-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GkWmI88XhCSZgR/VVAMxllcfbq0B8HBDF9VIJVEUpT8O+wU7ikke88Wv8g+InjmL /7pI/wxfdB7nM5KyCKgDcA== 0000820027-06-000462.txt : 20060322 0000820027-06-000462.hdr.sgml : 20060322 20060322161505 ACCESSION NUMBER: 0000820027-06-000462 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20060322 DATE AS OF CHANGE: 20060322 EFFECTIVENESS DATE: 20060322 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXP FIXED INCOME SERIES INC CENTRAL INDEX KEY: 0000049697 IRS NUMBER: 411237361 STATE OF INCORPORATION: MN FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 333-128985 FILM NUMBER: 06703920 BUSINESS ADDRESS: STREET 1: 50606 AMERIPRISE FINANCIAL CENTER STREET 2: H27/5228 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 BUSINESS PHONE: 6126714321 MAIL ADDRESS: STREET 1: 50606 AMERIPRISE FINANCIAL CENTER STREET 2: H27/5228 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 FORMER COMPANY: FORMER CONFORMED NAME: AXP BOND FUND INC DATE OF NAME CHANGE: 20000829 FORMER COMPANY: FORMER CONFORMED NAME: IDS BOND FUND INC DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXP FIXED INCOME SERIES INC CENTRAL INDEX KEY: 0000049697 IRS NUMBER: 411237361 STATE OF INCORPORATION: MN FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-02503 FILM NUMBER: 06703921 BUSINESS ADDRESS: STREET 1: 50606 AMERIPRISE FINANCIAL CENTER STREET 2: H27/5228 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 BUSINESS PHONE: 6126714321 MAIL ADDRESS: STREET 1: 50606 AMERIPRISE FINANCIAL CENTER STREET 2: H27/5228 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 FORMER COMPANY: FORMER CONFORMED NAME: AXP BOND FUND INC DATE OF NAME CHANGE: 20000829 FORMER COMPANY: FORMER CONFORMED NAME: IDS BOND FUND INC DATE OF NAME CHANGE: 19920703 0000049697 S000003362 RiverSource Diversified Bond Fund C000009231 RiverSource Diversified Bond Fund Class I C000009232 RiverSource Diversified Bond Fund Class A INBNX C000009233 RiverSource Diversified Bond Fund Class B ININX C000009234 RiverSource Diversified Bond Fund Class C AXBCX C000009235 RiverSource Diversified Bond Fund Class Y IDBYX 485BPOS 1 fixedinc_n-14.txt AXP FIXED INCOME SERIES, INC. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM N-14 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ] Pre-Effective Amendment No. [ ] (File No.: 333-128985) [X] Post-Effective Amendment No. [1] (Check Appropriate Box or Boxes) AXP Fixed Income Series, Inc. - ------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) (612) 330-9283 - ------------------------------------------------------------------------------- (Area Code and Telephone Number) 901 Marquette Avenue South, Suite 2810, Minneapolis, MN 55402-3268 - ------------------------------------------------------------------------------- (Address of Principal Executive Offices: Number, Street, City, State, Zip Code) Leslie L. Ogg - 901 Marquette Avenue South, - ------------------------------------------------------------------------------- (Name and Address of Agent For Service) Suite 2810, Minneapolis MN 55402-3268 - ------------------------------------------------------------------------------- (Number and Street) (City) (State) (Zip Code) Approximate Date of Proposed Public Offering: It is proposed that this filing will become effective (check appropriate box): [x] immediately upon filing pursuant to paragraph (b) [ ] on (date) pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1) [ ] on (date) pursuant to paragraph (a)(1) [ ] 75 days after filing pursuant to paragraph (a)(2) [ ] on (date) pursuant to paragraph (a)(2) of rule 485 If appropriate, check the following box: [ ] This Post-Effective Amendment designates a new effective date for previously filed Post-Effective Amendment. PART C. OTHER INFORMATION Item 15. Indemnification The Articles of Incorporation of the registrant provide that the Fund shall indemnify any person who was or is a party or is threatened to be made a party, by reason of the fact that she or he is or was a director, officer, employee or agent of the Fund, or is or was serving at the request of the Fund as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, to any threatened, pending or completed action, suit or proceeding, wherever brought, and the Fund may purchase liability insurance and advance legal expenses, all to the fullest extent permitted by the laws of the State of Minnesota, as now existing or hereafter amended. The By-laws of the registrant provide that present or former directors or officers of the Fund made or threatened to be made a party to or involved (including as a witness) in an actual or threatened action, suit or proceeding shall be indemnified by the Fund to the full extent authorized by the Minnesota Business Corporation Act, all as more fully set forth in the By-laws filed as an exhibit to this registration statement. