Annual Report
(THREADNEEDLE LOGO)
THREADNEEDLE
EMERGING MARKETS FUND
ANNUAL REPORT FOR
THE PERIOD ENDED
OCTOBER 31, 2008
THREADNEEDLE EMERGING MARKETS FUND SEEKS TO PROVIDE
SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH.
(SINGLE STRATEGY FUNDS ICON)
TABLE OF CONTENTS --------------------------------------------------------------
<Table>
Your Fund at a Glance.............. 3
Manager Commentary................. 6
The Fund's Long-term Performance... 12
Fund Expenses Example.............. 14
Portfolio of Investments........... 16
Statement of Assets and
Liabilities...................... 20
Statement of Operations............ 21
Statements of Changes in Net
Assets........................... 22
Financial Highlights............... 23
Notes to Financial Statements...... 29
Report of Independent Registered
Public Accounting Firm........... 44
Federal Income Tax Information..... 46
Board Members and Officers......... 47
Proxy Voting....................... 52
</Table>
RIVERSOURCE FAMILY OF FUNDS
Threadneedle Funds are a part of the RiverSource
family of funds that includes funds branded
"RiverSource," "RiverSource Partners," and
"Threadneedle." These funds share the same Board of
Directors/Trustees and officers.
Please see the pages that follow this report for a
list of mutual funds that are included in the
RiverSource family of funds.
(DALBAR LOGO)
The RiverSource mutual fund shareholder reports have
been awarded the Communications Seal from Dalbar Inc.,
an independent financial services research firm. The
Seal recognizes communications demonstrating a level
of excellence in the industry.
- --------------------------------------------------------------------------------
2 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
YOUR FUND AT A GLANCE ----------------------------------------------------------
FUND SUMMARY
- --------------------------------------------------------------------------------
> The Threadneedle Emerging Markets Fund (the Fund) Class A shares declined
57.79% (excluding sales charge) for the 12 months ended Oct. 31, 2008.
> The Fund underperformed its benchmark, the Morgan Stanley Capital
International (MSCI) Emerging Markets Index, which fell 56.22%.
> The Fund's peer group, the Lipper Emerging Markets Funds Index, declined
56.42% for the period.
ANNUALIZED TOTAL RETURNS (for period ended Oct. 31, 2008)
- --------------------------------------------------------------------------------
<Table>
<Caption>
1 year 3 years 5 years 10 years
- ---------------------------------------------------------------------
Threadneedle Emerging Markets
Fund Class A (excluding sales
charge) -57.79% -0.71% +8.42% +9.06%
- ---------------------------------------------------------------------
MSCI Emerging Markets Index
(unmanaged) -56.22% -0.07% +9.87% +10.05%
- ---------------------------------------------------------------------
Lipper Emerging Markets Funds
Index -56.42% -2.03% +8.74% +9.39%
- ---------------------------------------------------------------------
</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 institution or
visiting riversource.com/funds.
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the table above. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses. See the Average Annual Total Returns table for performance of other
share classes of the Fund.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes. It is not possible to invest directly in an index.
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 3
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
STYLE MATRIX
- --------------------------------------------------------------------------------
<Table>
<Caption>
STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
</Table>
Shading within the style matrix indicates areas in which the Fund is designed to
generally invest.
The style matrix can be a valuable tool for constructing and monitoring your
portfolio. It provides a frame of reference for distinguishing the types of
stocks or bonds owned by a mutual fund, and may serve as a guideline for helping
you build a portfolio.
Investment products, including shares of mutual funds, are not federally or
FDIC-insured, are not deposits or obligations of, or guaranteed by any financial
institution, and involve investment risks including possible loss of principal
and fluctuation in value.
ANNUAL OPERATING EXPENSE RATIO
(as of the current prospectus)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Total Net
expenses expenses
- --------------------------------------
Class A 1.87% 1.87%
- --------------------------------------
Class B 2.62% 2.62%
- --------------------------------------
Class C 2.63% 2.63%
- --------------------------------------
Class I 1.42% 1.42%
- --------------------------------------
Class R4 1.73% 1.72%(a)
- --------------------------------------
Class R5 1.47% 1.47%
- --------------------------------------
</Table>
(a) The Investment Manager and its affiliates have contractually agreed to waive
certain fees and to absorb certain expenses until Oct. 31, 2009, unless
sooner terminated at the discretion of the Fund's Board. Any amounts waived
will not be reimbursed by the Fund. Under this agreement, net fund expenses
(excluding fees and expenses of acquired funds), before giving effect to any
performance incentive adjustment (that increased the management fee by 0.08%
for the year ended Oct. 31, 2008), will not exceed 1.64% for Class R4.
International investing involves increased risk and volatility due to potential
political and economic instability, currency fluctuations, and differences in
financial reporting and accounting standards and oversight. Risks are
particularly significant in emerging markets.
- --------------------------------------------------------------------------------
4 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT OCT. 31, 2008
SINCE
Without sales charge 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION*
Class A (inception
11/13/96) -57.79% -0.71% +8.42% +9.06% N/A
- ---------------------------------------------------------------------------
Class B (inception
11/13/96) -58.08% -1.43% +7.57% +8.22% N/A
- ---------------------------------------------------------------------------
Class C (inception
6/26/00) -58.15% -1.42% +7.61% N/A +3.48%
- ---------------------------------------------------------------------------
Class I (inception
3/4/04) -57.63% -0.28% N/A N/A +5.37%
- ---------------------------------------------------------------------------
Class R4 (inception
11/13/96) -57.58% -0.44% +8.68% +9.32% N/A
- ---------------------------------------------------------------------------
Class R5 (inception
08/1/08) N/A N/A N/A N/A -44.96%**
- ---------------------------------------------------------------------------
With sales charge
Class A (inception
11/13/96) -60.20% -2.64% +7.15% +8.50% N/A
- ---------------------------------------------------------------------------
Class B (inception
11/13/96) -59.70% -2.22% +7.32% +8.22% N/A
- ---------------------------------------------------------------------------
Class C (inception
6/26/00) -58.41% -1.42% +7.61% N/A +3.48%
- ---------------------------------------------------------------------------
</Table>
<Table>
<Caption>
AT SEPT. 30, 2008
SINCE
Without sales charge 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION*
Class A (inception
11/13/96) -33.20% +8.23% +17.68% +13.60% N/A
- -------------------------------------------------------------------------
Class B (inception
11/13/96) -33.74% +7.40% +16.77% +12.73% N/A
- -------------------------------------------------------------------------
Class C (inception
6/26/00) -33.75% +7.40% +16.74% N/A +7.67%
- -------------------------------------------------------------------------
Class I (inception
3/4/04) -32.91% +8.72% N/A N/A +13.25%
- -------------------------------------------------------------------------
Class R4 (inception
11/13/96) -32.86% +8.52% +17.94% +13.87% N/A
- -------------------------------------------------------------------------
Class R5 (inception
08/1/08) N/A N/A N/A N/A -23.61%**
- -------------------------------------------------------------------------
With sales charge
Class A (inception
11/13/96) -37.04% +6.11% +16.28% +13.01% N/A
- -------------------------------------------------------------------------
Class B (inception
11/13/96) -36.29% +6.54% +16.56% +12.73% N/A
- -------------------------------------------------------------------------
Class C (inception
6/26/00) -34.26% +7.40% +16.74% N/A +7.67%
- -------------------------------------------------------------------------
</Table>
Class A share performance reflects the maximum sales charge of 5.75%. Class B
share performance reflects a contingent deferred sales charge (CDSC) applied as
follows: first year 5%; second and third years 4%; fourth year 3%; fifth year
2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to
a 1% CDSC if shares are sold within one year after purchase. Sales charges do
not apply to Class I, Class R4 and Class R5 shares. Class I, Class R4 and Class
R5 shares are available to institutional investors only.
*For classes with less than 10 years performance.
**Not annualized.
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 5
MANAGER COMMENTARY -------------------------------------------------------------
Below, Threadneedle Emerging Markets Fund portfolio managers Julian Thompson and
Jules Mort of Threadneedle International Limited (Threadneedle) discuss the
Fund's results and positioning for the fiscal year ended Oct. 31, 2008.
Threadneedle, an indirect wholly-owned subsidiary of Ameriprise Financial, Inc.,
acts as the subadvisor to the Fund.
Dear Shareholders,
The Threadneedle Emerging Markets Fund (the Fund) Class A shares declined 57.79%
(excluding sales charge) for the 12 months ended Oct. 31, 2008. The Fund
underperformed its benchmark, the Morgan Stanley Capital International (MSCI)
Emerging Markets Index, which fell 56.22%. The Fund's peer group, the Lipper
Emerging Markets Funds Index, declined 56.42% for the period.
COUNTRY DIVERSIFICATION (at Oct. 31, 2008; % of portfolio assets)
- ---------------------------------------------------------------------
<Table>
Bermuda 1.0%
- ------------------------------------------------
Brazil 12.2%
- ------------------------------------------------
Canada 0.8%
- ------------------------------------------------
China 14.4%
- ------------------------------------------------
Czech Republic 1.1%
- ------------------------------------------------
Hong Kong 7.5%
- ------------------------------------------------
India 7.3%
- ------------------------------------------------
Indonesia 1.4%
- ------------------------------------------------
Israel 6.7%
- ------------------------------------------------
Malaysia 1.3%
- ------------------------------------------------
Mexico 6.7%
- ------------------------------------------------
Norway 0.1%
- ------------------------------------------------
Russia 7.6%
- ------------------------------------------------
South Africa 8.3%
- ------------------------------------------------
South Korea 9.1%
- ------------------------------------------------
Taiwan 7.4%
- ------------------------------------------------
Thailand 1.1%
- ------------------------------------------------
Turkey 1.2%
- ------------------------------------------------
Other(1) 4.8%
- ------------------------------------------------
</Table>
(1) Cash & Cash Equivalents.
- --------------------------------------------------------------------------------
6 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
SIGNIFICANT PERFORMANCE FACTORS
This has been a very difficult period for emerging market equities. The bull
market cycle for the emerging market universe peaked last October, just before
the start of the Fund's fiscal period. Since then the U.S. credit crisis has
caused increased risk aversion and a shortage of liquidity in the global banking
system. Investors have sold securities perceived to be riskier and reinvested
the assets in dollar-denominated securities, pushing the value of the dollar
higher relative to most emerging market currencies. Rising risk aversion has
reduced the amount of money people are willing to invest in emerging markets and
falling demand for these securities has driven down equity prices.
