04 real estate and asset management company)
Minneapolis, MN 55402
Age 58
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 65
BOARD MEMBERS AND OFFICERS (continued) -----------------------------------------
INDEPENDENT BOARD MEMBERS (CONTINUED)
<Table>
<Caption>
OTHER PRESENT OR
NAME, POSITION HELD PAST DIRECTORSHIPS
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION (WITHIN PAST 5
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS YEARS)
- ------------------------------------------------------------------------------------------------------------------------------
Leroy C. Richie Board member Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc.
901 S. Marquette Ave. since 11/11/08 President and General Counsel, Automotive Legal (digital imaging);
Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil
Age 69 and gas exploration
and production); OGE
Energy Corp. (energy
and energy services)
- ------------------------------------------------------------------------------------------------------------------------------
Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera
901 S. Marquette Ave. 11/13/02 since 2003 (biotechnology); former President, Aquila Pharmaceuticals,
Minneapolis, MN 55402 Biopharmaceuticals Inc.
Age 66 (biotechnology);
Healthways, Inc.
(health management
programs)
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
66 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
BOARD MEMBER AFFILIATED WITH THE INVESTMENT MANAGER*
<Table>
<Caption>
OTHER PRESENT OR
NAME, POSITION HELD PAST DIRECTORSHIPS
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION (WITHIN PAST 5
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS YEARS)
- ------------------------------------------------------------------------------------------------------------------------------
William F. Truscott Board member Chairman of the Board, Columbia Management Investment None
53600 Ameriprise since 11/7/01, Advisers, LLC (formerly RiverSource Investments, LLC)
Financial Center Vice President since since May 2010 (previously President, Chairman of the
Minneapolis, MN 55474 2002 Board and Chief Investment Officer, 2001-April 2010);
Age 50 Senior Vice President, Atlantic Funds, Columbia Funds
and Nations Funds since May 2010; Chief Executive
Officer, U.S. Asset Management &
President -- Annuities, Ameriprise Financial, Inc.
since May 2010 (previously President -- U.S. Asset
Management and Chief Investment Officer, 2005-April
2010 and Senior Vice President -- Chief Investment
Officer, 2001-2005); Director, President and Chief
Executive Officer, Ameriprise Certificate Company since
2006; Director, Columbia Management Investment
Distributors, Inc. (formerly RiverSource Fund
Distributors, Inc.) since May 2010 (previously Chairman
of the Board and Chief Executive Officer, 2008-April
2010); Chairman of the Board and Chief Executive
Officer, RiverSource Distributors, Inc. since 2006
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
* Interested person (as defined under the 1940 Act) by reason of being an
officer, director, security holder and/or employee of the investment manager
or Ameriprise Financial.
The SAI has additional information about the Fund's Board members and is
available, without charge, upon request by calling 800.345.6611; contacting your
financial intermediary; or visiting columbiamanagement.com.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 67
BOARD MEMBERS AND OFFICERS (continued) -----------------------------------------
The Board has appointed officers who are responsible for day-to-day business
decisions based on policies it has established. The officers serve at the
pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the
Fund's other officers are:
FUND OFFICERS
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUNDS AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------
J. Kevin Connaughton President since Senior Vice President and General Manager -- Mutual
One Financial Center 5/1/10 Fund Products, Columbia Management Investment Advisers,
Boston, MA 02111 LLC since May 2010; President, Columbia Funds since
Age 46 2009 (previously Senior Vice President and Chief
Financial Officer, June 2008 -- January 2009);
President, Atlantic Funds and Nations Funds since 2009;
Managing Director of Columbia Management Advisors, LLC,
December 2004 -- April 2010; Treasurer, Columbia Funds,
October 2003 -- May 2008; Treasurer, the Liberty Funds,
Stein Roe Funds and Liberty All-Star Funds, December
2000 -- December 2006
- --------------------------------------------------------------------------------------------------------
Amy K. Johnson Vice President since Senior Vice President and Chief Operating Officer,
5228 Ameriprise Financial 12/5/06 Columbia Management Investment Advisers, LLC (formerly
Center Minneapolis, MN RiverSource Investments, LLC) since May 2010
55474 (previously Chief Administrative Officer, 2009 -- April
Age 45 2010 and Vice President -- Asset Management and Trust
Company Services, 2006-2009 and Vice
President -- Operations and Compliance, 2004-2006);
Senior Vice President, Atlantic Funds, Columbia Funds
and Nations Funds since May 2010
- --------------------------------------------------------------------------------------------------------
Jeffrey P. Fox Treasurer since Chief Financial Officer, Columbia Management Investment
105 Ameriprise 7/10/02 Distributors, Inc. (formerly RiverSource Fund
Financial Center Distributors, Inc.) and of Seligman Data Corp. since
Minneapolis, MN 55474 2008; Vice President -- Investment Accounting,
Age 55 Ameriprise Financial, Inc. since 2002; Chief Financial
Officer, RiverSource Distributors, Inc. since 2006
- --------------------------------------------------------------------------------------------------------
Scott R. Plummer Vice President, Chief Legal Officer and Assistant Secretary, Columbia
5228 Ameriprise Financial General Counsel and Management Investment Advisers, LLC (formerly
Center Secretary since RiverSource Investments, LLC) since June 2005; Vice
Minneapolis, MN 55474 12/5/06 President and Lead Chief Counsel -- Asset Management,
Age 51 Ameriprise Financial, Inc. since May 2010 (previously
Vice President and Chief Counsel -- Asset Management,
2005-April 2010 and Vice President -- Asset Management
Compliance, 2004-2005); Senior Vice President,
Secretary and Chief Legal Officer, Atlantic Funds,
Columbia Funds and Nations Funds since May 2010; Vice
President, Chief Counsel and Assistant Secretary,
Columbia Management Investment Distributors, Inc.
(formerly RiverSource Fund Distributors, Inc.) since
2008; Vice President, General Counsel and Secretary,
Ameriprise Certificate Company since 2005; Chief
Counsel, RiverSource Distributors, Inc. since 2006
- --------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
68 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
FUND OFFICERS (CONTINUED)
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUNDS AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------
Michael A. Jones Vice President since Director and President, Columbia Management Investment
100 Federal Street 5/1/10 Advisers, LLC since May 2010; President and Director,
Boston, MA 02110 Columbia Management Investment Distributors, Inc. since
Age 51 May 2010; Senior Vice President, Atlantic Funds,
Columbia Funds and Nations Funds since May 2010;
Manager, Chairman, Chief Executive Officer and
President, Columbia Management Advisors, LLC,
2007 -- April 2010; Chief Executive Officer, President
and Director, Columbia Management Distributors, Inc.,
2006 -- April 2010; former Co-President and Senior
Managing Director, Robeco Investment Management
- --------------------------------------------------------------------------------------------------------
Colin Moore Vice President since Chief Investment Officer, Columbia Management
One Financial Center 5/1/10 Investment Advisers, LLC since May 2010; Senior Vice
Boston, MA 02111 President, Atlantic Funds, Columbia Funds and Nations
Age 52 Funds since May 2010; Manager, Managing Director and
Chief Investment Officer, Columbia Management Advisors,
LLC, 2007- April 2010; Head of Equities, Columbia
Management Advisors, LLC, 2002-Sept. 2007
- --------------------------------------------------------------------------------------------------------
Linda Wondrack Chief Compliance Vice President and Chief Compliance Officer, Columbia
One Financial Center Officer since 5/1/10 Management Investment Advisers, LLC since May 2010;
Boston, MA 02111 Chief Compliance Officer, Columbia Funds since 2007;
Age 46 Senior Vice President and Chief Compliance Officer,
Atlantic Funds and Nations Funds since 2007; Director
(Columbia Management Group, LLC and Investment Product
Group Compliance), Bank of America, June 2005 -- April
2010
- --------------------------------------------------------------------------------------------------------
Neysa M. Alecu Money Laundering Vice President -- Compliance, Ameriprise Financial,
2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer and
Center since 11/9/05 and Identity Theft Prevention Officer, Columbia Management
Minneapolis, MN 55474 Identity Theft Investment Distributors, Inc. (formerly RiverSource
Age 46 Prevention Officer Fund Distributors, Inc.) since 2008; Anti-Money
since 2008 Laundering Officer, Ameriprise Financial, Inc. since
2005; Compliance Director, Ameriprise Financial, Inc.,
2004-2008
- --------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT 69
PROXY VOTING -------------------------------------------------------------------
The policy of the Board is to vote the proxies of the companies in which the
Fund holds investments consistent with the procedures as stated in the Statement
of Additional Information (SAI). You may obtain a copy of the SAI without charge
by calling 800.345.6611; contacting your financial intermediary; visiting
columbiamanagement.com; 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 columbiamanagement.com; or searching the website of
the SEC at www.sec.gov.
- --------------------------------------------------------------------------------
70 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2010 ANNUAL REPORT
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND
P.O. Box 8081
Boston, MA 02266-8081
COLUMBIAMANAGEMENT.COM
<Table>
This report must be accompanied or preceded by the Fund's
current prospectus. The Fund is distributed by Columbia
Management Investment Distributors, Inc., member FINRA, and
managed by Columbia Management Investment Advisers, LLC.
(C)2010 Columbia Management Investment Advisers, LLC. All
(COLUMBIA MANAGEMENT LOGO) rights reserved. S-6506 G (12/10)
</Table>
Annual Report
and Prospectus
(COLUMBIA MANAGEMENT LOGO)
THREADNEEDLE
INTERNATIONAL OPPORTUNITY FUND
- --------------------------------------------------------------------------------
ANNUAL REPORT FOR THE PERIOD ENDED
OCTOBER 31, 2010
(Prospectus also enclosed)
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH
LONG-TERM CAPITAL GROWTH.
This annual report includes a prospectus that describes in detail the Fund's
objective, investment strategy, risks, sales charges, fees and other matters of
interest. Please read the prospectus carefully before you invest or send money.
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
TABLE OF CONTENTS --------------------------------------------------------------
<Table>
Your Fund at a Glance.............. 3
Manager Commentary................. 6
The Fund's Long-term Performance... 12
Fund Expenses Example.............. 14
Portfolio of Investments........... 17
Statement of Assets and
Liabilities...................... 29
Statement of Operations............ 30
Statements of Changes in Net
Assets........................... 31
Financial Highlights............... 32
Notes to Financial Statements...... 36
Report of Independent Registered
Public Accounting Firm........... 52
Federal Income Tax Information..... 54
Board Members and Officers......... 55
Proxy Voting....................... 60
</Table>
In August 2010, the Board of Directors of Threadneedle International
Opportunity Fund (the "Fund") approved a proposal to merge the Fund with and
into Columbia Multi-Advisor International Equity Fund. The merger is expected
to be a tax-free reorganization for U.S. federal income tax purposes. More
information about Columbia Multi-Advisor International Equity Fund and the
definitive terms of the proposed merger will be included in proxy materials.
The merger is subject to certain conditions, including approval by
shareholders of the Fund. It is currently anticipated that proxy materials
regarding the merger will be distributed to shareholders of the Fund later
this year or in early 2011, and the meeting of shareholders to consider the
merger will be held in the first half of 2011.
SEE THE FUND'S PROSPECTUS FOR RISKS ASSOCIATED WITH INVESTING IN THE FUND.
- --------------------------------------------------------------------------------
2 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
YOUR FUND AT A GLANCE ----------------------------------------------------------
FUND SUMMARY
- --------------------------------------------------------------------------------
> Threadneedle International Opportunity Fund (the Fund) Class A shares gained
16.09% (excluding sales charge) for the 12 months ended Oct. 31, 2010.
> The Fund outperformed its benchmark index, the Morgan Stanley Capital
International (MSCI) EAFE Index (MSCI Index), which advanced 8.82% for the 12-
month period.
> The Fund also outperformed its peer group, as represented by the Lipper
International Large-Cap Core Funds Index, which increased 11.06% for the same
time period.
ANNUALIZED TOTAL RETURNS (for period ended Oct. 31, 2010)
- --------------------------------------------------------------------------------
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------
Threadneedle International
Opportunity Fund Class A
(excluding sales charge) +16.09% -7.82% +4.37% +0.50%
- ---------------------------------------------------------------------
MSCI Index (unmanaged) +8.82% -9.15% +3.79% +3.61%
- ---------------------------------------------------------------------
Lipper International Large-Cap
Core Funds Index (unmanaged) +11.06% -9.97% +3.20% +2.85%
- ---------------------------------------------------------------------
</Table>
(See "The Fund's Long-term Performance" for Index descriptions)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by contacting your financial intermediary,
visiting columbiamanagement.com or calling 800.345.6611.
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the table above. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
fees and expenses. The Fund's returns reflect the effect of fee waivers/expense
reimbursements, if any. Without such waivers/reimbursements, the Fund's returns
would be lower. See the Average Annual Total Returns table for performance of
other share classes of the Fund.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes. It is not possible to invest directly in an index.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 3
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT OCT. 31, 2010
SINCE
Without sales charge 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION*
Class A (inception
11/15/84) +16.09% -7.82% +4.37% +0.50% N/A
- ---------------------------------------------------------------------------
Class B (inception
3/20/95) +15.20% -8.52% +3.58% -0.28% N/A
- ---------------------------------------------------------------------------
Class C (inception
6/26/00) +15.20% -8.52% +3.58% -0.27% N/A
- ---------------------------------------------------------------------------
Class I (inception
3/4/04) +16.84% -7.32% +4.92% N/A +6.34%
- ---------------------------------------------------------------------------
Class R** (inception
12/11/06) +15.90% -7.85% N/A N/A -1.44%
- ---------------------------------------------------------------------------
Class R4 (inception
3/20/95) +16.49% -7.45% +4.72% +0.76% N/A
- ---------------------------------------------------------------------------
With sales charge
Class A (inception
11/15/84) +9.41% -9.62% +3.14% -0.09% N/A
- ---------------------------------------------------------------------------
Class B (inception
3/20/95) +10.20% -9.43% +3.23% -0.28% N/A
- ---------------------------------------------------------------------------
Class C (inception
6/26/00) +14.20% -8.52% +3.58% -0.27% N/A
- ---------------------------------------------------------------------------
</Table>
Class A share performance reflects the maximum initial sales charge of 5.75%.
Class B share performance reflects a contingent deferred sales charge (CDSC)
applied as follows: first year 5%; second year 4%; third and fourth years 3%;
fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be
subject to a 1% CDSC if shares are sold within one year after purchase. Sales
charges do not apply to Class I, Class R and Class R4 shares. Class I, Class R
and Class R4 are available to qualifying institutional investors only.
*For classes with less than 10 years performance.
**Effective Sept. 7, 2010, Class R2 shares were renamed Class R shares.
- --------------------------------------------------------------------------------
4 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
MORNINGSTAR STYLE BOX(TM)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Equity Style
Value Blend Growth
X Large
Medium Size
Small
</Table>
The Morningstar Style Box(TM) is based on the fund's portfolio holdings as of
period end. The vertical axis shows the market capitalization of the stocks
owned, and the horizontal axis shows investment style (value, blend, or growth).
Information shown is based on the most recent data provided by Morningstar.