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Any indemnification hereunder shall not be exclusive of any other rights of indemnification to which the directors, officers, employees or agents might otherwise be entitled. No indemnification shall be made in violation of the Investment Company Act of 1940. Part A is incorporated by reference to Registrant's Pre-Effective Amendment No. 1 to Registration Statement No. 333-128985 filed electronically on or about Dec. 5, 2005. Part B is incorporated by reference to Registrant's Pre-Effective Amendment No. 1 to Registration Statement No. 333-128985 filed electronically on or about Dec. 5, 2005. Item 16. Exhibits (1)(a) Articles of Incorporation, as amended Oct. 17, 1988, filed electronically as Exhibit 1 to Registrant's Post-Effective Amendment No. 28 to Registration Statement No. 2-51586, are incorporated by reference. (1)(b) Articles of Amendment, dated June 16, 1999, filed electronically as Exhibit (a)(2) to Registrant's Post-Effective Amendment No. 53 to Registration Statement No. 2-51586 filed on or about Oct. 25, 2001 is incorporated by reference. (1)(c) Articles of Amendment, dated Nov. 14, 2002, filed electronically as Exhibit (a)(3) to Registrant's Post-Effective Amendment No. 55 to Registration Statement No. 2-51586 is incorporated by reference. (2) By-laws, as amended Jan. 11, 2001, filed electronically as Exhibit (b) to Registrant's Post-Effective Amendment No. 53 to Registration Statement No. 2-51586 filed on or about Oct. 25, 2001 is incorporated by reference. (3) Not applicable. (4) Form of Agreement and Plan of Reorganization is included herein as Exhibit A to Part A of this Regsitration Statement. (5) Not applicable. (6)(a) Investment Management Services Agreement between Registrant and American Express Financial Corporation, dated March 20, 1995, filed electronically as Exhibit 5 to Registrant's Post-Effective Amendment No. 47 to Registration Statement No. 2-51586 is incorporated by reference. (6)(b) Amendment to Investment Management Services Agreement between AXP Growth Series, Inc. and American Express Financial Corporation, dated June 3, 2002, filed electronically on or about June 12, 2002 as Exhibit (d)(7) to AXP Growth Series, Inc. Post-Effective Amendment No. 71 to Registration Statement No. 2-38355, is incorporated by reference. Registrant's Amendment to Investment Management Services Agreement differs from the one incorporated by reference only by the fact that Registrant is one executing party. (6)(c) Investment Management Services Transfer Agreement, dated Sept. 29, 2005, between Ameriprise Financial, Inc. (fka American Express Financial Corporation) and RiverSource Investments, LLC.(1) (7) Distribution Agreement, dated Oct. 1, 2005, between Registrant and Ameriprise Financial Services, Inc.(2) (8) All employees are eligible to participate in a profit sharing plan. Entry into the plan is Jan. 1 or July 1. The Registrant contributes each year an amount up to 15 percent of their annual salaries, the maximum deductible amount permitted under Section 404(a) of the Internal Revenue Code. (9) Custodian Agreement between Registrant and First National Bank of Minneapolis, dated July 23, 1986, filed electronically as Exhibit 8 to Registrant's Post-Effective Amendment No. 46 to Registration Statement No. 2-51586 is incorporated by reference. (10)(a) Plan and Agreement of Distribution (for Class A and Class B Shares), dated Oct. 1, 2005, between Registrant and Ameriprise Financial Services, Inc.(7) (10)(b) Plan and Agreement of Distribution (for Class C Shares), dated Oct. 1, 2005, between Registrant and Ameriprise Financial Services, Inc.(8) (10)(c) Amended 18f-3 Plan, dated as of May 26, 2004, filed electronically on or about July 29, 2004 as Exhibit (n) to AXP Discovery Series, Inc. Post-Effective Amendment No. 49 to Registration Statement No. 2-72174 is incorporated by reference. (11) Opinion and consent of counsel as to the legality of the securities being registered filed electronically on or about Oct. 13, 2005 as Exhibit (11) to Registration Statement No. 333-128985 is incorporated by reference. (12) Tax opinion for Reorganization of RiverSource Selective Fund and RiverSource Diversified Bond Fund is filed electronically herewith as Exhibit (12). (13)(a) Administrative Services Agreement, dated Oct. 1, 2005, between Registrant and Ameriprise Financial, Inc. (3) (13)(b) Class Y Shareholder Service Agreement, dated Oct. 1, 2005, between Registrant and Ameriprise Financial Services, Inc. (4) (13)(c) Transfer Agency Agreement, dated Oct. 1, 2005, between Registrant and RiverSource Service Corporation. (5) (13)(d) License Agreement, dated Oct. 1, 2005, between Ameriprise Financial Inc. and the RiverSource funds. (6) (13)(e) License Agreement, dated June 17, 1999, between American Express Funds and American Express Company filed electronically on or about Sept. 23, 1999 as Exhibit (h)(4) to AXP Stock Fund, Inc.'s Post-Effective Amendment No. 98 to Registration Statement No. 2-11358, is incorporated by reference. (13)(f) Addendum to Schedule A and Schedule B of the License Agreement between the American Express Funds and American Express Company, dated June 23, 2004, filed electronically on or about June 28, 2004 as Exhibit (h)(2) to AXP Variable Portfolio - Select Series, Inc. Pre-Effective Amendment No. 1 to Registration Statement No. 333-113780 is incorporated by reference. (13)(g) Master Fee Waiver