Emerging market economies are quite sensitive to global economic trends because
they are typically large exporters of either commodities or manufactured goods.
Domestic consumption tends to be a smaller percentage of the gross national
product in emerging market countries. The economic slowdown in developed nations
has reduced demand for commodities and other emerging market exports. As a
result, economic growth rates in emerging market countries have also declined.
For the fiscal year, there was little difference in the performance of various
sectors or the results from different regions in the emerging market universe.
Asia underperformed, while Latin America and Eastern
TOP TEN HOLDINGS (at Oct. 31, 2008; % of portfolio assets)
- ---------------------------------------------------------------------
<Table>
China Mobile (Hong Kong) 6.5%
- -------------------------------------------------
Gazprom ADR (Russia) 4.4%
- -------------------------------------------------
Samsung Electronics (South Korea) 4.0%
- -------------------------------------------------
Redecard (Brazil) 3.7%
- -------------------------------------------------
Taiwan Semiconductor Mfg ADR (Taiwan) 3.3%
- -------------------------------------------------
Petroleo Brasileiro ADR (Brazil) 3.1%
- -------------------------------------------------
Industrial & Commercial Bank of China 3.0%
Series H (China)
- -------------------------------------------------
Teva Pharmaceutical Inds ADR (Israel) 2.9%
- -------------------------------------------------
Ping An Insurance Group of China Series H 2.7%
(China)
- -------------------------------------------------
America Movil ADR Series L (Mexico) 2.3%
- -------------------------------------------------
</Table>
For further detail about these holdings, please refer to the section entitled
"Portfolio of Investments."
Fund holdings are as of the date given, are subject to change at any time, and
are not recommendations to buy or sell any security.
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 7
MANAGER COMMENTARY (continued) -------------------------------------------------
Europe/the Mid East/Africa slightly outperformed the MSCI Emerging Markets
Index. The Fund's results suffered from a larger weighting in Russia than the
MSCI Emerging Markets Index, while being overweight in Brazil was advantageous.
Cyclical sectors such as industrials, materials, financials and energy were the
weaker performers within the MSCI Emerging Markets Index. Health care was the
only sector to hold up much better than the overall MSCI Emerging Markets Index.
The Fund entered the period with a larger materials weighting than the MSCI
Emerging Markets Index and, on average, maintained a larger energy weighting
throughout the period. Though these positions were helpful to performance early
in the fiscal year, they were detrimental in the latter months as it became
clear that the world economy, including China, was slowing. The portfolio
benefited from having a larger health care weighting and smaller industrials and
financials positions than the MSCI Emerging Markets Index.
Stock selection was mainly responsible for the Fund's underperformance of the
MSCI Emerging Markets Index. Three Russian holdings were key detractors. Coal
and steel company MECHEL came under political pressure and declined on concerns
that the Russian government might appropriate some of its assets. MMC NORILSK
NICKEL, a mining company that is the world's largest nickel producer, also
suffered from fear that it might ultimately pass into state ownership. Energy
company ROSNEFT OIL declined on concerns about its high level of short-term
debt. The Russian government is the company's majority shareholder so the credit
issues should not have been a problem. However, the whole Russian market
weakened during the period. We gradually sold the portfolio's holdings of Mechel
and Rosneft.
REDECARD in Brazil had a positive effect on relative performance. One of the
portfolio's larger holdings at the beginning of the fiscal year, Redecard has
the MasterCard franchise in Brazil and has produced very good results this year.
We added to the portfolio's holdings throughout the period. The company is a
transaction processor that does not take on credit risk, but benefits from
increased volume as people use credit cards more often in place of cash. We
think the outlook for the company remains favorable. It has a good dividend
yield and the Brazilian economy seems to be somewhat insulated from the global
slowdown.
- --------------------------------------------------------------------------------
8 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
Exports are a lesser percentage of Brazil's GDP than in other emerging market
countries, and Brazilian consumers have less debt so they have not been reducing
spending as much as in other nations.
CHANGES TO THE FUND'S PORTFOLIO
We decreased the portfolio's Russian exposure very significantly. We also moved
Brazil from an overweight to a weighting about equal to the MSCI Emerging
Markets Index. Though we think Brazil is well positioned for the global
slowdown, the market has a large number of commodity companies and we reduced
our exposure in that sector, resulting in a reduction in the portfolio's Brazil
weighting. We maintained exposure to Brazil's domestic economy.
We increased the portfolio's holdings in China, which became the largest country
allocation in the Fund. Our strategy is to focus the portfolio on countries
whose economies are in the strongest position to withstand the global economic
slowdown. The Chinese government has a healthy fiscal surplus, has relatively
low external debt and has announced a massive infrastructure program to counter
the loss of export demand. The Chinese banking system is well funded, with a low
ratio of loans to deposits, so we believe it is in a position to increase
lending. In our view, China appears well positioned to prevail through the
global slowdown.
We kept the portfolio very underweight in South Korea and Taiwan due to their
dependence on the consumer electronics industry and their indirect exposure to
consumer and business spending in developed markets. The domestic banking
systems
We have focused on companies that we believe have solid franchises, stable
revenue generators and healthy balance sheets.
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 9
MANAGER COMMENTARY (continued) -------------------------------------------------
in both countries are not well funded and consumers have high debt so domestic
spending may suffer as well.
Regarding the portfolio's sector weightings, we reduced exposure to the
materials sector, particularly steel and iron ore stocks. We also reduced the
energy weighting. We increased holdings of health care stocks and software
companies within the technology sector.
We moved from an underweight in the financials sector to an overweight. Though
financials stocks in emerging markets have suffered in sympathy with the
financials sell-off in developed markets, we believe most emerging market
financial stocks have better funding structures and higher asset quality than
their counterparts in the U.S. and Europe. We have added to what we consider the
most attractive banks from a quality and funding perspective. We have found
these mainly in China, Brazil and South Africa. We sold the portfolio's holdings
of SBERBANK in Russia because of concerns about the security of Russia's banking
sector.
OUR FUTURE STRATEGY
In summary, we have positioned the portfolio quite defensively for what is
clearly a downturn in the global economy. We have focused on companies that we
believe have solid franchises, stable revenue generators and healthy balance
sheets. We reduced the number of portfolio holdings, consolidating assets into
what we think are the companies best able to weather the downturn.
The portfolio's key regional overweights are China and Mexico. We consider the
quality of companies in Mexico to be very high. The portfolio has slightly more
cash than normal to enable us to take advantage of market volatility.
- --------------------------------------------------------------------------------
10 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
In general, we expect earnings to fall in 2009, but we think price/earnings
multiples for emerging markets will be attractive, both on an historical basis
and relative to developed markets. Though the environment is likely to remain
volatile, we do think emerging markets will be able to survive the downturn
without any major financial crisis.
<Table>
(PHOTO - JULIAN THOMPSON) (PHOTO - JULES MORT)
Julian Thompson, PhD Jules Mort
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 RiverSource Investments, LLC (RiverSource) or
any subadviser to the Fund or any other person in the RiverSource or subadviser
organizations. Any such views are subject to change at any time based upon
market or other conditions and RiverSource disclaims any responsibility to
update such views. These views may not be relied on as investment advice and,
because investment decisions for a RiverSource fund are based on numerous
factors, may not be relied on as an indication of trading intent on behalf of
any RiverSource fund.
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 11
THE FUND'S LONG-TERM PERFORMANCE -----------------------------------------------
The chart on the facing page illustrates the total value of an assumed $10,000
investment in Threadneedle Emerging Markets Fund Class A shares (from 11/1/98 to
10/31/08) as compared to the performance of two widely cited performance
indices, the Morgan Stanley Capital International (MSCI) Emerging Markets Index
and the Lipper Emerging Markets Funds Index. In comparing the Fund's Class A
shares to these indices, you should take into account the fact that the Fund's
performance reflects the maximum sales charge of 5.75%, while such charges are
not reflected in the performance of the indices. Returns for the Fund include
the reinvestment of any distribution paid during each period.
The performance information shown represents past performance and is not a
guarantee of future results. The table below and the chart on the facing page do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. The investment return and
principal value of your investment will fluctuate so that your shares, when
redeemed, may be worth more or less than their original cost. Current
performance may be lower or higher than the performance information shown. You
may obtain performance information current to the most recent month-end by
contacting your financial institution or visiting riversource.com/funds. Also
see "Past Performance" in the Fund's current prospectus.
COMPARATIVE RESULTS
- --------------------------------------------------------------------------------
<Table>
<Caption>
Results at Oct. 31, 2008
1 YEAR 3 YEARS 5 YEARS 10 YEARS
THREADNEEDLE EMERGING MARKETS FUND
(INCLUDES SALES CHARGE)
Class A Cumulative value of $10,000 $3,980 $9,229 $14,124 $22,431
- ------------------------------------------------------------------------------------------
Average annual total return -60.20% -2.64% +7.15% +8.50%
- ------------------------------------------------------------------------------------------
MSCI EMERGING MARKETS INDEX(1)
Cumulative value of $10,000 $4,378 $9,979 $16,010 $26,064
- ------------------------------------------------------------------------------------------
Average annual total return -56.22% -0.07% +9.87% +10.05%
- ------------------------------------------------------------------------------------------
LIPPER EMERGING MARKETS FUNDS INDEX(2)
Cumulative value of $10,000 $4,358 $9,403 $15,204 $24,545
- ------------------------------------------------------------------------------------------
Average annual total return -56.42% -2.03% +8.74% +9.39%
- ------------------------------------------------------------------------------------------
</Table>
Results for other share classes can be found on page 5.
- --------------------------------------------------------------------------------
12 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
(VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN THREADNEEDLE EMERGING MARKETS
FUND LINE GRAPH)
<Table>
<Caption>
THREADNEEDLE EMERGING
MARKETS FUND
CLASS A LIPPER EMERGING
(INCLUDES SALES MSCI EMERGING MARKETS FUNDS
CHARGE) MARKETS INDEX(1) INDEX(2)
--------------------- ---------------- ---------------
10/98 $ 9,425 $ 10,000 $ 10,000
10/99 13,684 14,463 13,641
10/00 13,192 13,189 13,057
10/01 10,121 10,095 10,157
10/02 10,971 10,947 10,881
10/03 14,975 16,282 16,145
10/04 17,384 19,441 19,629
10/05 22,918 26,117 26,100
10/06 31,592 35,367 35,134
10/07 53,141 59,534 56,323
10/08 22,431 26,064 24,545
</Table>
(1) The MSCI Emerging Markets Index, an unmanaged market capitalization-weighted
index, is designed to measure equity market performance in the global
emerging markets. The index reflects reinvestment of all distributions and
changes in market prices.