(C)2010 Morningstar, Inc. All rights reserved. The information contained herein
is proprietary to Morningstar and/or its content providers, may not be copied or
distributed and is not warranted to be accurate, complete, or timely. Neither
Morningstar nor its content providers are responsible for any damages or losses
arising from any use of this information. Past performance is no guarantee of
future results.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 5
MANAGER COMMENTARY -------------------------------------------------------------
Threadneedle International Opportunity Fund portfolio managers Alex Lyle and
Esther Perkins of Threadneedle International Limited (Threadneedle) discuss the
Fund's results and positioning for the fiscal year ended Oct. 31, 2010.
Threadneedle, an indirect wholly-owned subsidiary of Ameriprise Financial, Inc.,
is the subadviser to the Fund.
At Oct. 31, 2010, approximately 30% of the Fund's shares were owned in aggregate
by affiliated funds of funds managed by Columbia Management Investment Advisers,
LLC (Columbia Management). As a result of asset allocation decisions by Columbia
Management, it is possible Threadneedle International Opportunity Fund may
experience relatively large purchases or redemptions from affiliated funds of
funds (see page 45, Class I capital share transactions for related activity
during the most recent fiscal period). Columbia Management seeks to minimize the
impact of these transactions by structuring them over a reasonable period of
time. Threadneedle International Opportunity Fund may experience increased
expenses as it buys and sells securities as a result of purchases or redemptions
by affiliated funds of funds. For more information on the Fund's expenses, see
the discussions beginning on pages 14 and 41.
Dear Shareholders,
Threadneedle International Opportunity Fund (the Fund) Class A shares gained
16.09% (excluding sales charge) for the 12 months ended Oct. 31, 2010. The Fund
significantly outperformed its benchmark index, the Morgan Stanley Capital
International (MSCI) EAFE Index (MSCI Index), which advanced 8.82% for the 12-
month period. The Fund also outperformed its peer group, the Lipper
International Large-Cap Core Funds Index, which increased 11.06% for the same
time frame.
SIGNIFICANT PERFORMANCE FACTORS
Generally speaking, the market environment was positive over the past year. Very
strong equity markets reflected robust corporate results and attractive
valuations. The Fund was fully invested and well positioned to capitalize on the
favorable environment.
The Fund's asset allocation strategy contributed to its outperformance of the
MSCI Index. The Fund had larger weightings in Asia and the emerging markets than
the Index. These regions performed very well as
- --------------------------------------------------------------------------------
6 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
investors recognized their greater potential for growth compared to the highly
indebted developed economies.
In Europe, which is a major component of the MSCI Index, we focused on the
stronger core European economies, particularly Germany, and had very limited
exposure to the problem areas of Europe -- Ireland, Greece,
COUNTRY BREAKDOWN(1) (at Oct. 31, 2010)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Australia 4.5%
- ------------------------------------------------
Belgium 1.6%
- ------------------------------------------------
Bermuda 0.6%
- ------------------------------------------------
Brazil 2.3%
- ------------------------------------------------
Canada 1.7%
- ------------------------------------------------
China 3.1%
- ------------------------------------------------
Denmark 1.2%
- ------------------------------------------------
France 10.5%
- ------------------------------------------------
Germany 9.4%
- ------------------------------------------------
Hong Kong 3.4%
- ------------------------------------------------
Hungary 0.2%
- ------------------------------------------------
Indonesia 0.8%
- ------------------------------------------------
Italy 0.7%
- ------------------------------------------------
Japan 13.3%
- ------------------------------------------------
Luxembourg 0.3%
- ------------------------------------------------
Mexico 1.1%
- ------------------------------------------------
Netherlands 2.8%
- ------------------------------------------------
Norway 1.4%
- ------------------------------------------------
Singapore 1.2%
- ------------------------------------------------
South Korea 1.4%
- ------------------------------------------------
Spain 2.0%
- ------------------------------------------------
Sweden 3.9%
- ------------------------------------------------
Switzerland 5.2%
- ------------------------------------------------
Taiwan 1.9%
- ------------------------------------------------
Turkey 0.4%
- ------------------------------------------------
United Kingdom 23.5%
- ------------------------------------------------
Other(2) 1.6%
- ------------------------------------------------
</Table>
(1) Percentages indicated are based upon total investments (excluding
Investments of Cash Collateral Received for Securities on Loan). The Fund's
composition is subject to change.
(2) Cash & Cash Equivalents.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 7
MANAGER COMMENTARY (continued) -------------------------------------------------
Spain and Portugal -- where debt struggles have negatively affected stock
markets.
Relative to the MSCI Index, the Fund had a smaller weighting in Japan, which had
sluggish performance due to long-term structural problems in its economy and the
yen's strength. The strong yen was detrimental to Japan's export-driven economy.
The Fund's sector weightings also had a positive effect on relative performance.
We de-emphasized banks because we recognized that increased capital raising,
greater industry regulation and the need to strengthen balance sheets would
likely result in negative investor sentiment. Our concerns were valid and banks
have been a poor performing industry.
The Fund benefited from having a larger consumer discretionary weighting than
the MSCI Index. Within the consumer discretionary area, we focused on companies
with exposure to growth areas, for example, those with luxury goods products or
with a strong presence in Asia and the emerging markets. Contributors included
French luxury goods
TOP TEN HOLDINGS(1) (at Oct. 31, 2010)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Rio Tinto PLC (United Kingdom) 2.5%
- ------------------------------------------------
Vodafone Group PLC (United Kingdom) 2.1%
- ------------------------------------------------
BG Group PLC (United Kingdom) 2.1%
- ------------------------------------------------
Fresenius Medical Care AG & Co. KGaA
(Germany) 2.0%
- ------------------------------------------------
Volkswagen AG (Germany) 2.0%
- ------------------------------------------------
Admiral Group PLC (United Kingdom) 1.9%
- ------------------------------------------------
Nestle SA (Switzerland) 1.9%
- ------------------------------------------------
Standard Chartered PLC (United Kingdom) 1.7%
- ------------------------------------------------
LVMH Moet Hennessy Louis Vuitton SA
(France) 1.7%
- ------------------------------------------------
Anheuser-Busch InBev NV (Belgium) 1.6%
- ------------------------------------------------
</Table>
(1) Percentages indicated are based upon total investments (excluding
Investments of Cash Collateral Received for Securities on Loan and Cash &
Cash Equivalents).
For further detail about these holdings, please refer to the section entitled
"Portfolio of Investments."
Fund holdings are as of the date given, are subject to change at any time, and
are not recommendations to buy or sell any security.
- --------------------------------------------------------------------------------
8 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
company LVMH (Louis Vuitton Moet Hennessy) and German auto manufacturer
VOLKSWAGON, all of which benefited from sales into Asia.
An overweight in the industrial sector added to relative return as well. We have
been enthusiastic about this sector because we expect increasing levels of
capital spending from companies that have restricted spending for a number of
years, but now that cash flow is good and balance sheets are stronger, finally
need to reinvest. We're also seeing continued expenditure on infrastructure,
particularly in emerging economies. This has all benefited industrial holdings
such as U.K. engineering firm THE WEIR GROUP.
An overweight in materials, particularly the mining sector, was also
advantageous as these companies performed well. Our emphasis in this area
capitalizes on activity in China where demand for commodities has been extremely
strong. Materials companies have also benefited from weakness in the U.S.
dollar. Australia's RIO TINTO is an example of a materials holding that has been
a strong performer for the Fund.
Additional individual contributors included U.K. power supply company AGGREKO,
U.K. semi-conductor company ARM HOLDINGS and German renal care company FRESENIUS
MEDICAL CARE. These companies exhibit key themes we've focused on, including
having healthy balance sheets, reasonable growth, interesting niche positions or
exposure to faster growing economies.
CHANGES TO THE FUND'S PORTFOLIO
We added to the Fund's industrials exposure over the period, including companies
such as FANUC, a Japanese machine tools controls company. We
The Fund's asset allocation strategy contributed to its outperformance of the
MSCI EAFE Index.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 9
MANAGER COMMENTARY (continued) -------------------------------------------------
also added new holdings, including KAWASAKI HEAVY INDUSTRIES, another Japanese
firm. We believe these companies may benefit from increased infrastructure
expenditure and growing use of automation to reduce labor costs. Another new
holding is French industrial firm LEGRAND, which we believe should benefit from
efforts to improve energy efficiency.
We added to the Fund's consumer discretionary position, focusing on companies
with exposure to emerging economies. We added to the Fund's holdings of LOJAS
RENNER, a Brazilian retailer, and added new positions in Japanese automotive
company SUZUKI MOTOR CORP., which has significant exposure to India, and German
automaker Volkswagen, which has significant sales in China and Brazil.
To fund those increases we reduced the consumer staples allocation. Consumer
staples companies performed well for the Fund in the more difficult economic
environment of the past few years, but now that we're seeing economic growth, we
think it is time to shift in favor of consumer discretionary consumption rather
than staples. Hence, we sold the Fund's holdings of COLRUYT, a Belgium food
retailer, and RECKITT BENCKISER, a U.K. personal goods company. We also reduced
holdings of BRITISH AMERICAN TOBACCO in the U.K.
Finally, we reduced the Fund's financials exposure. We remain concerned about
issues related to bank balance sheets. Consequently, we sold the Fund's holdings
of BARCLAYS because we thought the company might need to raise funds and we sold
the Fund's holding in Spanish bank BANCO SANTANDER due to concerns about
peripheral Europe. We also sold the Fund's holdings in real estate company CHINA
OVERSEAS LAND & INVESTMENT due to uncertainty over Chinese monetary policy.
OUR FUTURE STRATEGY
Geographically, the portfolio remains overweight in the Far East and emerging
markets. We think the growth prospects there are materially superior to those of
the developed economies. And although Asia and emerging market equities have
already outperformed, we still don't think valuations fully reflect how much
better their prospects are.
As of fiscal year end, the Fund remains overweight in the industrials and
consumer discretionary sectors, while its telecommunications, utilities and
consumer staples positions are smaller than those of the MSCI Index. We
- --------------------------------------------------------------------------------
10 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
consider the outlook for those sectors unexciting either because of competitive
environments or because companies within the sectors depend on slower growing
domestic economies rather than faster growing overseas markets.
Our outlook for equities remains optimistic. We think valuations are attractive.
In our view, corporate results and cash flow are both very strong, and the
global economy is recovering, though weakly. We do think there will be some
challenges. Currently, there are clearly issues in peripheral Europe. Developed
markets appear likely to experience slower growth and there may be times when
investors become concerned about the economic outlook. Though we think markets
could remain volatile with possible setbacks, on balance, we believe equities
should be on an upward trend.
<Table>
Alex Lyle Esther Perkins, CFA(R)
Portfolio Manager Deputy Portfolio Manager
</Table>
Any specific securities mentioned are for illustrative purposes only and are not
a complete list of securities that have increased or decreased in value. The
views expressed in this statement reflect those of the portfolio manager(s) only
through the end of the period of the report as stated on the cover and do not
necessarily represent the views of Columbia Management Investment Advisers, LLC*
(the Investment Manager) or any subadviser to the Fund or any other person in
the Investment Manager or subadviser organizations. Any such views are subject
to change at any time based upon market or other conditions and the Investment
Manager disclaims any responsibility to update such views. These views may not
be relied on as investment advice and, because investment decisions for the Fund
are based on numerous factors, may not be relied on as an indication of trading
intent on behalf of the Fund.
* Effective May 1, 2010, RiverSource Investments, LLC became known as Columbia
Management Investment Advisers, LLC.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 11
THE FUND'S LONG-TERM PERFORMANCE -----------------------------------------------
The chart on the facing page illustrates the total value of an assumed $10,000
investment in Threadneedle International Opportunity Fund Class A shares (from
11/1/00 to 10/31/10) as compared to the performance of two widely cited
performance indices, the Morgan Stanley Capital International (MSCI) EAFE Index
(MSCI Index) and the Lipper International Large-Cap Core Funds Index. In
comparing the Fund's Class A shares to these indices, you should take into
account the fact that the Fund's performance reflects the maximum initial sales
charge of 5.75%, while such charges are not reflected in the performance of the
indices. Returns for the Fund include the reinvestment of any distribution paid
during each period.
The performance information shown represents past performance and is not a
guarantee of future results. The table below and the chart on the facing page do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. The investment return and
principal value of your investment will fluctuate so that your shares, when
redeemed, may be worth more or less than their original cost. Current
performance may be lower or higher than the performance information shown. You
may obtain performance information current to the most recent month-end by
contacting your financial institution or visiting riversource.com/funds. Also
see "Past Performance" in the Fund's current prospectus.
COMPARATIVE RESULTS
- --------------------------------------------------------------------------------
<Table>
<Caption>
Results at Oct. 31, 2010
1 YEAR 3 YEARS 5 YEARS 10 YEARS
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND
(INCLUDES SALES CHARGE)
Class A Cumulative value of $10,000 $10,941 $7,383 $11,674 $9,902
- ------------------------------------------------------------------------------------------
Average annual total return +9.41% -9.62% +3.14% -0.09%
- ------------------------------------------------------------------------------------------
MSCI INDEX(1)
Cumulative value of $10,000 $10,882 $7,499 $12,043 $14,251
- ------------------------------------------------------------------------------------------
Average annual total return +8.82% -9.15% +3.79% +3.61%
- ------------------------------------------------------------------------------------------
LIPPER INTERNATIONAL LARGE-CAP CORE FUNDS INDEX(2)
Cumulative value of $10,000 $11,106 $7,297 $11,707 $13,240
- ------------------------------------------------------------------------------------------
Average annual total return +11.06% -9.97% +3.20% +2.85%
- ------------------------------------------------------------------------------------------
</Table>
Results for other share classes can be found on page 4.
- --------------------------------------------------------------------------------
12 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
(VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN THREADNEEDLE INTERNATIONAL
OPPORTUNITY FUND LINE GRAPH)
<Table>
<Caption>
THREADNEEDLE INTERNATIONAL
OPPORTUNITY FUND
CLASS A LIPPER INTERNATIONAL
(INCLUDES SALES LARGE-CAP CORE
CHARGE) MSCI INDEX(1) FUNDS INDEX(2)
-------------------------- ------------- --------------------
10/00 $ 9,425 $10,000 $10,000
1/01 8,866 9,967 10,057
4/01 7,778 9,214 9,287
7/01 6,762 8,381 8,484
10/01 6,060 7,532 7,624
1/02 6,003 7,440 7,648
4/02 6,384 7,959 8,201
7/02 5,529 6,984 7,173
10/02 5,117 6,558 6,806
1/03 4,848 6,351 6,548
4/03 5,013 6,692 6,830
7/03 5,499 7,457 7,566
10/03 6,088 8,366 8,356
1/04 6,674 9,353 9,292
4/04 6,539 9,419 9,220
7/04 6,445 9,358 8,986
10/04 6,841 9,978 9,614
1/05 7,401 10,928 10,443
4/05 7,256 10,871 10,379
7/05 7,621 11,376 10,897
10/05 7,997 11,834 11,310
1/06 9,251 13,471 12,956
4/06 9,927 14,567 13,983
7/06 9,536 14,165 13,397
10/06 10,075 15,152 14,301
1/07 10,743 16,210 15,370
4/07 11,298 17,527 16,326
7/07 11,426 17,624 16,513
10/07 12,644 19,005 18,146
1/08 11,061 16,314 15,669
4/08 11,545 17,297 16,457
7/08 10,393 15,556 14,774
10/08 7,022 10,199 9,676
1/09 6,371 9,231 8,634
4/09 6,770 9,959 9,236
7/09 8,132 12,109 11,271
10/09 8,531 13,096 11,921
1/10 8,530 12,960 11,888
4/10 8,901 13,447 12,400
7/10 8,856 12,923 11,965
10/10 9,902 14,251 13,240
</Table>
(1) The Morgan Stanley Capital International (MSCI) EAFE Index (MSCI Index), an
unmanaged index, is compiled from a composite of securities markets of
Europe, Australia 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 -- 2010 ANNUAL REPORT 13
FUND EXPENSES EXAMPLE ----------------------------------------------------------
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (i) transaction
costs, including sales charges (loads) on purchase payments; and (ii) ongoing
costs, which may include management fees; distribution and service (Rule 12b-1)
fees; and other Fund fees and expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
In addition to the ongoing expenses which the Fund bears directly, the Fund's
shareholders indirectly bear the ongoing expenses of any funds in which the Fund
invests (also referred to as "acquired funds"), including affiliated and non-
affiliated pooled investment vehicles (including mutual funds and exchange
traded funds). The Fund's indirect expense from investing in the acquired funds
is based on the Fund's pro rata portion of the ongoing expenses charged by
acquired funds using the expense ratio of each of the acquired funds as of the
acquired fund's most recent shareholder report.