Agreement, dated Dec. 1, 2005, between Ameriprise Financial, Inc., RiverSource Investments, LLC, Ameriprise Financial Services, Inc. and RiverSource Funds filed electronically on or about Dec. 5, 2005 as Exhibit (13)(g) to AXP Tax-Exempt Series, Inc. Pre-Effective Amendment No. 1 to Registration Statement No. 333-128983 is incorporated by reference. (14) Consent of Independent Registered Public Accounting Firm as to RiverSource Selective Fund and RiverSource Diversified Bond Fund filed electronically on or about Dec. 5, 2005 as Exhibit (14) to Registrant's Pre-Effective Amendment No. 1 to Registration Statement No. 333-128985 is incorporated by reference. (15) Financial Statements: Not applicable. (16) Directors' Power of Attorney to sign this Registration Statement and its amendments, dated Jan. 11, 2006, is filed electronically herewith as Exhibit (16). (17)(a) Code of Ethics adopted under Rule 17j-1 for Registrant filed electronically on or about March 28, 2005 as Exhibit (p)(1) to AXP Selected Series, Inc.'s Post-Effective Amendment No. 42 to Registration Statement No. 2-93745 is incorporated by reference. (17)(b) Code of Ethics adopted under Rule 17j-1 for Registrant's investment adviser and principal underwriter, dated Oct. 26, 2005, filed electronically on or about Nov. 22, 2005 as Exhibit (p)(2) to AXP Equity Series, Inc. Post-Effective Amendment No. 100 to Registration Statement No. 2-13188 is incorporated by reference. (17)(c) Prospectus, dated Oct. 28, 2005, for RiverSource Diversified Bond Fund filed electronically on or about Dec. 5, 2005 as Exhibit (17)(c) to Pre-Effective Amendment No. 1 to Registration Statement No. 333-128985 is incorporated by reference. (17)(d) Statement of Additional Information, dated Nov. 29, 2005, for RiverSource Diversified Bond Fund and RiverSource Selective Fund filed electronically on or about Dec. 5, 2005 as Exhibit (17)(d) to Pre-Effective Amendment No. 1 to Registration Statement No. 333-128985 is incorporated by reference. (17)(e) Annual Report for the period ended Aug. 31, 2005 for RiverSource Diversified Bond Fund filed electronically on or about Dec. 5, 2005 as Exhibit (17)(e) to Pre-Effective Amendment No. 1 to Registration Statement No. 333-128985 is incorporated by reference. (17)(f) Prospectus, dated July 29, 2005, amended as of Oct. 3, 2005, for RiverSource Selective Fund filed electronically on or about Oct. 13, 2005 as Exhibit (17)(f) to Registration Statement No. 333-128985 is incorporated by reference. (17)(g) Annual Report for the period ended May 31, 2005 for RiverSource Selective Fund filed electronically on or about Dec. 5, 2005 as Exhibit (17)(g) to Pre-Effective Amendment No. 1 to Registration Statement No. 333-128985 is incorporated by reference. - -------------------- (1) Incorporated by reference to Exhibit (d)(3) of AXP Fixed Income Series, Inc. Post-Effective Amendment No. 59 to Registration Statement No. 2-51586 filed on or about Oct. 27, 2005. (2) Incorporated by reference to Exhibit (e) of AXP Fixed Income Series, Inc. Post-Effective Amendment No. 59 to Registration Statement No. 2-51586 filed on or about Oct. 27, 2005. (3) Incorporated by reference to Exhibit (h)(1) of AXP Fixed Income Series, Inc. Post-Effective Amendment No. 59 to Registration Statement No. 2-51586 filed on or about Oct. 27, 2005. (4) Incorporated by reference to Exhibit (h)(4) of AXP Fixed Income Series, Inc. Post-Effective Amendment No. 59 to Registration Statement No. 2-51586 filed on or about Oct. 27, 2005. (5) Incorporated by reference to Exhibit (h)(6) of AXP Fixed Income Series, Inc. Post-Effective Amendment No. 59 to Registration Statement No. 2-51586 filed on or about Oct. 27, 2005. (6) Incorporated by reference to Exhibit (h)(7) of AXP Fixed Income Series, Inc. Post-Effective Amendment No. 59 to Registration Statement No. 2-51586 filed on or about Oct. 27, 2005. (7) Incorporated by reference to Exhibit (m)(1) of AXP Fixed Income Series, Inc. Post-Effective Amendment No. 59 to Registration Statement No. 2-51586 filed on or about Oct. 27, 2005. (8) Incorporated by reference to Exhibit (m)(2) of AXP Fixed Income Series, Inc. Post-Effective Amendment No. 59 to Registration Statement No. 2-51586 filed on or about Oct. 27, 2005. Item 17. Undertakings. None. SIGNATURES As required by the Securities Act of 1933, as amended, the Registrant, AXP Fixed Income Series, Inc., certifies that it meets all of the requirements for effectiveness of this Amendment to the Registration Statement under Rule 485(b) under the Securities Act and has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned duly authorized in the city of Minneapolis, and State of Minnesota on the 22nd day of March, 2006. AXP FIXED INCOME SERIES, INC. By /s/ Paula R. Meyer ---------------------- Paula R. Meyer, President By /s/ Jeffrey P. Fox ---------------------- Jeffrey P. Fox, Treasurer As required by the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities indicated on the 22nd day of March, 2006. Signature Capacity /s/ Arne H. Carlson* Chair of the Board - --------------------- Arne H. Carlson /s/ Kathleen A. Blatz* Director - ----------------------- Kathleen A. Blatz /s/ Patricia M. Flynn* Director - ------------------------ Patricia M. Flynn /s/ Anne P. Jones* Director - ------------------- Anne P. Jones /s/ Jeffrey Laikind* Director - --------------------- Jeffrey Laikind /s/ Stephen R. Lewis, Jr.