(2) The Lipper Emerging Markets Funds Index includes the 30 largest emerging
markets funds tracked by Lipper Inc. The index's returns include net
reinvested dividends. The Fund's performance is currently measured against
this index for purposes of determining the performance incentive adjustment.
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 13
FUND EXPENSES EXAMPLE ----------------------------------------------------------
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, which may include management fees; distribution and service (12b-1) fees;
and other Fund fees and expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
In addition to the ongoing expenses which the Fund bears directly, the Fund's
shareholders indirectly bear the expenses of the funds in which it invests (also
referred to as "acquired funds"), including affiliated and non-affiliated pooled
investment vehicles (including mutual funds and exchange traded funds). The
Fund's indirect expense from investing in the acquired funds is based on the
Fund's pro rata portion of the cumulative expenses charged by the acquired funds
using the expense ratio of each of the acquired funds as of the acquired fund's
most recent shareholder report.
The example is based on an investment of $1,000 invested at the beginning of the
period indicated and held until Oct. 31, 2008.
ACTUAL EXPENSES
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
14 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
MAY 1, 2008(A) OCT. 31, 2008 THE PERIOD(B) EXPENSE RATIO
- -------------------------------------------------------------------------------------------
Class A
- -------------------------------------------------------------------------------------------
Actual(c) $1,000 $ 479.20 $ 7.12 1.91%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,015.58 $ 9.70 1.91%
- -------------------------------------------------------------------------------------------
Class B
- -------------------------------------------------------------------------------------------
Actual(c) $1,000 $ 476.80 $ 9.94 2.67%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,011.75 $13.54 2.67%
- -------------------------------------------------------------------------------------------
Class C
- -------------------------------------------------------------------------------------------
Actual(c) $1,000 $ 476.90 $ 9.94 2.67%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,011.75 $13.54 2.67%
- -------------------------------------------------------------------------------------------
Class I
- -------------------------------------------------------------------------------------------
Actual(c) $1,000 $ 480.30 $ 5.34 1.43%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,018.00 $ 7.27 1.43%
- -------------------------------------------------------------------------------------------
Class R4
- -------------------------------------------------------------------------------------------
Actual(c) $1,000 $ 480.40 $ 6.49 1.74%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,016.43 $ 8.84 1.74%
- -------------------------------------------------------------------------------------------
Class R5
- -------------------------------------------------------------------------------------------
Actual(d) $1,000 $ 550.40 $ 2.84 1.47%
- -------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,017.80 $ 7.48 1.47%
- -------------------------------------------------------------------------------------------
</Table>
(a) The beginning account value for Class R5 is as of Aug. 1, 2008 (when shares
of the class became publicly available) for actual expense calculations, and
as of May 1, 2008 for hypothetical expense calculations.
(b) Expenses for Classes A, B, C, I and R4 are equal to the Fund's annualized
expense ratio as indicated above, multiplied by the average account value
over the period, multiplied by 184/365 (to reflect the one-half year
period). Actual expenses for Class R5 are equal to the Fund's annualized
expense ratio as indicated above, multiplied by the average account value
over the period, multiplied by 91/365 (to reflect the period from Aug. 1,
2008 to Oct. 31, 2008). Hypothetical expenses for Class R5 are equal to the
Fund's annualized expense ratio as indicated above, multiplied by the
average account value over the period, multiplied by 184/365 (to reflect the
one-half year period).
(c) Based on the actual return for the six months ended Oct. 31, 2008: -52.08%
for Class A, -52.32% for Class B, -52.31% for Class C, -51.97% for Class I
and -51.96% for Class R4.
(d) Based on the actual return for the period from Aug. 1, 2008 (when shares
became publicly available) to Oct. 31, 2008: -44.96% for Class R5.
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 15
PORTFOLIO OF INVESTMENTS ------------------------------------------------------
OCT. 31, 2008
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
COMMON STOCKS (95.8%)(c)
ISSUER SHARES VALUE(a)
BERMUDA (1.0%)
Credicorp $-
72,761 2,857,324
- -------------------------------------------------------------------------------------
BRAZIL (12.2%)
AmBev ADR 54,439 2,313,658
Banco Bradesco 255,100 2,937,551
Companhia Vale do Rio Doce ADR 211,011 2,768,464
MRV Engenharia e Participacoes 160,400 833,218
Multiplan Empreendimentos Imobiliarios 399,849(b) 2,017,774
PDG Realty 269,800 1,381,506
Petroleo Brasileiro ADR 327,760 8,813,466
Redecard 955,100 10,405,191
UNIBANCO -- Uniao de Bancos Brasileiros GDR 52,661 3,321,857
------------
Total 34,792,685
- -------------------------------------------------------------------------------------
CANADA (0.8%)
Yamana Gold 460,420 2,131,745
- -------------------------------------------------------------------------------------
CHINA (14.4%)
China Construction Bank Series H 9,620,000 4,772,560
China Life Insurance Series H 2,005,000 5,358,462
China Medical Technologies ADR 77,736 1,894,426
China Merchants Bank Series H 2,439,000 3,736,882
CNOOC ADR 71,752 5,861,421
Industrial & Commercial Bank of China Series
H 18,359,000 8,638,789
Li Ning 1,691,500 2,093,436
Minth Group 2,484,000 868,102
Ping An Insurance Group of China Series H 1,825,000 7,805,478
------------
Total 41,029,556
- -------------------------------------------------------------------------------------
CZECH REPUBLIC (1.1%)
CEZ 70,000 3,033,756
- -------------------------------------------------------------------------------------
HONG KONG (7.5%)
China Mobile 2,084,000 18,347,176
China Overseas Land & Investment 2,566,000 2,897,869
------------
Total 21,245,045
- -------------------------------------------------------------------------------------
INDIA (7.4%)
Bharat Heavy Electricals 91,662 2,435,150
Bharti Airtel 412,765(b) 5,573,659
Housing Development Finance 87,154 3,163,627
Infosys Technologies 191,779 5,574,974
Reliance Inds 145,110 4,113,500
------------
Total 20,860,910
- -------------------------------------------------------------------------------------
INDONESIA (1.4%)
Bank Rakyat Indonesia 8,962,000 2,729,545
Bumi Resources 7,288,500(g) 1,136,986
------------
Total 3,866,531
- -------------------------------------------------------------------------------------
ISRAEL (6.8%)
Check Point Software Technologies 297,210(b) 6,009,586
Israel Chemicals 491,565 4,979,313
Teva Pharmaceutical Inds ADR 190,786 8,180,903
------------
Total 19,169,802
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
16 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
MALAYSIA (1.3%)
IOI $-
2,647,300 2,101,445
KNM Group 9,350,150 1,587,707
------------
Total 3,689,152
- -------------------------------------------------------------------------------------
MEXICO (6.8%)
America Movil ADR Series L 207,252 6,412,377
Grupo Financiero Banorte Series O 1,930,900 3,543,198
Grupo Televisa ADR 252,920 4,466,567
Wal-Mart de Mexico Series V 1,747,500 4,707,272
------------
Total 19,129,414
- -------------------------------------------------------------------------------------
NORWAY (0.1%)
Copeinca 110,800(b) 181,059
- -------------------------------------------------------------------------------------
RUSSIA (7.7%)
Eurasia Drilling GDR 243,662(b,d,e)1,339,747
Gazprom ADR 617,321 12,577,916
MMC Norilsk Nickel ADR 201,865 2,025,853
Pharmstandard 72,811(b) 1,830,430
Sibirskiy Cement 24,589 1,475,340
Vimpel-Communications ADR 163,588 2,372,026
------------
Total 21,621,312
- -------------------------------------------------------------------------------------
SOUTH AFRICA (8.4%)
ABSA Group 335,510 3,517,898
Aveng 720,771 3,571,281
Gold Fields 485,399 3,386,473
Gold Fields ADR 218,148 1,450,684
Impala Platinum Holdings 258,879 2,707,989
MTN Group 350,937 3,949,297
Murray & Roberts Holdings 272,391 1,848,111
Sasol 109,036 3,225,527
------------
Total 23,657,260
- -------------------------------------------------------------------------------------
SOUTH KOREA (9.2%)
Hyundai Motor 68,408 3,163,629
Infopia 65,450 488,514
KT 34,150 870,018
LG Electronics 45,653 3,411,257
NHN 33,539(b) 3,572,276
Samsung Electronics 27,090 11,430,540
Yuhan 20,363 2,964,512
------------
Total 25,900,746
- -------------------------------------------------------------------------------------
TAIWAN (7.4%)
Asustek Computer 2,037,062 2,919,344
Chunghwa Telecom 1,286,460 2,129,621
First Financial Holding 4,196,764 1,980,311
Hon Hai Precision Industry 1,098,250 2,652,248
Taiwan Semiconductor Mfg ADR 1,119,988 9,251,101
Tripod Technology 1,008,155 1,232,753
U-Ming Marine Transport 635,000 741,724
------------
Total 20,907,102
- -------------------------------------------------------------------------------------
THAILAND (1.1%)
Kasikornbank 2,094,800 3,066,297
- -------------------------------------------------------------------------------------
TURKEY (1.2%)
Turkiye Garanti Bankasi 2,008,865(b) 3,374,384
- -------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $424,358,342) $270,514,080
- -------------------------------------------------------------------------------------
<Caption>
MONEY MARKET FUND (4.8%)
SHARES VALUE(a)
RiverSource Short-Term Cash Fund, 1.60% $-
13,521,361(f) 13,521,361
- -------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $13,521,361) $13,521,361
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $437,879,703)(h) $284,035,441
=====================================================================================
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 17
PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
SUMMARY OF INVESTMENTS IN SECURITIES BY INDUSTRY
The following table represents the portfolio investments of the Fund by industry
classifications as a percentage of total net assets at Oct. 31, 2008:
<Table>
<Caption>
PERCENTAGE OF
INDUSTRY NET ASSETS VALUE
- -----------------------------------------------------------------------
Auto Components 0.3% $868,102
Automobiles 1.1 3,163,629
Beverages 0.8 2,313,658
Chemicals 1.8 4,979,313
Commercial Banks 15.8 44,476,596
Computers & Peripherals 1.0 2,919,344
Construction & Engineering 1.3 3,571,281
Diversified Telecommunication Services 1.9 5,371,665
Electric Utilities 1.1 3,033,756
Electrical Equipment 0.9 2,435,150
Electronic Equipment, Instruments &
Components 1.4 3,885,001
Energy Equipment & Services 1.0 2,927,454
Food & Staples Retailing 1.7 4,707,272
Food Products 0.8 2,282,504
Health Care Equipment & Supplies 0.8 2,382,940
Household Durables 2.0 5,625,981
Industrial Conglomerate 0.6 1,848,111
Insurance 4.7 13,163,940
Internet Software & Services 1.3 3,572,276
IT Services 5.7 15,980,165
Leisure Equipment & Products 0.7 2,093,436
Marine 0.3 741,724
Media 1.6 4,466,567
Metals & Mining 5.1 14,471,208
Multi-Utilities 0.5 1,475,340
Oil, Gas & Consumable Fuels 12.7 35,728,816
Pharmaceuticals 4.6 12,975,845
Real Estate Management & Development 1.7 4,915,643
Semiconductors & Semiconductor
Equipment 7.3 20,681,641
Software 2.1 6,009,586
Thrifts & Mortgage Finance 1.1 3,163,627
Wireless Telecommunication Services 12.1 34,282,509
Other(1) 4.8 13,521,361
- -----------------------------------------------------------------------
Total $284,035,441
- -----------------------------------------------------------------------
</Table>
(1) Cash & Cash Equivalents.