The example is based on an investment of $1,000 invested at the beginning of the
period indicated and held until Oct. 31, 2010.
ACTUAL EXPENSES
The first line of the table provides information about actual account values and
actual expenses for each class. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading titled "Expenses paid during the
period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the actual expense ratio for each
class and an assumed rate of return of 5% per year before expenses, which is not
the actual return for the class. The hypothetical account values and expenses
may not be used to estimate the actual ending account balance or expenses you
paid for the period. You may use this information to compare the ongoing costs
of investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
14 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
MAY 1, 2010 OCT. 31, 2010 THE PERIOD(a) EXPENSE RATIO
- ------------------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,112.50 $ 8.37(c) 1.59%(c)
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,017.00 $ 8.00(c) 1.59%(c)
- ------------------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,107.80 $12.35(c) 2.35%(c)
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,013.21 $11.80(c) 2.35%(c)
- ------------------------------------------------------------------------------------------
Class C
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,108.00 $12.35(c) 2.35%(c)
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,013.21 $11.80(c) 2.35%(c)
- ------------------------------------------------------------------------------------------
Class I
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,115.40 $ 5.48 1.04%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,019.75 $ 5.24 1.04%
- ------------------------------------------------------------------------------------------
Class R
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,111.30 $ 9.63(c) 1.83%(c)
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,015.81 $ 9.20(c) 1.83%(c)
- ------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 15
FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
MAY 1, 2010 OCT. 31, 2010 THE PERIOD(a) EXPENSE RATIO
- ------------------------------------------------------------------------------------------
Class R4
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,114.10 $ 7.22 1.37%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,018.10 $ 6.89 1.37%
- ------------------------------------------------------------------------------------------
</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 182/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Oct. 31, 2010: +11.25%
for Class A, +10.78% for Class B, +10.80% for Class C, +11.54% for Class I,
+11.13% for Class R and +11.41% for Class R4.
(c) Columbia Management Investment Advisers, LLC (formerly known as RiverSource
Investments, LLC) (the Investment Manager) and its affiliates have
contractually agreed to waive certain fees and to absorb certain expenses
until Dec. 31, 2011, unless sooner terminated at the sole discretion of the
Fund's Board, such that net expenses (excluding fees and expenses of
acquired funds), before giving effect to any performance incentive
adjustment, will not exceed 1.50% for Class A, 2.25% for Class B, 2.25% for
Class C and 1.75% for Class R. Any amounts waived will not be reimbursed by
the Fund. This change is effective Jan. 1, 2011. Had this change been in
place for the entire six month period ended Oct. 31, 2010, the actual
expenses paid would have been $8.22 for Class A, $12.09 for Class B, $12.14
for Class C and $9.53 for Class R; the hypothetical expenses paid would have
been $7.85 for Class A, $11.55 for Class B, $11.60 for Class C and $9.10 for
Class R. The actual and hypothetical expenses paid for Class I and Class R4
would have been the same as those expenses presented in the table above.
- --------------------------------------------------------------------------------
16 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
OCT. 31, 2010
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
COMMON STOCKS (96.4%)(c)
ISSUER SHARES VALUE(a)
AUSTRALIA (4.5%)
Australia & New Zealand Banking Group Ltd. 167,834 $4,078,601
BHP Billiton Ltd. 80,749 3,315,606
CSL Ltd. 77,134(e) 2,480,397
Macquarie Group Ltd. 53,304(e) 1,890,048
Newcrest Mining Ltd. 85,515(e) 3,347,127
Rio Tinto Ltd. 35,821(e) 2,901,317
---------------
Total 18,013,096
- -------------------------------------------------------------------------------------
BELGIUM (1.6%)
Anheuser-Busch InBev NV 100,203 6,278,441
- -------------------------------------------------------------------------------------
BERMUDA (0.6%)
SeaDrill Ltd. 82,724(e) 2,506,274
- -------------------------------------------------------------------------------------
BRAZIL (2.3%)
Itau Unibanco Holding SA, ADR 126,971 3,118,408
Lojas Renner SA 74,300 2,950,481
MRV Engenharia e Participacoes SA 168,100 1,637,659
OGX Petroleo e Gas Participacoes SA 121,000(b) 1,583,371
---------------
Total 9,289,919
- -------------------------------------------------------------------------------------
CANADA (1.7%)
Canadian Pacific Railway Ltd. 39,700 2,587,760
CGI Group, Inc., Class A 156,900(b) 2,413,728
IESI-BFC Ltd. 85,910 2,010,660
---------------
Total 7,012,148
- -------------------------------------------------------------------------------------
CHINA (3.1%)
China National Building Material Co., Ltd.,
Series H 880,000 2,145,788
China Shenhua Energy Co., Ltd., Series H 417,000 1,856,083
Industrial & Commercial Bank of China, Series
H 5,011,000 4,034,143
Ping An Insurance Group Co. of China Ltd.,
Series H 173,000 1,862,579
Tencent Holdings Ltd. 111,700 2,557,960
---------------
Total 12,456,553
- -------------------------------------------------------------------------------------
DENMARK (1.2%)
Novo Nordisk A/S, Series B 47,448 4,993,408
- -------------------------------------------------------------------------------------
FRANCE (10.5%)
Air Liquide SA 24,974 3,229,325
BNP Paribas 65,953 4,822,011
Edenred 90,163(b) 1,887,930
Legrand SA 82,604 3,188,075
LVMH Moet Hennessy Louis Vuitton SA 42,114 6,597,598
Publicis Groupe SA 65,603(e) 3,266,678
Safran SA 86,406 2,738,537
Sanofi-Aventis SA 39,897 2,785,427
Schneider Electric SA 40,845 5,796,421
Societe Generale 81,619 4,885,770
Vinci SA 60,897 3,251,785
---------------
Total 42,449,557
- -------------------------------------------------------------------------------------
GERMANY (7.5%)
BASF SE 58,380 4,246,398
BMW AG 57,298 4,106,312
Fresenius Medical Care AG & Co. KGaA 123,531 7,866,432
Infineon Technologies AG 297,558(b) 2,341,542
Kabel Deutschland Holding AG 30,839(b) 1,388,234
Linde AG 17,948 2,583,256
MAN SE 18,397 2,022,065
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 17
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
GERMANY (CONT.)
SAP AG 39,380 $2,052,959
Siemens AG 30,604 3,494,913
---------------
Total 30,102,111
- -------------------------------------------------------------------------------------
HONG KONG (3.4%)
China Overseas Land & Investment Ltd. 1,839,120(e) 3,867,586
Hong Kong Exchanges and Clearing Ltd. 123,500 2,718,243
Li & Fung Ltd. 877,600 4,636,527
Sun Hung Kai Properties Ltd. 143,000 2,450,058
---------------
Total 13,672,414
- -------------------------------------------------------------------------------------
HUNGARY (0.2%)
OTP Bank PLC 31,076(b,e) 925,023
- -------------------------------------------------------------------------------------
INDONESIA (0.8%)
Bank Mandiri Tbk PT 4,176,500 3,272,020
- -------------------------------------------------------------------------------------
ITALY (0.7%)
Saipem SpA 63,491 2,820,539
- -------------------------------------------------------------------------------------
JAPAN (13.3%)
Asahi Breweries Ltd. 40,300 813,813
Asahi Kasei Corp. 186,000 1,093,301
Asics Corp. 25,000 269,976
Benesse Holdings, Inc. 6,600 317,000
Bridgestone Corp. 24,300 435,751
Canon, Inc. 37,500 1,733,565
Daiichi Sankyo Co., Ltd. 20,100 425,879
Don Quijote Co., Ltd. 15,100 412,637
East Japan Railway Co. 9,800 605,878
Fanuc Ltd. 6,300 912,079
Fujitsu Ltd. 72,000 492,109
Goldcrest Co., Ltd. 22,370(e) 482,872
Hankyu Hanshin Holdings, Inc. 155,000 743,507
Hisamitsu Pharmaceutical Co., Inc. 10,100(e) 414,192
Hitachi Ltd. 55,000 248,788
Honda Motor Co., Ltd. 40,900 1,492,771
Hoya Corp. 22,400 523,882
ITOCHU Corp. 70,400 617,651
J Front Retailing Co., Ltd. 111,000 569,691
Jafco Co., Ltd. 11,100 232,014
JFE Holdings, Inc. 26,400 824,118
JGC Corp. 12,000 229,651
JX Holdings, Inc. 45,300 266,272
Kawasaki Heavy Industries Ltd. 252,000(e) 695,216
Kawasaki Kisen Kaisha Ltd. 136,000 530,682
Kirin Holdings Co., Ltd. 33,000 452,740
Komatsu Ltd. 49,900 1,222,850
Kyocera Corp. 8,000 798,311
Lawson, Inc. 11,600 527,600
Mabuchi Motor Co., Ltd. 5,200 275,606
Makita Corp. 31,800 1,118,355
Mitsubishi Corp. 42,400 1,019,561
Mitsubishi Electric Corp. 113,000 1,060,209
Mitsubishi Estate Co., Ltd. 56,000 981,235
Mitsubishi Gas Chemical Co., Inc. 43,000 266,112
Mitsubishi UFJ Financial Group, Inc. 354,700 1,652,945
Mitsubishi UFJ Lease & Finance Co., Ltd. 9,960 333,196
Mitsui & Co., Ltd. 41,400 650,814
Mitsui Fudosan Co., Ltd. 33,000 623,748
Mizuho Financial Group, Inc. 231,400 336,446
MS&AD Insurance Group Holdings, Inc. 23,000 552,492
Murata Manufacturing Co., Ltd. 10,500 590,437
NGK Spark Plug Co., Ltd. 59,000 822,642
Nichirei Corp. 50,000 218,094
Nintendo Co., Ltd. 2,900 751,398
Nippon Electric Glass Co., Ltd. 43,000 554,132
Nippon Sheet Glass Co., Ltd. 116,000 255,151
Nippon Telegraph & Telephone Corp. 17,300 785,777
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
18 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
JAPAN (CONT.)
Nissan Motor Co., Ltd. 146,700 $1,294,358
Nomura Holdings, Inc. 43,000 223,363
NSK Ltd. 64,000 485,150
NTT DoCoMo, Inc. 606 1,020,417
ORIX Corp. 4,200 383,099
Osaka Gas Co., Ltd. 123,000 464,670
Panasonic Corp. 21,800 320,485
Rinnai Corp. 8,600 523,673
Santen Pharmaceutical Co., Ltd. 26,000 897,577
Sanwa Holdings Corp. 70,000 200,075
Seven & I Holdings Co., Ltd. 16,100 374,740
Shin-Etsu Chemical Co., Ltd. 20,800(e) 1,053,312
Shiseido Co., Ltd. 11,800 246,646
SMC Corp. 2,100 320,989
Softbank Corp. 16,000 514,975
Sony Corp. 42,600 1,424,059
Sumitomo Corp. 60,800 770,672
Sumitomo Metal Industries Ltd. 202,000 469,417
Sumitomo Metal Mining Co., Ltd. 31,000 492,333
Sumitomo Mitsui Financial Group, Inc. 39,400 1,180,972
Suzuki Motor Corp. 37,200 907,464
Takeda Pharmaceutical Co., Ltd. 14,900 698,061
Terumo Corp. 9,800 497,490
The Bank of Kyoto Ltd. 32,000 286,318
The Chiba Bank Ltd. 34,000 209,991
The Dai-ichi Life Insurance Co., Ltd. 102 123,713
The Kansai Electric Power Co., Inc. 20,900 529,318
The Shizuoka Bank Ltd. 37,000 317,261
The Tokyo Electric Power Co., Inc. 23,100 552,597
Toho Co., Ltd. 20,500 316,404
Tokio Marine Holdings, Inc. 31,600 890,627
Tokyo Electron Ltd. 12,500 706,008
Tokyo Gas Co., Ltd. 71,000 334,398
Toshiba Corp. 56,000 280,452
Toyota Motor Corp. 65,300 2,320,029
Ushio, Inc. 27,200 453,277
Yamada Denki Co., Ltd. 4,830 313,917
---------------
Total 53,631,453
- -------------------------------------------------------------------------------------
LUXEMBOURG (0.3%)
Evraz Group SA, GDR 45,313(b,d) 1,373,890
- -------------------------------------------------------------------------------------
MEXICO (1.1%)
America Movil SAB de CV, Series L, ADR 37,290 2,135,225
Grupo Modelo SAB de CV, Series C 293,400 1,644,416
Wal-Mart de Mexico SAB de CV, Series V 173,600 475,239
---------------
Total 4,254,880
- -------------------------------------------------------------------------------------
NETHERLANDS (2.8%)
ASML Holding NV 104,342 3,442,006
ING Groep NV-CVA 524,556(b) 5,597,682
Koninklijke Philips Electronics NV 75,717 2,289,149
---------------
Total 11,328,837
- -------------------------------------------------------------------------------------
NORWAY (1.4%)
DnB NOR ASA 219,466 3,013,469
Telenor ASA 150,935 2,434,643
---------------
Total 5,448,112
- -------------------------------------------------------------------------------------
SINGAPORE (1.2%)
Oversea-Chinese Banking Corp., Ltd. 523,000(e) 3,641,881
Singapore Airlines Ltd. 110,000 1,344,926
---------------
Total 4,986,807
- -------------------------------------------------------------------------------------
SOUTH KOREA (1.3%)
Samsung Electronics Co., Ltd. 4,434 2,936,085
Shinhan Financial Group Co., Ltd. 64,591 2,500,212
---------------
Total 5,436,297
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 19
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
SPAIN (2.0%)
Amadeus IT Holding SA, Series A 235,032(b) $4,785,647
Inditex SA 40,624(e) 3,391,777
---------------
Total 8,177,424
- -------------------------------------------------------------------------------------
SWEDEN (3.9%)
Assa Abloy AB, Series B 112,418(e) 2,881,045
Atlas Copco AB, Series A 161,222 3,369,149
Autoliv, Inc., SDR 34,838 2,495,953
Swedish Match AB 159,402 4,455,010
TeliaSonera AB 306,124(e) 2,554,776
---------------
Total 15,755,933
- -------------------------------------------------------------------------------------
SWITZERLAND (5.2%)
Credit Suisse Group AG 86,257 3,562,637
Nestle SA 136,371 7,468,397
SGS SA 1,704 2,726,885
Syngenta AG 10,048 2,778,973
The Swatch Group AG 62,718 4,358,780
---------------
Total 20,895,672
- -------------------------------------------------------------------------------------
TAIWAN (1.9%)
Advanced Semiconductor Engineering, Inc. 217,092 187,191
Hon Hai Precision Industry Co., Ltd. 1,003,867 3,803,396
MediaTek, Inc. 123,245 1,549,771
Taiwan Semiconductor Manufacturing Co., Ltd. 1,015,049 2,082,016
---------------
Total 7,622,374
- -------------------------------------------------------------------------------------
TURKEY (0.4%)
KOC Holding AS 307,981 1,450,989
- -------------------------------------------------------------------------------------
UNITED KINGDOM (23.5%)
Admiral Group PLC 287,367 7,504,835
Aggreko PLC 197,292 4,978,592
ARM Holdings PLC 365,049 2,124,874
BG Group PLC 418,901 8,157,985
BP PLC 835,455 5,699,612
British Airways PLC 634,574(b) 2,752,245
British American Tobacco PLC 108,738 4,146,435
Burberry Group PLC 232,770 3,800,299
Carnival PLC 50,060 2,157,544
HSBC Holdings PLC 220,415 2,292,289
IG Group Holdings PLC 383,980 3,251,398
Lonmin PLC 78,885(b) 2,210,552
Prudential PLC 324,258 3,275,611
Rio Tinto PLC 153,636 9,934,837
Shire PLC 172,475 4,064,952
Standard Chartered PLC 232,023 6,711,894
Tesco PLC 764,939 5,231,409
The Weir Group PLC 128,615 3,210,522
Tullow Oil PLC 251,231 4,769,888
Vodafone Group PLC 3,032,718 8,253,045
---------------
Total 94,528,818
- -------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $314,023,031) $388,682,989
- -------------------------------------------------------------------------------------
<Caption>
PREFERRED STOCKS (1.9%)(c)
ISSUER SHARES VALUE(a)
GERMANY
Volkswagen AG 51,516 $7,740,817
- -------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost: $4,691,577) $7,740,817
- -------------------------------------------------------------------------------------
<Caption>
RIGHTS (0.1%)(c)
ISSUER SHARES VALUE(a)
UNITED KINGDOM
Standard Chartered PLC 29,002(b) $244,184
- -------------------------------------------------------------------------------------
TOTAL RIGHTS
(Cost: $--) $244,184
- -------------------------------------------------------------------------------------
<Caption>
MONEY MARKET FUND (1.6%)
SHARES VALUE(a)
Columbia Short-Term Cash Fund, 0.241% 6,508,038(f) $6,508,038
- -------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $6,508,038) $6,508,038
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
20 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
INVESTMENTS OF CASH COLLATERAL RECEIVED
FOR SECURITIES ON LOAN (6.4%)
AMOUNT
EFFECTIVE PAYABLE AT
ISSUER YIELD MATURITY VALUE(a)
ASSET-BACKED COMMERCIAL PAPER (0.2%)
Antalis US Funding Corp.