* Director - ----------------------------- Stephen R. Lewis, Jr. /s/ Catherine James Paglia* Director - ----------------------------- Catherine James Paglia /s/ Alan K. Simpson* Director - --------------------- Alan K. Simpson /s/ Alison Taunton-Rigby* Director - --------------------------- Alison Taunton-Rigby /s/ William F. Truscott* Director - ------------------------- William F. Truscott * Signed pursuant to Directors' Power of Attorney dated Jan. 11, 2006, filed electronically herewith as Exhibit (16), by: /s/ Leslie L. Ogg - --------------------- Leslie L. Ogg EX-99 2 exindex.txt EXHIBIT INDEX EXHIBIT INDEX (12) Tax opinion for Reorganization of RiverSource Selective Fund and RiverSource Diversified Bond Fund. (16) Directors' Power of Attorney to sign this Registration Statement and its amendments, dated Jan. 11, 2006. EX-99.12 TAX OPINION 3 tax-opinion.txt TAX OPINION FOR REORGANIZATION OF RIVERSOURCE SELECTIVE FUND AND RIVERSOURCE DIVERSIFIED BOND FUND [GRAPHIC OMITTED][GRAPHIC OMITTED] March 10, 2006 RiverSource Selective Fund AXP Income Series, Inc. 70100 AXP Financial Center Minneapolis, MN 55474 RiverSource Diversified Bond Fund AXP Fixed Income Series, Inc. 70100 AXP Financial Center Minneapolis, MN 55474 Ladies and Gentlemen: We have acted as counsel in connection with the Agreement and Plan of Reorganization (the "Agreement") dated November 10, 2005 between AXP Income Series, Inc.,1 a company organized under the laws of Minnesota ("Target Corporation"), on behalf of one of its series, RiverSource Selective Fund ("Target Fund") (formerly AXP Selective Fund), and AXP Fixed Income Series, Inc.,2 a company organized under the laws of Minnesota ("Acquiring Corporation"), on behalf of one of its series, RiverSource Diversified Bond Fund ("Acquiring Fund") (formerly AXP Diversified Bond Fund). The Agreement describes a transaction (the "Transaction") to occur as of the date of this letter (the "Closing Date"), pursuant to which Acquiring Fund will acquire substantially all of the assets of Target Fund in exchange for shares of beneficial interest in Acquiring Fund (the "Acquiring Fund Shares") and the assumption by Acquiring Fund of all of the liabilities of Target Fund following which the Acquiring Fund Shares received by Target Fund will be distributed by Target Fund to its shareholders in liquidation and termination of Target Fund. This opinion as to certain U.S. federal income tax consequences of the Transaction is furnished to you pursuant to Sections 7(d) and 8(d) of the Agreement. Capitalized terms not defined herein are used herein as defined in the Agreement. Target Fund is a series of Target Corporation, which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. Shares of Target Fund are redeemable at net asset value at each shareholder's option. Target Fund has elected to be a regulated investment company for federal income tax purposes under Section 851 of the Internal Revenue Code of 1986, as amended (the "Code"). - -------- 1 AXP Income Series, Inc. expects to change its name to RiverSource Income Series, Inc. in April of 2006. 2 AXP Fixed Income Series, Inc. expects to change its name to RiverSource Diversified Income Series, Inc. in April of 2006. 9909850_1 RiverSource Selective Fund RiverSource Diversified Bond Fund Acquiring Fund is a series of Acquiring Corporation, which is registered under the 1940 Act as an open-end management investment company. Shares of Acquiring Fund are redeemable at net asset value at each shareholder's option. Acquiring Fund has elected to be a regulated investment company for federal income tax purposes under Section 851 of the Code. For purposes of this opinion, we have considered the Agreement, the Combined Prospectus/Proxy Statement dated December 16, 2005 and such other items as we have deemed necessary to render this opinion. In addition, you have provided us with letters dated as of the date hereof, representing as to certain facts, occurrences and information upon which you have indicated that we may rely in rendering this opinion (whether or not contained or reflected in the documents and items referred to above). The facts you have represented as to in paragraph 5 of the letter from Acquiring Fund and paragraph 6 of the letter from Target Fund, each dated as of the date hereof, support the conclusion that, following the Transaction, Acquiring Fund will continue the historic business of Target Fund as an open-end investment company that seeks a high level of current income while conserving the value of the investment for the longest period of time, generally by investing in bonds. Target Fund has accomplished this goal historically through a "master-feeder" structure in which Target Fund invested all of its assets in Quality Income Portfolio, a series of Income Trust, a Massachusetts business trust. Quality Income Portfolio (the "Master Fund"), in turn invested those assets in a