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
18 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Securities are valued by using procedures described in Note 1 to the
financial statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
may be determined to be liquid under guidelines established by the Fund's
Board of Directors. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At Oct. 31,
2008, the value of these securities amounted to $1,339,747 or 0.5% of net
assets.
(e) Identifies issues considered to be illiquid as to their marketability (see
Note 1 to the financial statements). These securities may be valued at fair
value according to procedures approved, in good faith, by the Fund's Board
of Directors. Information concerning such security holdings at Oct. 31,
2008, is as follows:
<Table>
<Caption>
ACQUISITION
SECURITY DATES COST
----------------------------------------------------------------------
Eurasia Drilling GDR* 11-02-07 thru 04-15-08 $5,741,380
</Table>
* Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended.
(f) Affiliated Money Market Fund -- See Note 5 to the financial statements. The
rate shown is the seven-day current annualized yield at Oct. 31, 2008.
(g) Security valued by management at fair value according to procedures
approved, in good faith, by the Board.
(h) At Oct. 31, 2008, the cost of securities for federal income tax purposes
was $449,749,120 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
<Table>
Unrealized appreciation $2,377,852
Unrealized depreciation (168,091,531)
------------------------------------------------------------
Net unrealized depreciation $(165,713,679)
------------------------------------------------------------
</Table>
The industries identified above are based on the Global Industry Classification
Standard (GICS), which was developed by and is the exclusive property of Morgan
Stanley Capital International Inc. and Standard & Poor's, a division of The
McGraw-Hill Companies, Inc.
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at riversource.com/funds.
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 19
STATEMENT OF ASSETS AND LIABILITIES --------------------------------------------
OCT. 31, 2008
<Table>
<Caption>
ASSETS
Investments in securities, at value
Unaffiliated issuers (identified cost $424,358,342) $ 270,514,080
Affiliated money market fund (identified cost $13,521,361) 13,521,361
- --------------------------------------------------------------------------------
Total investments in securities (identified cost $437,879,703) 284,035,441
Cash 667,406
Foreign currency holdings (identified cost $1,911,096) 1,906,201
Capital shares receivable 202,353
Dividends and accrued interest receivable 435,788
Receivable for investment securities sold 12,802,608
- --------------------------------------------------------------------------------
Total assets 300,049,797
- --------------------------------------------------------------------------------
LIABILITIES
Capital shares payable 278,847
Payable for investment securities purchased 17,212,931
Accrued investment management services fees 8,332
Accrued distribution fees 2,524
Accrued transfer agency fees 2,573
Accrued administrative services fees 607
Accrued plan administration services fees 5
Other accrued expenses 320,472
- --------------------------------------------------------------------------------
Total liabilities 17,826,291
- --------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $ 282,223,506
- --------------------------------------------------------------------------------
REPRESENTED BY
Capital stock -- $.01 par value $ 576,740
Additional paid-in capital 456,206,763
Excess of distributions over net investment income (5,170)
Accumulated net realized gain (loss) (20,707,820)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign
currencies (153,847,007)
- --------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding
capital stock $ 282,223,506
- --------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE
NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE
Class A $250,088,197 50,453,378 $4.96(1)
Class B $ 28,179,486 6,354,512 $4.43
Class C $ 3,162,935 711,847 $4.44
Class I $ 7,972 1,558 $5.12
Class R4 $ 782,170 152,215 $5.14
Class R5 $ 2,746 535 $5.13
- -----------------------------------------------------------------------------------------
</Table>
(1) The maximum offering price per share for Class A is $5.26. The offering
price is calculated by dividing the net asset value by 1.0 minus the maximum
sales charge of 5.75%.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
20 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
STATEMENT OF OPERATIONS --------------------------------------------------------
YEAR ENDED OCT. 31, 2008
<Table>
<Caption>
INVESTMENT INCOME
Income:
Dividends $ 17,185,342
Interest 64,517
Income distributions from affiliated money market fund 412,142
Less foreign taxes withheld (1,058,784)
- --------------------------------------------------------------------------------
Total income 16,603,217
- --------------------------------------------------------------------------------
Expenses:
Investment management services fees 7,352,591
Distribution fees
Class A 1,283,814
Class B 701,567
Class C 62,513
Transfer agency fees
Class A 972,852
Class B 139,042
Class C 12,334
Class R4 868
Class R5 1
Administrative services fees 498,019
Plan administration services fees -- Class R4 4,342
Compensation of board members 13,359
Custodian fees 693,125
Printing and postage 117,050
Registration fees 86,716
Professional fees 79,151
Other 168,800
- --------------------------------------------------------------------------------
Total expenses 12,186,144
Expenses waived/reimbursed by the Investment Manager and its
affiliates (4,460)
Earnings and bank fee credits on cash balances (14,844)
- --------------------------------------------------------------------------------
Total net expenses 12,166,840
- --------------------------------------------------------------------------------
Investment income (loss) -- net 4,436,377
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions (18,203,439)
Foreign currency transactions (1,454,385)
- --------------------------------------------------------------------------------
Net realized gain (loss) on investments (19,657,824)
Net change in unrealized appreciation (depreciation) on
investments
and on translation of assets and liabilities in foreign
currencies (421,981,869)
- --------------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies (441,639,693)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(437,203,316)
- --------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 21
STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31, 2008 2007
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 4,436,377 $ 1,517,079
Net realized gain (loss) on investments (19,657,824) 156,013,553
Net change in unrealized appreciation (depreciation) on
investments and on translation of assets and liabilities in
foreign currencies (421,981,869) 189,936,461
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (437,203,316) 347,467,093
- -----------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (7,733,781) --
Class B (584,169) --
Class C (60,487) --
Class I (828,121) --
Class R4 (23,143) --
Net realized gain
Class A (117,775,823) (98,239,230)
Class B (18,510,075) (18,762,771)
Class C (1,520,014) (1,196,069)
Class I (9,800,247) (9,664,518)
Class R4 (416,434) (1,447,673)
- -----------------------------------------------------------------------------------------------
Total distributions (157,252,294) (129,310,261)
- -----------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales
Class A shares 109,825,373 91,841,700
Class B shares 12,474,577 12,086,529
Class C shares 2,616,649 1,969,066
Class I shares 30,164,283 5,204,952
Class R4 shares 642,913 3,407,128
Class R5 shares 5,000 N/A
Reinvestment of distributions at net asset value
Class A shares 124,102,560 97,170,044
Class B shares 18,787,330 18,551,177
Class C shares 1,531,576 1,147,176
Class I shares 10,623,826 9,658,984
Class R4 shares 439,576 1,447,453
Payments for redemptions
Class A shares (148,388,977) (127,473,312)
Class B shares (31,272,815) (38,310,114)
Class C shares (2,462,810) (2,015,974)
Class I shares (72,065,208) (16,607,477)
Class R4 shares (921,454) (9,169,513)
- -----------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions 56,102,399 48,907,819
- -----------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (538,353,211) 267,064,651
Net assets at beginning of year 820,576,717 553,512,066
- -----------------------------------------------------------------------------------------------
Net assets at end of year $ 282,223,506 $ 820,576,717
- -----------------------------------------------------------------------------------------------
Undistributed (excess of distributions over) net investment
income $ (5,170) $ 22,906
- -----------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
22 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
FINANCIAL HIGHLIGHTS -----------------------------------------------------------
CLASS A
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2008 2007 2006 2005 2004
Net asset value, beginning of period $14.99 $11.32 $8.23 $6.27 $5.46
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .08(b) .04(b) .01 .04 .03
Net gains (losses) (both realized and
unrealized) (7.24) 6.27 3.10 1.95 .84
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (7.16) 6.31 3.11 1.99 .87
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.18) -- (.02) (.03) (.06)
Distributions from realized gains (2.69) (2.64) -- -- --
- --------------------------------------------------------------------------------------------------------------
Total distributions (2.87) (2.64) (.02) (.03) (.06)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.96 $14.99 $11.32 $8.23 $6.27
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $250 $661 $425 $295 $191
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(c),(d) 1.87% 1.83% 1.81% 1.79% 1.83%
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e),(f) 1.87% 1.83% 1.81% 1.79% 1.83%
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) .78% .31% .19% .54% .41%
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 133% 125% 145% 124% 128%
- --------------------------------------------------------------------------------------------------------------
Total return(g) (57.79%) 68.21% 37.85% 31.83% 16.09%
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(d) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(e) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(f) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the year ended Oct. 31, 2008
were less than 0.01% of average net assets.