11-08-10 0.310% $999,716 $999,716
- -------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
EFFECTIVE PRINCIPAL
ISSUER YIELD AMOUNT VALUE(a)
REPURCHASE AGREEMENTS (6.2%)(g)
Deutsche Bank AG
dated 10-29-10, matures 11-01-10,
repurchase price
$1,848,326 0.230% $1,848,290 $1,848,290
Mizuho Securities USA, Inc.
dated 10-29-10, matures 11-01-10,
repurchase price
$15,000,313 0.250 15,000,000 15,000,000
Pershing LLC
dated 10-29-10, matures 11-01-10,
repurchase price
$7,000,187 0.320 7,000,000 7,000,000
RBS Securities, Inc.
dated 10-29-10, matures 11-01-10
repurchase price
$1,000,031 0.370 1,000,000 1,000,000
---------------
Total 24,848,290
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN
(Cost: $25,848,006) $25,848,006
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $351,070,652)(h) $429,024,034
=====================================================================================
</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 net assets at Oct. 31, 2010:
<Table>
<Caption>
PERCENTAGE OF
INDUSTRY NET ASSETS VALUE(a)
- -----------------------------------------------------------------------
Aerospace & Defense 0.7% $2,738,537
Airlines 1.0 4,097,171
Auto Components 0.9 3,754,346
Automobiles 2.5 10,120,934
Automotive 1.9 7,740,817
Beverages 2.3 9,189,410
Biotechnology 0.6 2,480,397
Building Products 0.8 3,336,271
Capital Markets 1.5 5,908,062
Chemicals 3.8 15,250,677
Commercial Banks 11.8 47,523,838
Commercial Services & Supplies 2.2 8,877,182
Computers & Peripherals 0.2 772,561
Construction & Engineering 0.9 3,481,436
Construction Materials 0.5 2,145,788
Consumer Finance 0.1 383,099
Distributors 1.2 4,636,527
Diversified Consumer Services 0.1 317,000
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 21
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
SUMMARY OF INVESTMENTS IN SECURITIES
BY INDUSTRY (CONTINUED)
<Table>
<Caption>
PERCENTAGE OF
INDUSTRY NET ASSETS VALUE(a)
- -----------------------------------------------------------------------
Diversified Financial Services 3.0% $11,900,519
Diversified Telecommunication Services 1.4 5,775,196
Electric Utilities 0.3 1,081,915
Electrical Equipment 2.7 10,773,588
Electronic Equipment, Instruments &
Components 1.6 6,518,946
Energy Equipment & Services 1.3 5,326,813
Food & Staples Retailing 1.6 6,608,988
Food Products 1.9 7,686,491
Gas Utilities 0.2 799,068
Health Care Equipment & Supplies 0.1 497,490
Health Care Providers & Services 2.0 7,866,432
Hotels, Restaurants & Leisure 0.5 2,157,544
Household Durables 1.0 3,905,876
Industrial Conglomerates 2.0 7,978,558
Insurance 3.5 14,209,857
Internet Software & Services 0.6 2,557,960
IT Services 1.8 7,199,375
Machinery 3.3 13,356,375
Marine 0.1 530,682
Media 1.2 4,971,316
Metals & Mining 6.2 24,869,197
Multiline Retail 1.0 3,932,809
Office Electronics 0.4 1,733,565
Oil, Gas & Consumable Fuels 5.5 22,333,211
Personal Products 0.1 246,646
Pharmaceuticals 3.5 14,279,496
Professional Services 0.7 2,726,885
Real Estate Management & Development 2.1 8,405,499
Road & Rail 0.8 3,193,638
Semiconductors & Semiconductor
Equipment 3.8 15,369,493
Software 0.7 2,804,357
Specialty Retail 0.9 3,705,694
Textiles, Apparel & Luxury Goods 3.7 15,026,653
Tobacco 2.1 8,601,445
Trading Companies & Distributors 0.8 3,058,698
Wireless Telecommunication Services 3.0 11,923,662
Other(1) 8.0 32,356,044
- -----------------------------------------------------------------------
Total $429,024,034
- -----------------------------------------------------------------------
</Table>
(1) Cash & Cash Equivalents
The industries identified above are based on the Global Industry Classification
Standard (GICS), which was developed by, and is the exclusive property of,
Morgan Stanley Capital International Inc. and Standard & Poor's, a division of
The McGraw-Hill Companies, Inc.
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
22 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
<Table>
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
SDR -- Swedish Depositary Receipt
</Table>
(a) Securities are valued by using policies described in Note 2 to the
financial statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
may be determined to be liquid under guidelines established by the Fund's
Board of Directors. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At Oct. 31, 2010,
the value of these securities amounted to $1,373,890 or 0.34% of net
assets.
(e) At Oct. 31, 2010, security was partially or fully on loan. See Note 7 to
the financial statements.
(f) Affiliated Money Market Fund - See Note 8 to the financial statements. The
rate shown is the seven-day current annualized yield at Oct. 31, 2010.
(g) The table below represents securities received as collateral for repurchase
agreements. This collateral, which is generally high quality short-term
obligations, is deposited with the Fund's custodian and, pursuant to the
terms of the repurchase agreement, must have an aggregate market value
greater than or equal to the repurchase price plus accrued interest at all
times. The value of securities and/or cash held as collateral for
repurchase agreements is monitored on a daily basis to ensure the existence
of the proper level of collateral.
<Table>
<Caption>
DEUTSCHE BANK AG (0.230%)
SECURITY DESCRIPTION VALUE(a)
- -----------------------------------------------------------
Fannie Mae Pool $1,885,256
- -----------------------------------------------------------
Total market value of collateral securities $1,885,256
- -----------------------------------------------------------
<Caption>
MIZUHO SECURITIES USA, INC. (0.250%)
SECURITY DESCRIPTION VALUE(a)
- -----------------------------------------------------------
Fannie Mae Pool $5,577,051
Freddie Mac Gold Pool 2,294,934
Freddie Mac Non Gold Pool 912,198
Freddie Mac REMICS 1,279,565
Ginnie Mae I Pool 3,146,158
Government National Mortgage Association 2,090,094
- -----------------------------------------------------------
Total market value of collateral securities $15,300,000
- -----------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 23
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
NOTES TO PORTFOLIO OF
INVESTMENTS (CONTINUED)
<Table>
<Caption>
PERSHING LLC (0.320%)
SECURITY DESCRIPTION VALUE(a)
- -----------------------------------------------------------
Fannie Mae Pool $1,066,662
Fannie Mae REMICS 494,693
Fannie Mae Whole Loan 8,228
Federal Farm Credit Bank 250,690
Federal Home Loan Banks 91,409
Federal Home Loan Mortgage Corp 12,399
Federal National Mortgage Association 144,490
Freddie Mac Gold Pool 970,894
Freddie Mac REMICS 596,155
Ginnie Mae I Pool 904,030
Ginnie Mae II Pool 811,199
Government National Mortgage Association 756,639
United States Treasury Inflation Indexed
Bonds 13,653
United States Treasury Note/Bond 1,018,860
- -----------------------------------------------------------
Total market value of collateral securities $7,140,001
- -----------------------------------------------------------
<Caption>
RBS SECURITIES, INC. (0.370%)
SECURITY DESCRIPTION VALUE(a)
- -----------------------------------------------------------
American Express Issuance Trust $100
Ameriquest Mortgage Securities Inc 53,278
BA Credit Card Trust 12,819
Bear Stearns Asset Backed Securities Trust 9,000
Capital Auto Receivables Asset Trust 241
Capital One Multi-Asset Execution Trust 18,263
Chase Issuance Trust 15,178
Citibank Credit Card Issuance Trust 102,814
Citigroup Commercial Mortgage Trust 5,153
Credit-Based Asset Servicing and
Securitization LLC 11,523
Discover Card Master Trust 37,825
First National Master Note Trust 12,057
Ford Credit Auto Owner Trust 5,898
GE Capital Credit Card Master Note Trust 39,209
Goal Capital Funding Trust 2,397
Greenwich Capital Commercial Funding Corp 77,738
GS Mortgage Securities Corp II 59,504
Hyundai Auto Receivables Trust 60,299
Keycorp Student Loan Trust 143
Massachusetts Educational Financing Authority 11,897
MBNA Master Credit Card Trust 36,678
Morgan Stanley Dean Witter Capital I 2,980
Nelnet Student Loan Trust 126,367
Nissan Auto Lease Trust 20,380
</Table>
- --------------------------------------------------------------------------------
24 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF
INVESTMENTS (CONTINUED)
<Table>
<Caption>
RBS SECURITIES, INC. (0.370%) (CONTINUED)
SECURITY DESCRIPTION VALUE(a)
- -----------------------------------------------------------
Renaissance Home Equity Loan Trust $9
SLM Student Loan Trust 260,811
Terwin Mortgage Trust 32,233
Wachovia Bank Commercial Mortgage Trust 35,225
- -----------------------------------------------------------
Total market value of collateral securities $1,050,019
- -----------------------------------------------------------
</Table>
(h) At Oct. 31, 2010, the cost of securities for federal income tax purposes
was $356,478,663 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
<Table>
Unrealized appreciation $78,557,622
Unrealized depreciation (6,012,251)
-----------------------------------------------------------
Net unrealized appreciation $72,545,371
-----------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 25
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
FAIR VALUE MEASUREMENTS
Generally accepted accounting principles (GAAP) require disclosure regarding the
inputs and valuation techniques used to measure fair value and any changes in
valuation inputs or techniques. In addition, investments shall be disclosed by
major category.
The Fund categorizes its fair value measurements according to a three-level
hierarchy that maximizes the use of observable inputs and minimizes the use of
unobservable inputs by prioritizing that the most observable input be used when
available. Observable inputs are those that market participants would use in
pricing an investment based on market data obtained from sources independent of
the reporting entity. Unobservable inputs are those that reflect the Fund's
assumptions about the information market participants would use in pricing an
investment. An investment's level within the fair value hierarchy is based on
the lowest level of any input that is deemed significant to the asset or
liability's fair value measurement. The input levels are not necessarily an
indication of the risk or liquidity associated with investments at that level.
For example, certain U.S. government securities are generally high quality and
liquid, however, they are reflected as Level 2 because the inputs used to
determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in the three broad levels listed below:
- Level 1 -- Valuations based on quoted prices for investments in active
markets that the Fund has the ability to access at the measurement date
(to include NAV for open-end mutual funds). Valuation adjustments are not
applied to Level 1 investments.
- Level 2 -- Valuations based on other significant observable inputs
(including quoted prices for similar securities, interest rates,
prepayment speeds, credit risks, etc.).
- Level 3 -- Valuations based on significant unobservable inputs (including
the Fund's own assumptions and judgment in determining the fair value of
investments).
Inputs that are used in determining fair value of an investment may include
price information, credit data, volatility statistics, and other factors. These
inputs can be either observable or unobservable. The availability of observable
inputs can vary between investments, and is affected by various factors such as
the type of investment, and the volume and level of activity for that investment
or similar investments in the marketplace. The inputs will be considered by the
Fund Administrator, along with any other relevant factors in the calculation of
an investment's fair value. The Fund uses prices and inputs that are current as
of the measurement date, which may include periods of market dislocations.
During these periods, the availability of prices and inputs may be reduced for
many investments. This condition could cause an investment to be reclassified
between the various levels within the hierarchy.
Non-U.S. equity securities actively traded in foreign markets may be reflected
in Level 2 despite the availability of closing prices, because the Fund
evaluates and determines whether those closing prices reflect fair value at the
close of the New York Stock Exchange (NYSE) or require adjustment, as described
in Note 2 to the financial statements -- Valuation of securities.
Investments falling into the Level 3 category are primarily supported by quoted
prices from brokers and dealers participating in the market for those
investments. However, these may be classified as
- --------------------------------------------------------------------------------
26 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
FAIR VALUE MEASUREMENTS (CONTINUED)
Level 3 investments due to lack of market transparency and corroboration to
support these quoted prices. Additionally, valuation models may be used as the
pricing source for any remaining investments classified as Level 3. These models
rely on one or more significant unobservable inputs and/or significant
assumptions by the Fund Administrator. Inputs used in valuations may include,
but are not limited to, financial statement analysis, capital account balances,
discount rates and estimated cash flows, and comparable company data.