portfolio of securities. Target Fund and Ameriprise Financial, Inc. have historically owned all of the interests of the Master Fund (with Target Fund historically owning more than 99% of those interests). On or before the day prior to the Closing Date, the Master Fund made one or more distributions to Ameriprise Financial, Inc. in liquidation of Ameriprise Financial, Inc.'s interest in the Master Fund. As a result of the liquidation of Ameriprise Financial, Inc.'s interest in the Master Fund, the Master Fund will be disregarded as an entity separate from its sole owner, Target Fund, in accordance with Treas. Reg. ss. 301.7701-3(f)(2) with the effect that, for federal income tax purposes, Target Fund will be deemed to have received assets from the Master Fund in liquidation of its interests therein. Accordingly, at the time of the Transaction, Target Fund will be deemed, for federal income tax purposes, to directly own the securities previously owned by the Master Fund, rather than owning interests in the Master Fund. Because Target Fund, as "feeder fund" in the above-described "master-feeder" structure, has owned more than 99% of the interests in the Master Fund for a significant period of time without reference to the Transaction, Treasury Regulations allow Target Fund to treat the business activities of the Master Fund as Target Fund's own historic business activities. Therefore, for purposes of this opinion, reference will be made directly to the business and assets of Target Fund rather than to the business and assets of the Master Fund. RiverSource Selective Fund RiverSource Diversified Bond Fund Various factors demonstrate the similarity between Target Fund and Acquiring Fund. The two funds have similar investment styles: Morningstar categorized both funds as "Intermediate-Term Bond" funds with "High-Intermediate" investment styles as of March 31, 2005 (the "comparison date"), a randomly selected date that reflects the funds' portfolios composed without reference to the Transaction.3 The similarity of the funds' investment styles is made evident and enhanced by the fact that three of the five manager of Acquiring Fund, Tom Murphy, Scott Kirby, and Jamie Jackson, are the sole managers of Target Fund. Moreover, the funds employ similar approaches in selecting investments. They both analyze factors such as credit characteristics and interest rate outlook, and target an average duration of 4 to 6 years. As one would expect from bond funds, as of the comparison date each fund invested approximately 90% of its net assets in bonds, between 4% and 8% in cash, 0% in stocks, and approximately 3.5% in other assets. A comparison of the funds' portfolios indicates that, consistent with the funds' shared goals and strategies, the funds hold securities with similar characteristics. First, as of the comparison date, the funds had similar overall yields4 (3.61% for Target Fund and 3.82% for Acquiring Fund) and average yields to maturity5 (5.00% for Target Fund and 5.13% for Acquiring Fund). Yield to maturity ("YTM") is a method of measuring the total yield of a bond that takes into account both coupon payments and amortization or accretion from the time of purchase until maturity (i.e., the average rate of return that will be earned on a bond if held to maturity).6 The fact that the funds have similar YTMs shows the similarity between the funds' bond portfolios with respect to annual coupon payments and number of years to maturity. As of the comparison date, the average coupons of the funds' portfolios were relatively close: 4.98% for Target Fund and 5.11% for Acquiring Fund. - ---------- 3 Although the funds were in the same Morningstar category, they were in different Lipper categories. Target Fund was in the "Corporate Debt Funds A Rated" category, and Acquiring Fund was in the "Intermediate Investment Grade Debt Funds" category. 4 Yield, expressed as a percentage, represents a fund's income return on capital investment for the past 12 months. This figure refers only to interest distributions from fixed-income securities, dividends from stocks, and realized gains from currency transactions. Monies generated from the sale of securities or from options and futures transactions are considered capital gains, not income. Return of capital is also not considered income. Morningstar computes yield by dividing the sum of the fund's income distributions for the past 12 months by the previous month's net asset value (adjusted upward for any capital gains distributed over the same time period). 5 The source of this data is AEFA Investment Accounting. Unless otherwise noted, all data is obtained from Morningstar. 