(g) Total return does not reflect payment of a sales charge.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 23
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS B
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2008 2007 2006 2005 2004
Net asset value, beginning of period $13.73 $10.63 $7.77 $5.95 $5.19
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .00(b),(c) (.05)(b) (.05) (.01) (.02)
Net gains (losses) (both realized and
unrealized) (6.53) 5.79 2.91 1.83 .81
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (6.53) 5.74 2.86 1.82 .79
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) -- -- -- (.03)
Distributions from realized gains (2.69) (2.64) -- -- --
- --------------------------------------------------------------------------------------------------------------
Total distributions (2.77) (2.64) -- -- (.03)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.43 $13.73 $10.63 $7.77 $5.95
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $28 $94 $77 $74 $73
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 2.62% 2.58% 2.57% 2.55% 2.59%
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(f),(g) 2.62% 2.58% 2.57% 2.55% 2.59%
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) .02% (.48%) (.55%) (.24%) (.32%)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 133% 125% 145% 124% 128%
- --------------------------------------------------------------------------------------------------------------
Total return(h) (58.08%) 66.95% 36.81% 30.59% 15.18%
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Rounds to zero.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(f) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(g) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the year ended Oct. 31, 2008
were less than 0.01% of average net assets.
(h) Total return does not reflect payment of a sales charge.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
24 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS C
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2008 2007 2006 2005 2004
Net asset value, beginning of period $13.78 $10.66 $7.79 $5.97 $5.20
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .00(b),(c) (.05)(b) (.06) -- (.01)
Net gains (losses) (both realized and
unrealized) (6.54) 5.81 2.93 1.82 .81
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (6.54) 5.76 2.87 1.82 .80
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.11) -- -- -- (.03)
Distributions from realized gains (2.69) (2.64) -- -- --
- --------------------------------------------------------------------------------------------------------------
Total distributions (2.80) (2.64) -- -- (.03)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.44 $13.78 $10.66 $7.79 $5.97
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $3 $8 $5 $3 $1
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 2.63% 2.59% 2.58% 2.56% 2.60%
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(f),(g) 2.63% 2.59% 2.58% 2.56% 2.60%
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) .03% (.48%) (.57%) (.19%) (.34%)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 133% 125% 145% 124% 128%
- --------------------------------------------------------------------------------------------------------------
Total return(h) (58.15%) 67.03% 36.84% 30.54% 15.37%
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Rounds to zero.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(f) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(g) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the year ended Oct. 31, 2008
were less than 0.01% of average net assets.
(h) Total return does not reflect payment of a sales charge.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 25
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS I
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2008 2007 2006 2005 2004(b)
Net asset value, beginning of period $15.38 $11.50 $8.35 $6.36 $6.54
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .11(c) .09(c) .03 .06 .01
Net gains (losses) (both realized and
unrealized) (7.45) 6.43 3.16 1.98 (.19)
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (7.34) 6.52 3.19 2.04 (.18)
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.23) -- (.04) (.05) --
Distributions from realized gains (2.69) (2.64) -- -- --
- --------------------------------------------------------------------------------------------------------------
Total distributions (2.92) (2.64) (.04) (.05) --
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.12 $15.38 $11.50 $8.35 $6.36
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $56 $41 $19 $13
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 1.42% 1.39% 1.35% 1.30% 1.35%(f)
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) 1.42% 1.39% 1.35% 1.30% 1.35%(f)
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) .97% .75% .63% .97% .79%(f)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 133% 125% 145% 124% 128%
- --------------------------------------------------------------------------------------------------------------
Total return (57.63%) 69.07% 38.36% 32.32% (2.75%)(i)
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from March 4, 2004 (inception date) to Oct. 31, 2004.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(h) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the year ended Oct. 31, 2008
were less than 0.01% of average net assets.
(i) Not annualized.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
26 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS R4
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2008 2007 2006 2005 2004
Net asset value, beginning of period $15.32 $11.50 $8.33 $6.35 $5.52
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .11(b) .05(b) .03 .05 .04
Net gains (losses) (both realized and
unrealized) (7.45) 6.41 3.14 1.97 .86
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (7.34) 6.46 3.17 2.02 .90
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.15) -- -- (.04) (.07)
Distributions from realized gains (2.69) (2.64) -- -- --
- --------------------------------------------------------------------------------------------------------------
Total distributions (2.84) (2.64) -- (.04) (.07)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.14 $15.32 $11.50 $8.33 $6.35
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $1 $2 $6 $2 $18
- --------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(c),(d) 1.73% 1.65% 1.63% 1.59% 1.65%
- --------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e),(f) 1.47% 1.65% 1.63% 1.59% 1.65%
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 1.12% .45% .41% .81% .61%
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 133% 125% 145% 124% 128%
- --------------------------------------------------------------------------------------------------------------
Total return (57.58%) 68.51% 38.06% 31.87% 16.50%
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(d) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(e) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(f) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the year ended Oct. 31, 2008
were less than 0.01% of average net assets.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 27
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS R5
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2008(b)
Net asset value, beginning of period $9.32
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) .03
Net gains (losses) (both realized and
unrealized) (4.22)
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (4.19)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.13
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $--
- --------------------------------------------------------------------------------------------------------------
Total expenses(d),(e),(f) 1.47%(g)
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) 1.57%(g)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 133%
- --------------------------------------------------------------------------------------------------------------
Total return (44.96%)(h)
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Aug. 1, 2008 (when shares became publicly available) to
Oct. 31, 2008.
(c) Per share amount has been calculated using the average shares outstanding
method.
(d) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(e) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(f) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the year ended Oct. 31, 2008
were less than 0.01% of average net assets.
(g) Adjusted to an annual basis.
(h) Not annualized.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
28 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS --------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Threadneedle Emerging Markets Fund (the Fund) (formerly RiverSource Emerging
Markets Fund) is a series of RiverSource Global Series, Inc. and is registered
under the Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. RiverSource Global Series, Inc. has 10 billion
authorized shares of capital stock that can be allocated among the separate
series as designated by the Board of Directors (the Board). The Fund invests
primarily in equity securities of emerging markets companies.
The Fund offers Class A, Class B, Class C, Class I, Class R4 and Class R5
shares.
- - Class A shares are sold with a front-end sales charge.
- - Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth year of
ownership.
- - Class C shares may be subject to a CDSC.
- - Class I, Class R4 and Class R5 shares are sold without a front-end sales
charge or CDSC and are offered to qualifying institutional investors. Class
R5 shares became available effective Aug. 1, 2008.
At Oct. 31, 2008, RiverSource Investments, LLC (RiverSource Investments or the
Investment Manager) and the RiverSource affiliated funds-of-funds owned 100% of
Class I shares and the Investment Manager owned 100% of Class R5 shares.
All classes of shares have identical voting, dividend and liquidation rights.
Class specific expenses (e.g., distribution and service fees, transfer agency
fees, plan administration services fees) differ among classes. Income, expenses
(other than class specific expenses) and realized and unrealized gains or losses
on investments are allocated to each class of shares based upon its relative net
assets.
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
VALUATION OF SECURITIES
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 29
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
counter market and are valued at a price that reflects fair value as quoted by
dealers in these securities or by an independent pricing service. When market
quotes are not readily available, the pricing service, in determining fair
values of debt securities, takes into consideration such factors as current
quotations by broker/dealers, coupon, maturity, quality, type of issue, trading
characteristics, and other yield and risk factors it deems relevant in
determining valuations. Foreign securities are valued based on quotations from
the principal market in which such securities are normally traded. The
procedures adopted by the Board generally contemplate the use of fair valuation
in the event that price quotations or valuations are not readily available,
price quotations or valuations from other sources are not reflective of market
value and thus deemed unreliable, or a significant event has occurred in
relation to a security or class of securities (such as foreign securities) that
is not reflected in price quotations or valuations from other sources. A fair
value price is a good faith estimate of the value of a security at a given point
in time.
Many securities markets and exchanges outside the U.S. close prior to the close
of the New York Stock Exchange and therefore the closing prices for securities
in such markets or on such exchanges may not fully reflect events that occur
after such close but before the close of the New York Stock Exchange, including
significant movements in the U.S. market after foreign exchanges have closed.
Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise
Financial), parent company of the Investment Manager, as administrator to the
Fund, will fair value foreign securities pursuant to procedures adopted by the
Board, including utilizing a third party pricing service to determine these fair
values. These procedures take into account multiple factors, including movements
in the U.S. securities markets, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New
York Stock Exchange.
Short-term securities maturing in more than 60 days from the valuation date are
valued at the market price or approximate market value based on current interest
rates; those maturing in 60 days or less are valued at amortized cost, which
approximates fair value.
ILLIQUID SECURITIES
At Oct. 31, 2008, investments in securities included issues that are illiquid
which the Fund currently limits to 15% of net assets, at market value, at the
time of purchase. The aggregate value of such securities at Oct. 31, 2008 was
$1,339,747 representing 0.47% of net assets. According to Board guidelines,
certain unregistered securities are determined to be liquid and are not included
within the 15% limitation specified above. Assets are liquid if they can be sold
or
- --------------------------------------------------------------------------------
30 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
disposed of in the ordinary course of business within seven days at
approximately the value at which the asset is valued by the Fund.
OPTION TRANSACTIONS
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Fund may buy and write options traded on any
U.S. or foreign exchange or in the over-the-counter market where completing the
obligation depends upon the credit standing of the other party. Cash collateral
may be collected by the Fund to secure certain over-the-counter options (OTC
options) trades. Cash collateral held by the Fund for such option trades must be
returned to the counterparty upon closure, exercise or expiration of the
contract. The Fund also may buy and sell put and call options and write covered
call options on portfolio securities as well as write cash-secured put options.
The risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Fund may incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying an option is that the
Fund pays a premium whether or not the option is exercised. The Fund also has
the additional risk of being unable to enter into a closing transaction if a
liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. Option
contracts, including OTC option contracts, with no readily available market
value are valued using quotations obtained from independent brokers as of the
close of the New York Stock Exchange. The Fund will realize a gain or loss when
the option transaction expires or closes. When an option is exercised, the
proceeds on sales for a written call option, the purchase cost for a written put
option or the cost of a security for a purchased put or call option is adjusted
by the amount of premium received or paid. At Oct. 31, 2008, and for the year
then ended, the Fund had no outstanding option contracts.
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes, the Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund also may buy and write put and call options on these futures contracts.
Risks of entering into futures contracts and related options include the
possibility of an illiquid market and that a change in the value of the contract
or option may not correlate with changes in the value of the underlying
securities.