The following table is a summary of the inputs used to value the Fund's
investments as of Oct. 31, 2010:
<Table>
<Caption>
FAIR VALUE AT OCT. 31, 2010
------------------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION(A) IDENTICAL ASSETS(B) INPUTS INPUTS TOTAL
- ----------------------------------------------------------------------------------------------
Equity Securities
Common Stocks $388,682,989 $-- $-- $388,682,989
Preferred Stocks 7,740,817 -- -- 7,740,817
Rights 244,184 -- -- 244,184
- ----------------------------------------------------------------------------------------------
Total Equity Securities 396,667,990 -- -- 396,667,990
- ----------------------------------------------------------------------------------------------
Other
Affiliated Money
Market Fund(c) 6,508,038 -- -- 6,508,038
Investments of Cash
Collateral Received
for Securities on
Loan -- 25,848,006 -- 25,848,006
- ----------------------------------------------------------------------------------------------
Total Other 6,508,038 25,848,006 -- 32,356,044
- ----------------------------------------------------------------------------------------------
Total $403,176,028 $25,848,006 $-- $429,024,034
- ----------------------------------------------------------------------------------------------
</Table>
(a) See the Portfolio of Investments for all investment classifications not
indicated in the table.
(b) Includes certain securities trading outside the U.S. whose values were
adjusted at Oct. 31, 2009 as a result of significant market movements
following the close of local trading, and were classified as Level 2.
Values were not adjusted as of Oct. 31, 2010. Therefore, these investment
securities were classified as Level 1 instead of Level 2 at Oct. 31, 2010.
The amount of securities transferred out of Level 2 into Level 1 during the
period was $196,009,324. Transfers between Levels 1 and 2 are determined
based on the fair value at the beginning of the period for security
positions held throughout the period.
(c) Money market fund that is a sweep investment for cash balances in the Fund
at Oct. 31, 2010.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 27
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 800.SEC.0330); and
(iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q,
can be obtained without charge, upon request, by calling 800.345.6611.
- --------------------------------------------------------------------------------
28 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
STATEMENT OF ASSETS AND LIABILITIES --------------------------------------------
OCT. 31, 2010
<Table>
<Caption>
ASSETS
Investments in securities, at value
Unaffiliated issuers* (identified cost $318,714,608) 396,667,990
Affiliated money market fund (identified cost $6,508,038) 6,508,038
Investments of cash collateral received for securities on loan
(identified cost $25,848,006) 25,848,006
- --------------------------------------------------------------------------------------------
Total investments in securities (identified cost $351,070,652) 429,024,034
Cash 1
Foreign currency holdings (identified cost $269,407) 277,917
Capital shares receivable 177,186
Dividends and accrued interest receivable 584,350
Receivable for investment securities sold 9,382,266
Reclaims receivable 847,411
- --------------------------------------------------------------------------------------------
Total assets 440,293,165
- --------------------------------------------------------------------------------------------
LIABILITIES
Capital shares payable 853,117
Payable for investment securities purchased 10,235,098
Payable upon return of securities loaned 25,848,006
Accrued investment management services fees 8,740
Accrued distribution fees 2,394
Accrued transfer agency fees 7,706
Accrued administrative services fees 885
Accrued plan administration services fees 1
Other accrued expenses 153,487
- --------------------------------------------------------------------------------------------
Total liabilities 37,109,434
- --------------------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $ 403,183,731
- --------------------------------------------------------------------------------------------
REPRESENTED BY
Capital stock -- $.01 par value $ 457,558
Additional paid-in capital 472,104,982
Undistributed net investment income 2,093,384
Accumulated net realized gain (loss) (149,586,789)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 78,114,596
- --------------------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding capital stock $ 403,183,731
- --------------------------------------------------------------------------------------------
*Value of securities on loan $ 24,789,197
- --------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE
NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE
Class A $255,611,550 29,053,332 $8.80(1)
Class B $ 14,408,870 1,670,230 $8.63
Class C $ 8,100,660 962,688 $8.41
Class I $123,175,619 13,857,362 $8.89
Class R $ 1,733,789 195,101 $8.89
Class R4 $ 153,243 17,066 $8.98
- ------------------------------------------------------------------------------
</Table>
(1) The maximum offering price per share for Class A is $9.34. 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 -- 2010 ANNUAL REPORT 29
STATEMENT OF OPERATIONS --------------------------------------------------------
YEAR ENDED OCT. 31, 2010
<Table>
<Caption>
INVESTMENT INCOME
Income:
Dividends 8,656,849
Income distributions from affiliated money market fund 12,802
Income from securities lending -- net 235,685
Foreign taxes withheld (995,169)
- ------------------------------------------------------------------------------------------
Total income 7,910,167
- ------------------------------------------------------------------------------------------
Expenses:
Investment management services fees 3,025,818
Distribution fees
Class A 618,574
Class B 180,052
Class C 74,227
Class R 7,013
Class R3 8
Transfer agency fees
Class A 757,379
Class B 58,833
Class C 23,388
Class R 1,243
Class R3 2
Class R4 110
Class R5 2
Administrative services fees 312,222
Plan administration services fees
Class R 2,869
Class R3 8
Class R4 414
Compensation of board members 11,546
Custodian fees 87,975
Printing and postage 65,340
Registration fees 75,750
Professional fees 39,299
Other 54,420
- ------------------------------------------------------------------------------------------
Total expenses 5,396,492
- ------------------------------------------------------------------------------------------
Investment income (loss) -- net 2,513,675
- ------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions 17,166,607
Foreign currency transactions (161,752)
- ------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 17,004,855
Net change in unrealized appreciation (depreciation) on investments and
on translation of assets and liabilities in foreign currencies 39,367,749
- ------------------------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies 56,372,604
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $58,886,279
- ------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
30 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31, 2010 2009
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 2,513,675 $ 5,152,573
Net realized gain (loss) on investments 17,004,855 (98,948,086)
Net change in unrealized appreciation (depreciation) on investments and
on translation of assets and liabilities in foreign currencies 39,367,749 163,562,358
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 58,886,279 69,766,845
- ----------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (4,051,775) (6,677,493)
Class B (131,408) (342,205)
Class C (106,618) (37,640)
Class I (2,509,317) (2,569,064)
Class R (20,822) (92)
Class R3 (64) (103)
Class R4 (4,320) (5,693)
Class R5 (81) (112)
- ----------------------------------------------------------------------------------------------------
Total distributions (6,824,405) (9,632,402)
- ----------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales
Class A shares 17,231,723 34,145,042
Class B shares 1,231,440 2,780,483
Class C shares 1,934,079 5,418,122
Class I shares 5,619,957 32,394,436
Class R shares 639,098 1,113,710
Class R4 shares 75,291 40,899
Reinvestment of distributions at net asset value
Class A shares 3,953,148 6,510,561
Class B shares 128,655 333,747
Class C shares 104,393 36,537
Class I shares 2,509,182 2,568,878
Class R shares 20,822 --
Class R4 shares 4,320 5,693
Conversions from Class B to Class A
Class A shares 4,433,546 5,124,288
Class B shares (4,433,546) (5,124,288)
Payments for redemptions
Class A shares (60,821,656) (73,172,762)
Class B shares (4,971,137) (7,655,726)
Class C shares (1,820,223) (1,010,812)
Class I shares (17,744,181) (10,235,698)
Class R shares (249,287) (61,328)
Class R3 shares (3,684) --
Class R4 shares (171,863) (24,761)
Class R5 shares (3,679) --
- ----------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions (52,333,602) (6,812,979)
- ----------------------------------------------------------------------------------------------------
Proceeds from regulatory settlement (Note 10) -- 270,486
- ----------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (271,728) 53,591,950
Net assets at beginning of year 403,455,459 349,863,509
- ----------------------------------------------------------------------------------------------------
Net assets at end of year $403,183,731 $403,455,459
- ----------------------------------------------------------------------------------------------------
Undistributed net investment income $ 2,093,384 $ 5,851,439
- ----------------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 31
FINANCIAL HIGHLIGHTS -----------------------------------------------------------
The following tables are intended to help you understand the Fund's financial
performance. Certain information reflects financial results for a single share
of a class held for the periods shown. For periods ended 2007 and after, per
share net investment income (loss) amounts are calculated based on average
shares outstanding during the period. Total returns assume reinvestment of all
dividends and distributions. Total returns do not reflect payment of sales
charges, if any, and are not annualized for periods of less than one year.
<Table>
<Caption>
YEAR ENDED OCT. 31,
CLASS A -------------------------------------------------------
PER SHARE DATA 2010 2009 2008 2007 2006
Net asset value, beginning of period $7.70 $6.52 $11.83 $9.54 $7.66
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .04 .09 .17 .07 .06
Net gains (losses) (both realized and
unrealized) 1.18 1.26 (5.40) 2.34 1.91
- ----------------------------------------------------------------------------------------------------------
Total from investment operations 1.22 1.35 (5.23) 2.41 1.97
- ----------------------------------------------------------------------------------------------------------
Proceeds from regulatory settlement -- .01 -- -- --
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.12) (.18) (.08) (.12) (.09)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.80 $7.70 $6.52 $11.83 $9.54
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN 16.09% 21.49%(a) (44.46%) 25.52% 25.98%
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(B)
Total expenses 1.50% 1.65% 1.45% 1.34% 1.48%
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) .53% 1.34% 1.68% .63% .76%
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $256 $258 $248 $520 $464
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 80% 97% 78% 84% 79%
- ----------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
32 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31,
CLASS B -------------------------------------------------------
PER SHARE DATA 2010 2009 2008 2007 2006
Net asset value, beginning of period $7.54 $6.34 $11.50 $9.27 $7.44
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.02) .04 .10 (.01) --
Net gains (losses) (both realized and
unrealized) 1.16 1.23 (5.26) 2.28 1.86
- ----------------------------------------------------------------------------------------------------------
Total from investment operations 1.14 1.27 (5.16) 2.27 1.86
- ----------------------------------------------------------------------------------------------------------
Proceeds from regulatory settlement -- .01 -- -- --
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.05) (.08) -- (.04) (.03)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.63 $7.54 $6.34 $11.50 $9.27
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN 15.20% 20.53%(a) (44.87%) 24.56% 25.07%
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(B)
Total expenses 2.25% 2.44% 2.21% 2.11% 2.25%
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) (.20%) .61% .98% (.10%) .01%
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $14 $20 $27 $72 $77
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 80% 97% 78% 84% 79%
- ----------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
YEAR ENDED OCT. 31,
CLASS C -------------------------------------------------------
PER SHARE DATA 2010 2009 2008 2007 2006
Net asset value, beginning of period $7.41 $6.27 $11.39 $9.19 $7.40
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.02) .02 .09 (.01) --
Net gains (losses) (both realized and
unrealized) 1.13 1.23 (5.20) 2.27 1.84
- ----------------------------------------------------------------------------------------------------------
Total from investment operations 1.11 1.25 (5.11) 2.26 1.84
- ----------------------------------------------------------------------------------------------------------
Proceeds from regulatory settlement -- .01 -- -- --
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.11) (.12) (.01) (.06) (.05)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.41 $7.41 $6.27 $11.39 $9.19
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN 15.20% 20.49%(a) (44.92%) 24.66% 24.93%
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(B)
Total expenses 2.26% 2.34% 2.21% 2.10% 2.25%
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) (.21%) .24% .91% (.12%) (.01%)
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $8 $7 $2 $4 $3
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 80% 97% 78% 84% 79%
- ----------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 33
FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31,
CLASS I -------------------------------------------------------
PER SHARE DATA 2010 2009 2008 2007 2006
Net asset value, beginning of period $7.77 $6.60 $11.97 $9.64 $7.75
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .09 .13 .21 .12 .11
Net gains (losses) (both realized and
unrealized) 1.20 1.26 (5.45) 2.38 1.92
- ----------------------------------------------------------------------------------------------------------
Total from investment operations 1.29 1.39 (5.24) 2.50 2.03
- ----------------------------------------------------------------------------------------------------------
Proceeds from regulatory settlement -- .01 -- -- --
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.17) (.23) (.13) (.17) (.14)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.89 $7.77 $6.60 $11.97 $9.64
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN 16.84% 22.06%(a) (44.18%) 26.22% 26.50%
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(B)
Total expenses .94% 1.03% .97% .88% .99%
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) 1.08% 2.00% 2.14% 1.13% 1.22%
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $123 $117 $73 $131 $105
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 80% 97% 78% 84% 79%
- ----------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
Year ended Oct. 31,
CLASS R* --------------------------------------------
PER SHARE DATA 2010 2009 2008 2007(c)
Net asset value, beginning of period $7.81 $6.62 $11.98 $10.08
- -----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .03 .01 .16 .03
Net gains (losses) (both realized and
unrealized) 1.19 1.35 (5.45) 2.04
- -----------------------------------------------------------------------------------------------
Total from investment operations 1.22 1.36 (5.29) 2.07
- -----------------------------------------------------------------------------------------------
Proceeds from regulatory settlement -- .01 -- --
- -----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.14) (.18) (.07) (.17)
- -----------------------------------------------------------------------------------------------
Net asset value, end of period $8.89 $7.81 $6.62 $11.98
- -----------------------------------------------------------------------------------------------
TOTAL RETURN 15.90% 21.42%(a) (44.40%) 20.81%
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(B)
Gross expenses prior to expense
waiver/reimbursement 1.75% 1.71% 1.77% 1.68%(d)
- -----------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e) 1.75% 1.71% 1.52% 1.68%(d)
- -----------------------------------------------------------------------------------------------
Net investment income (loss) .32% .11% 1.61% .36%(d)
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $2 $1 $-- $--
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate 80% 97% 78% 84%
- -----------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
34 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31,
CLASS R4 -------------------------------------------------------
PER SHARE DATA 2010 2009 2008 2007 2006
Net asset value, beginning of period $7.85 $6.68 $12.06 $9.72 $7.70
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .05 .12 .18 .09 .09
Net gains (losses) (both realized and
unrealized) 1.23 1.27 (5.46) 2.39 1.93
- ----------------------------------------------------------------------------------------------------------
Total from investment operations 1.28 1.39 (5.28) 2.48 2.02
- ----------------------------------------------------------------------------------------------------------
Proceeds from regulatory settlement -- .01 -- -- --
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.15) (.23) (.10) (.14) --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.98 $7.85 $6.68 $12.06 $9.72
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN 16.49% 21.71%(a) (44.08%) 25.85% 26.23%
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(B)
Gross expenses prior to expense
waiver/reimbursement 1.25% 1.33% 1.26% 1.18% 1.29%
- ----------------------------------------------------------------------------------------------------------
Net expenses after expense waiver/
reimbursement(e) 1.25% 1.28% 1.01% 1.18% 1.29%
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) .61% 1.75% 1.77% .85% 1.02%
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $-- $-- $-- $1
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 80% 97% 78% 84% 79%
- ----------------------------------------------------------------------------------------------------------
</Table>
NOTES TO FINANCIAL HIGHLIGHTS
* Effective Sept. 7, 2010, Class R2 shares were renamed Class R shares.