6 Technically speaking, YTM is the interest rate that makes the present value of a bond's payments equal to its price. Zvi Bodie, et al, Investments 417 (1999). It may be calculated using the following equation: c(1 + r)-1 + c(1 + r)-2 + . . .. + c(1 + r)-n + B(1 + r)-n = P, where c = annual coupon payment (in dollars, not a percent) n = number of years to maturity B = par value P = purchase price. RiverSource Selective Fund RiverSource Diversified Bond Fund With respect to maturity, the funds' portfolios are also similar. As of the comparison date, the funds had identical average maturities (6.5 years). When compared in terms of the percentage of net assets that each fund invested in securities of varying maturities, there was a total overlap of 94.98%. That overlap consisted of 4.39% in securities with maturities of 1-3 years, 12.06% in securities with maturities of 3-5 years, 9.00% in securities with maturities of 5-7 years, 12.12% in securities with maturities of 7-10 years, 10.19% in securities with maturities of 10-15 years, 5.18% in securities with maturities of 15-20 years, 36.60% in securities with maturities of 20-30 years, and 5.44% in securities with maturities 30 years and over. Not surprisingly, given the high-degree of overlap, the funds invested in the various maturity ranges in roughly the same proportions as each other. Each fund made nearly 40% of its investments in securities with maturities of 20-30 years, approximately 12% in securities with maturities of each of 3-5 years and 7-10 years, approximately 10% in securities with maturities of each of 5-7 years and 10-15 years, and approximately 5% in securities with maturities of 30 years and over. Next, the funds' portfolios are similar in terms of credit quality and duration. As of the comparison date, the average credit ratings of Target Fund and Acquiring Fund were both AAA.7 The credit ratings of the funds' individual investments overlapped by a total of 94.4%. Specifically there was an overlap of 71.9% in government bonds, 2.5% in AAA-rated investments, 5.6% in AA-rated investments, 4.6% in A-rated investments, and 9.8% in BBB-rated investments. Each fund made greater than 70% of its investments in government bonds, and greater than 95% of its investments in securities rated BBB or higher. In addition, as of the comparison date, the average effective durations of the funds were nearly identical (4.04 years for Target Fund and 4.03 years for Acquiring Fund). The funds' portfolios are also similar in terms of sector diversification. As of the comparison date, the funds shared a total overlap of 91.14%, constituted by 17.00% in corporate bonds, 11.00% in government issues, 2.00% in asset-backed securities, 29.00% in mortgage-backed securities, 18.00% in collateralized mortgage obligations, 10.00% in agencies, and 4.14% in cash and equivalents. Not surprisingly given the high-degree of overlap, the funds invested in several of these sectors in approximately the same proportions as each other. Each fund made its largest investment (in each case, approximately 30%) in mortgage-backed securities. Each fund also invested almost 20% in collateralized mortgage obligations, and exactly 10% in agencies. Neither fund invested in foreign government notes/bonds. Consistent with the similarity of investment strategies, the funds bear similar risk profiles. As of the comparison date, Target Fund and Acquiring Fund had identical correlations - ---------- 7 Morningstar defines funds with an average credit rating of AAA as "high quality." RiverSource Selective Fund RiverSource Diversified Bond Fund with the Lehman Brothers Aggregate Index, with each having a 3-year beta of 0.89.8 In addition, Target Fund and Acquiring Fund correlated with the Lehman Brothers Credit Bond Index to a similar degree, with betas of 0.69 and 0.71, respectively. The specific characteristics described above (the relative figures and percentages in terms of asset allocation, yield, yield to maturity, maturity, credit quality, duration, sector diversification, and risk profile) do not constitute fixed aspects of Target Fund and Acquiring Fund's investment strategies. Rather, they reflect the fact that the funds' similar investment strategies have led them to react similarly (by choosing similar portfolios) to the market conditions in place up until the comparison date. Consistent with the similarity of the funds, on the date of the Transaction, at least 33 1/3% of Target Fund's portfolio assets will not be required to be sold by virtue of the investment objectives, strategies, policies, risks or restrictions of Acquiring Fund, and Target Fund has not realigned its portfolio prior to the Transaction in order for this to be true. Acquiring Fund has no plan or intention to change any of its investment objectives, strategies, policies, risks or restrictions after the Transaction. After the Transaction, Acquiring Fund will invest all assets acquired from Target Fund in a manner consistent with the funds' shared investment strategies, as described above and reflected by the aforementioned portfolio data. Based on the foregoing representations and assumptions and our review of the documents and items referred to above, we are of the opinion that generally, subject to the final paragraphs hereof, for U.S. federal income tax purposes: (i) The Transaction will constitute a reorganization within the meaning of Section 368(a) of the Code, and Acquiring Fund and Target Fund each will be a "party to a reorganization" within the meaning of Section 368(b) of the Code; (ii) Under Section 1032 of the Code, no gain or loss will be recognized by Acquiring Fund