Futures and options on futures are valued daily based upon the last sale price
at the close of market on the principal exchange on which they are traded. Upon
entering into a futures contract, the Fund is required to deposit either cash or
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 31
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
securities in an amount (initial margin) equal to a certain percentage of the
contract value. Subsequent payments (variation margin) are made or received by
the Fund each day. The variation margin payments are equal to the daily changes
in the contract value and are recorded as unrealized gains and losses. The Fund
recognizes a realized gain or loss when the contract is closed or expires. At
Oct. 31, 2008, the Fund had no outstanding futures contracts.
FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the Statement of Operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes. At Oct. 31, 2008, foreign currency holdings consisted of
multiple denominations, primarily Indonesian rupiah.
The Fund may enter into forward foreign currency contracts for operational
purposes and to protect against adverse exchange rate fluctuation. The net U.S.
dollar value of foreign currency underlying all contractual commitments held by
the Fund and the resulting unrealized appreciation or depreciation are
determined using foreign currency exchange rates from an independent pricing
service. The Fund is subject to the credit risk that the counterparty will not
complete its contract obligations. At Oct. 31, 2008, the Fund had no outstanding
forward foreign currency contracts.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue Code
that applies to regulated investment companies and to distribute substantially
all
- --------------------------------------------------------------------------------
32 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
of its taxable income to shareholders. No provision for income or excise taxes
is thus required.
Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48),
"Accounting for Uncertainty in Income Taxes," which clarifies the accounting for
uncertainty in income taxes recognized in accordance with FASB Statement 109,
"Accounting for Income Taxes." FIN 48 provides guidance for how uncertain tax
positions should be recognized, measured, presented and disclosed in the
financial statements. Management of the Fund has concluded that there are no
significant uncertain tax positions that would require recognition in the
financial statements. Generally, the tax authorities can examine all the tax
returns filed for the last three years.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of foreign currency
transactions, passive foreign investment company (PFIC) holdings, and losses
deferred due to wash sales. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
On the Statement of Assets and Liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been increased by
$4,765,248 accumulated net realized loss has been increased by $9,262,053
resulting in a net reclassification adjustment to increase paid-in capital by
4,496,805.
The tax character of distributions paid for the years indicated is as follows:
<Table>
<Caption>
YEAR ENDED OCT. 31, 2008* 2007
- -----------------------------------------------------------------
CLASS A
Distributions paid from:
Ordinary income.................. $76,776,161 $43,124,323
Long-term capital gain........... 48,733,443 55,114,907
CLASS B
Distributions paid from:
Ordinary income.................. 11,435,113 8,236,390
Long-term capital gain........... 7,659,131 10,526,381
CLASS C
Distributions paid from:
Ordinary income.................. 951,551 523,272
Long-term capital gain........... 628,950 672,797
</Table>
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 33
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31, 2008* 2007
- -----------------------------------------------------------------
CLASS I
Distributions paid from:
Ordinary income.................. $6,573,170 $4,243,012
Long-term capital gain........... 4,055,198 5,421,506
CLASS R4
Distributions paid from:
Ordinary income.................. 267,263 635,576
Long-term capital gain........... 172,314 812,097
CLASS R5
Distributions paid from:
Ordinary income.................. -- N/A
Long-term capital gain........... -- N/A
</Table>
* Class R5 is for the period from Aug. 1, 2008 (when shares became publicly
available) to Oct. 31, 2008.
At Oct. 31, 2008, the components of distributable earnings on a tax basis are as
follows:
<Table>
Undistributed ordinary income................. $ --
Undistributed accumulated long-term gain...... $ --
Accumulated realized loss..................... $ (8,838,403)
Unrealized appreciation (depreciation)........ $(165,721,594)
</Table>
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2008, the FASB issued Statement of Financial Accounting Standards No.
161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging
Activities -- an amendment of FASB Statement No. 133," which requires enhanced
disclosures about a fund's derivative and hedging activities. Funds are required
to provide enhanced disclosures about (a) how and why a fund uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under SFAS 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect a fund's financial
position, financial performance, and cash flows. SFAS 161 is effective for
financial statements issued for periods beginning after Nov. 15, 2008. As of
Oct. 31, 2008, management does not believe the adoption of SFAS 161 will impact
the financial statement amounts; however, additional footnote disclosures may be
required about the use of derivative instruments and hedging items.
On Sept. 30, 2006, the FASB released Statement of Financial Accounting Standards
No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an
authoritative definition of fair value, sets out a hierarchy for measuring fair
value, and requires additional disclosures about the inputs used to develop the
measurements of fair value and the effect of certain measurements
- --------------------------------------------------------------------------------
34 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
reported in the Statement of Operations for a fiscal period. The application of
SFAS 157 will be effective for the Fund's fiscal year beginning Nov. 1, 2008.
The adoption of SFAS 157 is not anticipated to have a material impact on the
Fund's financial statements; however, additional disclosures will be required
about the inputs used to develop the measurements of fair value and the effect
of certain measurements reported in the Statement of Operations for a fiscal
period.
DIVIDENDS TO SHAREHOLDERS
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
2. EXPENSES AND SALES CHARGES
INVESTMENT MANAGEMENT SERVICES FEES
Under an Investment Management Services Agreement, the Investment Manager
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Fund's average daily net assets that declines from 1.10%
to 0.90% annually as the Fund's assets increase. The fee may be adjusted upward
or downward by a performance incentive adjustment determined monthly by
measuring the percentage difference over a rolling 12-month period between the
annualized performance of one Class A share of the Fund and the annualized
performance of the Lipper Emerging Markets Funds Index. In certain
circumstances, the Board may approve a change in the index. The maximum
adjustment is 0.12% per year. If the performance difference is less than 0.50%,
the adjustment will be zero. The adjustment increased the management fee by
$507,378 for the year ended Oct. 31, 2008. The management fee for the year ended
Oct. 31, 2008 was 1.16% of the Fund's average daily net assets, including the
adjustment under the terms of the performance incentive arrangement.
SUBADVISORY AGREEMENT
The Investment Manager has a Subadvisory Agreement with Threadneedle
International Limited (Threadneedle), an affiliate of the Investment Manager and
an indirect wholly-owned subsidiary of Ameriprise Financial, to subadvise the
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 35
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
assets of the Fund. The Investment Manager contracts with and compensates
Threadneedle to manage the investment of the Fund's assets.
ADMINISTRATIVE SERVICES FEES
Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a
fee for administration and accounting services at a percentage of the Fund's
average daily net assets that declines 0.08% to 0.05% annually as the Fund's
assets increase. The fee for the year ended Oct. 31, 2008 was 0.08% of the
Fund's average daily net assets.
OTHER FEES
Other expenses are for, among other things, certain expenses of the Fund or the
Board including: Fund boardroom and office expense, employee compensation,
employee health and retirement benefits, and certain other expenses. Payment of
these Fund and Board expenses is facilitated by a company providing limited
administrative services to the Fund and the Board. For the year ended Oct. 31,
2008, other expenses paid to this company were $3,707.
COMPENSATION OF BOARD MEMBERS
Compensation of board members includes, for a former Board Chair, compensation
as well as retirement benefits. Certain other aspects of a former Board Chair's
compensation, including health benefits and payment of certain other expenses,
are included under other expenses.
Under a Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the Fund or other
RiverSource funds. The Fund's liability for these amounts is adjusted for market
value changes and remains in the Fund until distributed in accordance with the
Plan.
TRANSFER AGENCY FEES
Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer
Agent) maintains shareholder accounts and records. The Fund pays the Transfer
Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50
for Class B and $20.00 for Class C for this service. The Fund also pays the
Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's
average net assets attributable to Class R4 and Class R5 shares.
The Transfer Agent charges an annual fee of $5 per inactive account, charged on
a pro rata basis for 12 months from the date the account becomes inactive. These
fees are included in the transfer agency fees on the Statement of Operations.
- --------------------------------------------------------------------------------
36 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
PLAN ADMINISTRATION SERVICES FEES
Under a Plan Administration Services Agreement with the Transfer Agent, the Fund
pays an annual fee at a rate of 0.25% of the Fund's average daily net assets
attributable to Class R4 shares for the provision of various administrative,
recordkeeping, communication and educational services.
DISTRIBUTION FEES
The Fund has an agreement with RiverSource Distributors, Inc. (the Distributor)
for distribution and shareholder services. Under a Plan and Agreement of
Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up
to 0.25% of the Fund's average daily net assets attributable to Class A shares
and a fee at an annual rate of up to 1.00% of the Fund's average daily net
assets attributable to Class B and Class C shares. For Class B and Class C
shares, up to 0.75% of the fee is reimbursed for distribution expenses.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed ("unreimbursed expense") was approximately $1,077,000 and $38,000 for
Class B and Class C shares, respectively. These amounts are based on the most
recent information available as of Oct. 31, 2008, and may be recovered from
future payments under the distribution plan or CDSC. To the extent the
unreimbursed expense has been fully recovered, the distribution fee is reduced.
SALES CHARGES
Sales charges received by the Distributor for distributing Fund shares were
$739,218 for Class A, $40,279 for Class B and $1,375 for Class C for the year
ended Oct. 31, 2008.
EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES
For the year ended Oct. 31, 2008, the Investment Manager and its affiliates
waived/reimbursed certain fees and expenses such that net expenses (excluding
fees and expenses of acquired funds*), including the adjustment under the terms
of a performance incentive arrangement, were as follows:
<Table>
Class R4............................................ 1.47%
</Table>
The waived/reimbursed fees and expenses for the transfer agency fees at the
class level were as follows:
<Table>
Class R4........................................... $118
</Table>
The waived/reimbursed fees and expenses for the plan administration services
fees at the class level were as follows:
<Table>
Class R4.......................................... $4,342
</Table>
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 37
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
The Investment Manager and its affiliates have contractually agreed to waive
certain fees and expenses until Oct. 31, 2009, unless sooner terminated at the
discretion of the Board, such that net expenses (excluding fees and expenses of
acquired funds*), before giving effect to any performance incentive adjustment,
will not exceed the following percentage of the Fund's average daily net assets:
<Table>
Class R4............................................ 1.64%
</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.