(a) During the year ended Oct. 31, 2009, the Fund received proceeds from a
regulatory settlement. Had the Fund not received these proceeds, the total
return would have been lower by 0.08%
(b) Expense ratios include the impact of a performance incentive adjustment, if
any. In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the reported expense ratios.
(c) For the period from Dec. 11, 2006 (when shares became available) to Oct. 31,
2007.
(d) Annualized.
(e) The Investment Manager and its affiliates agreed to waive/reimburse certain
fees and expenses (excluding fees and expenses of acquired funds), before
giving effect to any performance incentive adjustment.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 35
NOTES TO FINANCIAL STATEMENTS --------------------------------------------------
1. ORGANIZATION
Threadneedle International Opportunity Fund (the Fund) is a series of
RiverSource International Series, Inc. (the Corporation) and is registered under
the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified,
open-end management investment company. The Corporation has 10 billion
authorized shares of capital stock that can be allocated among the separate
series as designated by the Corporation's Board of Directors (the Board).
The Fund offers Class A, Class B, Class C, Class I, Class R and Class R4 shares.
- - Class A shares are offered with a front-end sales charge, which may be waived
under certain circumstances.
- - Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares one month after the completion of
the eighth year of ownership if originally purchased in a RiverSource fund on
or after May 21, 2005 or originally purchased in a Seligman fund on or after
June 13, 2009. Class B shares originally purchased in a RiverSource fund
prior to May 21, 2005 will convert to Class A shares in the ninth calendar
year of ownership. Class B shares originally purchased in a Seligman fund
prior to June 13, 2009 will convert to Class A shares in the month prior to
the ninth year of ownership. Effective Sept. 7, 2010, the Fund no longer
accepts investments from new or existing investors in the Fund's Class B
shares, except that (i) dividend and/or capital gain distributions may
continue to be reinvested in Class B shares of the Fund and (ii) shareholders
invested in Class B shares of the Fund may exchange those shares for Class B
shares of other Columbia, RiverSource, Seligman and Threadneedle funds
offering such shares.
- - Class C shares may be subject to a CDSC on shares redeemed within one year of
purchase.
- - Class I shares are not subject to sales charges and are available only to the
Columbia Family of Funds.
- - Class R shares are offered without a front-end sales charge or CDSC to
qualifying institutional investors. Effective Sept. 7, 2010, Class R2 shares
were renamed Class R shares.
- - Class R4 shares are not subject to sales charges, however, this class is
closed to new investors effective Dec. 31, 2010.
At Aug. 27, 2010, all Class R3 and Class R5 shares were liquidated. The shares
in these classes had consisted solely of seed capital from Columbia Management
Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (the
Investment Manager).
- --------------------------------------------------------------------------------
36 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
At Oct. 31 2010, the Investment Manager and affiliated funds-of-funds owned 100%
of Class I shares. At Oct. 31, 2010, the affiliated funds-of-funds owned
approximately 30% 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
VALUATION OF SECURITIES
All securities are valued at the close of business of the New York Stock
Exchange (NYSE). Securities traded on national securities exchanges or included
in national market systems are valued at the last quoted sales price from the
primary exchange. Debt securities are generally traded in the over-the-counter
market and are valued by an independent pricing service using an evaluated bid.
When market quotes are not readily available, the pricing service, in
determining fair values of debt securities, takes into consideration such
factors as current quotations by broker/dealers, coupon, maturity, quality, type
of issue, trading characteristics, and other yield and risk factors it deems
relevant in determining valuations. Foreign securities are valued based on
quotations from the principal market in which such securities are normally
traded. The procedures adopted by the Board generally contemplate the use of
fair valuation in the event that price quotations or valuations are not readily
available, price quotations or valuations from other sources are not reflective
of market value and thus deemed unreliable, or a significant event has occurred
in relation to a security or class of securities (such as foreign securities)
that is not reflected in price quotations or valuations from other sources. A
fair value price is a good faith estimate of the value of a security at a given
point in time.
Many securities markets and exchanges outside the U.S. close prior to the close
of the NYSE and therefore the closing prices for securities in such markets or
on such exchanges may not fully reflect events that occur after such close but
before the close of the NYSE, including significant movements in the U.S. market
after foreign exchanges have closed. Accordingly, in those situations,
Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the
Investment
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 37
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
Manager, as administrator to the Fund, will fair value foreign securities
pursuant to procedures adopted by the Board, including utilizing a third party
pricing service to determine these fair values. These procedures take into
account multiple factors, including movements in the U.S. securities markets, to
determine a good faith estimate that reasonably reflects the current market
conditions as of the close of the NYSE. The fair value of a security is likely
to be different from the quoted or published price, if available.
Short-term securities maturing in more than 60 days from the valuation date are
valued at the market price or approximate market value based on current interest
rates. Typically, those maturing in 60 days or less that originally had
maturities of more than 60 days at acquisition date are valued at amortized cost
using the market value on the 61st day before maturity. Short-term securities
maturing in 60 days or less at acquisition date are valued at amortized cost.
Amortized cost is an approximation of market value. Investments in money market
funds are valued at net asset value.
FOREIGN CURRENCY TRANSLATIONS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the Statement of Operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes. At Oct. 31, 2010, foreign currency holdings consisted of
multiple denominations.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements. Generally, securities received as
collateral subject to repurchase agreements are deposited with the Fund's
custodian and, pursuant to the terms of the repurchase agreement, must have an
aggregate market value greater than or equal to the repurchase price plus
accrued interest at all times. The market value of securities held as collateral
for repurchase agreements is monitored on a daily basis to ensure the existence
of the proper level of collateral.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
- --------------------------------------------------------------------------------
38 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue Code
that applies to regulated investment companies and to distribute substantially
all of its taxable income (which includes net short-term capital gains) to
shareholders. No provision for income or excise taxes is thus required.
Management of the Fund has concluded that there are no significant uncertain tax
positions that would require recognition in the financial statements. Generally,
the tax authorities can examine all tax returns filed for the last three years.
FOREIGN CAPITAL GAINS TAXES
Realized gains in certain countries may be subject to foreign taxes at the Fund
level, at rates ranging from approximately 10% to 15%. The Fund pays such
foreign taxes on net realized gains at the appropriate rate for each
jurisdiction.
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
normally distributed along with the income dividend.
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
3. DERIVATIVE INSTRUMENTS
The Fund invests in certain derivative instruments as detailed below to meet its
investment objectives. Derivatives are instruments whose values depend on, or
are derived from, in whole or in part, the value of one or more other assets,
such as securities, currencies, commodities or indices. Derivative instruments
may be used to maintain cash reserves while maintaining exposure to certain
other assets, to offset anticipated declines in values of investments, to
facilitate trading, to reduce transaction costs and to pursue higher investment
returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 39
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
foreign currency exchange rate risk, interest rate risk and credit risk.
Derivatives may involve various risks, including the potential inability of the
counterparty to fulfill its obligation under the terms of the contract, the
potential for an illiquid secondary market and the potential for market
movements which may expose the Fund to gains or losses in excess of the amount
shown in the Statement of Assets and Liabilities.
The Fund and any counterparty are required to maintain an agreement that
requires the Fund and that counterparty to monitor (on a daily basis) the net
fair value of all derivatives entered into pursuant to the contract between the
Fund and such counterparty. If the net fair value of such derivatives between
the Fund and that counterparty exceeds a certain threshold (as defined in the
agreement), the Fund or the counterparty (as the case may be) is required to
post cash and/or securities as collateral. Fair values of derivatives presented
in the financial statements are not netted with the fair value of other
derivatives or with any collateral amounts posted by the Fund or any
counterparty.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Forward foreign currency exchange contracts are agreements between two parties
to buy and sell a currency at a set price on a future date. These contracts are
intended to be used to minimize the exposure to foreign exchange rate
fluctuations during the period between the trade and settlement dates of the
contract. The Fund utilized forward foreign currency exchange contracts to hedge
the currency exposure associated with some or all of the Fund's securities.
The market values of forward foreign currency exchange contracts fluctuate with
changes in foreign currency exchange rates. The Fund will record a realized gain
or loss when the forward foreign currency exchange contract is closed.
The use of forward foreign currency exchange contracts does not eliminate
fluctuations in the prices of the Fund's portfolio securities. The risks of
forward foreign currency contracts include movement in the values of the foreign
currencies relative to the U.S. dollar (or other foreign currencies) and the
possibility that counterparties will not complete their contractual obligations,
which may be in excess of the amount reflected, if any, in the Statement of
Assets and Liabilities.
EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS
The following tables are intended to provide additional information about the
effect of derivatives on the financial statements of the Fund including: the
fair value of derivatives by risk category and the location of those fair values
in the Statement of Assets and Liabilities; the impact of derivative
transactions on the Fund's operations over the period including realized gains
or losses and
- --------------------------------------------------------------------------------
40 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
unrealized gains or losses. The derivative schedules following the Portfolio of
Investments present additional information regarding derivative instruments
outstanding at the end of the period, if any.
FAIR VALUES OF DERIVATIVE INSTRUMENTS AT OCT. 31, 2010
At Oct. 31, 2010, the Fund had no outstanding derivatives.
EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCT. 31, 2010
<Table>
<Caption>
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME
- --------------------------------------------------------------------------
FORWARD FOREIGN
RISK EXPOSURE CATEGORY CURRENCY EXCHANGE CONTRACTS
- --------------------------------------------------------------------------
Foreign exchange contracts $66,588
- --------------------------------------------------------------------------
</Table>
<Table>
<Caption>
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED
IN INCOME
- --------------------------------------------------------------------------
FORWARD FOREIGN
RISK EXPOSURE CATEGORY CURRENCY EXCHANGE CONTRACTS
- --------------------------------------------------------------------------
Foreign exchange contracts $599
- --------------------------------------------------------------------------
</Table>
VOLUME OF DERIVATIVE ACTIVITY
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
At Oct. 31, 2010, the Fund had no outstanding forward foreign currency exchange
contracts. The average gross notional amount of forward foreign currency
exchange contracts opened, and subsequently closed, was $471,000 for the year
ended Oct. 31, 2010.
4. EXPENSES AND SALES CHARGES
INVESTMENT MANAGEMENT SERVICES FEES
Under an Investment Management Services Agreement, the Investment Manager is
responsible for the management of the Fund. Day-to-day portfolio management of
the Fund is provided by the Fund's subadviser. See Subadvisory agreement below.
The management fee is an annual fee that is equal to a percentage of the Fund's
average daily net assets that declines from 0.80% to 0.57% as the Fund's net
assets increase. The fee may be adjusted upward or downward by a performance
incentive adjustment determined monthly by measuring the percentage difference
over a rolling 12-month period between the annualized performance of one Class A
share of the Fund and the annualized performance of the Lipper 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 decreased the management fee by $61,165 for the
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 41
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
year ended Oct. 31, 2010. The management fee for the year ended Oct. 31, 2010
was 0.78% of the Fund's average daily net assets, including the adjustment under
the terms of the performance incentive arrangement.
SUBADVISORY AGREEMENT
The Investment Manager has a Subadvisory Agreement with Threadneedle
International Limited (Threadneedle), an affiliate of the Investment Manager and
an indirect wholly-owned subsidiary of Ameriprise Financial, to subadvise the
assets of the Fund. The Investment Manager contracts with and compensates
Threadneedle to manage the investment of the Fund's assets.
ADMINISTRATIVE SERVICES FEES
Under an Administrative Services Agreement, the Fund pays Ameriprise Financial
an annual fee for administration and accounting services equal to a percentage
of the Fund's average daily net assets that declines from 0.08% to 0.05% as the
Fund's net assets increase. The fee for the year ended Oct. 31, 2010 was 0.08%
of the Fund's average daily net assets.
OTHER FEES
Other expenses are for, among other things, certain expenses of the Fund or the
Board including: Fund boardroom and office expense, employee compensation,
employee health and retirement benefits, and certain other expenses. Payment of
these Fund and Board expenses is facilitated by a company providing limited
administrative services to the Fund and the Board. For the year ended Oct. 31,
2010, other expenses paid to this company were $644.
COMPENSATION OF BOARD MEMBERS
Under a Deferred Compensation Plan (the Plan), the board members who are not
"interested persons" of the Fund as defined under the 1940 Act may defer receipt
of their compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the Fund or certain other funds managed
by the Investment Manager. 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, Columbia Management Investment Services Corp.
(formerly known as RiverSource Service Corporation) (the Transfer Agent) is
responsible for providing transfer agency services to the Fund.
Prior to Sept. 7, 2010, the Transfer Agent received annual account-based service
fees from Class A, Class B and Class C shares that varied by class and annual
asset-based service fees based on the Fund's average daily net assets
attributable to Class R and Class R4 shares. In addition, the Transfer Agent
charged an
- --------------------------------------------------------------------------------
42 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
annual fee per inactive account and received reimbursement from the Fund for
certain out-of-pocket expenses.
Under a new Transfer Agency Agreement effective Sept. 7, 2010, the Transfer
Agent has contracted with Boston Financial Data Services ("BFDS") to serve as
sub-transfer agent. The Transfer Agent receives monthly account-based service
fees based on the number of open accounts and is reimbursed by the Fund for the
fees and expenses the Transfer Agent pays to financial intermediaries that
maintain omnibus accounts with the Fund subject to an annual limitation (that
varies by class) that is a percentage of the average aggregate value of the
Fund's shares maintained in each such omnibus account (other than omnibus
accounts for which American Enterprise Investment Services, Inc. is the broker
of record or accounts where the beneficial shareholder is a customer of
Ameriprise Financial Services, Inc., which are paid a per account fee). The
Transfer Agent pays the fees of BFDS for services as sub-transfer agent and is
not entitled to reimbursement for such fees from the Fund.
The Transfer Agent also receives reimbursement for certain out-of-pocket
expenses and may also retain, as additional compensation for its services, fees
for wire, telephone and redemption orders, Individual Retirement Account ("IRA")
trustee agent fees and account transcript fees due to the Transfer Agent from
shareholders of the Fund and credits (net of bank charges) earned with respect
to balances in accounts the Transfer Agent maintains in connection with its
services to the Fund.
For the year ended Oct. 31, 2010, the Fund's effective transfer agent fee rates
as a percentage of average daily net assets of each class were as follows:
<Table>
Class A.............................................. 0.31%
Class B.............................................. 0.33
Class C.............................................. 0.32
Class R.............................................. 0.09
Class R4............................................. 0.07
</Table>
Class I shares do not pay transfer agent fees.
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. Prior to Sept. 7, 2010,
the Fund also paid an annual fee at a rate of 0.25% of the Fund's average daily
net assets attributable to Class R shares for such services.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 43
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
DISTRIBUTION FEES
The Fund has an agreement with Columbia Management Investment Distributors, Inc.
(formerly known as RiverSource Fund Distributors, Inc.) (the Distributor) for
distribution and shareholder services. Under a Plan and Agreement of
Distribution pursuant to Rule 12b-1, the Fund paid a fee at an annual rate of up
to 0.25% of the Fund's average daily net assets attributable to Class A shares,
a fee at an annual rate of up to 0.50% of the Fund's average daily net assets
attributable to Class R shares (of which up to 0.25% may be used for services)
and a fee at an annual rate of up to 1.00% of the Fund's average daily net
assets attributable to Class B and Class C shares. For Class B and Class C
shares, of the 1.00% fee, up to 0.75% is reimbursed for distribution expenses.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed (unreimbursed expense) was approximately $716,000 and $62,000 for
Class B and Class C shares, respectively. These amounts are based on the most
recent information available as of July 31, 2010, and may be recovered from
future payments under the distribution plan or CDSCs. To the extent the
unreimbursed expense has been fully recovered, the distribution fee is reduced.