upon the receipt of the assets of Target Fund in exchange for Acquiring Fund Shares and the assumption by Acquiring Fund of the liabilities of Target Fund; (iii) Under Section 362(b) of the Code, the basis in the hands of Acquiring Fund of the assets of Target Fund transferred to Acquiring Fund in the Transaction will be the same as the basis of such assets in the hands of Target Fund immediately prior to the transfer; - ---------- 8 Beta is the statistical measure of the degree of variance between a security or fund and a specifically defined market, such as the Lehman Brothers Aggregate Index or the Lehman Brothers Credit Bond Index. RiverSource Selective Fund RiverSource Diversified Bond Fund (iv) Under Section 1223(2) of the Code, the holding periods of the assets of Target Fund in the hands of Acquiring Fund will include the periods during which such assets were held by Target Fund; (v) Under Section 361 of the Code, no gain or loss will be recognized by Target Fund upon the transfer of Target Fund's assets to Acquiring Fund in exchange for Acquiring Fund Shares and the assumption by Acquiring Fund of the liabilities of Target Fund, or upon the distribution of Acquiring Fund Shares by Target Fund to its shareholders in liquidation; (vi) Under Section 354 of the Code, no gain or loss will be recognized by Target Fund shareholders upon the exchange of their Target Fund shares for Acquiring Fund Shares; (vii) Under Section 358 of the Code, the aggregate basis of Acquiring Fund Shares a Target Fund shareholder receives in connection with the Transaction will be the same as the aggregate basis of his or her Target Fund shares exchanged therefor; (viii) Under Section 1223(1) of the Code, a Target Fund shareholder's holding period for his or her Acquiring Fund Shares will be determined by including the period for which he or she held the Target Fund shares exchanged therefor, provided that he or she held such Target Fund shares as capital assets; and (ix) Acquiring Fund will succeed to and take into account the items of Target Fund described in Section 381(c) of the Code, subject to the conditions and limitations specified in Sections 381, 382, 383 and 384 of the Code and the Regulations thereunder. We express no view with respect to the effect of the reorganization on any transferred asset as to which any unrealized gain or loss is required to be recognized at the end of a taxable year (or on the termination or transfer thereof) under federal income tax principles. We note that, as described above, prior to the Transaction, Target Fund will, for federal income tax purposes, be deemed to have received assets from a partnership (the Master Fund) in which it has invested all of its assets, and through which it has historically conducted its business, in complete liquidation of its interests therein. That deemed liquidation will result in Target Fund's tax basis in its interest in that partnership being substituted for the tax basis of the assets owned by the partnership at the time of the liquidation, allocated among those assets as provided in Section 732(c) of the Code. It is this basis that will "carry over" to Acquiring Fund as described in (iii) above. RiverSource Selective Fund RiverSource Diversified Bond Fund In connection with this opinion, we call your attention to Revenue Ruling 87-76, 1987-2 C.B. 84, published by the Internal Revenue Service (the "IRS"). In that ruling, the IRS held that the so-called "continuity of business enterprise" requirement necessary for tax-free reorganization treatment was not met in the case of an acquisition of an investment company which invested in corporate stocks and bonds by an investment company which invested in municipal bonds. Specifically, the IRS based its ruling on its conclusion that the business of investing in corporate stocks and bonds is not the same line of business as investing in municipal bonds. We believe that the IRS's conclusion in this ruling has always been questionable. In addition, a series of private letter rulings issued in July 2005 suggests that the IRS's position on this issue is evolving: the IRS relied upon historic business representations to conclude that the reorganization satisfied the continuity of business enterprise requirement. However, even if the IRS's 1987 revenue ruling were a correct statement of law, the facts of this Transaction are distinguishable from those in the ruling. We believe that Acquiring Fund and Target Fund are both engaged in the same line of business: each is an open-end management investment company that seeks a high level of current income while conserving the value of the investment for the longest period of time, generally by investing in bonds. The funds' portfolios are substantially similar in terms of asset allocation, maturity, yield to maturity, credit quality, duration, sector diversification, and risk profile. After the Transaction, Acquiring Fund will continue that line of business for the benefit of the stockholders of both Target and Acquiring Funds. Although Acquiring Fund will dispose of securities formerly held by Target Fund, these dispositions will be fully