EARNINGS AND BANK FEE CREDITS
During the year ended Oct. 31, 2008, the Fund's custodian and transfer agency
fees were reduced by $14,844 as a result of earnings and bank fee credits from
overnight cash balances. The Fund pays custodian fees to Ameriprise Trust
Company, a subsidiary of Ameriprise Financial.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $819,754,752 and $913,722,799, respectively, for the
year ended Oct. 31, 2008. Realized gains and losses are determined on an
identified cost basis.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
<Table>
<Caption>
YEAR ENDED OCT. 31, 2008**
ISSUED FOR
REINVESTED NET
SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ---------------------------------------------------------------------------------
Class A 11,082,775 11,944,431 (16,677,659) 6,349,547
Class B 1,336,871 2,007,193 (3,818,705) (474,641)
Class C 296,342 163,281 (305,438) 154,185
Class I 2,894,086 993,810 (7,495,922) (3,608,026)
Class R4 56,860 40,967 (95,990) 1,837
Class R5 535 -- -- 535
- ---------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
38 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
YEAR ENDED OCT. 31, 2007
ISSUED FOR
REINVESTED NET
SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ---------------------------------------------------------------------------------
Class A 8,019,411 9,935,587 (11,422,639) 6,532,359
Class B 1,163,544 2,056,671 (3,595,546) (375,331)
Class C 179,156 126,760 (198,413) 107,503
Class I 463,963 966,865 (1,397,671) 33,157
Class R4 313,574 145,035 (806,884) (348,275)
- ---------------------------------------------------------------------------------
</Table>
** Class R5 is for the period from Aug. 1, 2008 (when shares became publicly
available) to Oct. 31, 2008.
5. AFFILIATED MONEY MARKET FUND
The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund,
a money market fund established for the exclusive use of the RiverSource funds
and other institutional clients of RiverSource Investments. The cost of the
Fund's purchases and proceeds from sales of the shares of the RiverSource Short-
Term Cash Fund aggregated $449,546,557 and $443,696,285, respectively, for the
year ended Oct. 31, 2008. The income distributions received with respect to the
Fund's investment in RiverSource Short-Term Cash Fund can be found on the
Statement of Operations and the Fund's invested balance in RiverSource Short-
Term Cash Fund at Oct. 31, 2008, can be found in the Portfolio of Investments.
6. BANK BORROWINGS
The Fund has entered into a revolving credit facility with a syndicate of banks
led by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the
temporary funding of shareholder redemptions or for other temporary or emergency
purposes. The credit facility became effective on Oct. 16, 2008, replacing a
prior credit facility. The credit facility agreement, which is a collective
agreement between the Fund and certain other RiverSource funds, severally and
not jointly, permits collective borrowings up to $475 million. The borrowers
shall have the right, upon written notice to the Administrative Agent to request
an increase of up to $175 million in the aggregate amount of the credit facility
from new or existing lenders, provided that the aggregate amount of the credit
facility shall at no time exceed $650 million. Participation in such increase by
any existing lender shall be at such lender's sole discretion. Interest is
charged to each Fund based on its borrowings at a rate equal to the federal
funds rate plus 0.75%. Each borrowing under the credit facility matures no later
than 60 days after the date of borrowing. The Fund also pays a commitment fee
equal to its pro rata share of the amount of the credit facility at a rate of
0.06% per annum, in addition to an
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 39
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
upfront fee equal to its pro rata share of 0.02% of the amount of the credit
facility. The Fund had no borrowings during the year ended Oct. 31, 2008.
Under the prior credit facility which was effective until Oct. 15, 2008, the
Fund had entered into a revolving credit facility with a syndicate of banks
headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund was permitted to
borrow for the temporary funding of shareholder redemptions or for other
temporary or emergency purposes. The credit facility agreement, which was a
collective agreement between the Fund and certain other RiverSource funds,
severally and not jointly, permitted collective borrowings up to $500 million.
Interest was charged to each Fund based on its borrowings at a rate equal to the
federal funds rate plus 0.30%. Each borrowing under the credit facility matured
no later than 60 days after the date of borrowing. The Fund also paid a
commitment fee equal to its pro rata share of the amount of the credit facility
at a rate of 0.06% per annum.
7. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$8,838,403 at Oct. 31, 2008, that if not offset by capital gains will expire in
2016. It is unlikely the Board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires.
8. RISKS RELATING TO CERTAIN INVESTMENTS
FOREIGN/EMERGING MARKETS RISK
Investing in foreign securities may include certain risks and considerations not
typically associated with investing in U.S. securities, such as fluctuating
currency values and changing local and regional economic, political and social
conditions, which may result in greater market volatility. In addition, certain
foreign securities may not be as liquid as U.S. securities. Investing in
emerging markets may accentuate these risks.
9. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In June 2004, an action captioned John E. Gallus et al. v. American Express
Financial Corp. and American Express Financial Advisors Inc., was filed in the
United States District Court for the District of Arizona. The plaintiffs allege
that they are investors in several American Express Company mutual funds and
they purport to bring the action derivatively on behalf of those funds under the
Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid
to the defendants by the funds for investment advisory and administrative
services
- --------------------------------------------------------------------------------
40 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
are excessive. The plaintiffs seek remedies including restitution and rescission
of investment advisory and distribution agreements. The plaintiffs voluntarily
agreed to transfer this case to the United States District Court for the
District of Minnesota. In response to defendants' motion to dismiss the
complaint, the Court dismissed one of plaintiffs' four claims and granted
plaintiffs limited discovery. Defendants moved for summary judgment in April
2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The
plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on
August 8, 2007.
In December 2005, without admitting or denying the allegations, American Express
Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc.
(Ameriprise Financial)), entered into settlement agreements with the Securities
and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC)
related to market timing activities. As a result, AEFC was censured and ordered
to cease and desist from committing or causing any violations of certain
provisions of the Investment Advisers Act of 1940, the Investment Company Act of
1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million
and civil money penalties of $7 million. AEFC also agreed to retain an
independent distribution consultant to assist in developing a plan for
distribution of all disgorgement and civil penalties ordered by the SEC in
accordance with various undertakings detailed at
http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its
affiliates have cooperated with the SEC and the MDOC in these legal proceedings,
and have made regular reports to the RiverSource Funds' Boards of
Directors/Trustees.
On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise
Financial, Inc., acquired J. & W. Seligman & Co., Inc. (Seligman). In late 2003,
Seligman conducted an extensive internal review concerning mutual fund trading
practices. Seligman's review, which covered the period 2001-2003, noted one
arrangement that permitted frequent trading in certain open-end registered
investment companies managed by Seligman (the Seligman Funds); this arrangement
was in the process of being closed down by Seligman before September 2003.
Seligman identified three other arrangements that permitted frequent trading,
all of which had been terminated by September 2002. In January 2004, Seligman,
on a voluntary basis, publicly disclosed these four arrangements to its clients
and to shareholders of the Seligman Funds. Seligman also provided information
concerning mutual fund trading practices to the SEC and the Office of the
Attorney General of the State of New York (NYAG). In September 2005, the New
York staff of the SEC indicated that it was considering recommending to the
Commissioners of the SEC the instituting of a formal action against Seligman and
the distributor of the Seligman Funds, Seligman
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 41
NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------
Advisors, Inc., relating to frequent trading in the Seligman Funds. Seligman
responded to the staff in October 2005 that it believed that any action would be
both inappropriate and unnecessary, especially in light of the fact that
Seligman had previously resolved the underlying issue with the Independent
Directors of the Seligman Funds and made recompense to the affected Seligman
Funds.
In September 2006, the NYAG commenced a civil action in New York State Supreme
Court against Seligman, Seligman Advisors, Inc., Seligman Data Corp. (transfer
agent for the Seligman Funds) and Brian T. Zino (collectively, the Seligman
Parties), alleging, in substance, that, in addition to the four arrangements
noted above, the Seligman Parties permitted other persons to engage in frequent
trading and, as a result, the prospectus disclosure used by the registered
investment companies managed by Seligman is and has been misleading. The NYAG
included other related claims and also claimed that the fees charged by Seligman
to the Seligman Funds were excessive. The NYAG is seeking damages of at least
$80 million and restitution, disgorgement, penalties and costs and injunctive
relief. The Seligman Parties answered the complaint in December 2006 and believe
that the claims are without merit. Any resolution of these matters may include
the relief noted above or other sanctions or changes in procedures. Any damages
would be paid by Seligman and not by the Seligman Funds. If the NYAG obtains
injunctive relief, Seligman and its affiliates could, in the absence of the SEC
in its discretion granting exemptive relief, be enjoined from providing advisory
and underwriting services to the Seligman Funds and other registered investment
companies. Seligman does not believe that the foregoing legal action or other
possible actions will have a material adverse impact on Seligman or its clients,
including the Seligman Funds and other investment companies managed by it;
however, there can be no assurance of this or that these matters and any related
publicity will not affect demand for shares of the Seligman Funds and such other
investment companies or have other adverse consequences.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, arbitration and regulatory proceedings, including
routine litigation, class actions, and governmental actions, concerning matters
arising in connection with the conduct of their business activities. Ameriprise
Financial believes that the Funds are not currently the subject of, and that
neither Ameriprise Financial nor any of its affiliates are the subject of, any
pending legal, arbitration or regulatory proceedings that are likely to have a
material adverse effect on the Funds or the ability of Ameriprise Financial or
its affiliates to perform under their contracts with the Funds. Ameriprise
Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the
Securities and Exchange Commission on legal and regulatory matters that relate
to Ameriprise
- --------------------------------------------------------------------------------
42 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
Financial and its affiliates. Copies of these filings may be obtained by
accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse publicity
associated with them, will not result in increased fund redemptions, reduced
sale of fund shares or other adverse consequences to the Funds. Further,
although we believe proceedings are not likely to have a material adverse effect
on the Funds or the ability of Ameriprise Financial or its affiliates to perform
under their contracts with the Funds, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range
of loss that may result. An adverse outcome in one or more of these proceedings
could result in adverse judgments, settlements, fines, penalties or other relief
that could have a material adverse effect on the consolidated financial
condition or results of operations of Ameriprise Financial.
10. SUBSEQUENT EVENTS
Effective Dec. 15, 2008, the Fund will pay custodian fees to JPMorgan Chase
Bank, N.A.