SALES CHARGES
Sales charges, including front-end and CDSCs, received by the Distributor for
distributing Fund shares were $148,945 for Class A, $11,063 for Class B and $241
for Class C for the year ended Oct. 31, 2010.
EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES
Effective Jan. 1, 2011, the Investment Manager and its affiliates have
contractually agreed to waive certain fees and reimburse certain expenses until
Dec. 31, 2011, unless sooner terminated at the sole discretion of the Board,
such that net expenses (excluding fees and expenses of acquired funds*), before
giving effect to any performance incentive adjustment, will not exceed the
following percentage of the class' average daily net assets:
<Table>
Class A.............................................. 1.50%
Class B.............................................. 2.25
Class C.............................................. 2.25
Class I.............................................. 1.05
Class R.............................................. 1.75
Class R4............................................. 1.35
</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.
- --------------------------------------------------------------------------------
44 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
5. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $302,982,904 and $353,972,888, respectively, for the
year ended Oct. 31, 2010. Realized gains and losses are determined on an
identified cost basis.
6. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated were as
follows:
<Table>
<Caption>
YEAR ENDED OCT. 31, 2010 2009
- ------------------------------------------------------------------
CLASS A
Sold 2,175,502 5,264,019
Converted from Class B* 563,341 698,224
Reinvested distributions 504,228 1,043,359
Redeemed (7,692,765) (11,588,871)
- ------------------------------------------------------------------
Net increase (decrease) (4,449,694) (4,583,269)
- ------------------------------------------------------------------
CLASS B
Sold 158,011 447,082
Reinvested distributions 16,622 54,268
Converted to Class A* (573,546) (711,799)
Redeemed (641,438) (1,262,785)
- ------------------------------------------------------------------
Net increase (decrease) (1,040,351) (1,473,234)
- ------------------------------------------------------------------
CLASS C
Sold 252,980 775,246
Reinvested distributions 13,845 6,049
Redeemed (240,872) (153,380)
- ------------------------------------------------------------------
Net increase (decrease) 25,953 627,915
- ------------------------------------------------------------------
CLASS I
Sold 698,584 5,147,285
Reinvested distributions 318,424 410,364
Redeemed (2,185,823) (1,552,225)
- ------------------------------------------------------------------
Net increase (decrease) (1,168,815) 4,005,424
- ------------------------------------------------------------------
CLASS R**
Sold 81,554 149,456
Reinvested distributions 2,626 --
Redeemed (31,236) (7,795)
- ------------------------------------------------------------------
Net increase (decrease) 52,944 141,661
- ------------------------------------------------------------------
CLASS R3
Redeemed (496) --
- ------------------------------------------------------------------
Net increase (decrease) (496) --
- ------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 45
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31, 2010 2009
- ------------------------------------------------------------------
CLASS R4
Sold 9,800 6,351
Reinvested distributions 541 898
Redeemed (22,143) (3,526)
- ------------------------------------------------------------------
Net increase (decrease) (11,802) 3,723
- ------------------------------------------------------------------
CLASS R5
Redeemed (496) --
- ------------------------------------------------------------------
Net increase (decrease) (496) --
- ------------------------------------------------------------------
</Table>
* Automatic conversion of Class B shares to Class A shares based on the
original purchase date.
** Effective Sept. 7, 2010, Class R2 shares were renamed Class R shares.
7. LENDING OF PORTFOLIO SECURITIES
The Fund has entered into a Master Securities Lending Agreement (the Agreement)
with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement
authorizes JPMorgan as lending agent to lend securities to authorized borrowers
in order to generate additional income on behalf of the Fund. Pursuant to the
Agreement, the securities loaned are secured by cash or U.S government
securities equal to at least 100% of the market value of the loaned securities.
Any additional collateral required to maintain those levels due to market
fluctuations of the loaned securities is delivered the following business day.
Cash collateral received is invested by the lending agent on behalf of the Fund
into authorized investments pursuant to the Agreement. The investments made with
the cash collateral are listed in the Portfolio of Investments. The values of
such investments and any uninvested cash collateral are disclosed in the
Statement of Assets and Liabilities along with the related obligation to return
the collateral upon return of the securities loaned. At Oct. 31, 2010,
securities valued at $24,789,197 were on loan, secured by cash collateral of
$25,848,006 invested in short-term securities or in cash equivalents.
Risks of delay in recovery of securities or even loss of rights in the
securities may occur should the borrower of the securities fail financially.
Risks may also arise to the extent that the value of the securities loaned
increases above the value of the collateral received. JPMorgan will indemnify
the Fund from losses resulting from a borrower's failure to return a loaned
security when due. Such indemnification does not extend to losses associated
with declines in the value of cash collateral investments. Loans are subject to
termination by the Fund or the borrower at any time, and are, therefore, not
considered to be illiquid investments.
- --------------------------------------------------------------------------------
46 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
Pursuant to the Agreement, the Fund receives income for lending its securities
either in the form of fees or by earning interest on invested cash collateral,
net of negotiated rebates paid to borrowers and fees paid to the lending agent
for services provided and any other securities lending expenses. Net income of
$235,685 earned from securities lending for the year ended Oct. 31, 2010 is
included in the Statement of Operations. The Fund also continues to earn
interest and dividends on the securities loaned.
8. AFFILIATED MONEY MARKET FUND
The Fund may invest its daily cash balance in Columbia Short-Term Cash Fund
(formerly known as RiverSource Short-Term Cash Fund), a money market fund
established for the exclusive use of certain funds managed by the Investment
Manager and other institutional clients of the Investment Manager. The cost of
the Fund's purchases and proceeds from sales of shares of Columbia Short-Term
Cash Fund aggregated $111,575,612 and $115,284,362, respectively, for the year
ended Oct. 31, 2010. The income distributions received with respect to the
Fund's investment in Columbia Short-Term Cash Fund can be found in the Statement
of Operations and the Fund's invested balance in Columbia Short-Term Cash Fund
at Oct. 31, 2010, can be found in the Portfolio of Investments.
9. BANK BORROWINGS
The Fund has entered into a revolving credit facility with a syndicate of banks
led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund
may borrow for the temporary funding of shareholder redemptions or for other
temporary or emergency purposes. The credit facility became effective on Oct.
14, 2010, replacing a prior credit facility. The credit facility agreement,
which is a collective agreement between the Fund and certain other funds managed
by the Investment Manager, severally and not jointly, permits collective
borrowings up to $300 million. The borrowers shall have the right, upon written
notice to the Administrative Agent, to request an increase of up to $200 million
in the aggregate amount of the credit facility from new or existing lenders,
provided that the aggregate amount of the credit facility shall at no time
exceed $500 million. Participation in such increase by any existing lender shall
be at such lender's sole discretion. Interest is charged to each fund based on
its borrowings at a rate equal to the sum of the federal funds rate plus (i)
1.25% per annum plus (ii) if one-month LIBOR exceeds the federal funds rate, the
amount of such excess. Each borrowing under the credit facility matures no later
than 60 days after the date of borrowing. The Fund also pays a commitment fee
equal to its pro rata share of the amount of the credit facility at a rate of
0.10% per annum. Prior to Oct. 14, 2010, the credit facility agreement, which
was a
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 47
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
collective agreement between the Fund and certain other funds managed by the
Investment Manager, severally and not jointly, permitted collective borrowings
up to $300 million. The Fund also paid a commitment fee equal to its pro rata
share of the amount of the credit facility at a rate of 0.10% per annum, in
addition to an upfront fee equal to its pro rata share of 0.04% of the amount of
the credit facility. The Fund had no borrowings during the year ended Oct. 31,
2010.
10. PROCEEDS FROM REGULATORY SETTLEMENT
During the year ended Oct. 31, 2009, as a result of a settlement of an
administrative proceeding brought by the Securities and Exchange Commission
against an unaffiliated third party relating to market timing and/or late
trading of mutual funds the Fund received $270,486, which represented the Fund's
portion of the proceeds from the settlement (the Fund was not a party to the
proceeding). The proceeds received by the Fund were recorded as an increase to
additional paid-in capital.
11. FEDERAL TAX INFORMATION
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of foreign currency
transactions, passive foreign investment company (PFIC) holdings, foreign tax
credits and losses deferred due to wash sales. The character of distributions
made during the year from net investment income or net realized gains may differ
from their ultimate characterization for federal income tax purposes. Also, due
to the timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gains were
recorded by the Fund.
In the Statement of Assets and Liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been increased by $552,675
and accumulated net realized loss has been decreased by $44,415,111 resulting in
a net reclassification adjustment to decrease paid-in capital by $44,967,786.
The tax character of distributions paid for the years indicated was as follows:
<Table>
<Caption>
YEAR ENDED OCT. 31, 2010 2009
- ------------------------------------------------------------------
Ordinary income........................... $6,824,405 $9,632,402
Long-term capital gain.................... -- --
</Table>
- --------------------------------------------------------------------------------
48 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
At Oct. 31, 2010, the components of distributable earnings on a tax basis were
as follows:
<Table>
Undistributed ordinary income................... $ 3,408,726
Undistributed accumulated long-term gain........ $ --
Accumulated realized loss....................... $(145,483,337)
Unrealized appreciation (depreciation).......... $ 72,695,802
</Table>
For federal income tax purposes, the Fund had a capital loss carry-over of
$145,483,337 at Oct. 31, 2010, that if not offset by capital gains will expire
as follows:
<Table>
<Caption>
2011 2016 2017
$38,262,972 $12,069,463 $95,150,902
</Table>
For the year ended Oct. 31, 2010, $14,534,698 of capital loss carry-over was
utilized and $44,697,300 expired unused. It is unlikely the Board will authorize
a distribution of any net realized capital gains until the available capital
loss carry-over has been offset or expires. There is no assurance that the Fund
will be able to utilize all of its capital loss carry-over before it expires.
12. 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.
GEOGRAPHIC CONCENTRATION RISK
The Fund may be particularly susceptible to economic, political, regulatory or
other events or conditions affecting companies and countries within the specific
geographic region in which the Fund focuses its investments. The Fund may be
more volatile than a more geographically diversified fund.
13. SUBSEQUENT EVENTS
Management has evaluated Fund related events and transactions that occurred
during the period from the date of the Statement of Assets and Liabilities
through the date of issuance of the Fund's financial statements. There were no
events or transactions that occurred during the period that materially impacted
the amounts or disclosures in the Fund's financial statements, other than as
noted below.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 49
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
The Board of Directors of the Fund has approved the proposed merger of the Fund
into Columbia Multi-Advisor International Equity Fund. It is currently
anticipated that a meeting of shareholders will be held during the first half of
2011 to vote on the proposal.
14. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In June 2004, an action captioned John E. Gallus et al. v. American Express
Financial Corp. and American Express Financial Advisors Inc. was filed in the
United States District Court for the District of Arizona. The plaintiffs allege
that they are investors in several American Express Company (now known as legacy
RiverSource) mutual funds and they purport to bring the action derivatively on
behalf of those funds under the Investment Company Act of 1940. The plaintiffs
allege that fees allegedly paid to the defendants by the funds for investment
advisory and administrative services are excessive. The plaintiffs seek remedies
including restitution and rescission of investment advisory and distribution
agreements. The plaintiffs voluntarily agreed to transfer this case to the
United States District Court for the District of Minnesota (the District Court).
In response to defendants' motion to dismiss the complaint, the District Court
dismissed one of plaintiffs' four claims and granted plaintiffs limited
discovery. Defendants moved for summary judgment in April 2007. Summary judgment
was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a
notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit)
on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary
judgment and remanded to the District Court for further proceedings. On August
6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court (the
Supreme Court), asking the Supreme Court to stay the District Court proceedings
while the Supreme Court considers and rules in a case captioned Jones v. Harris
Associates, which involves issues of law similar to those presented in the
Gallus case. On March 30, 2010, the Supreme Court issued its ruling in Jones v.
Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth
Circuit's decision in the Gallus case and remanded the case to the Eighth
Circuit for further consideration in light of the Supreme Court's decision in
Jones v. Harris Associates. On June 4, 2010, the Eighth Circuit remanded the
Gallus case to the District Court for further consideration in light of the
Supreme Court's decision in Jones v. Harris Associates. On Dec. 9, 1020, the
District Court reinstated its July 9, 2007 summary judgment order in favor of
the defendants.
In December 2005, without admitting or denying the allegations, American Express
Financial Corporation (AEFC, which is now known as Ameriprise
- --------------------------------------------------------------------------------
50 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
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 funds' Boards of Directors/Trustees.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, arbitration and regulatory proceedings, including
routine litigation, class actions, and governmental actions, concerning matters
arising in connection with the conduct of their business activities. Ameriprise
Financial believes that the Funds are not currently the subject of, and that
neither Ameriprise Financial nor any of its affiliates are the subject of, any
pending legal, arbitration or regulatory proceedings that are likely to have a
material adverse effect on the Funds or the ability of Ameriprise Financial or
its affiliates to perform under their contracts with the Funds. Ameriprise
Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the
Securities and Exchange Commission on legal and regulatory matters that relate
to Ameriprise Financial and its affiliates. Copies of these filings may be
obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse publicity
associated with them, will not result in increased fund redemptions, reduced
sale of fund shares or other adverse consequences to the Funds. Further,
although we believe proceedings are not likely to have a material adverse effect
on the Funds or the ability of Ameriprise Financial or its affiliates to perform
under their contracts with the Funds, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range
of loss that may result. An adverse outcome in one or more of these proceedings
could result in adverse judgments, settlements, fines, penalties or other relief
that could have a material adverse effect on the consolidated financial
condition or results of operations of Ameriprise Financial.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 51
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Threadneedle International Opportunity Fund
(one of the portfolios constituting the RiverSource International Series, Inc.)
as of October 31, 2010, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the four years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits. The financial highlights of the Fund for the period ended October
31, 2006, were audited by other auditors whose report dated December 20, 2006,
expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of October 31, 2010, by correspondence with the custodian
and brokers, or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
- --------------------------------------------------------------------------------
52 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
In our opinion, the financial statements and financial highlights audited by us
as referred to above present fairly, in all material respects, the financial
position of Threadneedle International Opportunity Fund of the RiverSource
International Series, Inc. at October 31, 2010, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the four
years in the period then ended, in conformity with U.S. generally accepted
accounting principles.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
December 20, 2010
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 53
FEDERAL INCOME TAX INFORMATION -------------------------------------------------
(UNAUDITED)
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
Fiscal year ended Oct. 31, 2010
<Table>
<Caption>
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for
distributions:
Qualified Dividend Income for individuals.................... 100.00%
Dividends Received Deduction for corporations................ 0.00%
U.S. Government Obligations.................................. 0.00%
Foreign Taxes Paid........................................... $778,377
$5,710,-
Foreign Source Income........................................ 884
</Table>
The Fund designates as distributions of long-term gains, to the extent necessary
to fully distribute such capital gains, earnings and profits distributed to
shareholders on the redemption of shares.