consistent with the shared historic investment policies of both Funds and all proceeds generated by such dispositions will be reinvested in a manner fully consistent with such policies. In these circumstances, we are of the opinion that Acquiring Fund will have continued the historic business of Target Fund for the benefit of, among others, the historic stockholders of Target Fund, and that the continuity of business enterprise doctrine should, as a result, be fulfilled. Because Revenue Ruling 87-76 is the only ruling on which taxpayers can rely (i.e., the only ruling that is not a private letter ruling) dealing specifically with the application of the "continuity of business enterprise" requirement to a reorganization involving investment companies, however, our opinion cannot be free from doubt. No ruling has been or will be obtained from the IRS as to the subject matter of this opinion and there can be no assurance that the IRS or a court of law will concur with the opinion set forth above. [Rest of page intentionally left blank.] RiverSource Selective Fund RiverSource Diversified Bond Fund Our opinion is based on the Internal Revenue Code of 1986, as amended, Treasury Regulations, Internal Revenue Service rulings, judicial decisions, and other applicable authority, all as in effect on the date of this opinion. The legal authorities on which this opinion is based may be changed at any time. Any such changes may be retroactively applied and could modify the opinions expressed above. Very truly yours, /s/ Ropes & Gray LLP ----------------------- Ropes & Gray LLP EX-99.16 PWR OF ATTY 4 poa.txt DIRECTORS' POWER OF ATTORNEY TO SIGN THIS REGISTRATION STATEMENT AND ITS AMENDMENTS, DATED JAN. 11, 2006 DIRECTORS/TRUSTEES POWER OF ATTORNEY City of Minneapolis State of Minnesota Each of the undersigned, as directors and trustees of the below listed open-end, diversified investment companies that previously have filed registration statements and amendments thereto pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940 with the Securities and Exchange Commission: 1933 Act 1940 Act Reg. Number Reg. Number AXP Fixed Income Series, Inc. 2-51586 811-2503 AXP California Tax-Exempt Trust 33-5103 811-4646 AXP Discovery Series, Inc. 2-72174 811-3178 AXP Equity Series, Inc. 2-13188 811-772 AXP High Yield Income Series, Inc. 2-86637 811-3848 AXP Government Income Series, Inc. 2-96512 811-4260 AXP Global Series, Inc. 33-25824 811-5696 AXP Growth Series, Inc. 2-38355 811-2111 AXP High Yield Tax-Exempt Series, Inc. 2-63552 811-2901 AXP International Series, Inc. 2-92309 811-4075 AXP Investment Series, Inc. 2-11328 811-54 AXP Managed Series, Inc. 2-93801 811-4133 AXP Market Advantage Series, Inc. 33-30770 811-5897 AXP Money Market Series, Inc. 2-54516 811-2591 AXP Dimensions Series, Inc. 2-28529 811-1629 AXP Selected Series, Inc. 2-93745 811-4132 AXP Progressive Series, Inc. 2-30059 811-1714 AXP Income Series, Inc. 2-10700 811-499 AXP Special Tax-Exempt Series Trust 33-5102 811-4647 AXP Stock Series, Inc. 2-11358 811-498 AXP Strategy Series, Inc. 2-89288 811-3956 AXP Tax-Exempt Series, Inc. 2-57328 811-2686 AXP Tax-Free Money Series, Inc. 2-66868 811-3003 AXP Sector Series, Inc. 33-20872 811-5522 AXP Partners Series, Inc. 333-57852 811-10321 AXP Partners International Series, Inc. 333-64010 811-10427 AXP Variable Portfolio-Partners Series, Inc 333-61346 811-10383 AXP Variable Portfolio-Investment Series, Inc. 2-73115 811-3218 AXP Variable Portfolio-Managed Series, Inc. 2-96367 811-4252 AXP Variable Portfolio-Money Market Series, Inc. 2-72584 811-3190 AXP Variable Portfolio-Income Series, Inc. 2-73113 811-3219 AXP Variable Portfolio-Select Series, Inc. 333-113780 811-21534 hereby constitutes and appoints Arne H. Carlson, any other member of the Boards who is not an interested person of the investment manager, and Leslie L. Ogg or any one of these persons individually as her or his attorney-in-fact and agent to file and sign for her or him in her or his name, place and stead any and all further amendments to said registration statements with all exhibits and other documents thereto pursuant to said Acts and any rules and regulations thereunder and grants them the full power and authority to do and perform each and every act required and necessary to be done in connection therewith. * RiverSource will replace AXP in the name of each company upon filing with the Secretary of State. Dated the 11th day of January, 2006. /s/ Arne H. Carlson /s/ Stephen R. Lewis, Jr. - ------------------- ---------------------------- Arne H. Carlson Stephen R. Lewis, Jr. /s/ Kathleen A. Blatz /s/ Catherine James Paglia - --------------------- ---------------------------- Kathleen A. Blatz Catherine James Paglia /s/ Patricia M. Flynn /s/ Alan K. Simpson - --------------------- ---------------------------- Patricia M. Flynn Alan K. Simpson /s/ Anne P. Jones /s/ Alison Taunton-Rigby - ----------------- ---------------------------- Anne P. Jones Alison Taunton-Rigby /s/ Jeffrey Laikind /s/ William F. Truscott - ------------------- ---------------------------- Jeffrey Laikind William F. Truscott -----END PRIVACY-ENHANCED MESSAGE-----