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 43
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
THREADNEEDLE EMERGING MARKETS FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Threadneedle Emerging Markets Fund (the Fund),
formerly RiverSource Emerging Markets Fund, (one of the portfolios constituting
the RiverSource Global Series, Inc.) as of October 31, 2008, and the related
statement of operations for the year then ended, and the statements of changes
in net assets and the financial highlights for each of the two years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights of the Fund for the periods presented through
October 31, 2006, were audited by other auditors whose report dated December 20,
2006 expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of October 31, 2008, by correspondence with the custodian
and brokers, or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
- --------------------------------------------------------------------------------
44 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
In our opinion, the financial statements and financial highlights audited by us
as referred to above present fairly, in all material respects, the financial
position of Threadneedle Emerging Markets Fund of the RiverSource Global Series,
Inc. at October 31, 2008, the results of its operations for the year then ended,
and changes in its net assets and the financial highlights for each of the two
years in the period then ended, in conformity with U.S. generally accepted
accounting principles.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
December 19, 2008
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 45
FEDERAL INCOME TAX INFORMATION -------------------------------------------------
(UNAUDITED)
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
Fiscal year ended Oct. 31, 2008
<Table>
<Caption>
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for
distributions:
Qualified Dividend Income for individuals.................... 0.00%
Dividends Received Deduction for corporations................ 0.00%
U.S. Government Obligations.................................. 0.00%
<Caption>
CAPITAL GAIN DISTRIBUTION - the Fund designates $61,249,036 to be taxed as
long-term capital gain.
</Table>
The Fund also designates as distributions of long-term gains, to the extent
necessary to fully distribute such capital gains, earnings and profits
distributed to shareholders on the redemption of shares.
- --------------------------------------------------------------------------------
46 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
BOARD MEMBERS AND OFFICERS -----------------------------------------------------
Shareholders elect a Board that oversees the Fund's operations. The Board
appoints officers who are responsible for day-to-day business decisions based on
policies set by the Board. The following is a list of the Fund's Board members.
The RiverSource complex of funds that each Board member oversees consists of 162
funds, which includes 104 RiverSource funds and 58 Seligman funds. Board members
serve until the next regular shareholders' meeting or until he or she reaches
the mandatory retirement age established by the Board. Under the current Board
policy, members may serve until the end of the meeting following their 75th
birthday, or the fifteenth anniversary of the first Board meeting they attended
as members of the Board, whichever occurs first. This policy does not apply to
Ms. Jones who may retire after her 75th birthday.
INDEPENDENT BOARD MEMBERS
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------
Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None
901 S. Marquette Ave. 2006 Attorney
Minneapolis, MN 55402
Age 54
- ------------------------------------------------------------------------------------------------------------------------------
Arne H. Carlson Board member since Chair, RiverSource Funds, 1999-2006; former Governor of None
901 S. Marquette Ave. 1999 Minnesota
Minneapolis, MN 55402
Age 74
- ------------------------------------------------------------------------------------------------------------------------------
Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None
901 S. Marquette Ave. 2007 Leadership (consulting company)
Minneapolis, MN 55402
Age 54
- ------------------------------------------------------------------------------------------------------------------------------
Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None
901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of
Minneapolis, MN 55402 Business, Bentley College
Age 58
- ------------------------------------------------------------------------------------------------------------------------------
Anne P. Jones Board member since Attorney and Consultant None
901 S. Marquette Ave. 1985
Minneapolis, MN 55402
Age 73
- ------------------------------------------------------------------------------------------------------------------------------
Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive
901 S. Marquette Ave. 2005 Insurance
Minneapolis, MN 55402
Age 73
- ------------------------------------------------------------------------------------------------------------------------------
Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries,
901 S. Marquette Ave. since 2007, College Inc. (manufactures
Minneapolis, MN 55402 Board member since irrigation systems)
Age 69 2002
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 47
BOARD MEMBERS AND OFFICERS (continued) -----------------------------------------
INDEPENDENT BOARD MEMBERS (CONTINUED)
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------
John F. Maher Board member since Retired President and Chief Executive Officer and None
901 S. Marquette Ave. 2008 former Director, Great Western Financial Corporation
Minneapolis, MN 55402 (bank holding company) and its principal subsidiary,
Age 64 Great Western Bank (federal savings bank)
- ------------------------------------------------------------------------------------------------------------------------------
Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None
901 S. Marquette Ave. 2004 real estate and asset management company)
Minneapolis, MN 55402
Age 56
- ------------------------------------------------------------------------------------------------------------------------------
Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C.; Director, Vibration Lead Outside
901 S. Marquette Ave. 2008 Control Technologies, LLC (auto vibration technology); Director, Digital
Minneapolis, MN 55402 Director and Chairman, Highland Park Michigan Economic Ally, Inc. (digital
Age 66 Development Corp; and Chairman, Detroit Public Schools imaging); and
Foundation. Formerly, Chairman and Chief Executive Infinity, Inc. (oil
Officer, Q Standards Worldwide, Inc. (library of and gas exploration
technical standards); Director, Kerr-McGee Corporation and production);
(diversified energy and chemical company); Trustee, New Director, OGE Energy
York University Law Center Foundation; Vice Chairman, Corp. (energy and
Detroit Medical Center and Detroit Economic Growth energy services
Corp. provider offering
physical delivery
and related services
for both electricity
and natural gas)
- ------------------------------------------------------------------------------------------------------------------------------
Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera
901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Forester Pharmaceutical, Inc.
Minneapolis, MN 55402 Biotech (biotechnology);
Age 64 Healthways, Inc.
(health management
programs)
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
48 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------
William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None
53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. and President,
Financial Center Vice President since Chairman of the Board and Chief Investment Officer,
Minneapolis, MN 55474 2002 RiverSource Investments, LLC since 2005; Director,
Age 48 President and Chief Executive Officer, Ameriprise
Certificate Company and Chairman of the Board, Chief
Executive Officer and President, RiverSource
Distributors, Inc. since 2006; Senior Vice
President -- Chief Investment Officer, Ameriprise
Financial, Inc. and Chairman of the Board and Chief
Investment Officer, RiverSource Investments, LLC, 2001-
2005
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
* Interested person by reason of being an officer, director, security holder
and/or employee of RiverSource Investments.
The SAI has additional information about the Fund's Board members and is
available, without charge, upon request by calling RiverSource Funds at (888)
791-3380; contacting your financial institution; or visiting
riversource.com/funds.
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 49
BOARD MEMBERS AND OFFICERS (continued) -----------------------------------------
The Board has appointed officers who are responsible for day-to-day business
decisions based on policies it has established. The officers serve at the
pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the
Fund's other officers are:
FUND OFFICERS
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------
Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management,
172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC
Center since 2006; Director and Vice President -- Asset
Minneapolis, MN 55474 Management, Products and Marketing, RiverSource
Age 43 Distributors, Inc. since 2006; Managing Director and
Global Head of Product, Morgan Stanley Investment
Management, 2004-2006; President, Touchstone
Investments, 2002-2004
- --------------------------------------------------------------------------------------------------------
Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income,
172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments,
Center LLC since 2006; Vice President -- Investments,
Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice
Age 44 President -- Fixed Income, Ameriprise Financial, Inc.,
2002-2006 and RiverSource Investments, LLC, 2004-2006
- --------------------------------------------------------------------------------------------------------
Amy K. Johnson Vice President since Vice President -- Asset Management and Trust Company
5228 Ameriprise Financial 2006 Services, RiverSource Investments, LLC since 2006; Vice
Center Minneapolis, MN President -- Operations and Compliance, RiverSource
55474 Investments, LLC, 2004-2006; Director of Product
Age 43 Development -- Mutual Funds, Ameriprise Financial,
Inc., 2001-2004
- --------------------------------------------------------------------------------------------------------
Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise
105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer,
Center RiverSource Distributors, Inc. since 2006
Minneapolis, MN 55474
Age 53
- --------------------------------------------------------------------------------------------------------
Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management,
5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel,
Center Secretary since 2006 RiverSource Distributors, Inc. and Chief Legal Officer
Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC
Age 49 since 2006; Vice President, General Counsel and
Secretary, Ameriprise Certificate Company since 2005;
Vice President -- Asset Management Compliance,
Ameriprise Financial, Inc., 2004-2005; Senior Vice
President and Chief Compliance Officer, USBancorp Asset
Management, 2002-2004
- --------------------------------------------------------------------------------------------------------
Jennifer D. Lammers Chief Compliance U.S. Asset Management Chief Compliance Officer,
172 Ameriprise Financial Officer since 2006 RiverSource Investments, LLC since 2006;
Center Director -- Mutual Funds, Voyageur Asset Management,
Minneapolis, MN 55474 2003-2006; Director of Finance, Voyageur Asset
Age 48 Management, 2000-2003
- --------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
50 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
FUND OFFICERS (CONTINUED)
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------
Neysa M. Alecu Money Laundering Compliance Director and Anti-Money Laundering Officer,
2934 Ameriprise Financial Prevention Officer Ameriprise Financial, Inc. since 2004; Manager Anti-
Center since 2004 Money Laundering, Ameriprise Financial, Inc., 2003-
Minneapolis, MN 55474 2004; Compliance Director and Bank Secrecy Act Officer,
Age 44 American Express Centurion Bank, 2000-2003
- --------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT 51
PROXY VOTING -------------------------------------------------------------------
The policy of the Board is to vote the proxies of the companies in which the
Fund holds investments consistent with the procedures as stated in the Statement
of Additional Information (SAI). You may obtain a copy of the SAI without charge
by calling RiverSource Funds at (888) 791-3380; contacting your financial
institution; visiting riversource.com/funds; or searching the website of the
Securities and Exchange Commission (SEC) at http://www.sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities is filed
with the SEC by August 31 for the most recent 12-month period ending June 30 of
that year, and is available without charge by visiting riversource.com/funds; or
searching the website of the SEC at www.sec.gov.
- --------------------------------------------------------------------------------
52 THREADNEEDLE EMERGING MARKETS FUND -- 2008 ANNUAL REPORT
THREADNEEDLE EMERGING MARKETS FUND
734 Ameriprise Financial Center
Minneapolis, MN 55474
RIVERSOURCE.COM/FUNDS
<Table>
This report must be accompanied or preceded by the Fund's
current prospectus.
Threadneedle(R) mutual funds are distributed by RiverSource
Distributors, Inc., Member FINRA, managed by RiverSource
Investments, LLC, and subadvised by Threadneedle
International Limited. These companies are part of
Ameriprise Financial, Inc.
(THREADNEEDLE LOGO) (C) 2008 RiverSource Distributors, Inc. S-6354 V (12/08)
</Table>