- --------------------------------------------------------------------------------
54 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
BOARD MEMBERS AND OFFICERS -----------------------------------------------------
Shareholders elect a Board that oversees the Fund's operations. The Board
appoints officers who are responsible for day-to-day business decisions based on
policies set by the Board. The following is a list of the Fund's Board members.
Each Board member oversees 145 Columbia, RiverSource, Seligman and Threadneedle
funds. Under current Board policy, members generally serve until the next Board
meeting after he or she reaches the mandatory retirement age established by the
Board, or the fifteenth anniversary of the first Board meeting they attended as
members of the Board.
INDEPENDENT BOARD MEMBERS
<Table>
<Caption>
OTHER PRESENT OR
NAME, POSITION HELD PAST DIRECTORSHIPS
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION (WITHIN PAST 5
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS YEARS)
- ------------------------------------------------------------------------------------------------------------------------------
Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None
901 S. Marquette Ave. 1/11/06 Attorney
Minneapolis, MN 55402
Age 56
- ------------------------------------------------------------------------------------------------------------------------------
Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None
901 S. Marquette Ave. 7/11/07 Leadership (consulting company)
Minneapolis, MN 55402
Age 56
- ------------------------------------------------------------------------------------------------------------------------------
Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None
901 S. Marquette Ave. 11/1/04 University; former Dean, McCallum Graduate School of
Minneapolis, MN 55402 Business, Bentley University
Age 60
- ------------------------------------------------------------------------------------------------------------------------------
Anne P. Jones Board member since Attorney and Consultant None
901 S. Marquette Ave. 3/1/85
Minneapolis, MN 55402
Age 75
- ------------------------------------------------------------------------------------------------------------------------------
Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries,
901 S. Marquette Ave. since 1/1/07, College Inc. (manufactures
Minneapolis, MN 55402 Board member irrigation systems)
Age 71 since 1/1/02
- ------------------------------------------------------------------------------------------------------------------------------
John F. Maher Board member Retired President and Chief Executive Officer and None
901 S. Marquette Ave. since 12/10/08 former Director, Great Western Financial Corporation
Minneapolis, MN 55402 (financial services), 1986-1997
Age 67
- ------------------------------------------------------------------------------------------------------------------------------
Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None
901 S. Marquette Ave. 11/1/04 real estate and asset management company)
Minneapolis, MN 55402
Age 58
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 55
BOARD MEMBERS AND OFFICERS (continued) -----------------------------------------
INDEPENDENT BOARD MEMBERS (CONTINUED)
<Table>
<Caption>
OTHER PRESENT OR
NAME, POSITION HELD PAST DIRECTORSHIPS
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION (WITHIN PAST 5
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS YEARS)
- ------------------------------------------------------------------------------------------------------------------------------
Leroy C. Richie Board member Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc.
901 S. Marquette Ave. since 11/11/08 President and General Counsel, Automotive Legal (digital imaging);
Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil
Age 69 and gas exploration
and production); OGE
Energy Corp. (energy
and energy services)
- ------------------------------------------------------------------------------------------------------------------------------
Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera
901 S. Marquette Ave. 11/13/02 since 2003 (biotechnology); former President, Aquila Pharmaceuticals,
Minneapolis, MN 55402 Biopharmaceuticals Inc.
Age 66 (biotechnology);
Healthways, Inc.
(health management
programs)
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
56 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
BOARD MEMBER AFFILIATED WITH THE INVESTMENT MANAGER*
<Table>
<Caption>
OTHER PRESENT OR
NAME, POSITION HELD PAST DIRECTORSHIPS
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION (WITHIN PAST 5
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS YEARS)
- ------------------------------------------------------------------------------------------------------------------------------
William F. Truscott Board member Chairman of the Board, Columbia Management Investment None
53600 Ameriprise since 11/7/01, Advisers, LLC (formerly RiverSource Investments, LLC)
Financial Center Vice President since since May 2010 (previously President, Chairman of the
Minneapolis, MN 55474 2002 Board and Chief Investment Officer, 2001-April 2010);
Age 50 Senior Vice President, Atlantic Funds, Columbia Funds
and Nations Funds since May 2010; Chief Executive
Officer, U.S. Asset Management &
President -- Annuities, Ameriprise Financial, Inc.
since May 2010 (previously President -- U.S. Asset
Management and Chief Investment Officer, 2005-April
2010 and Senior Vice President -- Chief Investment
Officer, 2001-2005); Director, President and Chief
Executive Officer, Ameriprise Certificate Company since
2006; Director, Columbia Management Investment
Distributors, Inc. (formerly RiverSource Fund
Distributors, Inc.) since May 2010 (previously Chairman
of the Board and Chief Executive Officer, 2008-April
2010); Chairman of the Board and Chief Executive
Officer, RiverSource Distributors, Inc. since 2006
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
* Interested person (as defined under the 1940 Act) by reason of being an
officer, director, security holder and/or employee of the investment manager
or Ameriprise Financial.
The SAI has additional information about the Fund's Board members and is
available, without charge, upon request by calling 800.345.6611; contacting your
financial intermediary; or visiting columbiamanagement.com.
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 57
BOARD MEMBERS AND OFFICERS (continued) -----------------------------------------
The Board has appointed officers who are responsible for day-to-day business
decisions based on policies it has established. The officers serve at the
pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the
Fund's other officers are:
FUND OFFICERS
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUNDS AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------
J. Kevin Connaughton President since Senior Vice President and General Manager -- Mutual
One Financial Center 5/1/10 Fund Products, Columbia Management Investment Advisers,
Boston, MA 02111 LLC since May 2010; President, Columbia Funds since
Age 46 2009 (previously Senior Vice President and Chief
Financial Officer, June 2008 -- January 2009);
President, Atlantic Funds and Nations Funds since 2009;
Managing Director of Columbia Management Advisors, LLC,
December 2004 -- April 2010; Treasurer, Columbia Funds,
October 2003 -- May 2008; Treasurer, the Liberty Funds,
Stein Roe Funds and Liberty All-Star Funds, December
2000 -- December 2006
- --------------------------------------------------------------------------------------------------------
Amy K. Johnson Vice President since Senior Vice President and Chief Operating Officer,
5228 Ameriprise Financial 12/5/06 Columbia Management Investment Advisers, LLC (formerly
Center Minneapolis, MN RiverSource Investments, LLC) since May 2010
55474 (previously Chief Administrative Officer, 2009 -- April
Age 45 2010 and Vice President -- Asset Management and Trust
Company Services, 2006-2009 and Vice
President -- Operations and Compliance, 2004-2006);
Senior Vice President, Atlantic Funds, Columbia Funds
and Nations Funds since May 2010
- --------------------------------------------------------------------------------------------------------
Jeffrey P. Fox Treasurer since Chief Financial Officer, Columbia Management Investment
105 Ameriprise 7/10/02 Distributors, Inc. (formerly RiverSource Fund
Financial Center Distributors, Inc.) and of Seligman Data Corp. since
Minneapolis, MN 55474 2008; Vice President -- Investment Accounting,
Age 55 Ameriprise Financial, Inc. since 2002; Chief Financial
Officer, RiverSource Distributors, Inc. since 2006
- --------------------------------------------------------------------------------------------------------
Scott R. Plummer Vice President, Chief Legal Officer and Assistant Secretary, Columbia
5228 Ameriprise Financial General Counsel and Management Investment Advisers, LLC (formerly
Center Secretary since RiverSource Investments, LLC) since June 2005; Vice
Minneapolis, MN 55474 12/5/06 President and Lead Chief Counsel -- Asset Management,
Age 51 Ameriprise Financial, Inc. since May 2010 (previously
Vice President and Chief Counsel -- Asset Management,
2005-April 2010 and Vice President -- Asset Management
Compliance, 2004-2005); Senior Vice President,
Secretary and Chief Legal Officer, Atlantic Funds,
Columbia Funds and Nations Funds since May 2010; Vice
President, Chief Counsel and Assistant Secretary,
Columbia Management Investment Distributors, Inc.
(formerly RiverSource Fund Distributors, Inc.) since
2008; Vice President, General Counsel and Secretary,
Ameriprise Certificate Company since 2005; Chief
Counsel, RiverSource Distributors, Inc. since 2006
- --------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
58 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
- --------------------------------------------------------------------------------
FUND OFFICERS (CONTINUED)
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUNDS AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------
Michael A. Jones Vice President since Director and President, Columbia Management Investment
100 Federal Street 5/1/10 Advisers, LLC since May 2010; President and Director,
Boston, MA 02110 Columbia Management Investment Distributors, Inc. since
Age 51 May 2010; Senior Vice President, Atlantic Funds,
Columbia Funds and Nations Funds since May 2010;
Manager, Chairman, Chief Executive Officer and
President, Columbia Management Advisors, LLC,
2007 -- April 2010; Chief Executive Officer, President
and Director, Columbia Management Distributors, Inc.,
2006 -- April 2010; former Co-President and Senior
Managing Director, Robeco Investment Management
- --------------------------------------------------------------------------------------------------------
Colin Moore Vice President since Chief Investment Officer, Columbia Management
One Financial Center 5/1/10 Investment Advisers, LLC since May 2010; Senior Vice
Boston, MA 02111 President, Atlantic Funds, Columbia Funds and Nations
Age 52 Funds since May 2010; Manager, Managing Director and
Chief Investment Officer, Columbia Management Advisors,
LLC, 2007- April 2010; Head of Equities, Columbia
Management Advisors, LLC, 2002-Sept. 2007
- --------------------------------------------------------------------------------------------------------
Linda Wondrack Chief Compliance Vice President and Chief Compliance Officer, Columbia
One Financial Center Officer since 5/1/10 Management Investment Advisers, LLC since May 2010;
Boston, MA 02111 Chief Compliance Officer, Columbia Funds since 2007;
Age 46 Senior Vice President and Chief Compliance Officer,
Atlantic Funds and Nations Funds since 2007; Director
(Columbia Management Group, LLC and Investment Product
Group Compliance), Bank of America, June 2005 -- April
2010
- --------------------------------------------------------------------------------------------------------
Neysa M. Alecu Money Laundering Vice President -- Compliance, Ameriprise Financial,
2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer and
Center since 11/9/05 and Identity Theft Prevention Officer, Columbia Management
Minneapolis, MN 55474 Identity Theft Investment Distributors, Inc. (formerly RiverSource
Age 46 Prevention Officer Fund Distributors, Inc.) since 2008; Anti-Money
since 2008 Laundering Officer, Ameriprise Financial, Inc. since
2005; Compliance Director, Ameriprise Financial, Inc.,
2004-2008
- --------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT 59
PROXY VOTING ------------------------------------------------------------------
The policy of the Board is to vote the proxies of the companies in which the
Fund holds investments consistent with the procedures as stated in the Statement
of Additional Information (SAI). You may obtain a copy of the SAI without charge
by calling 800.345.6611; contacting your financial intermediary; visiting
columbiamanagement.com; 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 columbiamanagement.com; or searching the website of
the SEC at www.sec.gov.
- --------------------------------------------------------------------------------
60 THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND -- 2010 ANNUAL REPORT
THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND
P.O. Box 8081
Boston, MA 02266-8081
COLUMBIAMANAGEMENT.COM
<Table>
This report must be accompanied or preceded by the Fund's
current prospectus. The Fund is distributed by Columbia
Management Investment Distributors, Inc., member FINRA, and
managed by Columbia Management Investment Advisers, LLC.
(C)2010 Columbia Management Investment Advisers, LLC. All
(COLUMBIA MANAGEMENT LOGO) rights reserved. S-6140 AJ (12/10)
</Table>
Item 2. Code of Ethics.
(a) The Registrant has adopted a code of ethics that applies to the
Registrant's principal executive officer and principal financial officer.
(b) During the period covered by this report, there were not any amendments
to a provision of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, there were no waivers,
including any implicit waivers, from a provision of the code of ethics
described in 2(a) above that relates to one or more of the items set forth
in paragraph (b) of this item's instructions.
Item 3. Audit Committee Financial Expert.
The Registrant's board of directors has determined that independent
directors Pamela G. Carlton, Jeffrey Laikind, John F. Maher and Anne P.
Jones, each qualify as audit committee financial experts.
Item 4. Principal Accountant Fees and Services
(a) Audit Fees. The fees for the year ended Oct. 31, to Ernst & Young LLP for
professional services rendered for the audit of the annual financial
statements for RiverSource International Series, Inc. were as follows:
2010 - $123,988 2009 - $124,937
(b) Audit-Related Fees. The fees for the year ended Oct. 31, to Ernst & Young
LLP for additional audit-related services rendered related to the
semiannual financial statement review and the 2010 transfer agent 17Ad-13
review for RiverSource International Series, Inc. were as follows:
2010 - $2,255 2009 - $1,125
(c) Tax Fees. The fees for the year ended Oct. 31, to Ernst & Young LLP for tax
compliance related services rendered for RiverSource International Series,
Inc. were as follows:
2010 - $17,405 2009 - $13,992
(d) All Other Fees. The fees for the year ended Oct. 31, to Ernst & Young LLP
for additional professional services rendered for RiverSource International
Series, Inc. were as follows:
2010 - $0 2009 - $0
(e) (1) Audit Committee Pre-Approval Policy. Pursuant to Sarbanes-Oxley
pre-approval requirements, all services to be performed by Ernst & Young
LLP for the registrant and to the registrant's investment adviser and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant must be
pre-approved by the audit committee.
(e) (2) 100% of the services performed for items (b) through (d) above during
2010 and 2009 were pre-approved by the audit committee.
(f) Not applicable.
(g) Non-Audit Fees. The fees for the year ended Oct. 31, to Ernst & Young LLP
by the registrant for non-audit fees and by the registrant's investment
adviser, and any entity controlling, controlled by, or under common control
with the adviser that provides ongoing services to the registrant were as
follows:
2010 - $2,445,621 2009 - $837,603
(h) 100% of the services performed in item (g) above during 2010 and 2009 were
pre-approved by the Ameriprise Financial Audit Committee and/or the
RiverSource Mutual Funds Audit Committee.
Item 5. Audit Committee of Listed Registrants. Not applicable.
Item 6. Investments.
(a) The registrant's "Schedule 1 - Investments in securities of unaffiliated
issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this
Form N-CSR.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not
applicable.
Item 9. Purchases 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.
There were no material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of directors.
Item 11. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial
officer, based on their evaluation of the registrant's disclosure controls
and procedures as of a date within 90 days of the filing of this report,
have concluded that such controls and procedures are adequately designed to
ensure that information required to be disclosed by the registrant in Form
N-CSR is accumulated and communicated to the registrant's management,
including principal executive officer and principal financial officer, or
persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.
(b) There was no change in the registrant's internal controls over
financial reporting that occurred during the registrant's second fiscal
quarter of the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 12. Exhibits.
(a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR,
is attached as Exhibit 99.CODE ETH.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as
Exhibit99.CERT.
(a)(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT.
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/ J. Kevin Connaughton
----------------------------------
J. Kevin Connaughton
President and Principal Executive
Officer
Date December 20, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By /s/ J. Kevin Connaughton
----------------------------------
J. Kevin Connaughton
President and Principal Executive
Officer
Date December 20, 2010
By /s/ Jeffrey P. Fox
----------------------------------
Jeffrey P. Fox
Treasurer and Principal Financial
Officer
Date December 20, 2010